-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FMRfnmvvje2EuI0AaNO33UBjJSWOODxsBugfjrGj29mdVHncjOv2rBRGdmr863kG tYoqf5DKkIZk2qoBfgWGkQ== 0001047469-98-013699.txt : 19980406 0001047469-98-013699.hdr.sgml : 19980406 ACCESSION NUMBER: 0001047469-98-013699 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19980103 FILED AS OF DATE: 19980403 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DOLE FOOD COMPANY INC CENTRAL INDEX KEY: 0000018169 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE PRODUCTION - CROPS [0100] IRS NUMBER: 990035300 STATE OF INCORPORATION: HI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-04455 FILM NUMBER: 98587127 BUSINESS ADDRESS: STREET 1: 31355 OAK CREST DRIVE CITY: WESTLAKE VILLAGE STATE: CA ZIP: 91361 BUSINESS PHONE: 8188796600 MAIL ADDRESS: STREET 1: 31355 OAK CREST DR CITY: WESTLAKE VILLAGE STATE: CA ZIP: 91361 FORMER COMPANY: FORMER CONFORMED NAME: CASTLE & COOKE INC DATE OF NAME CHANGE: 19910731 10-K405 1 10-K405 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- FORM 10-K (MARK ONE) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED JANUARY 3, 1998 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] FOR THE TRANSITION PERIOD FROM ________________ TO ________________. COMMISSION FILE NUMBER 1-4455 -------------------------- DOLE FOOD COMPANY, INC. (Exact Name of Registrant as specified in its charter) HAWAII 99-0035300 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification number) 31365 OAK CREST DRIVE, WESTLAKE VILLAGE, CALIFORNIA 91361 (Address of principal executive offices) Registrant's telephone number, including area code: (818) 879-6600 Securities registered pursuant to Section 12(b) of the Act: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ---------------------------------------- ON WHICH REGISTERED --------------------------------- Common Stock, No Par Value New York Stock Exchange Pacific Exchange Securities registered pursuant to Section 12(g) of the Act: NONE -------------------------- Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. /X/ The aggregate market value of the voting stock held by non-affiliates of the registrant as of March 20, 1998 was approximately $2,317,603,107. The number of shares of Common Stock outstanding as of March 20, 1998 was 60,354,537. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's 1998 Annual Report to Stockholders for the year ended January 3, 1998 are incorporated by reference into Parts I, II and IV. Portions of the registrant's definitive Proxy Statement for its 1998 Annual Meeting of Stockholders are incorporated by reference into Part III. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DOLE FOOD COMPANY, INC. FORM 10-K FISCAL YEAR ENDED JANUARY 3, 1998 TABLE OF CONTENTS
ITEM NUMBER IN FORM 10-K PAGE - ------------------------------------------------------------------------------------------------------ ---------- PART I 1. Business.................................................................................. 1 2. Properties................................................................................ 6 3. Legal Proceedings......................................................................... 8 4. Submission of Matters to a Vote of Security Holders; Executive Officers of the Registrant................................................................................ 9 PART II 5. Market for the Registrant's Common Equity and Related Stockholder Matters................. 11 6. Selected Financial Data................................................................... 11 7. Management's Discussion and Analysis of Financial Condition and Results of Operations... 11 8. Financial Statements and Supplementary Data............................................... 11 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.... 11 PART III 10. Directors and Executive Officers of the Registrant....................................... 12 11. Executive Compensation................................................................... 12 12. Security Ownership of Certain Beneficial Owners and Management........................... 12 13. Certain Relationships and Related Transactions........................................... 12 PART IV 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.......................... 12 (a) 1. Index to Financial Statements........................................................ 12 2. Index to Financial Statement Schedules................................................ 12 3. Exhibits.............................................................................. 13 (b) Reports on Form 8-K...................................................................... 14 Signatures............................................................................................ 15 Financial Statements and Financial Statement Schedules................................................ F-1-F-2
PART I ITEM 1. BUSINESS Dole Food Company, Inc. was founded in Hawaii in 1851 and was incorporated under the laws of Hawaii in 1894. Unless the context otherwise requires, Dole Food Company, Inc. and its consolidated subsidiaries are referred to herein as the "Company" and "Dole". The Company's principal executive offices are located at 31365 Oak Crest Drive, Westlake Village, California 91361, telephone (818) 879-6600. At January 3, 1998, the Company had approximately 44,000 full-time employees worldwide. The Company is engaged in food production and distribution. Dole is one of the largest companies engaged in the worldwide sourcing, growing, processing, distributing and marketing of high quality, branded fresh produce. The Company's operations are described below. For detailed financial information with respect to the Company's business and its operations, see the Company's Consolidated Financial Statements and the related Notes to Consolidated Financial Statements, which are included in its 1997 Annual Report for the fiscal year ended January 3, 1998 (the "Dole Annual Report") and incorporated by reference in Part II of this report. GENERAL Dole is engaged in the worldwide sourcing, growing, processing, distributing and marketing of high quality, branded fresh produce. Dole provides retail and institutional customers and other food product companies with high quality products which are produced and improved through research, agricultural assistance and advanced harvesting, processing, packing, cooling, shipping and marketing techniques and which bear the DOLE-Registered Trademark- trademarks. Dole is one of the world's largest producers of bananas and pineapples. Dole is also a major marketer of citrus and table grapes worldwide and an industry leader in iceberg lettuce, celery, cauliflower and broccoli and in fresh-cut salads and pre-cut vegetables. Dole also processes California almonds. Dole's products are produced both directly on Company-owned or leased land and through associated producer and independent grower arrangements pursuant to which Dole provides varying degrees of farming, harvesting, packing, storing, shipping, stevedoring and marketing services, as well as financing through advances to growers of certain products. Fresh fruit and vegetable products, almonds and processed pineapple products are, for the most part, packed and/or processed directly by Dole. Dole utilizes product quality, brand recognition, competitive pricing, effective customer service and consumer marketing programs to enhance its position within the highly competitive food industry. Consumer and institutional recognition of the DOLE-Registered Trademark- trademarks and related brands and the association of these brands with high quality food products contribute significantly to Dole's ability to compete in the markets for fresh fruit and vegetables, packaged foods and dried fruit, nuts and beverages. The Company owns these trademarks in the United States, Canada and in other countries in which it conducts business and regards them as important corporate assets with high recognition and acceptance. The markets for all of Dole's products are highly competitive. In order to compete successfully, Dole sources products of high quality and seeks to distribute them in worldwide markets on a timely basis. Dole's competitors in the fresh fruit business include a limited number of large international food companies, as well as a large number of smaller independent food companies, grower cooperatives and foreign government-sponsored producers which have intensified competition in recent years. With respect to vegetables, a limited number of grower-shippers in the United States and Mexico supply a significant portion of the domestic fresh vegetable market. However, numerous smaller independent distributors also compete with Dole in the market for fresh vegetables. With respect to processed pineapple, Dole competes against a limited number of large U.S. companies, as well as a substantial number of foreign competitors 1 and independent canners. Dole's citrus and dried fruit and nut products compete in North America primarily against large grower processing and marketing cooperatives with strong brand recognition. Dole's earnings from its fresh fruit, fresh vegetable, dried fruit and nut and beverage operations are sensitive to fluctuations in the volatile market prices for these products. Excess supplies often cause severe price competition. Growing conditions in various parts of the world, particularly weather conditions such as floods, droughts and freezes, and diseases and pests are primary factors affecting market prices because of their influence on supply and quality of product. Other factors affecting Dole's operations include the seasonality of its supplies, the ability to process products during critical harvest periods, the timing and effects of ripening, the degree of perishability, the effectiveness of worldwide distribution systems, the terms of various federal and state marketing orders, total worldwide industry volumes, the seasonality of consumer demand, foreign currency exchange fluctuations, foreign importation restrictions and foreign political risks. PRODUCTS Dole sources, distributes and markets fresh fruit products, including bananas, pineapples, table grapes, apples, pears, plums, oranges, grapefruit, lemons, mangoes, kiwi, tangelos, melons, cherries, strawberries, raspberries and other deciduous, tropical and citrus fruits. Dole sources, harvests, cools, distributes and markets more than 20 different types of fresh vegetable products, including iceberg lettuce, red and green leaf lettuce, romaine lettuce, butter lettuce, celery, cauliflower, broccoli, carrots, brussels sprouts, spinach, red and green onions, asparagus, snow peas and artichokes. Dole also markets value-added products such as iceberg lettuce based salad mixes, specialty lettuce salads, complete salad kits which include dressing and condiments, blends of specialty lettuces, red cabbage, peeled mini-carrots, shredded carrots, shredded red cabbage and coleslaw. Dole sources, processes and markets almonds and markets raisins, prunes and dates. Dole's fresh fruit and vegetable products and its consumer dried fruit and nut products are marketed under the DOLE-Registered Trademark- brand, under other brand names owned by the Company, and, in some cases, under private labels. Dole produces and markets processed food products, including sliced, chunk, tidbit and crushed pineapple and pineapple juice in cans, as well as tropical fruit salad and mandarin oranges. Dole's products are marketed through more than 50 direct selling offices in North America, approximately 50 in Europe, five in Japan, one each in Hong Kong, Korea, the Middle East and the Philippines, as well as through independent brokers. DOLE NORTH AMERICA DOLE NORTH AMERICA distributes and markets DOLE-Registered Trademark- fresh fruits and vegetables, and processed food products, including processed pineapple, canned pineapple juices and pineapple juice blend beverages, almonds, raisins, prunes and dates, in North America. Dole markets bananas and pineapples grown in Latin America, table grapes, apples and pears grown in the United States and Chile, melons grown in Brazil, Costa Rica and Honduras and citrus fruit grown in the United States, as well as other deciduous and tropical fruit grown in the United States, Latin America and Mexico. Fresh pineapple destined for North America is grown by Dole in Hawaii and in Honduras. These products are sold primarily to retail chains and wholesalers, which in turn resell or distribute them to retail food stores. Vegetables, sold as fresh and included in packaged salads and other value-added products, marketed by Dole are generally grown by independent growers in California and Arizona and northern and central 2 Mexico. The vegetables are generally field packed and transported to Dole's central cooling and distribution facilities. The products are sold to customers in North America and, to a lesser extent, Asia and Western Europe. Almonds are sourced from independent growers and, to a lesser extent, produced by Dole North America. They are sold in bulk to cereal, confectionery and other food processors and to a lesser extent, packaged for the retail consumer. They are marketed overseas, primarily in Western Europe and Asia, and domestically. Retail packs of raisins, prunes and dates are processed and packed through co-production arrangements. Dole has an agreement with Nestle Frozen, Refrigerated & Ice Cream Companies, Inc., a subsidiary of Nestle USA, Inc., pursuant to which Dole has licensed to Nestle its rights to market and manufacture processed products in key segments of the frozen novelty business in the United States and Canada, including FRUIT 'N JUICE-Registered Trademark-, and SORBET 'N CREAM-TM- bars and, in the premium novelty category, FRUIT SORBET. Certain pineapple and pineapple blend fruit juices are obtained through co-production arrangements with independent manufacturers. Dole also markets DOLE-Registered Trademark- canned pineapple juice and pineapple juice blend beverages. DOLEWHIP-Registered Trademark-, a soft-serve, non-dairy dessert, is manufactured and marketed by Precision Food under license from Dole. In connection with the sale of a portion of its juice business to Tropicana Products, Inc. in May of 1995, Dole granted to Tropicana a royalty-free license to use certain trademarks, including DOLE-Registered Trademark-, in Tropicana's juice business. DOLE LATIN AMERICA DOLE LATIN AMERICA sources and transports bananas grown in Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Nicaragua, Panama and Venezuela for markets principally in North America, Europe, Russia, the Mediterranean and selected Asian markets. Fresh pineapples destined for the North American and Western European markets are grown by Dole Latin America on plantations in Honduras and sourced from independent producers in Costa Rica. Dole sources table grapes, apples, pears and other deciduous fruit grown in Chile, melons grown in Brazil, Costa Rica and Honduras, citrus fruit grown in Honduras, and mangoes from Brazil, Costa Rica, Ecuador, Guatemala, Honduras, Mexico and Peru for markets in North America and Western Europe. Dole operates a fleet of 8 refrigerated containerships and 32 breakbulk refrigerated ships, of which 20 are Company-owned or bareboat chartered and the remainder are time chartered. From time to time, excess capacity may be chartered to others or may carry commercial cargo for third parties. Dole conducts other food and beverage operations in Honduras. It owns an approximately 81% interest in, and operates, a beer and soft drink bottling operation, a bottle crown plant, a plastic injection molding facility used primarily for the manufacture of beer and soft drink plastic cases, a sugar mill and sugar cane plantations, as well as a majority interest in an edible oils refinery, a laundry soap factory, a palm oil extraction operation and a palm oil plantation. The soft drink bottling operation, which sells its products primarily in Honduras, competes against other local bottlers. DOLE ASIA DOLE ASIA sources bananas and fresh pineapples grown in the Philippines and transports them to markets principally in Asia and the Middle East. Pineapples used for processed products distributed around the world are grown primarily in the Philippines and Thailand. Dole Asia also sources DOLE-Registered Trademark- and MOUNTAIN-Registered Trademark- asparagus from the Philippines and distributes and markets these products in Japan and other Asian countries. Dole distributes domestic and imported fruits and vegetables, including asparagus, broccoli, tomatoes, cabbage, radishes, carrots, lettuce, cherry tomatoes and melons, and pre-cut fruits, vegetables and salads, 3 in Japan. Dole owns and operates six distribution centers in Japan through joint ventures with local distributors. Snow Dole Co., Ltd., a joint venture of Dole and Snow Brand Milk Products Co., Ltd. of Japan, processes and distributes frozen desserts, canned pineapple and other processed foods in Japan. Dole granted to Snow Brand Milk Products a royalty-free license to use certain trademarks, including DOLE-Registered Trademark-, in Snow's juice business. Dole also produces anthuriums and other tropical flowers in the Philippines for export to Japan. DOLE EUROPE DOLE EUROPE is a major importer of bananas and other fresh fruits, dried fruits, nuts and canned fruits in Europe, the Ivory Coast and the Near East. Dole operates regional banana ripening facilities in France and Spain. It is a partner in the largest French banana and pineapple producer and is a minority partner in a banana export company in Guadeloupe. The Company is a minority partner with the Jamaican Producer Group (the largest banana producer in Jamaica) in the Jamaican Producers Fruit Distributors Ltd. in the United Kingdom. This banana ripening and fruit distribution company distributes fresh fruits and bananas under the DOLE-Registered Trademark- brand, as well as Jamaican bananas, fruits and vegetables direct to retail stores in the United Kingdom. Dole is the majority partner, with the Livorno Stevedore Company C.I.L.P., in a major port discharge and distribution facility in the Italian port of Livorno. Dole operates three banana ripening facilities and fruit and vegetable distribution facilities in Italy. Dole operates a major fresh fruit and vegetable distributor and banana ripener in northern Germany. Dole Europe is a partner in a Norwegian joint venture which owns and operates a cut-salad plant which supplies the Norwegian market. Dole owns and operates a banana ripening and fresh fruit distribution facility near Istanbul, Turkey. Dole owns and operates Pascual Hermanos, a major Spanish