e10vq
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
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(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
October 9, 2010
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or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission file number 1-4455
Dole Food Company,
Inc.
(Exact name of registrant as
specified in its charter)
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Delaware
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99-0035300
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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One Dole
Drive, Westlake Village, California 91362
(Address of principal executive
offices and zip code)
Registrants telephone number, including area code:
(818) 879-6600
Indicate by check mark whether the 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 þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data file required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes o No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large
accelerated
filer o
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Accelerated
filer o
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Non-accelerated
filer þ
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Smaller
reporting
company o
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest
practicable date.
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Class
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Shares Outstanding at November 19, 2010
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Common Stock, $0.001 Par Value
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88,217,622
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DOLE FOOD
COMPANY, INC.
INDEX
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Page
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Number
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PART I
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Financial Information
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Item 1.
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Financial Statements (Unaudited)
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Condensed Consolidated Statements of Operations
Quarters and Three Quarters Ended October 9, 2010 and
October 10, 2009
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3
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Condensed Consolidated Balance Sheets
October 9, 2010 and January 2, 2010
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4
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Condensed Consolidated Statements of Cash Flows
Three Quarters Ended October 9, 2010 and October 10,
2009
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5
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Condensed Consolidated Statements of Shareholders
Equity Three Quarters Ended October 9, 2010 and
October 10, 2009
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7
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Condensed Consolidated Statements of Comprehensive
Income Quarters and Three Quarters Ended
October 9, 2010 and October 10, 2009
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8
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Notes to Condensed Consolidated Financial Statements
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9
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Item 2.
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Managements Discussion and Analysis of Financial Condition
and Results of Operations
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38
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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49
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Item 4.
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Controls and Procedures
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49
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PART II
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Other Information
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Item 1.
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Legal Proceedings
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50
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Item 6.
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Exhibits
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50
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Signatures
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51
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Exhibit Index
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52
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Certification by the Chief Executive Officer pursuant to
Section 302 of the
Sarbanes-Oxley
Act
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53
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Certification by the Chief Financial Officer pursuant to
Section 302 of the
Sarbanes-Oxley
Act
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54
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Certification by the Chief Executive Officer pursuant to
Section 906 of the
Sarbanes-Oxley
Act
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55
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Certification by the Chief Financial Officer pursuant to
Section 906 of the
Sarbanes-Oxley
Act
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56
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EX-31.1 |
EX-31.2 |
EX-32.1 |
EX-32.2 |
2
PART I.
FINANCIAL INFORMATION
Item 1.
FINANCIAL STATEMENTS
DOLE FOOD
COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
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Quarter Ended
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Three Quarters Ended
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October 9,
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October 10,
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October 9,
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October 10,
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2010
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2009
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2010
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2009
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(In thousands, except per share amounts)
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Revenues, net
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$
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1,988,571
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$
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1,938,173
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$
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5,335,967
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$
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5,249,485
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Cost of products sold
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(1,789,085
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)
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(1,761,371
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)
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(4,763,474
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)
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(4,646,696
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)
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Gross margin
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199,486
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176,802
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572,493
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602,789
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Selling, marketing and general and administrative expenses
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(137,712
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)
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(148,979
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)
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(372,792
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)
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(360,329
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)
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Charges for restructuring and long-term receivables (Note 6)
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(23,518
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)
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(24,888
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)
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Gain on arbitration settlement, net (Note 11)
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27,271
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27,271
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Gain on asset sales (Note 12)
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16,359
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2,921
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33,152
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Operating income
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65,527
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44,182
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205,005
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275,612
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Other income (expense), net (Note 2)
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(61,994
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)
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(34,582
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)
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(62,883
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(45,676
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)
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Interest income
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1,606
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2,365
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4,724
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5,501
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Interest expense
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(49,187
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)
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(69,955
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)
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(127,375
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(157,743
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Income (loss) from continuing operations before income taxes and
equity earnings
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(44,048
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)
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(57,990
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)
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19,471
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77,694
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Income taxes
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(7,522
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)
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1,307
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(19,764
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)
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(15,704
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)
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Earnings (losses) from equity method investments
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(1,604
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)
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3,247
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2,679
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7,718
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Income (loss) from continuing operations
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(53,174
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)
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(53,436
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2,386
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69,708
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Income from discontinued operations, net of income taxes
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202
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445
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876
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832
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Gain on disposal of discontinued operations, net of income taxes
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4,143
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4,143
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1,308
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Net income (loss)
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(48,829
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)
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(52,991
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)
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7,405
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71,848
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Less: Net income attributable to noncontrolling interests
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(1,547
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)
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(830
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)
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(3,307
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)
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(2,704
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)
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Net income (loss) attributable to Dole Food Company, Inc.
