1. 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 6 A N N U A L R E P O R T healthy convenient fresh chiquita

2. F I N A N C I A L H I G H L I G H TS Chiquita Brands International, Inc. (NYSE: CQB) is a leading international marketer and distributor of high-quality fresh and value-added food products from energy-rich bananas and other fruits to nutritious blends of convenient green salads. The companys products and services are designed to win the hearts and smiles of the worlds consumers by helping them enjoy healthy fresh foods. The company markets its products under the Chiquita and Fresh Express premium brands and other related trademarks. Chiquita employs approximately 25,000 people operating in more than 70 countries worldwide. Additional information is available at www.chiquita.com and www.freshexpress.com.$188$1,029 $223$997 $113$94$349$15($28) 0405 0604 05 0612.31.04 12.31.0512.31.06 O P E RAT I N G I N CO M E ( LOSS )CAS H F LOW TOTA L D E BTF R O M O P E RAT I O N S (in millions)(in millions)(in millions) (In millions, except per share amounts)2006 2005*2004I N CO M E STAT E M E N T DATA Net sales$ 4,499 $ 3,904 $3,071 Operating income (loss) (28)188 113 Net income (loss) (96) 131 55 Diluted per share net income (loss) (2.28) 2.921.33 Shares used to calculate diluted EPS 42.145.141.7 CAS H F LOW DATA Cash ow from operations $15 $ 223 $ 94 Capital expenditures6143 43Dec 31, 2006Dec 31, 2005Dec 31, 2004BA LA N C E S H E ET DATA Cash and cash equivalents$65 $89 $143 Total assets 2,739 2,8331,780 Shareholders equity 871 994839 * The companys Consolidated Income Statement includes the operations of Fresh Express from the June 28, 2005, acquisition date to the end of the year. 3. L E T T E R F R O M C H A I R M A N & C EO We are encouraged by a promising 01 future, as we reach to achieve our vision as an innovative global leader in branded, healthy, fresh foods. D E A R S TA K E H O L D E R S ,2006 was a difcult, transitional year for Chiquita. We achieved a number of operational and strategic targets and made progress towards achieving our vision of becoming an innovative global leader in branded, healthy, fresh foods. However, we also faced many challenges during the year. We faced these head-on and have recently begun to recover, but these factors had a signicant impact on our overall nancial performance.W E D E L I V E R E D T H E FO L LO W I N G R E S U LT S I N 2 0 0 6 :Net sales grew by 15 percent to a new record of $4.5 billion. The increase in annual salesA D D R ESS I N G I N D UST RY W I D ECHALLENGES THROUGHOUT 2006 reects the positive full-year impact of theWe were not satised with our results in 2006, acquisition of Fresh Express in mid-year 2005.a year in which we faced what many investors We incurred an operating loss of $28 million,called a perfect storm. We confronted signicant compared to operating income of $188 millionheadwinds from higher tariffs and increased com- in 2005 and a net loss of $96 million, orpetition in the E.U. banana market, U.S. consumer ($2.28) per diluted share, compared to netconcerns about the safety of fresh spinach, higher income of $131 million the prior year.industry costs and other competitive pressures. Operating cash ow was $15 million, compared However, we rmly believe our 2006 results are to $223 million in 2005, reecting the decline not indicative of the underlying strengths of in operating income. Chiquitas business or our long-term potential.2 0 0 6 A N N U A L R E P O R T 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 . 4. L E T T E R F R O M C H A I R M A N & C EO 02In September, the fresh-cut industry was affectedby an E. coli outbreak that has had a negativeimpact on U.S. consumer condence. The U.S.Food and Drug Administrations investigation ofthis outbreak did not link any conrmed cases ofillness to the companys products. In fact, FreshExpress has a stellar food-safety record for theAt the beginning of 2006, the European19 years during which we have produced retailCommission imposed a tariff rate of 176 pervalue-added salads. Nevertheless, we estimatemetric ton of bananas imported from Latin that operating results were $21 million lower inAmerica, up from 75 per metric ton, andour Fresh Cut segment due to reduced sales andeliminated the volume quota that previously decreased margins as consumption of packagedapplied to Latin American banana imports. Thissalads declined. Although we have been reboundingunilateral regulatory change resulted in a netfaster than others in the category, we believe theincrease of $75 million in higher tariff costs to impact on consumer condence is likely to con-Chiquita and contributed to a decline oftinue to negatively affect our Fresh Cut segment$110 million in banana pricing in core European results through at least the third quarter 2007.markets. As expected, several Latin Americangovernments have strongly objected to the Our costs for fuel, fruit, ship charters, paper andcurrent E.U. banana regime as illegal. In March resin increased by $54 million in 2006, reecting2007, Ecuadors request for an arbitrationincreases affecting the entire industry. In addition,panel under expedited Article 21.5 World Tradewe recorded a one-time, noncash charge of $43Organization procedures was approved, and million related to goodwill impairment at Atlantaa ruling is expected late in 2007. While such a AG, our German fresh produce distributor, and achallenge does not guarantee success, we$25 million reserve for settlement of a previouslybelieve the Latin Americans have strong legal disclosed investigation by the U.S. Departmentarguments and, this challenge has the potential of Justice. Lastly, to enhance nancial exibility,to lead Europe to negotiate a lower tariff rate orwe suspended Chiquitas quarterly cash dividendother constructive changes to the current regime. in September.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 6 A N N U A L R E P O R T 5. HEADLINE: sep Latin American1406banana-producingcountries rejectnew EU tariffXINHUA GENERAL NEWS SERVICEAt the beginning of 2006, the European Commission imposed a tariff rate of176 per metric ton of bananas imported from Latin America, up from 75 permetric ton, and eliminated the volume quota that previously applied to LatinAmerican banana imports. This unilateral regulatory change resulted in higher tariffcosts to Chiquita and contributed to a decline in banana pricing in core Europeanmarkets. As expected, several Latin American governments have strongly objectedto the current E.U. banana regime as illegal. In March 2007, Ecuadors request foran arbitration panel under expedited World Trade Organization procedures wasapproved, and a ruling is expected late in 2007. 6. HEADLINE: oct Fresh Express 23 06leads the pack inproduce safetyU S A T O D AY J U L I E S C H M I TWe are committed to bringing healthy, safe products to consumers, and food safetyhas always been our No. 1 priority. As an example of our leadership, we formed anindependent scientic advisory panel in May 2006 to further explore how food-safetypractices might be enhanced. In fact, we committed $2 million to fund nine innovativeresearch projects recommended by this panel in an effort to better understand andmitigate the threat posed by E. coli O157:H7 in lettuce and leafy greens. We plan toshare any research findings as widely as possible to stimulate the development ofadvanced safeguards within the fresh-cut industry. 7. L E T T E R F R O M C H A I R M A N & C EO05D E L I V E R I N G I N N O V AT I V E ,H I G H E R - M A R G I N P R O D U CTS Our company is enhancing its leadership positionin branded, healthy, fresh foods by focusing onmeeting consumer needs with differentiated,value-added products and making them moreavailable to consumers. Despite these challenges, we sustained our Fresh Express expanded its market leadership leadership position in the premium-quality segment in retail value-added salads, growing its dollar of the European banana market, expanding share to approximately 48 percent in 2006, sales of Chiquita-brand bananas by 4 percent,compared to approximately 43 percent in and maintained all of our signicant customer2005. Fresh Express successfully introduced relationships in Europe. Banana pricing in North 12 new higher-margin products during 2006, America continued to improve, generating anincluding Sweet Butter and 5 Lettuce Mix additional $21 million in 2006 income. Further,salad blends. These two salad blends were our Fresh Express business expanded its market the top two new items across all categories leadership position, while strengthening introduced in U. S. supermarkets in the third Chiquitas reputation for food safety. quarter, beating out all new products fromother leading brands such as Pepsi, Frito-Lay, We are encouraged by a promising future. OurKraft and Campbell Soup. vision is to enhance our position as an innovative global leader in branded, healthy, fresh foods.Chiquita minis are also achieving success. We aim to double revenue from our 2005 base andThese higher-margin baby bananas meet more than double protability during the next veconsumer needs for healthy, portable snacks. years. To achieve this goal, we are focused on two We are currently serving several large retail key objectives: to pursue protable growth bycustomers in North America. Following a delivering innovative, higher-margin productssuccessful market test in Finland, we are and to build a high-performance organization.expanding across Europe in 2007.2 0 0 6 A N N U A L R E P O R T 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 . 8. L E T T E R F R O M C H A I R M A N & C EO 06 Chiquita Apple Bites remain the No. 1 brand of sliced apples in the United States with a 49 percent value share at year-end. We continue to expand distribution aggressively, both at retail, where we have increased distribution to about 38 percent, and through our quick- service restaurant partners. In March 2007, Subway began offering co-branded Chiquita Apple Bites nationally, expecting to reach more than 14,500 restaurants in 2007.These are just some of the new, innovative higher- Chiquita Just Fruit in a Bottle, a line of all-margin products Chiquita is introducing, and we natural chilled fruit smoothies, has excelledsee signicant opportunity to expand our offerings in its initial European market introduction inand protability by meeting consumer demand Belgium last June. This product is available atfor healthy, on-the-go, fresh foods. Throughout major grocery retailers, as well as in various2007, more innovative products like these will out-of-home channels. After only six months,be tested and introduced into the marketplace. Just Fruit in a Bottle is the leading fresh smoothie in Belgium with 70 percent distribution amongB U I L D I N G A H I G H - P E R FO R M A N C E major retailers. O R G A N I Z AT I O NChiquita to Go, single Chiquita bananas in pro-Our second key objective is to continue to build prietary packaging that keeps bananas perfectlya high-performance organization. This means ripe for seven days or more, has generated optimizing our efforts to become a consumer- tremendous enthusiasm. This packaging inno-centric and customer-preferred company. For vation enables us to reach consumers through example, we are working to make value-selling new higher-margin convenience outlets. Ata key capability across our organization. We year-end, Chiquita to Go was already in more continue to excel in cold-chain management, than 8,000 outlets, and we will signicantly lead with innovation and technology to expand increase the size of this business in 2007, as margins, and apply best-in class people practices we add new distribution points every month.across Chiquita.