citrus and vegetable producer and exporter. Dole owns and operates a European dried fruit and nut business which sources products from around the world for processing and packaging in France and distribution in France and to other European markets. RESEARCH AND DEVELOPMENT Dole's research and development programs concentrate on improvements in productivity, food safety and product quality of existing products and the development of new value-added products, as well as agricultural research and packaging design. Agricultural research is directed toward improving product yields and product quality by examining and improving agricultural practices in all phases of production (such as development of specifically adapted plant varieties, land preparation, fertilization, cultural practices, pest and disease control, and post-harvesting, packing, and shipping procedures), and includes on-site technical services and the implementation and monitoring of recommended agricultural practices. Research efforts are also directed towards integrated pest management and biological pest control. Specialized machinery is also developed for various phases of agricultural production and packaging which reduces labor, improves productivity and efficiency and increases product quality. Agricultural research is conducted at field facilities primarily in California, Hawaii, Latin America and Asia. WORLDWIDE OPERATIONS Dole has significant food sourcing and related operations in Chile, Colombia, Costa Rica, Ecuador, Guatemala, Honduras, the Philippines, Thailand and the United States. Dole also sources food products in Algeria, Argentina, Australia, Brazil, Cameroon, Greece, Italy, Ivory Coast, Mexico, New Zealand, 4 Nicaragua, Panama, Peru, Spain, Syria, Tunisia, Turkey and Venezuela. Significant volumes of Dole's fresh fruit and packaged products are marketed in Canada, Western Europe, Japan and the United States, with lesser volumes marketed in New Zealand, Hong Kong, South Korea, Russia, Australia and certain countries in Asia, Eastern Europe, Scandinavia, the Middle East and Central and South America. Exports of Dole's products to these countries, particularly China, Japan, Russia, South Korea, Taiwan and the Middle East, are subject to various restrictions which may be increased or reduced in response to international political pressures, thus affecting Dole's ability to compete in these markets. Some of Dole's dried fruit and nut products are marketed to Asia and Western Europe. The European Union ("EU") banana regulations which impose quotas and tariffs on bananas remained in effect in 1997 and continue to be in effect in 1998. The World Trade Organization upheld, in a report during 1997, a complaint from the United States, Ecuador, Mexico, Honduras and Guatemala, that the EU had installed a "protectionist and discriminatory" banana trade regime by favoring imports from former European colonies in Africa and the Caribbean. Trade negotiations and discussions continue between the EU, the United States and the individual banana exporting countries. These trade negotiations could lead to further changes in the regulations governing banana exports to the EU. The net impact of these changing regulations on Dole's future results of operations is not determinable at this time. Dole's foreign operations are subject to risks of expropriation, civil disturbances, political unrest, increases in taxes and other restrictive governmental policies, such as import quotas. Loss of one or more of its foreign operations could have a material adverse effect on Dole's operating results. Dole attempts to maintain a cordial working relationship in each country where it operates. Because Dole's operations are a significant factor in the economies of certain countries, its activities are subject to intense public and governmental scrutiny, and may be affected by changes in the status of the host economies, the makeup of the government or even public opinion in a particular country. The Company distributes its products in more than 90 countries throughout the world. Dole's international sales are usually transacted in U.S. dollars and major European and Asian currencies, while certain costs are incurred in currencies different from those that are received from the sale of the product. Results of operations may be affected by fluctuations in currency exchange rates in both the sourcing and selling locations. ENVIRONMENTAL AND REGULATORY MATTERS Dole's agricultural operations are subject to a broad range of evolving environmental laws and regulations in each country in which it operates. In the United States, these laws and regulations include the Food Quality Protection Act of 1996, the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Federal Insecticide, Fungicide and Rodenticide Act and the Comprehensive Environmental Response, Compensation and Liability Act. Compliance with these foreign and domestic laws and related regulations is an ongoing process which is not currently expected to have a material effect on Dole's capital expenditures, earnings or competitive position. Environmental concerns are, however, inherent in most major agricultural operations, including those conducted by Dole, and there can be no assurance that the cost of compliance with environmental laws and regulations will not be material. Moreover, it is possible that future developments, such as increasingly strict environmental laws and enforcement policies thereunder, and further restrictions on the use of agricultural chemicals could result in increased compliance costs. Dole's food operations are also subject to regulations enforced by, among others, the U.S. Food and Drug Administration and state, local and foreign equivalents and to inspection by the U.S. Department of Agriculture and other federal, state, local and foreign environmental and health authorities. The U.S. Food and Drug Administration enforces statutory standards regarding the branding and safety of food products, establishes ingredients and manufacturing procedures for certain foods, establishes standards of identity for foods and determines the safety of food substances in the United States. Similar functions are 5 performed by state, local and foreign governmental entities with respect to food products produced or distributed in their respective jurisdictions. ITEM 2. PROPERTIES The Company maintains executive offices in Westlake Village, California and auxiliary executive offices in Los Angeles, California, both of which are leased from third parties. Dole's various divisions also maintain headquarters offices in Westlake Village and Bakersfield, California, which are leased from third parties, and in Orland and Salinas, California and Wenatchee, Washington, which are owned by the Company. The Company owns its Latin American regional headquarters building in Costa Rica, as well as offices in Colombia and Honduras. Dole Europe maintains its European headquarters in Paris, France and regional offices in Hamburg, Germany, Brussels, Belgium, Milan, Italy and Valencia, Spain, which are leased from third parties. It owns its offices in Aguilas and Alemenara, Spain. Dole Latin America maintains regional offices in Chile and Ecuador which are leased from third parties. Dole Asia maintains offices in Hong Kong, Manila, the Philippines and Tokyo, Japan, which are leased from third parties. The inability to renew any of the above office leases by the Company would not have a material adverse effect on the Company's operating results. The Company and each of its subsidiaries believe that their property and equipment are generally well maintained, in good operating condition and adequate for their present needs. The following is a description of the Company's significant properties. DOLE NORTH AMERICA Dole's Hawaii pineapple and papaya operations for the fresh produce market are located on the island of Oahu and total approximately 8,000 acres, 6,500 of which are owned by the Company and the remainder of which are leased. Dole produces citrus on approximately 10,000 acres in the San Joaquin Valley of California owned directly or through partially-owned agricultural partnerships and on substantial additional acreage under management arrangements, as well as through independent growing arrangements. Dole also provides care and management services for approximately 10,000 citrus acres in Florida. Citrus is packed in seven Company-owned packing houses--five in California and two in Florida. Domestic table grapes are sourced from approximately 3,500 acres on three Company-owned vineyards in the San Joaquin Valley. Domestic table grapes are cooled in two Company-owned facilities in the San Joaquin Valley. Dole produces wine grapes on approximately 400 acres and stone fruit on approximately 800 acres of Company-owned property in the San Joaquin Valley. The Company owns a cherry packing and processing facility in Victor, California. Dole produces apples and pears directly from four Company-owned orchards on approximately 1,250 productive acres in Wenatchee and Chelan, Washington as well as through independent growing arrangements. The Company also owns apple and pear storage, processing and packing facilities in Wenatchee and Chelan. The Company owns approximately 1,400 acres of farmland in California and Arizona, and leases approximately 8,000 acres of farmland in California and another 6,000 acres in Arizona in connection with Dole's vegetable operations. The majority of this acreage is farmed under joint growing arrangements with independent growers, while the remainder is farmed by Dole. The Company owns cooling, packing and shipping facilities in Yuma, Arizona and the following California cities: Marina, Holtville, Guadalupe, Gonzales and Huron. Additionally, the Company has partnership interests in facilities in Yuma, Arizona, Salinas, California and Mexico, and leases facilities in Oxnard, California. The Company owns and operates state-of-the-art, value-added processing plants in Yuma, Arizona, Soledad, California and Springfield, Ohio. 6 Dole produces almonds from approximately 850 acres and pistachios from approximately 3,000 acres of orchards in the San Joaquin Valley, owned or leased by the Company, or by agricultural partnerships in which the Company has an interest. The Company owns and operates one almond processing and packing plant and three almond receiving and storage facilities, all of which are located in the San Joaquin and Sacramento Valleys. The phase-out of the Company's Hawaii sugar operations was completed in 1996. The former sugar plantation consists of approximately 12,000 acres (approximately 6,200 acres of which are owned and the remainder of which are leased) which are partially used for diversified agricultural crops. Portions of the Company's fresh fruit and vegetable farm properties are irrigated by surface water supplied by local government agencies using facilities financed by federal or state agencies, as well as from underground sources. Water received through federal facilities is subject to acreage limitations under the 1982 Reclamation Reform Act. The quantity and quality of these water supplies varies depending on weather conditions and government regulations. The Company believes that under normal conditions these water supplies are adequate for current production needs. DOLE LATIN AMERICA Dole produces bananas directly from Company-owned plantations in Costa Rica, Colombia, Honduras and Venezuela as well as through associated producers or independent growing arrangements in those countries and in Ecuador, Guatemala, Panama and Nicaragua. The Company owns approximately 18,420 acres in Honduras, 31,400 acres in Costa Rica, 3,000 acres in Colombia and 350 acres in Venezuela. Dole owns a 50% interest in a Guatemala banana producer which owns or controls approximately 9,600 acres in Guatemala. Dole also grows pineapple on approximately 6,000 acres of owned land in Honduras, primarily for the fresh produce market, and owns a juice concentrate plant in Honduras for pineapple and citrus. Dole produces citrus on approximately 600 acres of Company-owned land and operates a grapefruit packing house in Honduras. Dole grows grapes, stone fruit, kiwi and pears on approximately 2,400 Company-owned acres in Chile. Dole owns and operates 11 packing and cold storage facilities, a corrugated box plant and a wooden grape box plant in Chile. Dole operates Company-owned corrugated box plants in Chile, Colombia, Costa Rica, Ecuador and Honduras. The Company's operations in Honduras include an approximately 81% interest in a beer and soft drink bottling operation, a bottle crown plant, a plastic injection molding facility used primarily for the manufacture of beer and soft drink plastic cases and a sugar mill, as well as a majority interest in an edible oils refinery, a laundry soap factory, a palm oil extraction operation and 3,800 acres of palm oil plantation. Dole operates a fleet of 8 refrigerated containerships and 32 breakbulk refrigerated ships, of which 20 are Company-owned or bareboat chartered and the remainder are time chartered. The Company also owns or leases approximately 10,000 refrigerated containers and owns or leases approximately 9,400 chassis and gensets. From time to time, excess capacity may be chartered to others or may carry commercial cargo for third parties. DOLE ASIA Dole operates a pineapple plantation of approximately 24,000 acres in the Philippines. Originally covered by a lease agreement between Dole and a government-owned and controlled corporation, approximately 17,000 acres of the plantation have been transferred to a cooperative of Dole employees 7 that will acquire the land pursuant to agrarian reform law. The remaining acreage in the Philippines is farmed pursuant to individual farm management contracts. A cannery, freezer, juice concentrate plant, corrugated box plant and can manufacturing plant, each owned by Dole, are located at or near the plantation. Dole owns and operates a cannery, can plant and juice concentrate plant located in central Thailand and a second multi-fruit cannery in southern Thailand. Through a subsidiary in Thailand controlled by Dole, Dole grows pineapple on approximately 3,900 acres of leased land and purchases additional supplies of pineapple in Thailand on the open market. Dole operates six distribution facilities in Japan through joint ventures with local distributors. Two of the distribution centers are located in Tokyo. Through independent growing arrangements Dole sources product from over 1,200 Japanese farmers. Dole also sources bananas through associated producers or independent growing arrangements in the Philippines. A plastic extruding plant and a box forming plant, both owned by Dole, are located near the plantations. With joint venture partners, Dole Asia is developing approximately 7,500 acres of citrus orchards in southwestern China. DOLE EUROPE Dole owns twelve banana ripening and fruit distribution facilities in France, seven in Spain, three in Italy and one in Germany. The Company has a minority interest in a French company which owns a majority interest in banana and pineapple plantations in Cameroon and the Ivory Coast, and has banana producing interests in the Ivory Coast. Dole owns a minority interest in a banana ripening and fruit distribution company with five facilities in the United Kingdom. Dole Europe is the majority owner in a port terminal and distribution facility in Livorno, Italy. The Company owns a banana ripening and fruit distribution facility near Istanbul, Turkey. Dole owns and operates four citrus packing houses and three lettuce packing houses in Spain. The Company also owns and operates approximately 360 acres of greenhouses and grows lettuce, tomatoes and citrus fruit on approximately 3,500 acres in Spain. It owns its offices in Aguilas and Alemenara, Spain and leases offices in Valencia, Spain. In France, the Company owns a dried fruit and nut processing, packaging and warehousing facility in Vitrolles, a date processing and packing plant in Marseille and a prune processing and packaging plant in Agen. ITEM 3. LEGAL PROCEEDINGS In the Company's Form 10-Q for the quarter ended October 4, 1997, the Company described certain lawsuits that had been filed in Texas against some of the manufacturers of a formerly widely used agricultural chemical called DBCP, the Company and several of its competitors. In these lawsuits, a large number of foreign nationals allege personal injuries caused by contact with DBCP. The plaintiffs claim that during the 1960's and 1970's they were employees of Company subsidiaries, competitors and independent local growers. In October 1995, four of the six cases pending in Texas state courts were removed to Texas federal court and dismissed by the Texas federal court on the grounds that the plaintiffs' home countries are the more appropriate forums for the claims. This dismissal involved approximately 75% of the Texas plaintiffs, many of whom have now filed claims in their home countries of Costa Rica, Ecuador, Honduras, Nicaragua and the Philippines. The two remaining Texas state court cases were removed to Texas federal court, one of which has since been dismissed. Similar DBCP actions were filed in Louisiana state court in 8 June 1995 by plaintiffs from some of the same foreign countries. The Louisiana cases were removed to federal court but were remanded in September 1996. Additional DBCP actions were filed in the state courts of Mississippi, in May of 1996 and of Hawaii in October of 1997. These cases have been removed to federal court. As to all such matters, the Company has denied liability and asserted substantial defenses. In the opinion of management, after consultation with outside counsel, the pending lawsuits are not expected to have a material adverse effect on the Company's financial position or results of operations. The Company is involved from time to time in various claims and legal actions incident to its operations, both as plaintiff and defendant. In the opinion of management, after consultation with outside counsel, none of the claims or actions to which the Company is a party is expected to have a material adverse effect on the Company's financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the quarter ended January 3, 1998. EXECUTIVE OFFICERS OF THE REGISTRANT Below is a list of the names and ages of all executive officers of the Company as of March 20, 1998 indicating their positions with the Company and their principal occupations during the past five years. The current terms of the executive officers will expire at the next organizational meeting of the Company's Board of Directors or at such time as their successors are elected.