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$
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(50,376
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)
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$
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(53,821
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)
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$
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4,098
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$
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69,144
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Earnings per share Basic and Diluted (Note 15):
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Income (loss) from continuing operations
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$
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(0.61
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)
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$
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(1.03
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)
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$
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0.03
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$
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1.35
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Net income (loss) attributable to Dole Food Company, Inc.
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$
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(0.58
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)
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$
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(1.04
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)
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$
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0.05
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$
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1.34
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See Accompanying Notes to Condensed Consolidated Financial
Statements
3
DOLE FOOD
COMPANY, INC.
(Unaudited)
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October 9,
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January 2,
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2010
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2010
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(In thousands, except per
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share data)
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ASSETS
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Cash and cash equivalents
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$
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200,851
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$
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119,670
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Restricted deposits (Note 13)
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37,840
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Receivables, net of allowances of $35,898 and $51,380,
respectively
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760,056
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726,157
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Inventories
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722,829
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718,191
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Prepaid expenses and other assets
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77,743
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68,665
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Deferred income tax assets
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9,609
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8,496
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Assets
held-for-sale
(Note 12)
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88,736
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96,020
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Total current assets
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1,897,664
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1,737,199
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Restricted deposits (Note 13)
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23,290
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Investments
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86,017
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85,004
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Property, plant and equipment, net of accumulated depreciation
of $1,120,758 and $1,069,299, respectively
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932,727
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962,247
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Goodwill
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407,247
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407,247
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Intangible assets, net
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701,936
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705,853
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Other assets, net
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190,609
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186,183
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Total assets
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$
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4,216,200
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$
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4,107,023
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LIABILITIES AND SHAREHOLDERS EQUITY
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Accounts payable
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$
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481,285
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$
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474,399
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Accrued liabilities
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630,452
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440,840
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Current portion of long-term debt
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7,406
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8,017
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Notes payable
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32,405
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37,308
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Total current liabilities
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1,151,548
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960,564
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Long-term debt
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1,567,755
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1,552,680
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Deferred income tax liabilities
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209,734
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204,567
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Other long-term liabilities
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415,132
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523,233
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Contingencies (Note 11)
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Shareholders equity
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Preferred stock $0.001 par value;
10,000 shares authorized, none issued or outstanding
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Common stock $0.001 par value;
300,000 shares authorized, 88,221 and 88,233 shares
issued and outstanding as of October 9, 2010 and
January 2, 2010, respectively
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88
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88
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Additional paid-in capital
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773,999
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768,973
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Retained earnings
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109,305
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105,207
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Accumulated other comprehensive loss
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(35,806
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)
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(35,293
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)
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Equity attributable to Dole Food Company, Inc.
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847,586
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838,975
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Equity attributable to noncontrolling interests
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24,445
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27,004
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Total shareholders equity
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872,031
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|
|
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865,979
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Total liabilities and shareholders equity
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$
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4,216,200
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$
|
4,107,023
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See Accompanying Notes to Condensed Consolidated Financial
Statements
4
DOLE FOOD
COMPANY, INC.