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 6 A N N U A L R E P O R T 9. HEADLINE:jan Want fast food? 0806Now you canhave fast fruitT U CS O N C I T I Z E N B R U C E H O R OV I TZOur products are the perfect t to address consumers needs for health, convenienceand great taste. Chiquita is enhancing its leadership position in branded, healthy,fresh foods by focusing on meeting consumer needs with value-added productsand making them more available to consumers. To help parents nd easy ways toincorporate fruits into their childrens diets and meet the USDAs recommendedtwo cups of fruit a day, we have introduced smaller and pre-packaged snackoptions. Chiquita minis and Chiquita Apple Bites are excellent examples of ready-to-eat choices for parents that are ideal for lunchboxes and snack time. 10. HEADLINE: aug A recipe 31 06for prots T H E I R I S H T I M E S B Y A L I S O N H E A LY To achieve our vision as an innovative global leader in branded, healthy, fresh foods, we are focused on two key objectives: to pursue protable growth by delivering innovative, higher-margin products and to build a high-performance organization. We believe we made a great deal of progress in both areas during 2006, and we are prepared to further take advantage of these opportunities in 2007. We are building a steady stream of innovations, transitioning from a commodity focus to protable value-added products with higher margins, while expanding into adjacent product categories. Chiquita is on the right path to protable, sustainable growth. 11. L E T T E R F R O M C H A I R M A N & C EO09achieved our target of a $20 million run-rate inacquisition synergies within 18 months of acquiringFresh Express, in half the time we had committed.We expect to make further progress and haveset a goal to deliver an additional $40 million ingross cost savings in 2007. We are focused on becoming a customer-preferredcompany by excelling in category management,product quality, customer service and in-storeexecution. In fact, Progressive Grocer magazine For example, in September 2006, we announcedrecognized Chiquita and Fresh Express as that we were exploring strategic alternativesCategory All-Stars in 2006 for exceptional for the sale and long-term management of ourcategory management, honoring companies that ocean shipping operations. We believe there ishave been Category Captains in at least ve of the an opportunity to enhance shareholder valuelast 10 years. while maintaining high quality and competitive long-term operating costs by partnering withA D D I N G L E A D E R S H I P TA L E N T expert shipping service providers that can grow withWe have made enhancements to our management Chiquita. Potential opportunities such as theseteam to support our goal to grow Chiquita into an will allow us to focus our efforts and resourcesinnovative global leader in branded, healthy, fresh even more on strengthening customer relationshipsfoods. James Thompson now serves as our general and generating capital, which will primarily becounsel and secretary with responsibility for used to reduce debt, as well as to invest in newChiquitas global law department. We appointed growth opportunities.Vanessa Vargas-Land to serve as our chief com- We are continuously evaluating how to make our pliance ofcer, as we continue our commitment business more efcient and drive synergies. We to full regulatory compliance and transparency in exceeded our cost savings and synergy targetsall of our activities. Additionally, we named two in 2006, achieving $47 million in gross cost newly created global product leader positions to savings across our tropical production and supplybetter manage our pipeline of innovative products chain, which mitigated some of the cost increasesacross all segments and develop a growth platform affecting the entire industry. In addition, we for our key products on a global basis.2 0 0 6 A N N U A L R E P O R T 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 . 12. L E T T E R F R O M C H A I R M A N & C EO 10We are also integrating the strengths of ourChiquita and Fresh Express sales teams to betterleverage our value-selling capability and havealready begun producing results. We are pleasedthat Mike Holcomb has joined our managementteam as vice president of corporate sales andcustomer development to lead this effort. M OV I N G TOWA R D A ST R O N G F U T U R EIndividually and as a team, we have ensuredI have condence that Chiquita is on the rightthat our management is well-prepared to growpath to return to protable, sustainable growth.our businesses protably through innovation andWe are focused on diversication and innovationbuild a high-performance organization. Consistentto ensure we capitalize on opportunities towith our deep commitment to innovation, 2007strengthen our business and brand. Our team ismarks the rst year that a portion of our man-working together to share new product ideas andagement teams incentive compensation will becreate efciencies and protable growth across ourbased on achieving certain revenue targets foroperation. We believe the strategic initiatives wenew higher-margin products.are executing will revitalize our company in 2007. I want to thank our employees for their tremendousdedication to Chiquita in leading this effort. I amcondent we will successfully transform Chiquitainto an innovative global leader in branded,healthy, fresh foods, and I look forward to updatingyou on our progress as we move through the year.F E R N A N D O AG U I R R EChairman & Chief Executive OfcerApril 12, 2007 13. Chiquita has a clear vision, focused on innovation with higher- margin products that t perfectly with consumer needs for healthy, convenient and fresh foods. 14. 13 F R ES H EX P R ES S SALADSFresh Express is the U.S. market leader, providing convenient, fresh and healthy salads to more than 20 million consumers each week. Drawing on up to 25 varieties of ne lettuces and greens for nutritious salad creations, Fresh Express offers more than 50 different salad products. healthy Fresh Express continued to successfully introduce new higher- margin products, 12 in all during 2006, including Sweet Butter and 5 Lettuce Mix salad blends, which are high in vitamin A, vitamin C and iron. convenient The pioneer of the retail packaged salad category and the rst to market ready-to-eat salads nationwide, Fresh Express provides consumers with convenient, everyday gourmet salads. fresh Our innovative supply chain delivers a difference you can taste. To ensure the freshest products available, we tenderly rush lettuces from the eld to coolers within four hours of harvest. Our salads are thoroughly washed, rinsed and gently dried, then sealed in patented Keep Crisp breathable bags to ensure just-picked freshness without preservatives. 15. 14C H I Q U I TA M I N I S Chiquita minis baby bananassold in clusters of six or sevenngers per bag are a goodexample of a new product thatsdriving incremental sales and protability by offering consumers quick, portable and healthy snacks. healthyWith the same great nutritionalvalue as regular bananas, these quick, easy snacks are a favoritewith moms and kids alike.convenient The smaller size makes Chiquitaminis attractive to children and easier to carry in a lunchboxor a briefcase when a little is exactly enough!freshWith the same premium quality oftraditional Chiquita bananas, Chiquita minis are known to beeven a little bit sweeter. 16. C H I Q U I TA17 A P P L E B I T ESChiquita Apple Bites crispy apple slices that are perfect to include in a lunchbox or as an after-school snack are the No. 1 brand of sliced apples in U. S. grocery stores, with a 49 percent value share. healthy With no articial avors or colors, Chiquita Apple Bites are a healthy, ready-to-eat fruit snack. convenient Chiquita has made it easy for consumers to enjoy scrumptious, natural fruit anytime, anywhere. fresh Our sweet red or tangy green Chiquita Apple Bites are picked at the peak of ripeness to ensure the best avor and then are carefully cleaned and packaged in a specially designed snack-size bag to lock in the juicy apple crunch. 17. 18JUST FRUIT I N A B OT T L EChiquitas Just Fruit in a Bottleoffers European consumers a new way to enjoy fresh fruits. These nondairy smoothies are a chilled mix of fresh fruits andfreshly squeezed juice in three avors: strawberry-banana, banana-pineapple-orange andmango-passion fruit.healthy We have just put whole fruits into a bottle and added nothing else: noadditives, no preservatives and noadded sugar. Pure fruit, pure pleasure!convenientChiquita Just Fruit in a Bottle brings the natural goodness offresh fruits to European retailoutlets in a single-serve bottle that consumers can enjoy atany time or place. fresh The intense natural fruit taste andthe rich texture make Chiquita Just Fruit in a Bottle delicious, while thefresh fruit ingredients make it anutritious, healthy snack. 18. 19 19. C H I Q U I TA TO G O21 BANANASOur single Chiquita bananas are packed in conveniently sized boxes sealed with a proprietary patch that perfectly regulates air ow, enabling a longer shelf life and distribution through nontraditional and higher-margin retail outlets. At year-end, Chiquita to Go was in more than 8,000 outlets, and we will signicantly increase the size of this business in 2007. convenient Using proprietary packaging technology that keeps bananas at their peak of ripeness for more than seven days, Chiquita to Go brings healthy, fresh fruit to consumers every day of the week, any time of day. healthy Chiquita bananas are vitamin-rich, heart-healthy and perfectly fat-free. In fact, a single Chiquita banana supplies 20 percent and 11 percent of the U.S. Recommended Daily Allowances of vitamin B6 and potassium, respectively. fresh Selected for their ideal size, color, shape and ripeness, Chiquita to Go bananas are perfectly ripe every day of the week and offer a healthy alternative snack to consumers. 