POSITIONS WITH THE COMPANY AND SUBSIDIARIES NAME AND AGE AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------------------ --------- -------------------------------------------------------------- David H. Murdock.......................... (74) Chairman of the Board, Chief Executive Officer and Director of the Company since July 1985. Chairman of the Board, Chief Executive Officer and Director of Castle & Cooke, Inc. since October 1995. Since June 1982, Chairman of the Board and Chief Executive Officer of Flexi-Van Leasing, Inc., a Delaware corporation wholly-owned by Mr. Murdock. Sole owner and developer of the Sherwood Country Club in Ventura County, California, and numerous other real estate developments; also sole stockholder of numerous corporations engaged in a variety of business ventures and in the manufacture of textile-related products and industrial and building products. David A. DeLorenzo........................ (51) President and Chief Operating Officer of the Company since March 1996. President of Dole Food Company-International from September 1993 to March 1996. Executive Vice President of the Company from July 1990 to March 1996. Director of the Company since February 1991. President of Dole Fresh Fruit Company from September 1986 to June 1992. Gregory L. Costley........................ (44) President of Dole North America Fruit since March 1996. President of Dole Bakersfield from April 1994 to March 1996. President of Dole Citrus from February 1992 to April 1994.
9
POSITIONS WITH THE COMPANY AND SUBSIDIARIES NAME AND AGE AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------------------ --------- -------------------------------------------------------------- Lawrence A. Kern.......................... (50) President of Dole Fresh Vegetables, Inc. since January 1993. Peter M. Nolan............................ (55) President of Dole Packaged Foods Company since February 1995. Senior Vice President, Sales and Marketing of Dole Packaged Foods from August 1994 to February 1995. Senior Vice President, Sales and Marketing for Dole Fresh Fruit and Vegetables, North America Division, from October 1992 to August of 1994. David A. Cohen............................ (34) Senior Vice President-Acquisitions and Investments of the Company since October 1996. Director of Mergers and Acquisitions of the Company from March 1991 to December 1996. Director of Investments of Pacific Holding Company (a sole proprietorship of Mr. Murdock) since March 1991. John W. Tate.............................. (47) Vice President and Chief Financial Officer of the Company since October 1997. Senior Vice President and Chief Financial Officer of Dole Europe from June 1996 to October 1997. Senior Vice President and Chief Financial Officer of Dole Fresh Vegetables from November 1994 to June 1996. Vice President, Finance and Administration of Dole Fresh Vegetables from January 1993 to November 1994. Harvey J. Heimbuch........................ (65) Vice President of the Company since December 1996. Chief Accounting Officer and Controller of the Company from December 1996 to October 1997. Vice President-Finance of Dole Packaged Foods Company from May 1988 to December 1996. George R. Horne........................... (61) Vice President-Human Resources of Dole since February 1986. Vice President of the Company since October 1982. Edward A. Lang, III....................... (42) Vice President-Treasurer of the Company since July 1996. Assistant Treasurer from December 1993 to July 1996. Manager of International Finance of the Company from June 1989 to December 1993. Patrick A. Nielson........................ (47) Vice President-International Legal and Regulatory Affairs of the Company since October 1995. Vice President and General Counsel-Food Operations of the Company from May 1994 to October 1995. General Counsel-Food Operations of the Company from July 1991 to May 1994.
10
POSITIONS WITH THE COMPANY AND SUBSIDIARIES NAME AND AGE AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------------------ --------- -------------------------------------------------------------- J. Brett Tibbitts......................... (42) Vice President, Corporate General Counsel and Corporate Secretary of the Company since October 1995. Vice President and Corporate General Counsel of the Company from May 1994 to October 1995. General Counsel--Corporate of the Company from June 1992 to May 1994. Roberta Wieman............................ (54) Vice President of the Company since February 1995. Executive Assistant to the Chairman of the Board and Chief Executive Officer from November 1991 to February 1995. Vice President and Corporate Secretary of Castle & Cooke, Inc. since April 1996. Secretary of Pacific Holding Company (a sole proprietorship of Mr. Murdock) since January 1992. James A. Dykstra.......................... (36) Controller and Chief Accounting Officer of the Company since October 1997. Chief Financial Officer of Dole Latin America from October 1995 to October 1997. Controller of Dole Latin America from August 1990 to October 1995.
PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS As of March 20, 1998, there were approximately 12,365 holders of record of the Company's Common Stock. Additional information required by Item 5 is contained on pages 33, 36, 41 and 43 of the Dole Annual Report. Such information is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA There is hereby incorporated by reference the information appearing under the caption "Results of Operations and Selected Financial Data" on page 41 of the Dole Annual Report. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS There is hereby incorporated by reference the information appearing under the caption "Management's Discussion and Analysis of Results of Operations and Financial Position" on pages 38, 39 and 40 of the Dole Annual Report. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA There is hereby incorporated by reference the information appearing on pages 25 through 37 of the Dole Annual Report. See also Item 14 of this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There have been no changes in the Company's independent public accountants for the 1997 and 1996 fiscal years nor have there been any disagreements with the Company's independent public accountants on accounting principles or practices for financial statement disclosures. 11 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT There is hereby incorporated by reference the information regarding the Company's directors to appear under the caption "Election of Directors" in the Company's definitive proxy statement for its 1998 Annual Meeting of Stockholders (the "1998 Proxy Statement"). See the list of the Company's executive officers and related information under "Executive Officers of the Registrant", which is set forth in Part I hereof. ITEM 11. EXECUTIVE COMPENSATION There is hereby incorporated by reference the information to appear under the captions "Remuneration of Directors" and "Compensation of Executive Officers" in the 1998 Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT There is hereby incorporated by reference the information with respect to security ownership to appear under the captions "General Information", "Beneficial Ownership of Certain Stockholders" and "Security Ownership of Directors and Executive Officers" in the 1998 Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS There is hereby incorporated by reference the information to appear under the caption "Certain Transactions" in the 1998 Proxy Statement. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements: The following consolidated financial statements are included in the Dole Annual Report and are incorporated herein by reference:
ANNUAL REPORT PAGES ----------- Consolidated Statements of Income--fiscal years ended January 3, 1998, December 28, 1996 and December 30, 1995......................................................... 25 Consolidated Balance Sheets--January 3, 1998 and December 28, 1996................... 26 Consolidated Statements of Cash Flow--fiscal years ended January 3, 1998, December 28, 1996 and December 30, 1995..................................................... 27 Notes to Consolidated Financial Statements........................................... 28-36 Report of Independent Public Accountants............................................. 37 2. Financial Statement Schedules: FORM 10-K PAGES ----------- Independent Public Accountants' Report on Financial Statement Schedule............... F-1 Schedule II--Valuation and Qualifying Accounts....................................... F-2
All other schedules are omitted because they are not applicable, not required or the information is included elsewhere in the financial statements or notes thereto. 12 3. Exhibits:
EXHIBIT NO. - --------- 3.1 The Restated Articles of Association of the Company, as amended through July 30, 1991. Incorporated by reference to Exhibit 3(a) to the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1991, File No. 1-4455. 3.2 By-Laws of the Company, as amended through March 25, 1993. Incorporated by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 1994, File No. 1-4455. 4.1 Credit Agreement dated as of July 29, 1996 among the Company, The Chase Manhattan Bank, as Administrative Agent and Lender; Bank of America National Trust & Savings Association, as Syndication Agent and Lender; Citibank, N.A., as Documentation Agent and Lender; and the financial institutions which are Lenders thereunder, relating to the Company's $400 million revolving credit facility. Incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-QA for the quarter ended October 5, 1996, File No.1-4455. 4.2 Indenture dated as of April 15, 1993 between the Company and Chemical Trust Company of California, relating to $300 million of the Company's senior notes. Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K, event date May 6, 1993, File No. 1-4455. 4.3 Indenture dated as of July 15, 1993 between the Company and Chemical Trust Company of California, relating to $400 million of the Company's senior notes. Incorporated by reference to Exhibit 4 to the Company's Current Report on Form 8-K, event date July 15, 1993, File No. 1-4455. 4.4 The Company agrees to furnish to the Securities and Exchange Commission upon request a copy of each instrument with respect to issues of long-term debt of the Company and its subsidiaries, the authorized principal amount of which does not exceed 10% of the consolidated assets of the Company and its subsidiaries. Executive Compensation Plans and Arrangements--Exhibits 10.1-10.9: 10.1 The Company's 1991 Stock Option and Award Plan, as amended through July 31, 1997. Incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended October 4, 1997, File No. 1-4455. 10.2 The Company's 1982 Stock Option and Award Plan, as amended through July 31, 1997. Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended October 4, 1997, File No. 1-4455. 10.3 Dole Food Company, Inc. Executive Supplementary Retirement Plan (effective January 1, 1989), First Restatement. Incorporated by reference to Exhibit 10(c) to the Company's Annual Report on Form 10-K for the fiscal year ended December 29, 1990, File No. 1-4455. 10.4 Dole Food Company, Inc. Annual Incentive Plan. Incorporated by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 1994, File No. 1-4455. 10.5 Dole Food Company, Inc. Long-Term Incentive Plan. Incorporated by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 1994, File No. 1-4455.
13
EXHIBIT NO. - --------- 10.6 Dole Food Company, Inc. Executive Deferred Compensation Plan. Incorporated by reference to Exhibit 10.9 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994. 10.7 The Company's 1996 Non-Employee Directors Deferred Stock and Cash Compensation Plan, as amended effective October 1, 1997. Incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended October 4, 1997, File No. 1-4455. 10.8 The Company's Stock Ownership Enhancement Program, as effective July 31, 1997. Incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended October 4, 1997, File No. 1-4455. 10.9 The Company's 1995 Non-Employee Directors Stock Option Plan. Incorporated by reference to Exhibit 4.1 to the Company's Report on Form S-8 filed on June 28, 1995, Registration No. 33-60641. 11 Computations of earnings per common share. 13 Dole Food Company, Inc. 1997 Annual Report for the fiscal year ended January 3, 1997. (This Report is furnished for information of the Commission and, except for those portions thereof which are expressly incorporated by reference herein, is not "filed" as a part of this Annual Report on Form 10-K.) 21 Subsidiaries of Dole Food Company, Inc. 23 Consent of Arthur Andersen LLP. 27 Financial Data Schedules.