(Unaudited)
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|
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Three Quarters Ended
|
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|
|
October 9,
|
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October 10,
|
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|
|
2010
|
|
|
2009
|
|
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(In thousands)
|
|
|
Operating Activities
|
|
|
|
|
|
|
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Net income
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$
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7,405
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$
|
71,848
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|
Adjustments to reconcile net income to net cash provided by
operating activities:
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Depreciation and amortization
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87,621
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|
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92,386
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Share-based compensation expense
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|
4,838
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|
|
|
|
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Net losses on financial instruments
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65,605
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|
|
|
48,535
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Asset write-offs and net gain on sale of assets
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|
(2,760
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)
|
|
|
(35,544
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)
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Earnings from equity method investments
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|
|
(2,679
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)
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|
|
(7,718
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)
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Amortization of debt discounts and debt issuance costs
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|
8,224
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|
|
|
4,121
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|
Provision for long-term receivables
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|
11,058
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|
|
|
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Write-off of debt issuance costs
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|
4,650
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|
|
|
5,316
|
|
Provision for deferred income taxes
|
|
|
1,540
|
|
|
|
(2,898
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)
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Pension and other postretirement benefit plan expense
|
|
|
14,270
|
|
|
|
10,410
|
|
Other
|
|
|
583
|
|
|
|
1,462
|
|
Changes in operating assets and liabilities:
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|
|
|
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|
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Receivables
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|
|
(12,569
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)
|
|
|
81,777
|
|
Inventories
|
|
|
(2,768
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)
|
|
|
66,958
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|
Prepaid expenses and other assets
|
|
|
(29,862
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)
|
|
|
(35,243
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)
|
Income taxes
|
|
|
(4,120
|
)
|
|
|
(401
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)
|
Accounts payable
|
|
|
13,139
|
|
|
|
(41,523
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)
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Accrued liabilities
|
|
|
(2,678
|
)
|
|
|
25,580
|
|
Other long-term liabilities
|
|
|
(22,609
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)
|
|
|
(2,166
|
)
|
|
|
|
|
|
|
|
|
|
Cash flow provided by operating activities
|
|
|
138,888
|
|
|
|
282,900
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
Cash received from sales of assets and businesses, net of cash
disposed
|
|
|
32,582
|
|
|
|
94,404
|
|
Capital expenditures
|
|
|
(59,963
|
)
|
|
|
(36,211
|
)
|
Restricted deposits
|
|
|
(14,550
|
)
|
|
|
(342,813
|
)
|
Other
|
|
|
(567
|
)
|
|
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
Cash flow used in investing activities
|
|
|
(42,498
|
)
|
|
|
(284,665
|
)
|
Financing Activities
|
|
|
|
|
|
|
|
|
Short-term debt repayments, net of borrowings
|
|
|
(12,134
|
)
|
|
|
(8,813
|
)
|
Long-term debt borrowings
|
|
|
923,325
|
|
|
|
1,202,025
|
|
Long-term debt repayments
|
|
|
(911,125
|
)
|
|
|
(1,137,614
|
)
|
Payment of debt issuance costs
|
|
|
(17,000
|
)
|
|
|
(25,322
|
)
|
Dividends paid to parent
|
|
|
|
|
|
|
(15,000
|
)
|
Payment of initial public offering costs
|
|
|
(959
|
)
|
|
|
|
|
Dividends paid to noncontrolling interests
|
|
|
(1,792
|
)
|
|
|
(5,541
|
)
|
|
|
|
|
|
|
|
|
|
Cash flow (used in) provided by financing activities
|
|
|
(19,685
|
)
|
|
|
9,735
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency exchange rate changes on cash
|
|
|
4,476
|
|
|
|
3,234
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents
|
|
|
81,181
|
|
|
|
11,204
|
|
Cash and cash equivalents at beginning of period
|
|
|
119,670
|
|
|
|
90,829
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
200,851
|
|
|
$
|
102,033
|
|
|
|
|
|
|
|
|
|
|
5
DOLE FOOD
COMPANY, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH
FLOWS (Continued)
(Unaudited)
Supplemental
cash flow information
At October 9, 2010 and January 2, 2010, accounts
payable included approximately $5.2 million and
$6.1 million, respectively, for capital additions. Of the
$6.1 million of capital additions included in accounts
payable at January 2, 2010, the majority was paid during
the three quarters ended October 9, 2010. Of the
$6.7 million of capital additions included in accounts
payable at January 3, 2009, the majority was paid during
the three quarters ended October 10, 2009.
For the three quarters ended October 10, 2009, changes in
operating assets and liabilities for prepaid expenses and other
assets included a $10 million provisional payment made to
the European Commission (EC) during January 2009
related to the ECs Antitrust Decision. Refer to
Note 11 Contingencies for further information.