20. E V E N M O R E I N N O VAT I V E P R O D U CTSThese are just some of the new, innovative higher-margin products Chiquita is 22 introducing, and we see signicant opportunity to expand our offerings andprotability by meeting consumer demand for healthy, on-the-go, fresh foods.Throughout 2007, more innovative products like these will be tested andintroduced into the marketplace. Chiquita Fresh & ReadyChiquita Fresh & Ready offers bananas that stay fresh for twice as longas regular bananas. Taking the Chiquita to Go technology from theconvenience store to the produce department at your local grocer,Chiquita Fresh & Ready provides consumers a convenient, healthy snackat home. At year-end 2006, Chiquita Fresh & Ready was in test withseveral major retailers in three U.S. states. Chiquita Fruit Bar Chiquita Fruit Bar offers a wide array of high-quality Chiquita fresh produce and tasty fruit-based drinks that are made on demand in a fun and friendly retail atmosphere. A natural extension to meet consumers needs for healthy and convenient food choices, Chiquita Fruit Bar continues to build our brand equity with European consumers and is currently at four locations in Germany.Healthy SnackingTo meet the demand from todays consumers for convenient, healthy andgreat-tasting food choices, we are expanding on the success of ChiquitaApple Bites by introducing ready-to-eat mini carrots, snap peas and grapesthat are ideal for lunchboxes and snack time. These healthy, bite-sizedproducts are fun for kids and adults alike and provide essential vitaminsand minerals in consumer-friendly, on-the-go packages. Gourmet Caf Salads The pioneer of the retail packaged salad category, Fresh Express continues its commitment to quality and innovation through a new line of full-meal salads in convenient, single-serve packaging.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 6 A N N U A L R E P O R T 21. HEADLINE:nov Chiquita 1706cleansup its actFO R T U N E M AGA Z I N E J E N N I F E R A LS EV E RWe manage all of our operations in accordance with our Core Values Integrity,Respect, Opportunity and Responsibility and the Chiquita Code of Conduct,which guide our daily decisions and dene our standards for corporate respon-sibility. In addition to strict legal compliance, we dene corporate responsibilityto include social responsibilities, such as respect for the environment and thecommunities where we do business, the health and safety of our workers, laborrights and food safety. We see a positive link between our Core Values and ourcompanys vision, mission and sustainable growth strategy. 22. C O R P O R AT E R ES P O N S I B I L I T Y 24CONSERVING BIODIVERSITY WITHCOMMUNITY SUPPORT A highlight of our corporate responsibility effortsin 2006 occurred when President Oscar Ariasof Costa Rica presented the 2006 Contributionto the Community Award to Chiquita BrandsInternational on behalf of the American-CostaRican Chamber of Commerce, in recognition ofthe companys Nature & Community Project,an initiative designed to preserve biodiversity,M A I N TA I N I N G 1 0 0 % C E R T I F I C AT I O N O Npromote nature conservation awareness amongO W N E D FA R M S I N L AT I N A M E R I C Athe local population and create new sources ofWe have selected industry standards that are mostincome for people in the community.relevant to each segment of our business. In mostcases, we have been the industry pioneer seekingChiquitas Nature and Community Project credible third-party certication of our performance.developed with the support and cooperation ofindependent partners, including Swiss retailerFor example, in the mid-1990s, we committedMigros (www.migros.ch), the Rainforest Alliance,to achieve certication on all company bananaand German Technical Cooperation GTZfarms to the rigorous standards of the Rainforest(www.gtz.de) contributes to the protection ofAlliance, a leading international conservationthe exceptional biodiversity of the region byorganization. The Rainforest Alliance (www.ra.org)encouraging local communities and farmers tocerties farms that follow its 10 stringent environ-actively participate in the protection of rainforestsmental and social standards for agriculture,and the many species which depend on them.designed to protect the environment, wildlife,workers and local communities.The project, which started in September 2003,is based at Chiquitas Nogal farm in the SarapiquDuring 2006, all of our Latin American bananaregion in northeastern Costa Rica. More than 100divisions earned recertication by the Rainforesthectares (250 acres) of protected rainforest onAlliance for the seventh straight year based onthis farm were designated as a private wildlifefarm-by-farm audits, despite more rigorousrefuge by the Costa Rican government in Januarystandards. Moreover, 84 percent of acreage of2006. To facilitate the migration and survival ofindependent grower farms in Latin America fromendangered species, this forest will be connectedwhich we source bananas also had achievedwith other forest areas of the region, includingRainforest Alliance certication at year-end.the Braulio Carrillo national park, 8 kilometersIn addition, 100 percent of our owned banana(5 miles) away. To date, the creation of this biologicalfarms in Latin America were certied to the Socialcorridor has involved the planting of 10,000 treesAccountability 8000 labor and human rightsof more than 40 native species. Local farmers arestandard (www.sa-intl.org) and to the EurepGAPcontributing to this effort by providing land forfood-safety standard (www.eurepgap.org).reforestation.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 6 A N N U A L R E P O R T 23. C O R P O R AT E R ES P O N S I B I L I T Y 25 Environmental education for schoolchildren, neighbors and Chiquitas own employees plays an important role in this work, since the support of the local population is essential for long-term environmental conservation. Nearly 3,000 visitors have already participated in workshops provided at the Nogal project center.The creation of new economic opportunities, such as ecotourism and arts and crafts based on envi- ronmental protection, is another important aspect one count of violating a U.S. law in connection with of the project. So far, ve small businesses have payments made from 2001 to 2004 by its former been established with assistance of the project, andsubsidiary to entities afliated with Autodefensas their sales have contributed to the income of manyUnidas de Colombia, which had been designated families in neighboring communities.as a foreign terrorist organization. In anticipation of this settlement, the company recorded a reserve AG R E E M E N T W I T H for $25 million in its nancial statements for the U. S . D E PA R T M E N T O F J U ST I C E quarter and year ended Dec. 31, 2006. In April 2003, Chiquita voluntarily informed the U.S. Department of Justice (DOJ) that in order to C O R E VA LU ES C O N T I N U E TO G U I D E protect the lives and safety of its employees, itsBUSINESS DECISIONS banana-producing subsidiary in Colombia had We are proud of our corporate responsibility been forced to make protection payments to localprogress. In many parts of our company, such as in right- and left-wing paramilitary groups. Chiquitathe banana divisions and in the supply chain, our approached the DOJ when senior management corporate responsibility programs have generated became aware that payments to these groupsbenets in productivity and employee morale. As were prohibited under a U.S. antiterrorism law that a result, corporate responsibility is largely integrated had changed in September 2001.into the culture and daily life of these operations. At the same time, we recognize that there is always The payments made by the company were always more that can be done. We have new businesses motivated by our good faith concern for the safety of and new employees who do not have a long history our employees. Since disclosing this information with our corporate responsibility programs. So, its four years ago, Chiquita has cooperated with the important to help all our employees to understand DOJ investigation, sold its Colombian operations and our Core Values, our ethical and legal obligations enhanced its compliance programs and procedures. and the benets of our programs. We must continue The aim of the companys enhanced programs is to to integrate compliance and values into our decision- foster transparency and to reinforce a strong culture making, and we need to implement these efforts of ethics and compliance with our obligations under more consistently across the company. U.S. law and in the jurisdictions around the world in which we do business. While there will be many challenges and opportu- nities ahead, our Core Values and Code of Conduct In March 2007, Chiquita reached an agreement will continue to guide managements decisions. with the DOJ relating to the investigation. Under terms of the agreement, Chiquita will pay a ne ofFor more information, please visit www.chiquita.com $25 million over ve years and pleaded guilty tounder the Corporate Responsibility tab. 2 0 0 6 A N N U A L R E P O R T 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 . 24. F I N A N C I A L TA B L E O F C O N T E N TSS TAT E M E N T O F27 M A N AG E M E N TRESPONSIBILITYM A N AG M E N T SDISCUSSION ANDA N A LY S I SOF FINANCIALCONDITION AND28 R E S U LT S O FO P E R AT I O N SREPORT OFINDEPENDENTREGISTERED PUBLICACCO U N T I N G F I R M50 ON FINANCIALS TAT E M E N T SREPORT OFINDEPENDENTREGISTERED PUBLICACCO U N T I N G F I R MON INTERNALCONTROL OVER51 FINANCIALREPORTINGC O N S O L I D AT E D52 S TAT E M E N T O FINCOME53 C O N S O L I D AT E DBALANCE SHEETC O N S O L I D AT E DS TAT E M E N T O F54 SHAREHOLDERSEQUITYC O N S O L I D AT E D55 S TAT E M E N T O FCA S H F LO WN OT ES TOC O N S O L I D AT E D56 FINANCIALS TAT E M E N T S81 S E L ECT E DF I N A N C I A L D ATABOA R D O FD I R ECTO R S,OFFICERS ANDSENIOR82 O P E R AT I N GM A N AG E M E N TI N V ESTO RI N F O R M AT I O N A N D83 CO M M O N STO C KP E R FO R M A N C E G RA P H 25. STAT E M E N T O F M A N AG E M E N T R ES P O N S I B I L I T Y27 The nancial statements and related nancial information presented in this Annual Report are the responsibility of Chiquita Brands International, Inc. management, which believes that they present fairly the companys consol- idated nancial position and results of operations in accordance with generally accepted accounting principles. The companys management is responsible for establishing and maintaining adequate internal controls. The company has a system of internal accounting controls, which includes internal control over nancial reporting and is supported by formal nancial and administrative policies. This system is designed to provide reasonable assurance that the companys nancial records can be relied on for preparation of its nancial statements and that its assets are safeguarded against loss from unauthorized use or disposition. The company also has a system of disclosure controls and procedures designed to ensure that material infor- mation relating to the company and its consolidated