(b) Reports on Form 8-K: No current reports on Form 8-K were filed by the Company during the last quarter of the year ended January 3, 1998. 14 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DOLE FOOD COMPANY, INC. REGISTRANT
March 27, 1998 By: /s/ DAVID H. MURDOCK ----------------------------------------- David H. Murdock CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ DAVID H. MURDOCK Chairman of the Board and - ------------------------------ Chief Executive Officer March 27, 1998 David H. Murdock and Director /s/ DAVID A. DELORENZO - ------------------------------ President, Chief Operating March 27, 1998 David A. DeLorenzo Officer and Director /s/ JOHN W. TATE - ------------------------------ Chief Financial Officer March 27, 1998 John W. Tate Controller and Chief /s/ JAMES A. DYKSTRA Accounting Officer - ------------------------------ (Principal Accounting March 27, 1998 James A. Dykstra Officer) /s/ ELAINE L. CHAO - ------------------------------ Director March 27, 1998 Elaine L. Chao /s/ MIKE CURB - ------------------------------ Director March 27, 1998 Mike Curb /s/ RICHARD M. FERRY - ------------------------------ Director March 27, 1998 Richard M. Ferry 15 /s/ JAMES F. GARY - ------------------------------ Director March 27, 1998 James F. Gary /s/ ZOLTAN MERSZEI - ------------------------------ Director March 27, 1998 Zoltan Merszei
16 EXHIBIT INDEX
EXHIBITS PAGE - ----------- --------- 3.1 The Restated Articles of Association of the Company, as amended through July 30, 1991. Incorporated by reference to Exhibit 3(a) to the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1991, File No. 1-4455.......................................... 3.2 By-Laws of the Company, as amended through March 25, 1993. Incorporated by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 1994, File No. 1-4455............................................................................... 4.1 Credit Agreement dated as of July 29, 1996 among the Company, The Chase Manhattan Bank, as Administrative Agent and Lender; Bank of America National Trust & Savings Association, as Syndication Agent and Lender; Citibank, N.A., as Documentation Agent and Lender; and the financial institutions which are Lenders thereunder, relating to the Company's $400 million revolving credit facility. Incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-QA for the quarter ended October 5, 1996, File No. 1-4455................... 4.2 Indenture dated as of April 15, 1993 between the Company and Chemical Trust Company of California, relating to $300 million of the Company's senior notes. Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K, event date May 6, 1993, File No. 1-4455. 4.3 Indenture dated as of July 15, 1993 between the Company and Chemical Trust Company of California, relating to $400 million of the Company's senior notes. Incorporated by reference to Exhibit 4 to the Company's Current Report on Form 8-K, event date July 15, 1993, File No. 1-4455........................................................................................ 4.4 The Company agrees to furnish to the Securities and Exchange Commission upon request a copy of each instrument with respect to issues of long-term debt of the Company and its subsidiaries, the authorized principal amount of which does not exceed 10% of the consolidated assets of the Company and its subsidiaries.................................................................. Executive Compensation Plans and Arrangements - Exhibits 10.1 - 10.9: 10.1 The Company's 1991 Stock Option and Award Plan, as amended through July 31, 1997. Incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended October 4, 1997, File No. 1-4455................................................ 10.2 The Company's 1982 Stock Option and Award Plan, as amended through July 31, 1997. Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended October 4, 1997, File No. 1-4455................................................ 10.3 Dole Food Company, Inc. Executive Supplementary Retirement Plan (effective January 1, 1989), First Restatement. Incorporated by reference to Exhibit 10(c) to the Company's Annual Report on Form 10-K for the fiscal year ended December 29, 1990, File No. 1-4455..................... 10.4 Dole Food Company, Inc. Annual Incentive Plan. Incorporated by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 1994, File No. 1-4455........................................................................................ 10.5 Dole Food Company, Inc. Long-Term Incentive Plan. Incorporated by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 1994, File No. 1-4455........................................................................................
17
EXHIBITS PAGE - ----------- --------- 10.6 Dole Food Company, Inc. Executive Deferred Compensation Plan. Incorporated by reference to Exhibit 10.9 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994...................................................................................... 10.7 The Company's 1996 Non-Employee Directors Deferred Stock and Cash Compensation Plan, as amended effective October 1, 1997. Incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended October 4, 1997, File No. 1-4455........................................................................................ 10.8 The Company's Stock Ownership Enhancement Program, as effective July 31, 1997. Incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended October 4, 1997, File No. 1-4455................................................ 10.9 The Company's 1995 Non-Employee Directors Stock Option Plan. Incorporated by reference to Exhibit 4.1 to the Company's Report on Form S-8 filed on June 28, 1995, Registration No. 33-60641...................................................................................... 11 Computations of earnings per common share....................................................... 13 Dole Food Company, Inc. 1997 Annual Report for the fiscal year ended January 3, 1997. (This Report is furnished for information of the Commission and, except for those portions thereof which are expressly incorporated by reference herein, is not "filed" as a part of this Annual Report on Form 10-K.)......................................................................... 21 Subsidiaries of Dole Food Company, Inc.......................................................... 23 Consent of Arthur Andersen LLP.................................................................. 27 Financial Data Schedules........................................................................
18 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Shareholders and Board of Directors of Dole Food Company, Inc.; We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Dole Food Company, Inc.'s annual report to shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 6, 1998. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in the preceding index is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ ARTHUR ANDERSEN LLP Los Angeles, California April 2, 1998 DOLE FOOD COMPANY, INC. VALUATION AND QUALIFYING ACCOUNTS
ADDITIONS -------------------------- BALANCE AT CHARGED TO CHARGED TO BEGINNING COSTS AND OTHER BALANCE AT OF YEAR EXPENSES ACCOUNTS(B) DEDUCTIONS(A) END OF YEAR ----------- ----------- ------------- ------------- ----------- (IN THOUSANDS) Year Ended January 3, 1998 Allowance for doubtful accounts Trade receivables $ 40,766 $ 4,932 -- $ 7,829 $ 37,869 Notes and other current receivables 20,988 4,994 -- 3,752 22,230 Long-term receivables 13,474 10,951 3,300 3,269 24,456 Year Ended December 28, 1996 Allowance for doubtful accounts Trade receivables $ 32,329 $ 18,271 -- $ 9,834 $ 40,766 Notes and other current receivables 14,665 8,992 -- 2,669 20,988 Long-term receivables 10,399 5,311 -- 2,236 13,474 Year Ended December 30, 1995 Allowance for doubtful accounts Trade receivables $ 25,034 $ 11,120 -- $ 3,825 $ 32,329 Notes and other current receivables 10,034 5,588 -- 957 14,665 Long-term receivables 13,895 2,584 -- 6,080 10,399
Note: (A) Write-off of uncollectible amounts. (B) Net reserve established in connection with asset purchase. EX-11 2 EXHIBIT 11 EXHIBIT 11 DOLE FOOD COMPANY, INC. Computations of Earnings per Common Share (in 000s, except per share amounts)
For the year Ended ---------------------------------------- January 3, December 28, December 30, 1998 1996 1995 ----------- ------------ ------------ BASIC Income from continuing operations applicable to common shares $ 160,164 $ 89,031 $ 119,824 Loss from discontinued operations (net of income taxes) applicable to common shares - - (96,493) --------- --------- --------- Net income applicable to common shares $ 160,164 $ 89,031 $ 23,331 --------- --------- --------- --------- --------- --------- Weighted average number of common shares 59,959 60,027 59,651 outstanding during the period Basic earnings (loss) per common share: Continuing operations $ 2.67 $ 1.48 $ 2.01 Discontinued operations - - (1.62) --------- --------- --------- Net income $ 2.67 $ 1.48 $ 0.39 --------- --------- --------- --------- --------- --------- DILUTED Income from continuing operations applicable to common shares $ 160,164 $ 89,031 $ 119,824 Loss from discontinued operations (net of income taxes) applicable to common shares - - (96,493) --------- --------- --------- Net income applicable to common shares $ 160,164 $ 89,031 $ 23,331 --------- --------- --------- --------- --------- --------- Weighted average number of common shares outstanding during the period 59,959 60,027 59,651 Add: Dilutive effect of stock options at average prices during the period 477 421 127 --------- --------- --------- Total diluted shares 60,436 60,448 59,778 --------- --------- --------- --------- --------- --------- Diluted earnings (loss) per common share Continuing operations $ 2.65 $ 1.47 $ 2.00 Discontinued operations - - (1.61) --------- --------- --------- Net income $ 2.65 $ 1.47 $ 0.39 --------- --------- --------- --------- --------- ---------
EX-13 3 EXHIBIT 13 CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------- Revenue $4,336,120 $3,840,303 $3,803,846 Cost of products sold 3,692,277 3,256,345 3,217,869 - ------------------------------------------------------------------------------------------------------------------- Gross margin 643,843 583,958 585,977 Selling, marketing and administrative expenses 399,800 369,675 392,694 Restructuring charge - 50,000 - - ------------------------------------------------------------------------------------------------------------------- Operating income 244,043 164,283 193,283 Interest income 7,776 8,412 7,501 Net gain on assets sold or held for disposal - - 61,655 Other income (expense) - net 8,034 4,535 (5,429) - ------------------------------------------------------------------------------------------------------------------- Earnings before interest and taxes 259,853 177,230 257,010 Interest expense (64,589) (68,699) (81,186) - ------------------------------------------------------------------------------------------------------------------- Income from continuing operations before income taxes 195,264 108,531 175,824 Income taxes (35,100) (19,500) (56,000) - ------------------------------------------------------------------------------------------------------------------- Income from continuing operations 160,164 89,031 119,824 Loss from discontinued operations, net of income taxes - - (96,493) - ------------------------------------------------------------------------------------------------------------------- Net income $ 160,164 $ 89,031 $ 23,331 - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- Earnings per common share Basic - continuing operations $ 2.67 $ 1.48 $ 2.01 Diluted - continuing operations 2.65 1.47 2.00 - ------------------------------------------------------------------------------------------------------------------- Basic - net income (after discontinued operations) $ 0.39 Diluted - net income (after discontinued operations) 0.39 - ------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DOLE FOOD COMPANY, INC. 25 CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS) 1997 1996 - ----------------------------------------------------------------------------------------------- Current assets Cash and short-term investments $ 31,202 $ 34,342 Receivables - net 534,844 518,266 Inventories 468,692 526,052 Prepaid expenses 48,438 47,164 - ----------------------------------------------------------------------------------------------- Total current assets 1,083,176 1,125,824 Investments 69,248 72,930 Property, plant and equipment - net 1,024,247 1,024,135 Long-term receivables - net 63,482 69,861 Other assets 223,742 194,057 - ----------------------------------------------------------------------------------------------- Total assets $2,463,895 $2,486,807 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- Current liabilities Notes payable $ 11,290 $ 20,478 Current portion of long-term debt 2,326 1,497 Accounts payable 230,143 185,747 Accrued liabilities 432,680 454,208 - ----------------------------------------------------------------------------------------------- Total current liabilities 676,439 661,930 Long-term debt 754,849 903,807 Deferred income taxes and other long-term liabilities 328,293 341,798 Minority interests 37,842 29,712 Commitments and contingencies Common shareholders' equity 666,472 549,560 - ----------------------------------------------------------------------------------------------- Total liabilities and equity $2,463,895 $2,486,807 - ----------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 26 DOLE FOOD COMPANY, INC. CONSOLIDATED STATEMENTS OF CASH FLOW
(IN THOUSANDS) 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------- Operating activities Income from continuing operations $ 160,164 $ 89,031 $ 119,824 Adjustments to continuing operations Depreciation and amortization 112,081 111,073 113,325 Equity earnings net of distributions 373 (2,875) (6,533) Net gain on assets sold or held for disposal - - (61,655) Provision for deferred income taxes 11,575 (1,741) 30,429 Restructuring charge - 50,000 - Other (23,005) (8,203) 41 Change in operating assets and liabilities, net of effects from acquisitions Receivables - net (10,438) (89,176) 53,142 Inventories 72,066 27,222 (57,588) Prepaid expenses and other assets (1,167) (8,846) (18,800) Accounts payable and accrued liabilities (7,487) (34,270) 30,842 Other (23,126) (37,262) 31,592 - ------------------------------------------------------------------------------------------------------------------- Cash flow provided by operating activities of continuing operations 291,036 94,953 234,619 Cash flow used in operating activities of discontinued operations - - (11,467) - ------------------------------------------------------------------------------------------------------------------- Cash flow provided by operating activities 291,036 94,953 223,152 Investing activities Proceeds from sales of businesses and assets 39,200 58,417 432,746 Capital additions (129,171) (109,686) (90,276) Purchases of investments and acquisitions, net of cash acquired (40,010) (58,775) (35,251) Other (500) 438 998 - ------------------------------------------------------------------------------------------------------------------- Cash flow provided by (used in) investing activities of continuing operations (130,481) (109,606) 308,217 Cash flow used in investing activities of discontinued operations - - (15,144) - ------------------------------------------------------------------------------------------------------------------- Cash flow provided by (used in) investing activities (130,481) (109,606) 293,073 Financing activities Short-term borrowings 28,414 19,694 29,348 Repayments of short-term debt (40,887) (20,449) (62,944) Long-term borrowings 35,232 168,060 12,384 Repayments of long-term debt (169,110) (163,799) (675,098) Proceeds from distribution of real estate and resorts business - - 235,186 Cash dividends paid (23,988) (24,020) (23,861) Issuance of common stock 6,644 11,232 5,101 Repurchase of common stock - (13,874) - - ------------------------------------------------------------------------------------------------------------------- Cash flow used in financing activities of continuing operations (163,695) (23,156) (479,884) Cash flow used in financing activities of discontinued operations - - (9,352) - ------------------------------------------------------------------------------------------------------------------- Cash flow used in financing activities (163,695) (23,156) (489,236) Increase (decrease) in cash and short-term investments (3,140) (37,809) 26,989 Cash and short-term investments at beginning of year 34,342 72,151 45,162 - ------------------------------------------------------------------------------------------------------------------- Cash and short-term investments at end of year $ 31,202 $ 34,342 $ 72,151 - ------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DOLE FOOD COMPANY, INC. 27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - NATURE OF OPERATIONS Dole Food Company, Inc. and its consolidated subsidiaries ("the Company") are engaged in the worldwide sourcing, processing, distributing and marketing of high quality, branded food products including fresh fruits and vegetables. Operations are conducted throughout North America, Latin America, Europe (including eastern European countries), and Asia (primarily in Japan and the Philippines). The Company is also engaged in beverage operations in Honduras. The Company's principal products are produced on both Company-owned and leased land and are also acquired through associated producer and independent grower arrangements. The Company's products are primarily packed and processed by the Company and are sold to retail and institutional customers and other food product companies. NOTE 2 - SUMMARY OF ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the accounts of all significant majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. ANNUAL CLOSING DATE - The Company's fiscal year ends on the Saturday closest to December 31. Fiscal year 1997 ended January 3, 1998 and included 53 weeks, while fiscal years 1996 and 1995 contained 52 weeks. CASH AND SHORT-TERM INVESTMENTS - Cash and short-term investments include cash on hand and time deposits