In addition to proceeds from asset sales of $94.4 million
for the three quarters ended October 10, 2009,
$25.9 million of long-term debt was assumed by the buyer of
the fresh-cut flowers subsidiaries, therefore providing a total
benefit to Dole of $120.3 million from asset sales. During
the fourth quarter of 2008, the fresh-cut flowers subsidiaries
borrowed $25.9 million and Doles cash balance at
January 3, 2009 reflected the cash proceeds from this
transaction. The debt ceased to be an obligation (and the
associated remaining cash ceased to be an asset) of Dole upon
the closing of the first phase of the Flowers transactions
during the first quarter of 2009.
During fiscal 2007, two of Doles non-wholly-owned
subsidiaries sold land parcels located in Central California to
subsidiaries of Castle and Cooke, Inc. (Castle) for
$40.3 million, of which $30.5 million was in cash and
$9.8 million was a note receivable. Castle is owned by
David H. Murdock, Doles Chairman. During the third quarter
of 2010, Dole collected $5.7 million which represented its
share of the note receivable. The remaining $4.1 note receivable
balance was ultimately disbursed to our minority partner during
the third quarter of 2010 as a non-cash distribution.
See Accompanying Notes to Condensed Consolidated Financial
Statements
6
DOLE FOOD
COMPANY, INC.
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension &
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
Cumulative
|
|
|
Unrealized
|
|
|
Attributable
|
|
|
Total
|
|
|
|
Shares
|
|
|
Common
|
|
|
Paid-In
|
|
|
Retained
|
|
|
Postretirement
|
|
|
Translation
|
|
|
Gains (Losses)
|
|
|
to Noncontrolling
|
|
|
Shareholders
|
|
|
|
Outstanding
|
|
|
Stock
|
|
|
Capital
|
|
|
Earnings
|
|
|
Benefits
|
|
|
Adjustment
|
|
|
on Hedges
|
|
|
Interests
|
|
|
Equity
|
|
|
|
(In thousands)
|
|
|
Balance at January 3, 2009
|
|
|
51,710
|
|
|
$
|
51
|
|
|
$
|
409,630
|
|
|
$
|
36,122
|
|
|
$
|
(40,960
|
)
|
|
$
|
27,187
|
|
|
$
|
(29,130
|
)
|
|
$
|
30,259
|
|
|
$
|
433,159
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,704
|
|
|
|
71,848
|
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,541
|
)
|
|
|
(20,541
|
)
|
Unrealized foreign currency translation and hedging gains
(losses), net of income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,993
|
|
|
|
(2,220
|
)
|
|
|
25
|
|
|
|
20,798
|
|
Reclassification of realized losses to net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,524
|
|
|
|
|
|
|
|
7,524
|
|
Change in employee benefit plans, net of income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(58
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(58
|
)
|
Contribution received from noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(497
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at October 10, 2009
|
|
|
51,710
|
|
|
$
|
51
|
|
|
$
|
410,127
|
|
|
$
|
90,266
|
|
|
$
|
(41,018
|
)
|
|
$
|
50,180
|
|
|
$
|
(23,826
|
)
|
|
$
|
26,950
|
|
|
$
|
512,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 2, 2010
|
|
|
88,233
|
|
|
$
|
88
|
|
|
$
|
768,973
|
|
|
$
|
105,207
|
|
|
$
|
(52,393
|
)
|
|
$
|
38,226
|
|
|
$
|
(21,126
|
)
|
|
$
|
27,004
|
|
|
$
|
865,979
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,307
|
|
|
|
7,405
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
4,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,838
|
|
Cancellation of restricted stock
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer of land from affiliate entity
|
|
|
|
|
|
|
|
|
|
|
188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
188
|
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,792
|
)
|
|
|
(1,792
|
)
|
Non-cash distribution
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,078
|
)
|
|
|
(4,078
|
)
|
Unrealized foreign currency translation and hedging gains
(losses), net of income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,064
|
|
|
|
(16,023
|
)
|
|
|
4
|
|
|
|
(4,955
|
)
|
Reclassification of realized losses to net income, net of income
taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,446
|
|
|
|
|
|
|
|
4,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at October 9, 2010
|
|
|
88,221
|
|
|
$
|
88
|
|
|
$
|
773,999
|
|
|
$
|
109,305
|
|
|
$
|
(52,393
|
)
|
|
$
|
49,290
|
|
|
$
|
(32,703
|
)
|
|
$
|
24,445
|
|
|
$
|
872,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Accompanying Notes to Condensed Consolidated Financial
Statements
7
DOLE FOOD
COMPANY, INC.