subsidiaries is made known to the company representatives who prepare and are responsible for the companys nancial statements and periodic reports led with the Securities and Exchange Commission (SEC). The effectiveness of these disclosure controls and procedures is reviewed quarterly by management, including the companys Chief Executive Ofcer and Chief Financial Ofcer. Management modies these disclosure controls and procedures as a result of the quarterly reviews or as changes occur in business conditions, operations or reporting requirements. The companys worldwide internal audit function, which reports to the Audit Committee, reviews the adequacy and effectiveness of controls and compliance with the companys policies. Chiquita has published its Core Values and Code of Conduct which establish the companys high standards for corporate responsibility. The company maintains a hotline, administered by an independent company, that employees can use condentially and anonymously to communicate suspected violations of the companys Core Values or Code of Conduct, including concerns regarding accounting, internal accounting control or auditing matters. Any reported accounting, internal accounting control or auditing matters are also forwarded directly to the Chairman of the Audit Committee of the Board of Directors. The Audit Committee of the Board of Directors consists solely of directors who are considered independent under applicable New York Stock Exchange rules. One member of the Audit Committee, Roderick M. Hills, has been determined by the Board of Directors to be an audit committee nancial expert as dened by SEC rules. The Audit Committee reviews the companys nancial statements and periodic reports led with the SEC, as well as the companys internal control over nancial reporting including its accounting policies. In performing its reviews, the Committee meets periodically with the independent auditors, management and internal auditors, both together and separately, to discuss these matters. The Audit Committee engages Ernst & Young, an independent registered accounting rm, to audit the companys nancial statements and its internal control over nancial reporting and express opinions thereon. The scope of the audits 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. Ernst & Young has issued an opinion on the companys nancial statements. This report appears on page 50. Ernst & Young has also issued an audit report on managements assessment of the companys internal control over nancial reporting. This report appears on page 51.M A N AG E M E N T S ASS ESS M E N T O F T H E CO M PA NY S I N T E R N A L CO N T R O L OV E R F I N A N C I A L R E P O RT I N G The companys management assessed the effectiveness of the companys internal control over nancial reporting as of December 31, 2006. Based on managements assessment, management believes that, as of December 31, 2006, the companys internal control over nancial reporting was effective based on the criteria in Internal Control Integrated Framework, as set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). F E R N A N D O AG U I R R E J E F F R E Y M . ZA L L A B R I A N W. KO C H E R Chief Executive OfcerChief Financial OfcerChief Accounting Ofcer 2 0 0 6 A N N U A L R E P O R T 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 . 26. 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 ES U LTS O F O P E R AT I O N S 28 OV E RV I EW Chiquita Brands International, Inc. (CBII) and its subsidiaries (collectively, Chiquita or the company) operateas a leading international marketer and distributor of high-quality fresh and value-added produce, which is soldunder the Chiquita premium brand, the Fresh Express brand and other related trademarks. The company isone of the largest banana producers in the world and a major supplier of bananas in Europe and NorthAmerica. In June 2005, Chiquita acquired Fresh Express, the U.S. market leader in value-added salads, afast-growing food category for grocery retailers, foodservice providers and quick-service restaurants. Theacquisition of Fresh Express increased Chiquitas consolidated annual revenues by about $1 billion. The companybelieves that the acquisition diversied its business, accelerated revenue growth in higher margin value-addedproducts, and provided a more balanced mix of sales between Europe and North America, which makes thecompany less susceptible to risks unique to Europe, such as the European Union (EU) banana import regimeand foreign exchange risk. See Note 2 to the Consolidated Financial Statements for further information on thecompanys 2005 acquisition of Fresh Express.Signicant nancial items in 2006 included the following: Net sales for 2006 were $4.5 billion, compared to $3.9 billion for 2005. The increase resulted from the acquisition of Fresh Express in June 2005. The operating loss for 2006 was $28 million, compared to $188 million of operating income for 2005. The 2006 results included a $43 million goodwill impairment charge related to Atlanta AG and a $25 million charge related to a potential settlement of a previously disclosed U.S. Department of Justice investigation. Operating income for 2005 included ood costs of $17 million related to Tropical Storm Gamma and a $6 million charge related to the consolidation of fresh-cut fruit facilities in the Midwestern United States. Operating cash ow was $15 million in 2006, compared to $223 million in 2005. The decline was primarily due to the signicant decline in operating results in 2006. The companys debt at both December 31, 2006 and 2005 was $1 billion. The balance at December 31, 2006 included $44 million of borrowings on the companys revolving credit facility to fund working capital needs. In September 2006, the board of directors suspended the companys quarterly cash dividend of $0.10 per share on its outstanding shares of common stock.Operating results in 2006 were signicantly affected by regulatory changes in the European banana market,which resulted in lower local pricing and increased tariff costs, and by higher fuel and other industry costs.Neither the company nor the industry has been able to pass on the increased tariff costs to customers orconsumers, although the company has been able to maintain its price premium in the European market.Comparisons to 2005 are also affected by the fact that 2005 was an unusually good year for banana pricing inEurope. Additionally, the company recorded a charge in 2006 in its Banana segment related to the U.S.Department of Justice investigation and a goodwill impairment charge related to Atlanta AG that affectedboth the Banana and Fresh Select segments. The Fresh Cut segment was signicantly affected by consumerconcerns regarding the safety of packaged salad products, after discovery of E. coli in certain industry spinachproducts in September 2006 and the resulting investigation by the U.S. Food and Drug Administration (FDA).Although the FDA investigation linked no cases of illness to the companys Fresh Express products, the industryissues related to fresh spinach products will likely continue to have a signicant impact on Fresh Cut segmentresults through at least the third quarter of 2007.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 6 A N N U A L R E P O R T 27. 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 ES U LTS O F O P E R AT I O N S 29 In 2006, the company outlined its vision to become a global leader in branded, healthy, fresh foods, and rened its strategic objectives to (i) become a consumer-driven, customer-preferred organization, (ii) be an innovative, high-performance organization, and (iii) deliver leading food industry shareholder returns. The company is continuing to focus on becoming a more consumer-centric organization and launching innovative products to meet consumers growing desire for healthy, fresh and convenient food choices. In 2006, the company expanded its distribution of convenient, single Chiquita-To-Go bananas into 8,000 non-grocery convenience outlets. Chiquita Fresh and Ready was also introduced for testing in late 2006 in traditional grocery stores, as an innovative way to keep bananas fresher four days longer. During the year, Fresh Express added 12 new offerings, including 5-Lettuce Mix and Sweet Butter blends, to its line of ready-to-eat salad kits and premium value- added salads. Chiquita intends to continue providing value-added products and services in ways it believes better satisfy consumers, increase retailer protability and boost the in-store presence of Chiquita and Fresh Express branded products. The major risks facing the business include the EU tariff-only regime and related industry and pricing dynamics, weather and agricultural disruptions, consumer concerns regarding the safety of packaged salads, exchange rates, industry cost increases, risks of governmental investigations and other contingencies, and nancing.In January 2006, the European Commission implemented a new regime for the importation of bananas intothe EU. It eliminated the quota that was previously applicable and imposed a higher tariff on bananasimported from Latin America, while imports from certain African, Caribbean and Pacic (ACP) sources areassessed zero tariff on the rst 775,000 metric tons imported. The new tariff, which increased to 176 from75 per metric ton, equates to an increase in cost of approximately 1.84 per box for bananas importedby the company into the EU from Latin America, Chiquitas primary source of bananas. In 2006, the companyincurred a net $75 million in higher tariff-related costs, which is the sum of $116 million in incremental tariffcosts minus $41 million in lower costs to purchase banana import licenses, which are no longer required. Inpart due to the elimination of the quota, the volume of bananas imported into the EU increased in 2006,which contributed to a decrease in the companys average banana prices in core European markets of 11%on a local currency basis compared to 2005. The negative impact of the new regime has been substantialand is expected to continue indenitely.In 2006, the company incurred $25 million of higher sourcing, logistics and other costs for replacementfruit due to banana volume shortfalls caused by Hurricane Stan and Tropical Storm Gamma, whichoccurred in the fourth quarter of 2005. These storms, along with Hurricane Katrina in 2005, causedsignicant damage to banana cultivations and port facilities and resulted in increased costs for alternativebanana sourcing, logistics and farm rehabilitation, and write-downs of damaged farms. Additionally, in2007, Fresh Cut segment results for the rst quarter are expected to be impacted by up to $4 million from arecord January freeze in Arizona which affected lettuce sourcing.The company could be adversely affected by actions of regulators or a decline in consumer condence inthe safety and quality of certain food products or ingredients, even if the companys practices and proce-dures are not implicated. For example, consumer concerns regarding the safety of packaged salads in theUnited States, after discovery of E. coli in certain industry spinach products in September 2006, adverselyimpacted Fresh Express operations in the third and fourth quarters of 2006, resulting in lower sales andunforeseen costs, even though Fresh Express products were not implicated in these issues. As a result, thecompany may also elect or be required to incur additional costs aimed at restoring consumer condence inthe safety of its products. The company incurred $9 million of direct costs in 2006, such as abandoned rawproduct inventory and non-cancelable purchase commitments, related to this spinach issue. In addition tothese direct costs, the company believes that 2006 operating income was approximately $12 million lowerthan it otherwise would have been, as a result of reduced sales and decreased margins. The companyexpects this issue will continue to negatively impact Fresh Cut segment results through at least the thirdquarter of 2007. 