with maturities of three months or less. INVENTORIES - Inventories are valued at the lower of cost or market. Cost is determined principally on a first-in, first-out basis. Specific identification and average cost methods are also used for certain packing materials and operating supplies. RECURRING AGRICULTURAL COSTS - The costs of growing bananas and pineapples are charged to operations as incurred. Growing costs related to other crops are recognized when the crops are harvested and sold. INVESTMENTS - Investments in affiliates and joint ventures with ownership of 20% to 50% are generally recorded on the equity method. Other investments are generally accounted for using the cost method. PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is computed principally by the straight-line method over the estimated useful lives of the assets. GOODWILL AND OTHER INTANGIBLE ASSETS - Goodwill and other intangible assets, generally representing the excess of the cost over the net asset value of acquired businesses, are stated at cost and are amortized, principally on a straight-line basis, over the estimated future periods to be benefited (not exceeding 40 years). The Company periodically reviews the recoverability of these assets based on analyses of undiscounted expected future cash flows. FOREIGN EXCHANGE - For subsidiaries in which the functional currency is the United States dollar, net foreign exchange transaction gains or losses are included in determining net income. These resulted in net losses of $5.0 million, $2.1 million, and $2.4 million for 1997, 1996 and 1995, respectively. Net foreign exchange gains or losses resulting from the translation of assets and liabilities of foreign subsidiaries whose local currency is the functional currency are accumulated as a separate component of common shareholders' equity. INCOME TAXES - Deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates to the differences between financial statement carrying amounts and the tax bases of assets and liabilities. The income taxes which would be due upon the distribution of foreign subsidiary earnings have not been provided where the undistributed earnings are considered permanently invested. EARNINGS PER COMMON SHARE - In accordance with Statement of Financial Accounting Standards No. 128, basic earnings per common share are calculated using the weighted average number of common shares outstanding during the period without consideration of the dilutive effect of stock options. The basic weighted average number of common shares outstanding was 60.0 million, 60.0 million and 59.7 million for 1997, 1996 and 1995, respectively. Diluted earnings per common share are calculated using the weighted average number of common shares outstanding during the period after consideration of the dilutive effect of stock options. The diluted weighted average number of common shares and equivalents outstanding was 60.4 million, 60.4 million and 59.8 million for 1997, 1996 and 1995, respectively. FAIR VALUE OF FINANCIAL INSTRUMENTS - The historical carrying amount is a reasonable estimate of fair value for short-term financial instruments. Fair values for long-term financial instruments not readily marketable were estimated based upon discounted future cash flows at prevailing market interest rates. Based on these assumptions, management believes the fair market values of the Company's financial instruments, other than certain debt instruments (see Note 7), are not materially different from their recorded amounts as of January 3, 1998. STOCK BASED COMPENSATION - Statement of Financial Accounting Standards No. 123 ("SFAS 123") defines a fair value method of accounting for employee stock 28 DOLE FOOD COMPANY, INC. compensation plans but allows for the continuation of the intrinsic value method of accounting to measure compensation cost prescribed by Accounting Principles Board Opinion No. 25 ("APB 25"). In accordance with SFAS 123, the Company has elected to continue utilizing the accounting method prescribed by APB 25 and has adopted the disclosure requirements of SFAS 123 (see Note 9). USE OF ESTIMATES - The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. RECLASSIFICATIONS - Certain prior year amounts have been reclassified to conform with the 1997 presentation. NOTE 3 - ACQUISITIONS AND DISPOSITIONS During 1997 and 1996, the Company acquired and invested in production and distribution operations in Europe, Latin America and Asia. Each of the acquisitions was accounted for as a purchase and, accordingly, the purchase price was allocated to the net assets acquired based upon their estimated fair values as of the date of acquisition. The fair values of assets and investments acquired, and liabilities assumed were approximately $79 million and $39 million in 1997 and approximately $106 million and $48 million in 1996. Results of acquired operations were not significant in 1997 or 1996. In 1996, the Company implemented a formal plan to close its dried fruit facility located in Fresno, California which had suffered continued losses. During the fourth quarter of 1996, a restructuring charge of $50.0 million was recorded related to the closure of this facility. The principal component of the charge was a provision for asset write-downs of $38.5 million. The closure of this facility was essentially completed in the second quarter of 1997. During 1997, $30.0 million for asset write-downs, $2.2 million for contract terminations and $2.6 million for severance payments were charged against this provision. The remaining balance relates primarily to write-downs of assets still held for disposal. In total, 466 employees were terminated as a result of the closure of this facility. During 1995, the Company completed the sale of its juice business, resulting in net proceeds of approximately $270 million and a pretax gain of approximately $145 million. In addition, during 1995 the Company began to implement its plan to sell certain of its agricultural properties and other assets which had generated low returns. The book value of the assets to be sold exceeded the estimated fair value less costs to sell, resulting in an adjustment of $83.3 million. The above dispositions resulted in a net pretax gain of $61.7 million. NOTE 4 - DISCONTINUED OPERATIONS On December 28, 1995, the Company completed the separation of its real estate and resorts business [Castle & Cooke, Inc. ("Castle")] from its food business in a nontaxable distribution to its shareholders. Under the plan of distribution, each Company shareholder of record on December 20, 1995 received a dividend of one share of Castle common stock for every three shares of the Company's common stock. Approximately $1.0 billion of net assets were transferred to Castle, and in partial consideration thereof the Company received cash proceeds of approximately $235 million and a $10 million note receivable from Castle which bears interest at the rate of 7% per annum and is due December 8, 2000. As a result, the Company's common shareholders' equity was reduced by approximately $582 million (see Note 10). In connection with the distribution, the operating results of the real estate and resorts business have been accounted for as a discontinued operation. Revenues from discontinued operations for 1995 were approximately $349 million. Basic losses per common share from discontinued operations were $1.62 and diluted losses per common share from discontinued operations were $1.61, in 1995. The 1995 loss from discontinued operations includes an allocation of the Company's overall interest costs (based on the cash proceeds and the interest bearing note received by the Company at distribution) of $7.3 million after tax. During the third quarter of 1995, the Company reviewed certain of its real estate and resort properties to determine whether expected future cash flows (undiscounted and without interest charges) from each property would result in the recovery of the carrying amount of such property. Certain adverse developments in 1995 affecting the Lana'i resort and certain other properties caused management to substantially lower its estimates of future cash flow and led to a determination that the properties were impaired in accordance with generally accepted accounting principles and accordingly, an impairment loss of $103.8 million after tax was recorded as part of discontinued operations in the accompanying 1995 statement of income. NOTE 5 - CURRENT ASSETS AND LIABILITIES Short-term investments of $1.8 million and $7.5 million as of January 3, 1998 and December 28, 1996, respectively, consisted principally of time deposits. DOLE FOOD COMPANY, INC. 29 Outstanding checks which are funded as presented for payment totaled $22.1 million and $48.8 million as of January 3, 1998 and December 28, 1996, respectively, and were included in accounts payable. Details of certain current assets were as follows:
(IN THOUSANDS) 1997 1996 --------------------------------------------------------------------- Receivables Trade $434,781 $428,186 Notes and other 142,820 138,577 Affiliated operations 17,342 13,257 --------------------------------------------------------------------- 594,943 580,020 Allowance for doubtful accounts (60,099) (61,754) --------------------------------------------------------------------- $534,844 $518,266 --------------------------------------------------------------------- --------------------------------------------------------------------- Inventories Finished products $149,933 $169,280 Raw material and work in progress 142,623 198,306 Growing crop costs 46,207 46,887 Packing materials 24,803 23,213 Operating supplies and other 105,126 88,366 --------------------------------------------------------------------- $468,692 $526,052 --------------------------------------------------------------------- ---------------------------------------------------------------------
Accrued liabilities as of January 3, 1998 and December 28, 1996 included approximately $86 million and $101 million, respectively, of amounts due to growers. NOTE 6 - PROPERTY, PLANT AND EQUIPMENT Major classes of property, plant and equipment were as follows:
(IN THOUSANDS) 1997 1996 --------------------------------------------------------------------- Land and land improvements $ 444,686 $ 391,561 Buildings and improvements 264,494 277,984 Machinery and equipment 864,431 910,785 Construction in progress 84,954 54,728 --------------------------------------------------------------------- 1,658,565 1,635,058 Accumulated depreciation (634,318) (610,923) --------------------------------------------------------------------- $1,024,247 $1,024,135 --------------------------------------------------------------------- ---------------------------------------------------------------------
Depreciation expense for 1997, 1996 and 1995 totaled $101.9 million, $102.5 million and $106.2 million, respectively. NOTE 7 - DEBT Notes payable consisted primarily of short-term borrowings required to fund certain foreign operations and totaled $11.3 million with a weighted average interest rate of 19.3% as of January 3, 1998 and $20.5 million with a weighted average interest rate of 15.7% as of December 28, 1996. Long-term debt consisted of:
(IN THOUSANDS) 1997 1996 --------------------------------------------------------------------- Unsecured debt Notes payable to banks at an average interest rate of 6.2% (5.9% - 1996) $ 14,600 $172,300 6.75% notes due 2000 225,000 225,000 7% notes due 2003 300,000 300,000 7.875% debentures due 2013 175,000 175,000 Various other notes due 1998- 2014 at an average interest rate of 7.8% (5.2% - 1996) 36,102 23,808 Secured debt Mortgages, contracts and notes due 1998-2012, at an average interest rate of 9.2% (9.7% - 1996) 8,525 11,594 Unamortized debt discount and issue costs (2,052) (2,398) --------------------------------------------------------------------- 757,175 905,304 Current maturities (2,326) (1,497) --------------------------------------------------------------------- $754,849 $903,807 --------------------------------------------------------------------- ---------------------------------------------------------------------
The Company estimates the fair value of its fixed interest rate unsecured debt based on current quoted market prices. The estimated fair value of unsecured noncallable notes (face value $700 million) was approximately $716 million at January 3,1998. At December 28, 1996, the estimated fair value approximated book value. In July 1996, the Company replaced its existing $1 billion, 5-year revolving credit facility with a $600 million, 5-year revolving credit facility (the "Facility"). In July 1997, the Company extended the Facility to 2002 and in November 1997, reduced it to $400 million. At the Company's option, borrowings under the Facility bear interest at a certain percentage over the agent's prime rate or the London Interbank Offered Rate ("LIBOR"). Provisions under the Facility require the Company to comply with certain financial covenants which include a maximum permitted ratio of consolidated debt to net worth and a minimum required fixed charge coverage ratio. At January 3, 1998, there were no borrowings outstanding under the Facility. Net borrowings outstanding under the Facility at December 28, 1996 totaled $90.0 million. The Company may also borrow under uncommitted lines of credit at rates offered from time to time by various banks that may not be lenders under the Facility. Net borrowings outstanding under the uncommitted lines of credit totaled $14.6 million and $82.3 million at January 3, 1998 and December 28, 1996, respectively. Sinking fund requirements and maturities with respect to long-term debt as of January 3, 1998 were as follows (in millions): 1998 - $2.3; 1999 - $10.4; 2000 - $229.8; 2001 - $4.7; 2002 - $19.4; and thereafter $490.5. 30 DOLE FOOD COMPANY, INC. Interest payments totaled $66.2 million, $68.4 million and $86.4 million, during 1997, 1996 and 1995, respectively. NOTE 8 - EMPLOYEE BENEFIT PLANS The Company has qualified and non-qualified defined benefit pension plans covering certain full-time employees. Benefits under these plans are generally based on each employee's eligible compensation and years of service except for certain hourly plans which are based on negotiated benefits. For U.S. plans, the Company's policy is to fund the net periodic pension cost plus a 15-year amortization of the unfunded liability. The plans covering international employees are generally not funded. The status of the defined benefit pension plans was as follows:
U.S. PLANS ( IN THOUSANDS) 1997 1996 --------------------------------------------------------------------- Actuarial present value of accumulated benefit obligation Vested $249,843 $231,999 Non-vested 2,196 3,480 --------------------------------------------------------------------- $252,039 $235,479 --------------------------------------------------------------------- Actuarial present value of projected benefit obligation $276,767 $248,676 Plan assets at fair value, primarily stocks and bonds 281,944 250,154 --------------------------------------------------------------------- Plan assets in excess of projected benefit obligation 5,177 1,478 Unrecognized net transition asset (650) (774) Unrecognized prior service cost 2,099 2,078 Unrecognized net gain (2,967) (4,969) Additional minimum liability (1,704) (720) --------------------------------------------------------------------- Prepaid (accrued) pension cost $ 1,955 $ (2,907) --------------------------------------------------------------------- ---------------------------------------------------------------------
INTERNATIONAL PLANS (IN THOUSANDS) 1997 1996 --------------------------------------------------------------------- Actuarial present value of accumulated benefit obligation Vested $ 10,113 $ 9,099 Non-vested 3,105 5,036 --------------------------------------------------------------------- $ 13,218 $ 14,135 --------------------------------------------------------------------- Actuarial present value of projected benefit obligation $ 30,535 $ 30,776 Plan assets at fair value, primarily stocks and bonds 1,737 2,473 --------------------------------------------------------------------- Projected benefit obligation in excess of plan assets (28,798) (28,303) Unrecognized net transition obligation 1,677 2,892 Unrecognized prior service cost 3,815 4,619 Unrecognized net loss 2,588 108 Additional minimum liability (140) (583) --------------------------------------------------------------------- Accrued pension cost $(20,858) $(21,267) --------------------------------------------------------------------- ---------------------------------------------------------------------
For U.S. plans, the projected benefit obligation was determined using assumed discount rates of 7.25% in 1997 and 7.75% in 1996 and assumed rates of increase in future compensation levels of 4.5% in 1997 and 1996. The expected long-term rate of return on assets was 9.25% in 1997 and 9.0% in 1996. For international plans, the projected benefit obligation was determined using assumed discount rates of 7.25% to 20.0% in 1997 and 7.75% to 20.0% in 1996 and assumed rates of increase in future compensation levels of 4.5% to 17.5% in 1997 and 1996. The expected long-term rate of return on assets for international plans was 9.25% to 20.0% in 1997 and 9.0% to 20.0% in 1996. Pension expense for the U.S. and international plans consisted of the following components:
(IN THOUSANDS) 1997 1996 1995 ------------------------------------------------------------------------ Service cost - benefits earned during the year $ 5,911 $ 9,143 $ 8,114 Interest cost on projected benefit obligation 22,055 21,968 21,270 Actual return on plan assets (46,282) (32,823) (46,944) Net amortization and deferral 25,817 13,885 28,337 ------------------------------------------------------------------------ Net periodic pension cost $ 7,501 $ 12,173 $ 10,777 ------------------------------------------------------------------------ ------------------------------------------------------------------------