2 0 0 6 A N N U A L R E P O R T 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 . 28. 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 ES U LTS O F O P E R AT I O N S 30In 2006, the euro strengthened against the dollar, causing the companys sales and prots to increase as a result of the favorable exchange rate conversion of euro-denominated sales to U.S. dollars. The companys results are signicantly affected by currency changes in Europe and, should the euro weaken against the dollar, it would adversely affect the companys results. The company seeks to reduce its exposure to adverse effects of euro exchange rate movements by purchasing euro put option contracts. Currently, the company has hedging coverage for approximately 70% of its estimated net euro cash ow in 2007 at average put option strike rates of $1.28 per euro and approximately 65% of its estimated net euro cash ow in the rst half of 2008 at average strike rates of $1.27 per euro. Transportation costs are signicant in the companys business, and the price of bunker fuel used in shipping operations is an important variable component of transportation costs. The companys fuel costs have increased substantially since 2003, and may increase further in the future. In addition, fuel and transportation costs are a signicant cost component of much of the produce that the company purchases from growers or distributors, and there can be no assurance that the company will be able to pass on such increased costs to its customers. The company enters into hedge contracts which permit it to lock in fuel purchase prices for up to three years on up to 75% of the fuel consumed in its ocean shipping eet, and thereby minimize the volatility that fuel prices could have on its operating results. However, these hedging strategies cannot fully protect against continually rising fuel rates and entail the risk of loss if market fuel rates decline (see Note 8 to the Consolidated Financial Statements). At December 31, 2006, the company had 55% hedging coverage through the end of 2009 on fuel consumed in its banana shipments to core markets in North America and Europe; in relation to market forward fuel prices at December 31, 2006, these hedge positions entailed losses of $3 million in 2007, $5 million in 2008, and $2 million in 2009. The cost of paper and plastics are also signicant to the company because bananas and some other produce items are packed in cardboard boxes for shipment, and packaged salads are shipped in sealed plastic bags. If the price of paper and/or plastics increases, or results in a higher cost to the company to purchase fresh produce, and the company is not able to effectively pass these price increases along to its customers, then the companys operating income will decrease. Increased costs of paper and plastics have negatively impacted the companys operating income in the past, and there can be no assurance that these costs will not adversely affect the companys operating results in the future. The company has international operations in many foreign countries, including in Central and South America, the Philippines and the Ivory Coast. These activities are subject to risks inherent in operating in those countries, including government regulation, currency restrictions and other restraints, 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 the company. Should such circumstances occur, the company might need to curtail, cease or alter activities in a particular region or country and may be subject to nes or other penalties. The companys ability to deal with these issues may be affected by applicable U.S. or other applicable law. See Note 15 to the Consolidated Financial Statements for a description of (i) a $25 million nancial sanction contained in a plea agreement offer made by the company to the U.S. Department of Justice and relating to payments made by the companys former banana producing subsidiary in Colombia to certain groups in that country which had been designated under United States law as a foreign terrorist organization, (ii) an investigation by EU competition authorities relating to prior information sharing in Europe and (iii) customs proceedings in Italy.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 6 A N N U A L R E P O R T 29. 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 ES U LTS O F O P E R AT I O N S31 The company has $1 billion outstanding in total debt, most of which is issued under debt agreements that require continuing compliance with nancial covenants. The most restrictive of these covenants are in the companys bank credit facility, which includes a $200 million revolving credit facility and $394 million of outstanding term loans (the CBL Facility). In 2006, after seeking prospective covenant relief in June, the company needed to seek further covenant relief later in the year. In October, the company obtained a temporary waiver, for the period ended September 30, 2006, from compliance with certain nancial covenants in the CBL Facility, with which the company otherwise would not have been in compliance. In November, the company obtained a permanent amendment to the CBL Facility to cure the covenant violations that would have otherwise occurred when the temporary waiver expired. In March 2007, the company obtained further prospective covenant relief with respect to a proposed nancial sanction contained in a plea agreement offer made by the company to the U.S. Department of Justice and other related costs. If the companys nancial performance were to decline compared to lender expectations, the company could in the future be required to seek further covenant relief from its lenders, or to restructure or replace its credit facility, which would further increase the cost of the companys borrowings, restrict its access to capital, and/or limit its operating exibility. As of February 28, 2007, the company had borrowed $84 million under its revolving credit facility, and expects to make additional draws to fund peak seasonal working capital needs through March or April 2007. Another $29 million of capacity was used to issue letters of credit, including a $7 million letter of credit issued to preserve the right to appeal certain customs claims in Italy. During 2007, the company may be required to issue up to an additional $25 million of letters of credit for appeal bonds relating to litigation of additional customs claims in Italy. The company believes that operating cash ow, including the collection of receivables from high season banana sales, should permit it to signicantly reduce the revolving credit balance during the second quarter and to fully repay it during the third quarter; however, there can be no assurance in this regard. In order to ensure adequate liquidity, in the event that the company experiences shortfalls in operating performance or unanticipated contingencies which require the use of signicant amounts of cash, the company may be limited in its ability to fund discretionary market or brand-support activities, innovation spending, capital investments and/or acquisitions that had been planned as part of the execution of its long-term growth strategy.2 0 0 6 A N N U A L R E P O R T 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 . 30. 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 ES U LTS O F O P E R AT I O N S 32 O P E RAT I O N S The company reports three business segments: Bananas, Fresh Select, and Fresh Cut. The Banana segmentincludes the sourcing (purchase and production), transportation, marketing and distribution of bananas. TheFresh Select segment includes the sourcing, marketing and distribution of whole fresh fruits and vegetablesother than bananas. The Fresh Cut segment includes value-added salads, foodservice and fresh-cut fruitoperations. Remaining operations, which are reported in Other, primarily consist of processed fruit ingredientproducts, which are produced in Latin America and sold in other parts of the world, and other consumerpackaged goods. The company evaluates the performance of its business segments based on operatingincome. Intercompany transactions between segments are eliminated.Financial information for each segment follows:(In thousands)200620052004 Net sales Bananas $ 1,933,866 $ 1,950,565 $ 1,713,160 Fresh Select1,355,963 1,353,573 1,289,145 Fresh Cut 1,139,097 538,66710,437 Other70,15861,55658,714Total net sales$4,499,084$ 3,904,361 $ 3,071,456Segment operating income (loss) Bananas $(20,591) $182,029 $122,739 Fresh Select (27,341) 10,546 440 Fresh Cut24,823(3,276) (13,422) Other (4,588)(1,666) 3,190Total operating income (loss)$ (27,697) $187,633 $ 112,947C 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 6 A N N U A L R E P O R T 31. 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 ES U LTS O F O P E R AT I O N S 33 BA N A N A S EG M E N T Net sales Banana segment net sales for 2006 decreased 1% versus 2005. The decrease resulted from lower banana pricing in Europe, which was mostly offset by higher volume in Europe and improved pricing in North America. Net sales for 2005 increased 14% versus 2004. The increase resulted primarily from improved banana pricing in both Europe and North America. Operating income 2006 compared to 2005. The Banana segment operating loss for 2006 was $21 million, compared to operating income of $182 million for 2005. Banana segment operating results were adversely affected by: $110 million from lower European local banana pricing, attributable in part to increased banana volumes that entered the market, encouraged by regulatory changes that expanded the duty preference for African and Caribbean suppliers and eliminated quota limitations for Latin American fruit, as well as reduced consumption driven by unseasonably hot weather in many parts of Europe during the third quarter. $75 million of net incremental costs associated with higher banana tariffs in the European Union. This consisted of approximately $116 million of incremental tariff costs, reecting the duty increase to 176 from 75 per metric ton effective January 1, 2006, offset by approximately $41 million of expenses incurred in 2005 to purchase banana import licenses, which are no longer required. $54 million of industry cost increases for fuel, fruit, paper and ship charters. $25 million of higher sourcing, logistics and other costs for replacement fruit due to banana volume shortfalls caused by Hurricane Stan and Tropical Storm Gamma, which occurred in the fourth quarter 2005. $25 million charge for potential settlement of a contingent liability related to the Justice Department investigation related to the companys former Colombian subsidiary. $14 million goodwill impairment charge related to Atlanta AG. $12 million in higher professional fees related to previously-reported legal proceedings, including the Justice Department investigation, the EU competition law investigation, and U.S. anti-trust litigation. These adverse items were offset in part by: $23 million of net cost savings in the Banana segment, primarily related to efciencies in the companys supply chain and tropical production operations. $21 million from higher pricing in North America. $20 million from lower marketing costs, primarily in Europe. $17 million impact from 2005 ooding in Honduras as a result of Tropical Storm Gamma, which did not recur in 2006. $13 million benet from the impact of European currency, consisting of a $23 million favorable variance from balance sheet translation and a $1 million increase in revenue, partially offset by $9 million of increased hedging costs and $2 million of higher European costs due to a stronger euro. $11 million of costs related to ooding in Costa Rica and Panama in the rst half of 2005 that did not repeat in 2006. $10 million from lower accruals for performance-based compensation due to lower operating results relative to targets. 2 0 0 6 A N N U A L R E P O R T 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 . 32. 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 ES U LTS O F O P E R AT I O N S 34 The companys banana sales volumes of 40-pound boxes were as follows:(In millions, except percentages) 20062005 % Change Core European Markets(1)53.854.0(0.4%)Trading Markets(2)12.5 6.981.2%North America 56.958.4(2.6%)Asia and the Middle East(3) 20.919.2 8.9%Total144.1 138.5 4.0% The volume of fruit sold into trading markets typically reects excess banana supplies beyond core marketdemands, sold on a spot basis. Beginning in 2007, the company anticipates less volume being available to tradingmarkets on a spot basis as a result of recent marketing agreements to provide a year-round supply of bananasto customers in Turkey, which in the future will be included in the companys core European markets. The following table presents the 2006 percentage change compared to 2005 for the companys bananaprices and banana volume:Q1 Q2Q3Q4Year BA N A N A P R I C ESCore European Markets(1)U.S. Dollars(4) (6%)(14%)(14%)(6%) (10%)Local Currency 2% (13%)(18%) (13%)(11%)Trading Markets(2)U.S. Dollars 27% 18% (16%) 6% (4%)North America 0%9% 8%4%5%Asia and the Middle East(3)U.S. Dollars(7%) (2%) (2%)18%4%BA N A N A VO LU M ECore European Markets(1) (9%) (1%)8%4%(0%)Trading Markets(2)150%(42%) 219% 83%81%North America(6%)(8%) 0%5%(3%)Asia and the Middle East(3)33% 12% 18% (9%)9%(1) The 25 countries of the EU, Norway, Iceland and Switzerland; beginning in 2007, core European markets will also include Bulgaria and Romania(two new EU member states) as well as Turkey(2) Other European and Mediterranean countries not included in Core Markets(3) The company primarily operates through joint ventures in this region.(4) Prices on a U.S. dollar basis do not include the impact of hedging.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 6 A N N U A L R E P O R T 33. 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 ES U LTS O F O P E R AT I O N S 35 The average spot and hedged euro exchange rates for 2006 and 2005 were as follows: (Dollars per euro) 2006 2005 % ChangeEuro average exchange rate, spot$ 1.25 $ 1.250.0% Euro average exchange rate, hedged 1.211.23(1.6%)The company has entered into put option contracts to hedge its risks associated with euro exchange rate movements. Put options require an upfront premium payment. These put options can reduce the negative earnings and cash ow impact on the company of a signicant future decline in the value of the euro, without limiting the benet the company would receive from a stronger euro. Foreign currency hedging costs charged to the Consolidated Statement of Income were $17 million in 2006, compared to $8 million in 2005. These costs relate primarily to hedging the companys net cash ow exposure to uctuations in the U.S. dollar value of its euro-denominated sales. The lower 2005 costs primarily resulted from gains recognized in late 2005 on put option contracts expiring at that time. At December 31, 2006, unrealized losses of $19 million on the companys currency option contracts were included in Accumulated other comprehensive income, of which $15 million is expected to be reclassied to net income during the next 12 months.The company also enters into forward contracts for fuel oil for its shipping operations, to minimize the volatility that changes in fuel prices could have on its operating results. Unrealized losses of $10 million on the fuel oil forward contracts were also included in Accumulated other comprehensive income at December 31, 2006, of which $3 million is expected to be reclassied to net income during the next 12 months.Banana segment operating income for 2005 was $182 million, compared to $123 2005 compared to 2004. million for 2004. Banana segment operating results were favorably affected by: $151 million benet from improved local European pricing. $15 million from improved pricing in North America, due principally to temporary contract price increases to offset costs from ooding in Costa Rica and Panama in January 2005, and implementation late in the year of surcharges to offset rising industry costs, including fuel-related products and transportation. $9 million before-tax loss on the sale of the companys former Colombian banana production division in 2004. $4 million increase from the impact of European currency, consisting of an $8 million increase in revenue and a $22 million decrease in hedging costs, partially offset by a $26 million adverse impact of balance sheet translation. $4 million charge in 2004 relating to stock options and restricted stock granted to the companys former chairman and CEO that vested upon his retirement in May 2004. These items were offset in part by: $34 million of cost increases from higher fuel, paper and ship charter costs. $27 million of higher costs for advertising, marketing and innovation spending, primarily due to consumer brand support efforts in Europe late in the year. $24 million of higher license-related banana import costs in Europe. $17 million impact from ooding in Honduras caused by Tropical Storm Gamma (included in Cost of sales in the Consolidated Statement of Income). $11 million primarily from increased costs related to the January ooding in Costa Rica and Panama, including alternative banana sourcing, logistics and farm rehabilitation costs, and write-downs of damaged farms. $4 million adverse impact of pricing in Asia. $3 million of higher administrative expenses, in part due to accruals for performance-based compensation due to improved year-over-year operating results. $3 million due to lower volume of second-label fruit in Europe. 2 0 0 6 A N N U A L R E P O R T 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 . 34. 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 ES U LTS O F O P E R AT I O N S 36 F R ES H S E L ECT S EG M E N TNet salesFresh Select net sales were at at $1.4 billion in 2006 compared to 2005. Net sales for 2005 increased by 5%compared to 2004, primarily due to higher volume from Atlanta AG.Operating income The Fresh Select segment had an operating loss of $27 million in 2006, compared2006 compared to 2005.to operating income of $10 million in 2005. The 2006 operating results included a $29 million charge for goodwillimpairment at Atlanta AG. Aside from the impairment charge, year-over-year improvements in the companysNorth American Fresh Select operations were more than offset by a decline in protability at Atlanta AG, andlower pricing and currency-related declines in the companys Chilean operations. The decline in protability ofAtlanta AG resulted from intense price competition in its primary market of Germany, as well as $3 million ofcharges late in 2006 related to rationalization of its distribution network, including the closure of one facility.During the 2006 third quarter, due to the decline in Atlanta AGs business performance in the period followingthe implementation of the new EU banana import regime as of January 1, 2006, the company accelerated thetesting of Atlantas goodwill and xed assets for impairment. As a result, the company recorded a goodwillimpairment charge in the 2006 third quarter for the full amount, of which $29 million was included in the FreshSelect segment and $14 million in the Banana segment. The Fresh Select segment had operating income of $10 million in 2005, compared2005 compared to 2004.to breakeven results for 2004. The improvement resulted primarily from a restructured melon program andother improvements in North America, and operational improvement at Atlanta, partially offset by weather andcurrency-related declines in the companys Chilean operations.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 6 A N N U A L R E P O R T 35. 