The Company recognized net curtailment losses of $1.3 million in 1996 for the domestic plans and $2.4 million in 1997 and $3.6 million in 1995 for the international plans. These losses were due to additional benefit payments resulting from reductions in workforce. The Company offers two 401(k) plans generally covering all full-time U.S. employees. Eligible employees may defer a percentage of their annual compensation up to a maximum allowable amount under federal income tax law to supplement their retirement income. These plans provide for Company contributions based on a certain percentage of each participant's contribution. Total Company contributions to these plans in 1997, 1996 and 1995 were $3.2 million, $3.8 million and $4.4 million, respectively. The Company is also a party to various industry-wide collective bargaining agreements which provide pension benefits. Total contributions to these plans plus direct payments to pensioners in 1997, 1996 and 1995 were $0.8, $1.2 million and $0.8 million, respectively. In addition to providing pension benefits, the Company provides certain health care and life insurance benefits for eligible retired employees. Certain employees may become eligible for such benefits if they fulfill established requirements upon reaching retirement age. DOLE FOOD COMPANY, INC. 31 The status of the postretirement benefit plans was as follows:
(IN THOUSANDS) 1997 1996 --------------------------------------------------------------------- Accumulated postretirement benefit obligation (APBO) Retirees $63,353 $62,991 Fully eligible actives 4,943 5,746 Other actives 3,211 4,439 --------------------------------------------------------------------- 71,507 73,176 Unrecognized prior service cost 1,740 2,080 Unrecognized net gain 15,968 13,034 --------------------------------------------------------------------- Accrued postretirement benefit liability $89,215 $88,290 --------------------------------------------------------------------- ---------------------------------------------------------------------
Postretirement benefit expense included the following components:
(IN THOUSANDS) 1997 1996 1995 ------------------------------------------------------------------------------------ Service cost - benefits earned during the year $ 212 $ 237 $ 449 Interest cost on APBO 5,423 5,482 7,258 Net amortization and deferral (333) (481) (342) Curtailment gain (600) (577) - ------------------------------------------------------------------------------------ Net periodic postretirement benefit cost $4,702 $4,661 $7,365 ------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------
An annual rate of increase in the per capita cost of covered health care benefits of 9.0% for 1998 decreasing to 5.0% in 2006 and thereafter was assumed in determining the APBO for the U.S. and international plans in 1997, and 9.5% for 1997 decreasing to 5.0% in 2006 and thereafter was assumed in determining the APBO for the U.S. and international plans in 1996. Increasing the assumed health care cost trend rate by one percentage point in each year would have resulted in an increase in the Company's APBO as of January 3, 1998 of $8.7 million and the aggregate of the service and interest cost components of postretirement benefit expense for 1997 of $0.7 million. The weighted average discount rate used in determining the APBO was 7.25% for the U.S. and international plans in 1997 and 7.75% for the U.S. and international plans in 1996. The plans are not funded. NOTE 9 - STOCK OPTIONS AND AWARDS Under the 1991 and 1982 Stock Option and Award Plans ("the Option Plans"), the Company can grant incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards and performance share awards to officers and key employees of the Company. Stock options vest over time or based on stock price appreciation and may be exercised for up to 10 years from the date of grant, as determined by the committee of the Company's Board of Directors administering the Option Plans. No stock appreciation rights, restricted stock awards or performance share awards were outstanding at January 3, 1998. Under the 1995 Non-Employee Directors Stock Option Plan (the "Directors Plan"), each active non-employee director receives a grant of 1,500 non-qualified stock options (the "Options") on February 15th (or the first trading day thereafter) of each year. The Options vest over three years and expire 10 years after the date of the grant or upon early termination as defined by the plan agreement. Changes in outstanding stock options were as follows:
WEIGHTED AVERAGE EXERCISE SHARES PRICE --------------------------------------------------------------------- Outstanding, December 31, 1994 2,055,764 $29.43 Granted 563,000 27.21 Exercised (371,989) 13.73 Canceled (294,513) 31.30 Adjustment for distribution of real estate and resorts business 8,158 --------------------------------------------------------------------- Outstanding, December 30, 1995 1,960,420 $29.23 Granted 711,000 38.52 Exercised (373,952) 30.04 Canceled (103,661) 33.39 --------------------------------------------------------------------- Outstanding, December 28, 1996 2,193,807 $31.91 Granted 449,630 38.65 Exercised (249,365) 28.36 Canceled (25,288) 36.78 --------------------------------------------------------------------- Outstanding, January 3, 1998 2,368,784 $33.51 --------------------------------------------------------------------- Exercisable, January 3, 1998 1,284,866 $29.78 --------------------------------------------------------------------- ---------------------------------------------------------------------
The number and exercise price of all options outstanding were adjusted to reflect the impact of the distribution of the real estate and resorts business in December 1995 (see Note 4). Of the 2,368,784 options outstanding at January 3, 1998, 750,140 have exercise prices between $17.50 and $27.07 with a weighted-average exercise price of $26.05 and a weighted-average remaining term of 6 years (697,135 exercisable at a weighted-average exercise price of $26.09), 539,933 have exercise prices 32 DOLE FOOD COMPANY, INC. between $30.92 and $36.99 with a weighted-average exercise price of $33.75 and a weighted-average remaining term of 4 years (539,933 exercisable at a weighted-average exercise price of $33.75), and 1,078,711 have exercise prices between $38.50 and $44.25 with a weighted-average exercise price of $38.58 and a weighted-average remaining term of 9 years (47,798 exercisable at a weighted-average exercise price of $38.60). The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted- average assumptions for grants in 1997, 1996 and 1995, respectively: dividend yields of 1.0%, 1.0% and 1.5%, expected volatility of 29.0%, 30.0% and 30.0%, risk-free interest rates of 6.5%, 5.8% and 7.4% and expected lives of 9 years, 9 years and 7 years. The weighted-average fair value of options granted during 1997, 1996 and 1995 was $17.29, $15.08 and $11.23, respectively. The Company accounts for the Option Plans under APB 25 and, accordingly, no compensation costs have been recognized in the accompanying statements of income for 1997, 1996 or 1995. Had compensation costs for the Option Plans been determined under SFAS 123, pro forma net income would have been $156.8 million, $86.0 million and $22.2 million, respectively, for 1997, 1996 and 1995. Pro forma basic and diluted earnings per share would have been $2.61 and $2.59, respectively, for 1997, $1.43 and $1.42, respectively, for 1996 and $0.37 for both basic and diluted earnings per share in 1995. Since SFAS 123 was only applied to options granted subsequent to December 31, 1994, the resulting pro forma compensation cost may not be representative of that to be expected in future years. NOTE 10 - SHAREHOLDERS' EQUITY Authorized capital at January 3, 1998 consisted of 80 million shares of no par value common stock and 30 million shares of no par value preferred stock, issuable in series. At January 3, 1998, approximately 5.1 million shares and 53,024 shares of common stock were reserved for issuance under the Option Plans and the Directors Plan, respectively. There was no preferred stock outstanding. The Company's policy is to pay quarterly dividends on common shares at an annual rate of 40 cents per share. During 1996, the Company announced a program to repurchase up to 5% of its outstanding common stock. As of January 3, 1998 the Company had repurchased 395,400 shares at a cost of $13.9 million. Changes in shareholders' equity were as follows:
CUMULATIVE ADDITIONAL FOREIGN TOTAL COMMON COMMON COMMON PAID-IN RETAINED CURRENCY SHAREHOLDERS' SHARES (IN THOUSANDS, EXCEPT SHARE DATA) STOCK CAPITAL EARNINGS ADJUSTMENT EQUITY OUTSTANDING - ----------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1994 $320,121 $165,541 $634,717 $(39,738) $1,080,641 59,478,108 Net income - - 23,331 - 23,331 - Cash dividends declared ($.30 per share) - - (17,913) - (17,913) - Translation adjustments - - - (859) (859) - Distribution of real estate and resorts business - - (581,866) - (581,866) - Issuance of common stock 376 4,725 - - 5,101 376,631 - ----------------------------------------------------------------------------------------------------------------------------- Balance, December 30, 1995 320,497 170,266 58,269 (40,597) 508,435 59,854,739 Net Income - - 89,031 - 89,031 - Cash dividends declared ($.40 per share) - - (24,020) - (24,020) - Translation adjustments - - - (21,244) (21,244) - Issuance of common stock 374 10,858 - - 11,232 373,952 Repurchase of common stock (395) (13,479) - - (13,874) (395,400) - ----------------------------------------------------------------------------------------------------------------------------- Balance, December 28, 1996 320,476 167,645 123,280 (61,841) 549,560 59,833,291 Net Income - - 160,164 - 160,164 - Cash dividends declared ($.40 per share) - - (23,988) - (23,988) - Translation adjustments - - - (25,908) (25,908) - Issuance of common stock 231 6,413 - - 6,644 231,156 - ----------------------------------------------------------------------------------------------------------------------------- Balance, January 3, 1998 $320,707 $174,058 $259,456 $(87,749) $ 666,472 60,064,447 - ----------------------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------------------
DOLE FOOD COMPANY, INC. 33 NOTE 11 - CONTINGENCIES At January 3, 1998, the Company was guarantor of approximately $98 million of indebtedness of certain key fruit suppliers and other entities integral to the Company's operations. The Company has ordered two refrigerated container vessels from HDW in Kiel, Germany, which are scheduled for delivery in late 1999. The cost per ship is approximately DM 100 million. The Company is involved from time to time in various claims and legal actions incident to its operations, both as plaintiff and defendant. In the opinion of management, after consultation with legal counsel, none of such claims is expected to have a material adverse effect on the Company's financial position or results of operations. NOTE 12 - LEASE COMMITMENTS The Company has obligations under noncancelable operating leases, primarily for ship charters and containers, and certain equipment and office facilities. Lease terms are for less than the economic life of the property. Certain agricultural land leases provide for increases in minimum rentals based on production. Total rental expense was $182.2 million, $158.7 million and $147.3 million (net of sublease income of $10.6 million, $12.4 million and $9.4 million) for 1997, 1996 and 1995, respectively. During 1995, the Company entered into an agreement with a bank syndicate for the sale and seven year leaseback of certain vessels. This transaction generated net proceeds of approximately $133 million. At January 3, 1998, the Company's aggregate minimum rental commitments, before sublease income, were as follows (in millions): 1998 - $147.9; 1999 - $124.6; 2000 - $81.9; 2001 - $50.3; 2002 - $151.8 and thereafter - $65.4. Total future sublease income is $27.6 million. NOTE 13 - INCOME TAXES Income tax expense (benefit) was as follows:
(IN THOUSANDS) 1997 1996 1995 -------------------------------------------------------------------------- Current Federal, state and local $ 2,810 $ 1,882 $ 2,292 Foreign 20,715 19,359 23,279 -------------------------------------------------------------------------- 23,525 21,241 25,571 Deferred Federal, state and local 12,285 (444) 30,656 Foreign (710) (1,297) (227) -------------------------------------------------------------------------- 11,575 (1,741) 30,429 -------------------------------------------------------------------------- $35,100 $19,500 $56,000 -------------------------------------------------------------------------- --------------------------------------------------------------------------
Pretax earnings attributable to foreign operations were approximately $147 million, $173 million and $181 million for 1997, 1996 and 1995, respectively. Undistributed earnings of foreign subsidiaries, which have been or are intended to be permanently invested, aggregated $1.3 billion at January 3, 1998. The Company's reported income tax expense varied from the expense calculated using the U.S. federal statutory tax rate for the following reasons:
(IN THOUSANDS) 1997 1996 1995 -------------------------------------------------------------------------- Expense computed at U.S. federal statutory income tax rate $68,341 $37,986 $61,538 Foreign income taxed at different rates (36,437) (21,656) (16,366) Dividends from subsidiaries 456 618 - State and local income tax, net of federal income tax benefit 602 1,100 4,293 Other 2,138 1,452 6,535 -------------------------------------------------------------------------- Reported income tax expense $35,100 $19,500 $56,000 -------------------------------------------------------------------------- --------------------------------------------------------------------------
Total income tax payments (net of refunds) were $17.3 million, $(1.6) million and $51.3 million for 1997, 1996 and 1995, respectively. Deferred tax assets (liabilities) were comprised of the following:
(IN THOUSANDS) 1997 1996 1995 -------------------------------------------------------------------------- Operating reserves $24,892 $45,246 $36,840 Accelerated depreciation (25,290) (21,717) (37,868) Inventory valuation methods 3,024 3,670 3,690 Effect of differences between book values assigned in prior acquisitions and historical tax values (33,100) (36,941) (37,927) Postretirement benefits 34,278 33,946 31,263 Tax credit carryforward 1,263 4,987 39,310 Net operating loss carryforward 86,670 77,685 79,616 Other, net (11,729) (18,677) (22,308) -------------------------------------------------------------------------- $80,008 $88,199 $92,616 -------------------------------------------------------------------------- --------------------------------------------------------------------------
34 DOLE FOOD COMPANY, INC. The Company has recorded deferred tax assets of $86.7 million reflecting the benefit of approximately $229 million in federal and state net operating loss carryovers which will, if unused, begin to expire in 2009. The tax credit carryforward amount of $1.3 million is comprised of general business credits which begin to expire in 2008. Total deferred tax assets and deferred tax liabilities were as follows:
(IN THOUSANDS) 1997 1996 1995 -------------------------------------------------------------------------- Deferred tax assets $226,028 $253,831 $281,392 Deferred tax liabilities (146,020) (165,632) (188,776) -------------------------------------------------------------------------- $ 80,008 $ 88,199 $ 92,616 -------------------------------------------------------------------------- --------------------------------------------------------------------------
The Company remains contingently liable with respect to certain tax credits sold with recourse by Flexi-Van Corporation ( Flexi-Van ), the Company's former transportation equipment leasing business, to a third party in 1981. These credits, which have been contested by the Internal Revenue Service, continue to be litigated by Flexi-Van. Flexi-Van, which separated from the Company in 1987 and was subsequently acquired by David H. Murdock, has indemnified the Company against obligations that might result from the resolution of this matter. NOTE 14 - GEOGRAPHIC AREA SEGMENT INFORMATION The Company's only significant segment of business is food products. Product transfers between geographic areas are accounted for based on the estimated fair market value of the products. Revenue, operating income and identifiable assets pertaining to the geographic areas in which the Company operates are presented as follows:
(IN MILLIONS) 1997 1996 1995 -------------------------------------------------------------------------- Revenue North America $2,091 $1,843 $1,959 Latin America 909 801 771 Asia 1,038 974 914 Europe 1,180 1,040 959 Intercompany elimination (882) (818) (799) -------------------------------------------------------------------------- $4,336 $3,840 $3,804 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Operating income (loss) North America $ 126 $ 76 $ 72 Latin America 137 149 138 Asia 24 17 14 Europe (9) - 3 Corporate (34) (78) (34) -------------------------------------------------------------------------- $ 244 $ 164 $ 193 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Identifiable assets North America $ 891 $ 980 $ 973 Latin America 794 695 698 Asia 235 289 327 Europe 477 446 339 Corporate 67 77 105 -------------------------------------------------------------------------- $2,464 $2,487 $2,442 -------------------------------------------------------------------------- --------------------------------------------------------------------------
NOTES: REVENUE INCLUDES INTER-AREA TRANSFERS FROM LATIN AMERICA TO NORTH AMERICA, ASIA AND EUROPE OF $603 MILLION, $542 MILLION AND $514 MILLION IN 1997, 1996 AND 1995, RESPECTIVELY; FROM ASIA TO NORTH AMERICA AND EUROPE OF $200 MILLION, $170 MILLION AND $184 MILLION IN 1997, 1996 AND 1995, RESPECTIVELY; FROM NORTH AMERICA TO ASIA AND EUROPE OF $50 MILLION, $78 MILLION AND $72 MILLION IN 1997, 1996 AND 1995, RESPECTIVELY; AND FROM EUROPE TO NORTH AMERICA, ASIA AND LATIN AMERICA OF $29 MILLION, $28 MILLION AND $29 MILLION IN 1997, 1996 AND 1995, RESPECTIVELY. CORPORATE OPERATING LOSS FOR 1996 INCLUDES THE RESTRUCTURING CHARGE OF $50 MILLION. DOLE FOOD COMPANY, INC. 35 NOTE 15 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED) The following table presents summarized quarterly results.