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 ES U LTS O F O P E R AT I O N S37 F R ES H C U T S EG M E N T Net sales Net sales in 2006 for the companys Fresh Cut segment were $1.1 billion, up from $539 million in 2005 due to the Fresh Express acquisition in mid-2005. Substantially all of the revenue in this segment is from Fresh Express. Operating income 2006 compared to 2005. The Fresh Cut segment had operating income of $25 million in 2006, compared to an operating loss of $3 million for 2005. Fresh Cut segment results were favorably affected by: $31 million increase in operating income from Fresh Express, as a result of Chiquita owning Fresh Express for a full year in 2006 versus a half year in 2005, as well as normal operating improvements. $6 million of mostly non-cash charges in 2005 from the shut-down of Chiquitas fresh-cut fruit facility in Manteno, Illinois following the acquisition of Fresh Express, which had a facility servicing the same Midwestern area. These items were offset in part by: $9 million of direct costs in 2006, including lost raw product inventory and non-cancelable purchase commitments, related to consumer concerns about the safety of packaged salads after discovery of E. coli in certain industry spinach products in September 2006 and the resulting investigation by the U.S. Food and Drug Administration. In addition to the direct costs resulting from the fresh spinach issue, the company believes that 2006 operating income was at least $12 million lower than it otherwise would have been as a result of reduced sales and decreased margins during the nal four months of 2006. Although the FDA investigation linked no cases of illness to the companys Fresh Express products, consumer concerns are likely to continue to have an impact on Fresh Cut segment results through at least the third quarter of 2007. On a pro forma basis, as if the company had completed the acquisition of Fresh Express on December 31, 2004, there was a $12 million improvement in Fresh Cut segment operating income compared to 2005. The improve- ment in pro forma results was driven by a 10 percent increase in volume and a 2 percent increase in net revenue per case in retail value-added salads, continuing improvements in fresh-cut fruit operations, the achievement of acquisition synergies and other cost savings, and the absence of $6 million of non-cash charges in 2005 from the shut-down of the fresh-cut fruit facility noted above. These improvements were partially offset by the spinach impact mentioned above, as well as higher industry costs and increased marketing and innovation spending. The pro forma segment results may not be indicative of what the actual results would have been had the acquisition been completed on the date assumed or the results that may be achieved in the future. The Fresh Cut segment operating income reects approximately $18 million of depreciation and $5 million of amortization for Fresh Express in the rst half of 2006, which explains the increase in consolidated depreciation and amortization expense from 2005, since the acquisition of Fresh Express was completed in mid-2005.2 0 0 6 A N N U A L R E P O R T 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 . 36. 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 ES U LTS O F O P E R AT I O N S 38 The Fresh Cut segment had an operating loss of $3 million in 2005, compared to an2005 compared to 2004.operating loss of $13 million for 2004. Fresh Cut segment results were favorably affected by: $14 million in operating income at Fresh Express from the June 28, 2005 acquisition date to the end of the year. On a pro forma basis as if the company had completed its acquisition of Fresh Express on June 30, 2004, this represents a $5 million improvement in operating income compared to the same period in 2004, driven by a 7 percent increase in volume, a 3 percent increase in net revenue per case in retail value-added salads on a full-year basis and a reduction in corporate overhead and insurance costs, partially offset by increases in cost of goods sold and innovation spending. $2 million of improvements in the operating results of Chiquitas fresh-cut fruit facility.This was partially offset by: $6 million of charges from the shut-down of Chiquitas fresh-cut fruit facility in Manteno, Illinois. These costs were primarily included in Cost of sales in the Consolidated Statement of Income.On a pro forma basis, as if the company had completed its acquisition of Fresh Express on June 30, 2004, FreshCut segment revenue for the six months ended December 31, 2005 was $515 million, up 6 percent from $484million in the same period in 2004, and operating income for the six months ended December 31, 2005 was $8million before plant shut-down costs, compared to $3 million in the same period in 2004. The pro forma segmentresults for the second half of 2004 do not purport to be indicative of what the actual results would have beenhad the acquisition been completed on the date assumed or the results that may be achieved in the future.I N T E R EST A N D OT H E R I N CO M E ( EX P E N S E ) Interest income in 2006 was $9 million, compared to $10 million in 2005. Interest expense in 2006 was $86million, compared to $60 million in 2005. The increase in interest expense was due to the full-year impact ofthe Fresh Express acquisition nancing.Other income (expense) in 2006 included a $6 million gain from the sale of the companys 10% ownership inChiquita Brands South Pacic, an Australian fresh produce distributor. In 2005, other income (expense) included$3 million of nancing fees, primarily related to the write-off of unamortized debt issue costs for a prior creditfacility and $2 million of charges for settlement of an indemnication claim relating to prior periods, partiallyoffset by a $1 million gain on the sale of Seneca preferred stock and a $1 million gain from an insurancesettlement. Other income (expense) in 2004 included a loss of $22 million from the premium associated withthe renancing of the companys then-outstanding 10.56% Senior Notes, partially offset by a $2 million gainrelated to proceeds received as a result of the demutualization of a company with which Chiquita held pensionannuity contracts.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 6 A N N U A L R E P O R T 37. 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 ES U LTS O F O P E R AT I O N S39 I N CO M E TAX ESThe companys effective tax rate varies from period to period due to the level and mix of income among various domestic and foreign jurisdictions in which the company operates. The company currently does not generate U.S. federal taxable income. The companys taxable earnings are substantially from foreign operations being taxed in jurisdictions at a net effective rate lower than the U.S. statutory rate. No U.S. taxes have been accrued on foreign earnings because such earnings have been or are expected to be permanently invested in foreign operating assets. Income taxes were a $2 million benet for 2006, compared to expense of $3 million in 2005 and expense of $5 million in 2004. Income taxes for 2006 include benets of $10 million primarily from the resolution of tax contingencies in various jurisdictions and a reduction in valuation allowance. In addition, the company recorded a tax benet of $5 million as a result of a change in German tax law. Income taxes for 2005 included benets of $8 million primarily from the resolution of tax contingencies and reduction in the valuation allowance of a foreign subsidiary due to the execution of tax planning initiatives. Income taxes in 2004 included a benet of $5.7 million from the release to income, upon the sale of the Colombian banana production division, of a deferred tax liability related to growing crops in Colombia. See Note 13 to the Consolidated Financial Statements for further information about the companys income taxes.ST RAT EG I C A LT E R N AT I V E FO R S H I P P I N G A N D LO G I ST I CSIn September 2006, the company announced that it is exploring strategic alternatives with respect to the sale and long-term management of its overseas shipping assets and shipping-related logistics activities. Great White Fleet, Ltd. (GWF), a wholly-owned subsidiary of Chiquita, manages the companys global ocean transportation and logistics operations. GWF operates 12 owned refrigerated cargo vessels and charters additional vessels for use primarily for the long-haul transportation of Chiquitas fresh fruit products from Latin America to North America and Europe. The owned vessels, consisting of eight reefer ships and four container ships, are included in the Banana segment. The company will consider various structures, including the sale and leaseback of the companys owned ocean-going shipping eet, the sale and/or outsourcing of related ocean-shipping assets and container operations, and entry into a long-term strategic partnership to meet all of Chiquitas international cargo transportation needs. Proceeds from a sale would be used primarily to repay debt, including $101 million of shipping-related debt outstanding at December 31, 2006 and up to $80 million of term loans outstanding under the CBL Facility.SA L E O F I N V EST M E N TIn December 2006, the company sold its 10% ownership in Chiquita Brands South Pacic, an Australian fresh produce distributor. The company received $9 million in cash and realized a $6 million gain on the sale of the shares, which was included in Other income (expense), net in the Consolidated Statement of Income.S E N ECA STO C KIn April 2005, the company sold approximately 968,000 shares of Seneca Foods Corporation preferred stock, which had been received as part of the May 2003 sale of the companys Chiquita Processed Foods division to Seneca. The company received proceeds of approximately $14 million from the sale of the preferred stock and recorded a $1 million gain on the transaction in the 2005 second quarter in Other income (expense), net in the Consolidated Statement of Income.2 0 0 6 A N N U A L R E P O R T 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 . 38. 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 ES U LTS O F O P E R AT I O N S 40 SA L E O F CO LO M B I A N D I V I S I O N In June 2004, the company sold its former banana-producing and port operations in Colombia to Invesmar Ltd.(Invesmar), the holding company of C.I. Banacol S.A., a Colombian-based producer and exporter of bananasand other fruit products. In exchange for these operations, the company received $28.5 million in cash; $15million face amount of notes and deferred payments; and the assumption by the buyer of approximately $7million of pension liabilities.In connection with the sale, Chiquita entered into eight-year agreements to purchase bananas and pineapplesfrom afliates of the buyer. Under the banana purchase agreement, Chiquita purchases approximately 11million boxes of Colombian bananas per year at above-market prices. This resulted in a liability of $33 million atthe sale date ($26 million at December 31, 2006), which represents the estimated net present value of theabove-market premium to be paid for the purchase of bananas over the term of the contract. Substantially allof this liability is included in Other liabilities in the Consolidated Balance Sheet. Under the pineapplepurchase agreement, Chiquita purchases approximately 2.5 million boxes of Costa Rican golden pineapplesper year at below-market prices. This resulted in a receivable of $25 million at the sale date ($20 million atDecember 31, 2006), which represents the estimated net present value of the discount to be received for thepurchase of pineapples over the term of the contract. Substantially all of this receivable is included inInvestments and other assets, net in the Consolidated Balance Sheet. Together, the two long-term fruit purchaseagreements commit Chiquita to approximately $80 million in annual purchases.Also in connection with the sale, Chiquita agreed that, in the event that it becomes unable to perform itsobligations under the banana purchase agreement due to a conict with U.S. law, Chiquita will indemnifyInvesmar primarily for the lost premium on the banana purchases.The net book value of the assets and liabilities transferred in the transaction was $36 million. The companyrecognized a before-tax loss of $9 million and an after-tax loss of $4 million on the transaction, which takes intoaccount the net $8 million loss from the two long-term fruit purchase agreements.