FIRST SECOND THIRD FOURTH (IN THOUSANDS, EXCEPT PER SHARE DATA) QUARTER QUARTER QUARTER QUARTER YEAR ----------------------------------------------------------------------------------------------------------------------- 1997 Revenue $964,992 $1,107,804 $1,178,301 $1,085,023 $4,336,120 Gross Margin 151,738 191,006 156,157 144,942 643,843 Net income 42,043 70,429 24,443 23,249 160,164 ----------------------------------------------------------------------------------------------------------------------- Net income per diluted common share $ 0.70 $ 1.17 $ 0.40 $ 0.38 $ 2.65 ----------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------- 1996 Revenue $814,438 $1,041,191 $1,093,586 $ 891,088 $3,840,303 Gross Margin 126,990 179,592 155,961 121,415 583,958 Net income (loss) 30,009 63,580 22,966 (27,524) 89,031 ----------------------------------------------------------------------------------------------------------------------- Net income (loss) per diluted common share $ 0.50 $ 1.05 $ 0.38 $ (0.46) $ 1.47 ----------------------------------------------------------------------------------------------------------------------- -----------------------------------------------------------------------------------------------------------------------
THE NET LOSS FOR THE FOURTH QUARTER OF 1996 INCLUDES A CHARGE OF $50 MILLION, BEFORE TAX, RELATED TO THE RESTRUCTURING OF THE COMPANY'S DRIED FRUIT BUSINESS. ALL QUARTERS HAVE TWELVE WEEKS, EXCEPT THE FOURTH QUARTER OF 1997 WHICH HAS THIRTEEN WEEKS AND THE THIRD QUARTERS OF BOTH YEARS WHICH HAVE SIXTEEN WEEKS. NOTE 16 - COMMON STOCK DATA (UNAUDITED) The following table shows the market price range of the Company's common stock for each quarter in 1997 and 1996.
HIGH LOW -------------------------------------------------------------- 1997 First Quarter $40 1/4 $33 3/8 Second Quarter 43 3/8 37 3/4 Third Quarter 46 15/16 39 1/16 Fourth Quarter 49 5/8 43 9/16 -------------------------------------------------------------- Year $49 5/8 $33 3/8 -------------------------------------------------------------- -------------------------------------------------------------- 1996 First Quarter $42 3/4 $34 1/8 Second Quarter 43 37 1/4 Third Quarter 43 1/2 38 7/8 Fourth Quarter 40 1/4 32 7/8 -------------------------------------------------------------- Year $43 1/2 $32 7/8 -------------------------------------------------------------- --------------------------------------------------------------
36 DOLE FOOD COMPANY, INC. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors of Dole Food Company, Inc.: We have audited the accompanying consolidated balance sheets of Dole Food Company, Inc., (a Hawaii corporation) and subsidiaries as of January 3, 1998 and December 28, 1996, and the related consolidated statements of income and cash flow for the years ended January 3, 1998, December 28, 1996, and December 30, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Dole Food Company, Inc. and subsidiaries as of January 3, 1998 and December 28, 1996 and the results of their operations and their cash flow for the years ended January 3, 1998, December 28, 1996, and December 30, 1995, in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP Los Angeles, California February 6, 1998 DOLE FOOD COMPANY, INC. 37 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL POSITION 1997 COMPARED WITH 1996 REVENUE - Revenue increased 13% to $4,336.1 million in 1997 from $3,840.3 million in 1996. The increase in revenue is primarily attributable to higher worldwide banana volumes; increased volumes in fresh cut salads and favorable pricing for the fresh vegetable business; continued growth at the Honduran beverage operation; newly acquired businesses; and an additional week in fiscal year 1997. The Company was able to grow revenue in spite of adverse currency movements in 1997. SELLING, MARKETING AND ADMINISTRATIVE EXPENSES - Selling, marketing and administrative expenses were $399.8 million or only 9.2% of revenue in 1997 compared to $369.7 million or 9.6% of revenue in 1996. The increased expense is due to higher sales activity in existing product lines and the acquisition of new businesses, partially offset by the closure of the dried fruit facility. OPERATING INCOME - Operating income improved to $244.0 million in 1997 from $214.3 million before the restructuring charge in 1996. Higher earnings in 1997 were the result of increased volumes of fresh cut salads and favorable pricing in the fresh vegetables business, and growth in the banana business. In addition, the processed pineapple and Honduran beverage businesses posted higher results in 1997, and the closure of the dried fruit facility in the second quarter reduced losses. The European Union ("E.U.") banana regulations which impose quotas and tariffs on bananas remained in full effect in 1997, and continue in effect in 1998. The World Trade Organization upheld in a report during 1997, a complaint from the United States, Ecuador, Mexico, Honduras, and Guatemala, that the E.U. had installed a "protectionist and discriminatory" banana trade regime by favoring imports from former European colonies in Africa and the Caribbean. Trade negotiations and discussions continue between the E.U., the United States and the individual banana exporting countries. These trade negotiations could lead to further changes in the regulations governing banana exports to the E.U. The net impact of these changing regulations on the Company's future results of operations is not determinable at this time. The Company distributes its products in more than 90 countries throughout the world. Its international sales are usually transacted in U.S. dollars and major European and Asian currencies. Certain costs are incurred in currencies different from those that are received from the sale of the product. While results of operations may be affected by fluctuations in currency exchange rates in both the sourcing and selling locations, the Company has historically followed a policy of not attempting to hedge these exposures. INTEREST EXPENSE, NET - Interest expense, net of interest income, decreased to $56.8 million in 1997 from $60.3 million in 1996, due to lower average debt levels. OTHER INCOME (EXPENSE) - Other income for 1997 increased $3.5 million from 1996 primarily due to the gain on sale of certain investments and fixed assets. INCOME TAXES - The Company's effective income tax rate was 18% in 1997 and 1996. YEAR 2000 - The Company has made an assessment of year 2000 impacts on its computer software and hardware. Remediation has been completed in certain of the operating units. Normal software version upgrades and hardware replacements will solve a large part of the remaining issues by the Company's internal target date of December 1998. All remaining remediation work also has a targeted completion date of December 1998, and the total cost to remediate will not be material to the Company's results of operations, liquidity or capital resources. NEW ACCOUNTING PRONOUNCEMENTS -- In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130") and Statement 38 DOLE FOOD COMPANY, INC. of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS 131"). The Company will adopt SFAS 130 and SFAS 131 in 1998. In accordance with SFAS 131, the Company is currently evaluating the additional business segments to be reported in 1998. Since SFAS 130 and SFAS 131 require additional disclosure only, they will have no effect on the financial condition or results of operations of the Company. 1996 COMPARED WITH 1995 REVENUE -- Revenue increased 4% to $3,840.3 million in 1996 from $3,694.5 million in 1995, excluding revenue from the juice business sold in 1995. The revenue growth resulted from a combination of increased sales volumes and favorable pricing and 1996 business acquisitions and joint ventures. SELLING, MARKETING AND ADMINISTRATIVE EXPENSES -- Selling, marketing and administrative expenses decreased 6% to $369.7 million or 9.6% of revenue in 1996 from $392.7 million or 10.3% of revenue in 1995. Of the decrease, $17.1 million resulted from the sale of the juice business in 1995. RESTRUCTURING CHARGE -- In 1996, the Company implemented a formal plan to close its dried fruit facility located in Fresno, California which had suffered continued losses. During the fourth quarter of 1996, a restructuring charge of $50.0 million ($41.0 million after tax or 68 cents per diluted share) was recorded related to the closure of this facility. Principal components of the charge were provisions for asset write-downs, contract terminations and severance payments. The closure of this facility was completed in the second quarter of 1997. OPERATING INCOME -- Operating income before the restructuring charge improved 10.9% to $214.3 million in 1996 compared to $193.3 million in 1995. Processed pineapple operations improved in 1996 due to favorable pricing and reduced shipping costs. Fresh pineapple operations benefited from the closure of operations in the Dominican Republic which historically generated negative returns. Partially offsetting the improved results from the pineapple operations was the return to normal pricing levels for the fresh vegetable business which benefited from favorable pricing in 1995 due to flooding. The return to normal pricing levels was somewhat mitigated by increased volumes for the fresh cut salad business. INTEREST EXPENSE, NET -- Interest expense, net of interest income, decreased to $60.3 million in 1996 from $73.7 million in 1995 as a result of lower average debt levels throughout the year. OTHER INCOME (EXPENSE) -- Other income for 1996 increased $10.0 million from 1995 primarily due to the gain on the sale of certain investments and other assets and increased earnings from joint ventures. INCOME TAXES -- The Company's effective tax rate decreased to 18% in 1996 as a result of a change in the mix of the Company's foreign and domestic earnings. The 1995 tax rate was significantly impacted by the sale of the juice business. LIQUIDITY AND CAPITAL RESOURCES The Company's operational and investing activities in 1997 were financed by funds generated internally and cash on hand at December 28, 1996. Cash and short-term investments were $31.2 million at January 3, 1998 compared to $34.3 million at December 28, 1996. Operating activities generated cash flow of $291.0 million in 1997 compared to $95.0 million in 1996. The improvement results from higher operating income and a large decrease in working capital requirements following the closure of the dried fruit business during 1997. In the second quarter of 1997, the Company completed the closure of its Fresno, California dried fruit operations. DOLE FOOD COMPANY, INC. 39 This has relieved operations of sizable losses and has allowed for a substantial reduction in working capital requirements associated with this business. This initiative was taken as part of the Company's overall plan to dispose of or liquidate assets which do not meet and are not anticipated to meet the Company's minimum return on investment requirements. Capital expenditures for the acquisition and maintenance of productive assets were $129.2 million in 1997. These expenditures were funded with cash provided by current year operations and the proceeds from the sale of existing assets and agricultural properties. The Company also acquired and invested in production operations in Latin America and Asia and distribution operations in Europe for an aggregate cash purchase price of $40.0 million. The Company has ordered two refrigerated container vessels from HDW in Kiel, Germany. The vessels are scheduled for delivery in late 1999, and will further improve the Company's cost structure. The cost per ship is approximately DM 100 million. In January 1998, the Company announced plans to move to a new headquarters facility in Westlake Village, California. Construction of the complex is anticipated to begin in 1998, and the company plans to occupy these leased facilities during 1999. During 1997 the Company used its strong cash flow from operations to reduce net debt by approximately $154 million. The Company's net debt to net debt and equity ratio improved from 62% at December 28,1996 to 53% at January 3, 1998. Debt is now primarily composed of existing long-term bonds. In July 1997, the Company extended its $600 million, 5-year revolving credit facility (the "Facility") to 2002. In November 1997, based on its strong operating cash flow, the Company reduced this facility to $400 million. Provisions under the Facility require the Company to comply with certain financial covenants which include a maximum permitted ratio of consolidated debt to net worth and a minimum required fixed charge coverage ratio. At January 3, 1998 no borrowings were outstanding under the Facility. The Company may also borrow under uncommitted lines of credit at rates offered from time to time by various banks that may not be lenders under the Facility. Net borrowings outstanding under the uncommitted lines of credit totaled $14.6 million at January 3, 1998. During 1996, the Company announced a program to repurchase up to 5% of its outstanding common stock. As of December 28, 1996 the Company had repurchased 395,400 shares at a cost of $13.9 million. No repurchases were made during 1997. The Company does not expect the stock repurchase program to affect its ability to fund operating requirements, capital expenditures or acquisitions. The Company paid four quarterly dividends of 10 cents per share on its common stock totaling $24.0 million in 1997. The Company believes that cash from operations and its cash position will be sufficient to enable it to meet its capital expenditure, debt maturity, common stock repurchase, dividend payment and other funding requirements. 