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 6 A N N U A L R E P O R T 39. 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 ES U LTS O F O P E R AT I O N S41 L I Q U I D I TY A N D CA P I TA L R ESO U R C ESThe companys cash balance was $65 million at December 31, 2006, compared to $89 million at December 31, 2005. Operating cash ow was $15 million in 2006, $223 million in 2005 and $94 million in 2004. The decrease in operating cash ow for 2006 was primarily due to a signicant decline in operating results. The operating cash ow increase in 2005 was primarily due to signicantly improved operating results and was partially used to fund a portion of the Fresh Express acquisition. Capital expenditures were $61 million for 2006 and $43 million for both 2005 and 2004. The increase in 2006 was partially due to the full year impact of the acquisition of Fresh Express, which occurred in June 2005. The 2005 capital expenditures included $12 million related to Fresh Express subsequent to the acquisition. In 2004, capital expenditures included $10 million for implementation of a global business transaction processing system. The following table summarizes the companys contractual obligations for future cash payments at December 31, 2006, which are primarily associated with debt service payments, operating leases, pension and severance obligations and long-term purchase contracts:Less than1-33-5More than (In thousands) Total1 yearyearsyears5 yearsLong-term debt Parent company $ 475,000 $ $ $ $ 475,000 Subsidiaries498,47522,588 43,565218,875213,447 Notes and loans payable55,04255,042 Interest on debt 500,000 80,000150,000145,000125,000 Operating leases250,93887,590 68,795 36,248 58,305 Pension and severance obligations92,950 12,15920,38518,01742,389 Purchase commitments1,696,478 632,655491,404393,102 179,317$3,568,883$ 890,034 $774,149 $ 811,242$ 1,093,458Estimating future cash payments for interest on debt requires signicant assumptions. The gures in the table reect a LIBOR rate of 5.375% and an interest rate of LIBOR plus a margin of 3.00% on the term loans under the CBL Facility for all future periods. No debt principal repayments were assumed, other than normal matu- rities. The table does not include interest on any borrowings under the revolving credit facility to fund working capital needs. The companys purchase commitments consist primarily of long-term contracts to purchase bananas, lettuce and other produce from third-party producers. The terms of these contracts, which set the price for the com- mitted produce to be purchased, range primarily from one to ten 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, lettuce and other produce at the contract price until the renegotiation date. The purchase obligations included in the table are based on the current contract price and the estimated production volume the company is committed to purchase until the renegotiation date. The banana and lettuce purchase commitments reected in the table above represent normal and customary operating commitments in the industry. Most of the 2007 banana volume to be purchased is reected above, as the company has secured and committed to its sources for the upcoming year. Substantially all of the contracts provide for minimum penalty payments, which are less than the amounts included in the table, to be paid if the company were to purchase less than the committed volume of bananas or lettuce.2 0 0 6 A N N U A L R E P O R T 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 . 40. 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 ES U LTS O F O P E R AT I O N S 42 Total debt at both December 31, 2006 and 2005 was $1 billion. The following table provides detail of thecompanys debt balances: December 31,(In thousands)20062005 PA R E N T CO M PA NY71/2% Senior Notes, due 2014 $ 250,000 $ 250,00087/8% Senior Notes, due 2015 225,000 225,000S U B S I D I A R I ESCBL credit facility Term Loan B24,341 24,588 Term Loan C369,375373,125 Revolver44,000 Shipping 100,581111,413Other 15,22012,982Total debt $ 1,028,517 $ 997,108 The company and Chiquita Brands L.L.C. (CBL), the main operating subsidiary of the company, are parties toan amended and restated credit agreement with a syndicate of bank lenders for a senior secured credit facility(the CBL Facility), which consists of a $200 million revolving credit facility (the Revolving Credit Facility), a$125 million term loan (Term Loan B), and a $375 million term loan (Term Loan C). Total fees of approxi-mately $18 million were paid to obtain the CBL Facility in June 2005. The company made $100 million ofdiscretionary principal payments on Term Loan B in the second half of 2005. The letter of credit sublimit underthe Revolving Credit Facility is $100 million.At December 31, 2006, $44 million of borrowings were outstanding under the Revolving Credit Facility and $31million of credit availability was used to support issued letters of credit (including a $7 million letter of creditissued to preserve the right to appeal certain customs claims in Italy), leaving $125 million of credit available.The company borrowed an additional $40 million under the Revolving Credit Facility in January and February2007, and expects to borrow more to fund peak seasonal working capital needs through March or April 2007.Additionally, as more fully described in Note 15 to the Consolidated Financial Statements, the company may berequired to issue letters of credit of up to approximately $50 million in connection with its appeal of certainclaims of Italian customs authorities, although the company does not expect to issue letters of credit in 2007 inexcess of $25 million for this matter. The company believes that operating cash ow, including the collection ofreceivables from high season banana sales, should permit it to signicantly reduce the revolving credit balanceduring the second quarter and to fully repay it during the third quarter; however, there can be no assurance inthis regard. The company also believes that its cash level, cash ow generated by operating subsidiaries andborrowing capacity will provide sufcient cash reserves and liquidity to fund the companys working capitalneeds, capital expenditures and debt service requirements. However, in the event that the company experi-ences shortfalls in operating performance compared to lender expectations or unanticipated contingencieswhich require the use of signicant amounts of cash, the company may be required to seek further covenantrelief or to restructure or replace its credit facility and may be limited in its ability to fund discretionary marketor brand-support activities, innovation spending, capital investments and/or acquisitions that had beenplanned as part of the execution of its long-term growth strategy.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 6 A N N U A L R E P O R T 41. 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 ES U LTS O F O P E R AT I O N S 43 In October 2006, even after obtaining covenant relief in June, the company was required to obtain a temporary waiver, for the period ended September 30, 2006, from compliance with certain nancial covenants in the CBL Facility, with which the company otherwise would not have been in compliance. In November 2006, the company obtained a permanent amendment to the CBL Facility to cure the covenant violations that would have otherwise occurred when the temporary waiver expired. The amendment revised certain covenant calcu- lations relating to nancial ratios for leverage and xed charge coverage, established new levels for compliance with those covenants to provide additional nancial exibility, and established new interest rates. Total fees of approximately $2 million were paid to amend the CBL Facility. In March 2007, the company obtained further prospective covenant relief with respect to a proposed nancial sanction contained in a plea agreement offer made by the company to the U.S. Department of Justice and other related costs. The term loans bear interest at LIBOR plus a margin of 2.00% to 3.00%, depending on the companys consoli- dated leverage ratio. At December 31, 2006 and 2005, the interest rate on the term loans was LIBOR plus 3.00% and LIBOR plus 2.00%, respectively. The Revolving Credit Facility bears interest at LIBOR plus a margin of 1.25% to 3.00%. At December 31, 2006, the interest rate on the Revolving Credit Facility was LIBOR plus 3.00%. Substantially all U.S. assets of CBL and its subsidiaries are pledged to secure the CBL Facility. The Revolving Credit Facility and Term Loan B are principally secured by the U.S. assets of CBL and its subsidiaries other than Fresh Express and its subsidiaries. The Term Loan C is principally secured by the assets of Fresh Express and its subsidiaries. The CBL Facility is also secured by liens on CBLs trademarks as well as pledges of equity and guarantees by various subsidiaries worldwide. The CBL Facility is guaranteed by CBII and secured by a pledge of CBLs equity. Under the amended CBL Facility, CBL may distribute cash to CBII for routine CBII operating expenses, interest payments on CBIIs 71/2% and 8 7/8% Senior Notes and payment of certain other specied CBII liabilities. Until Chiquita meets certain nancial ratios and elects to become subject to a reduced maximum CBL leverage ratio, (i) CBLs distributions to CBII for other purposes, such as dividend payments to Chiquita shareholders and repurchases of CBIIs common stock, warrants and senior notes, are prohibited, and (ii) the ability of CBL and its subsidiaries to incur debt, dispose of assets, carry out mergers and acquisitions, and make capital expenditures is further limited than under the original CBL Facility. In June 2005, the company issued $225 million of 8 7/8% Senior Notes due 2015, for net proceeds of $219 million. The proceeds were used to nance a portion of the acquisition of Fresh Express. The 8 7/8% Senior Notes are callable on or after June 1, 2010, in whole or from time to time in part, at 104.438% of face value declining to face value in 2013. Before June 1, 2010, the company may redeem some or all of the 8 7/8% Senior Notes at a specied treasury make-whole rate. In addition, before June 1, 2008, the company may redeem up to 35% of the notes at a redemption price of 108.75% of their principal amount using proceeds from sales of certain kinds of company stock. In September 2004, the company issued $250 million of 71/2% Senior Notes due 2014, for net proceeds of $246 million. The proceeds from this offering, together with available cash,