40 DOLE FOOD COMPANY, INC. RESULTS OF OPERATIONS AND SELECTED FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE DATA) 1997 1996 1995 1994 1993 - ----------------------------------------------------------------------------------------------------------------------------- Revenue $4,336 $3,840 $3,804 $3,499 $3,108 Cost of products sold 3,692 3,256 3,218 2,966 2,609 - ----------------------------------------------------------------------------------------------------------------------------- Gross margin 644 584 586 533 499 Selling, marketing, and administrative expenses 400 370 393 395 333 Restructuring charge and cost reduction program - 50 - - 43 - ----------------------------------------------------------------------------------------------------------------------------- Operating income 244 164 193 138 123 Interest expense - net (57) (60) (74) (67) (48) Net gain on assets sold or held for disposal - - 62 - - Other income (expense) - net 8 5 (5) (3) (9) - ----------------------------------------------------------------------------------------------------------------------------- Income from continuing operations before income taxes 195 109 176 68 66 Income taxes (35) (20) (56) (10) (4) - ----------------------------------------------------------------------------------------------------------------------------- Net income from continuing operations 160 89 120 58 62 Net income from discontinued operations - - (97) 10 16 - ----------------------------------------------------------------------------------------------------------------------------- Net income 160 89 23 68 78 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Diluted earnings per common share Continuing operations $ 2.65 $ 1.47 $ 2.00 $ 0.98 $ 1.04 Discontinued operations - - (1.61) 0.16 0.26 - ----------------------------------------------------------------------------------------------------------------------------- Net income $ 2.65 $ 1.47 $ 0.39 $ 1.14 $ 1.30 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Other statistics Working capital $ 407 $ 464 $ 480 $ 495 $ 391 Total assets 2,464 2,487 2,442 3,685 3,159 Long-term debt 755 904 896 1,555 1,111 Total debt 768 926 920 1,609 1,190 Common shareholders' equity 666 550 508 1,081 1,052 Annual cash dividends per common share 0.40 0.40 0.40 0.40 0.40 Capital additions for continuing operations 129 110 90 212 174 Depreciation and amortization from continuing operations 112 111 113 120 106 - -----------------------------------------------------------------------------------------------------------------------------
EX-21 4 EXHIBIT 21 EXHIBIT 21 SUBSIDIARIES OF DOLE FOOD COMPANY, INC. There are no parents of the Registrant. Registrant's consolidated subsidiaries are shown below together with the percentage of voting securities owned and the state or jurisdiction of organization of each subsidiary. The names have been omitted for subsidiaries which, if considered in the aggregate as a single subsidiary, do not constitute a significant subsidiary. Subsidiaries of subsidiaries are indented in the following table:
Percent of Outstanding Voting Securities Owned as of Subsidiaries of Registrant January 3, 1998 - -------------------------- ----------------- Dole Holdings, Inc. (fka Castle & Cooke Fresh Fruit Company) 100% (Nevada) Beebe Orchard Company 100% (Delaware) Dole Citrus 100% (California) Dole Fresh Fruit Company 100% (Nevada) Dole Ocean Liner Express, Inc. 100% (Nevada) Dole Europe Company 100% (Delaware) Dole Fresh Fruit Europe Ltd. & Co. 100% (Federal Republic of Germany) Dole Fresh Fruit International, Inc. 100% (Panama)
1
Percent of Outstanding Voting Securities Owned as of Subsidiaries of Registrant January 3, 1998 - -------------------------- ----------------- Dole Holdings, Inc. (cont'd) Standard Fruit Company 100% (Delaware) Cerveceria Hondurena, S.A. 82% (Honduras) Manufacturas de Carton S.A 100% (Honduras) Compania Agropecuaria el Porvenir S.A. 100% (Honduras) Fabrica de Manteca y Jabon Atlantida S.A. 51% (Honduras) Standard Fruit Company de Costa Rica, S.A. 100% (Costa Rica) Wells & Wade Fruit Company 100% (Washington) Ashford Company Limited 100% (Bermuda) Castle & Cooke Worldwide Limited 100% (Hong Kong) Standard Fruit Company (Bermuda) Ltd. 100% (Bermuda)
2
Percent of Outstanding Voting Securities Owned as of Subsidiaries of Registrant January 3, 1998 - -------------------------- ----------------- Castle & Cooke Worldwide Limited (cont'd) Dole Fresh Fruit International, Limited 100% (Liberia) Productora Cartonera S.A. 51% (Ecuador) Solvest, Ltd. 100% (Bermuda) Alppha Sideral S.A. 100% (Costa Rica) Dole Italia s.p.a 100% (Italy) Inversiones y Valores Montecristo, S.A. 74% (Honduras) Standard Fruit de Honduras, S.A. 100% (Honduras) Agricola Santa Ines, S.A. 98% (Honduras) Union de Bananeros Ecuatorianos, S.A. 100% (Ecuador) Productora Cartonera S.A. 49% (Ecuador) Tecnicas Baltime de Colombia, S.A. 100% (Colombia)
3
Percent of Outstanding Voting Securities Owned as of Subsidiaries of Registrant January 3, 1998 - -------------------------- ----------------- Castle & Cooke Worldwide Limited (cont'd) Comafrica, spa 51% (Italy) Dole Europe B.V. 100% (Netherlands) Dole (Deutschland) GmbH 100% (Germany) Paul Kempowski GmbH & Co. KG 100% (Germany) Dole Food Espana, S.A. 100% (Spain) Jesus Alonso Gaytan, S.A. 100% (Spain) Pascual Hermanos 91% (Spain) Soleil Holding France S.A. 100% (France) Saman, S.A. 100% (France) Muriserries Francaises 100% (France) Dole Chile S.A. 100% (Chile)
4
Percent of Outstanding Voting Securities Owned as of Subsidiaries of Registrant January 3, 1998 - -------------------------- ----------------- Castle & Cooke Worldwide Limited (cont'd) Cartones San Fernando S.A. 90% (Chile) Inversiones del Pacifico, S.A. 100% (Chile) Dole Thailand Limited 64% (Thailand) Compania Financiera de Costa Rica, S.A. 100% (Costa Rica) Dole Bakersfield, Inc. 100% (California) Dole Fresh Vegetables, Inc. 100% (California) Bud Antle, Inc. 100% (California) Royal Packing Co. 100% (California) Dole Japan, Ltd. 100% (Japan) Dole Philippines, Inc. 99% (Republic of the Philippines) S & J Ranch, Inc. 100% (California) Dole Orland, Inc. (fka Dole Nut Company) 100% (California)
5
Percent of Outstanding Voting Securities Owned as of Subsidiaries of Registrant January 3, 1998 - -------------------------- ----------------- S&J Ranch, Inc. (cont'd) Dole Dried Fruit and Nut Company, 10% a California general partnership M K Development, Inc. 100% (Hawaii) Dole Dried Fruit and Nut Company, a California general partnership 90% La Petite d'Agen, Inc. 100% (Hawaii) Cerulean, Inc. 61% (Hawaii) Muscat, Inc. 100% (Hawaii) Calicahomes, Inc. 100% (California) Dole Diversified, Inc. (fka Castle & Cooke Land Company, Inc.) 100% (Hawaii) Zante Currant, Inc. 100% (Hawaii) Blue Anthurium, Inc. 100% (Hawaii) Cerulean, Inc. 39% (Hawaii) Alyssum, Inc. 100% (California)
6 EX-23 5 EXHIBIT 23 CONSENT OF INDEPENDENT OF PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated February 6, 1998 included (or incorporated by reference) in this Form 10-K into Dole Food Company, Inc.'s previously filed Registration Statements on Form S-3 Registration Nos. 33-41480, 33-64984 and 333-07849; Form S-8 Registration Nos. 2-87475, 33-594, 33-28782, 33-60643, 33-60641, 33-42152, 333-13739 and 333-06949 and Form N-2 Registration Nos. 333-325 and 811-7499. /s/ ARTHUR ANDERSEN LLP Los Angeles, California April 2, 1998 EX-27.1 6 EXHIBIT 27.1
5 1,000 YEAR JAN-03-1998 DEC-29-1996 JAN-03-1998 31,202 0 594,943 60,099 468,692 1,083,176 1,658,565 634,318 2,463,895 676,439 754,849 0 0 320,707 345,765 2,463,895 4,336,120 4,336,120 3,692,277 3,692,277 399,800 0 64,589 195,264 35,100 160,164 0 0 0 160,164 2.67 2.65 THE COMPANY'S FISCAL YEAR ENDS ON THE SATURDAY CLOSEST TO DECEMBER 31, FISCAL YEAR 1997 ENDED JANUARY 3, 1998 AND INCLUDED 53 WEEKS. THE FIRST TWO QUARTERS OF 1997 HAD 12 WEEKS, THE THIRD QUARTER OF 1997 HAD 16 WEEKS AND THE FOURTH QUARTER OF 1997 HAD 13 WEEKS. IN ACCORDANCE WITH SFAS NO. 128, "EARNINGS PER SHARE", THIS ITEM REFLECTS BASIC EARNINGS PER SHARE. IN ACCORDANCE WITH SFAS NO. 128, "EARNINGS PER SHARE", THIS ITEM REFLECTS DILUTED EARNINGS PER SHARE.
EX-27.2 7 EXHIBIT 27.2
5 1,000 YEAR OTHER OTHER OTHER YEAR DEC-30-1995 DEC-28-1996 DEC-28-1996 DEC-28-1996 DEC-28-1996 JAN-01-1995 DEC-31-1995 DEC-31-1995 DEC-31-1995 DEC-31-1995 DEC-30-1995 MAR-23-1996 JUN-15-1996 OCT-05-1996 DEC-28-1996 72,151 46,782 35,173 31,057 34,342 0 0 0 0 0 509,297 519,794 554,469 513,543 580,020 46,994 47,187 46,851 45,753 61,754 559,660 558,667 515,153 513,427 526,062 1,137,201 1,135,942 1,113,646 1,056,525 1,125,824 1,571,183 1,754,039 1,776,890 1,622,223 1,635,058 554,192 736,439 753,983 600,809 610,923 2,442,192 2,447,272 2,415,771 2,386,398 2,486,807 656,890 577,469 660,003 629,832 661,930 895,998 959,682 790,179 781,104 903,807 0 0 0 0 0 0 0 0 0 0 320,497 320,633 320,697 320,819 320,476 187,938 209,631 265,715 278,891 229,084 2,442,192 2,447,272 2,415,771 2,386,398 2,486,807 3,803,846 814,438 1,855,629 2,949,215 3,840,303 3,803,846 814,438 1,855,629 2,949,215 3,840,303 3,217,869 687,448 1,549,047 2,486,672 3,256,345 3,217,867 687,448 1,549,047 2,486,672 3,256,345 398,123 79,815 168,238 276,310 369,675 0 0 0 0 0 81,186 17,002 33,384 53,287 68,699 175,824 36,509 114,089 142,155 108,531 56,000 6,500 20,500 25,600 19,500 119,824 30,009 93,589 116,555 89,031 (96,493) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 23,331 30,009 93,589 116,555 89,031 0.39 0.50 1.56 1.94 1.48 0.39 0.50 1.55 1.93 1.47 THE COMPANY'S FISCAL YEAR ENDS ON THE SATURDAY CLOSEST TO DECEMBER 31. FISCAL YEAR 1996 ENDED DECEMBER 28, 1996 AND INCLUDED 52 WEEKS. FISCAL YEAR 1995 ENDED DECEMBER 30, 1995 AND INCLUDED 52 WEEKS. ALL QUARTERS HAVE 12 WEEKS, EXCEPT THE THIRD QUARTERS OF BOTH YEARS WHICH HAVE 16 WEEKS. IN ACCORDANCE WITH SFAS NO. 128, "EARNINGS PER SHARE", THIS ITEM REFLECTS BASIC EARNINGS PER SHARE. IN ACCORDANCE WITH SFAS NO. 128, "EARNINGS PER SHARE", THIS ITEM RELECTS DILUTED EARNINGS PER SHARE.
EX-27.3 8 EXHIBIT 27.3
5 1,000 OTHER OTHER OTHER JAN-03-1998 JAN-03-1998 JAN-03-1998 DEC-29-1996 DEC-29-1996 DEC-29-1996 MAR-22-1997 JUN-14-1997 OCT-04-1997 25,773 23,427 43,778 0 0 0 620,457 633,355 547,621 58,410 55,416 57,949 518,724 431,965 445,011 1,159,057 1,082,148 1,020,889 1,650,391 1,653,260 1,591,898 628,064 637,329 610,954 2,542,043 2,439,648 2,358,563 656,373 659,474 610,113 936,044 761,635 730,947 0 0 0 0 0 0 320,525 320,778 320,852 249,089 319,118 330,974 2,542,043 2,439,648 2,358,563 964,992 2,072,796 3,251,097 964,992 2,072,796 3,251,097 813,254 1,730,052 2,752,196 813,254 1,730,052 2,752,196 90,939 181,737 291,833 0 0 0 16,899 31,964 50,683 51,243 137,172 167,015 9,200 24,700 30,100 42,043 112,472 136,915 0 0 0 0 0 0 0 0 0 42,043 112,472 136,915 0.70 1.88 2.29 0.70 1.87 2.27 THE COMPANY'S FISCAL YEAR ENDS ON THE SATURDAY CLOSEST TO DECEMBER 31. FISCAL YEAR 1997 ENDED JANUARY 3, 1998 AND INCLUDED 53 WEEKS. THE FIRST TWO QUARTERS OF 1997 HAD 12 WEEKS, THE THIRD QUARTER OF 1997 HAD 16 WEEKS AND THE FOURTH QUARTER OF 1997 HAD 13 WEEKS. IN ACCORDANCE WITH SFAS NO. 128, "EARNINGS PER SHARE", THIS ITEM REFLECTS BASIC EARNINGS PER SHARE. IN ACCORDANCE WITH SFAS NO. 128, "EARNINGS PER SHARE", THIS ITEM REFLECTS DILUTED EARNINGS PER SHARE.
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