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Three Quarters Ended
|
|
|
|
October 9,
|
|
|
October 10,
|
|
|
October 9,
|
|
|
October 10,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Net income (loss)
|
|
$
|
(48,829
|
)
|
|
$
|
(52,991
|
)
|
|
$
|
7,405
|
|
|
$
|
71,848
|
|
Unrealized foreign currency translation and hedging gains
(losses), net of income taxes
|
|
|
11,380
|
|
|
|
22,335
|
|
|
|
(4,955
|
)
|
|
|
20,798
|
|
Reclassification of realized losses to net income (loss), net of
income taxes
|
|
|
2,187
|
|
|
|
3,517
|
|
|
|
4,446
|
|
|
|
7,524
|
|
Change in employee benefit plans, net of income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(58
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
|
(35,262
|
)
|
|
|
(27,139
|
)
|
|
|
6,896
|
|
|
|
100,112
|
|
Less: Comprehensive income attributable to noncontrolling
interests
|
|
|
(1,577
|
)
|
|
|
(858
|
)
|
|
|
(3,311
|
)
|
|
|
(2,729
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to Dole Food Company,
Inc.
|
|
$
|
(36,839
|
)
|
|
$
|
(27,997
|
)
|
|
$
|
3,585
|
|
|
$
|
97,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Accompanying Notes to Condensed Consolidated Financial
Statements
8
DOLE FOOD
COMPANY, INC.
(Unaudited)
|
|
NOTE 1
|
BASIS OF
PRESENTATION
|
In the opinion of management, the accompanying unaudited
condensed consolidated financial statements of Dole Food
Company, Inc. and its consolidated subsidiaries
(Dole or the Company) include all
adjustments necessary, which are of a normal recurring nature,
to present fairly Doles financial position, results of
operations and cash flows. Dole operates under a 52/53-week
year. The quarters ended October 9, 2010 and
October 10, 2009 are sixteen weeks in duration. For a
summary of significant accounting policies and additional
information relating to Doles financial statements, refer
to the Notes to Consolidated Financial Statements in Item 8
of Doles Annual Report on
Form 10-K
for the year ended January 2, 2010.
Interim results are subject to seasonal variations and are not
necessarily indicative of the results of operations for a full
year. Doles operations are sensitive to a number of
factors including weather-related phenomena and their effects on
industry volumes, prices, product quality and costs. Operations
are also sensitive to fluctuations in foreign currency exchange
rates in both sourcing and selling locations as well as economic
crises and security risks.
In March 2003, Dole completed a going-private merger
transaction. As a result of the transaction, Dole became
wholly-owned by David H. Murdock, Doles Chairman. On
October 28, 2009, Dole completed a $446 million
initial public offering (IPO) of 35,715,000 common
shares at $12.50 per share. On October 23, 2009,
Doles common stock began trading on the New York Stock
Exchange under the ticker symbol DOLE. At the
completion of the IPO, Doles chairman, David H. Murdock,
and his affiliates beneficially owned, which has not changed
since then, approximately 51,710,000 common shares, or 58.6% of
Doles outstanding common shares.
|
|
NOTE 2
|
OTHER
INCOME (EXPENSE), NET
|
Included in other income (expense), net in Doles condensed
consolidated statements of operations for the quarters and three
quarters ended October 9, 2010 and October 10, 2009
are the following items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Three Quarters Ended
|
|
|
|
October 9,
|
|
|
October 10,
|
|
|
October 9,
|
|
|
October 10,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Unrealized loss on cross currency swap
|
|
$
|
(45,562
|
)
|
|
$
|
(27,984
|
)
|
|
$
|
(59,863
|
)
|
|
$
|
(34,687
|
)
|
Realized gain on cross currency swap
|
|
|
2,115
|
|
|
|
2,301
|
|
|
|
6,662
|
|
|
|
7,242
|
|
Unrealized loss on foreign denominated borrowings
|
|
|
(13,748
|
)
|
|
|
(9,960
|
)
|
|
|
(6,281
|
)
|
|
|
(8,599
|
)
|
Realized gain (loss) on foreign denominated borrowings
|
|
|
(1
|
)
|
|
|
(70
|
)
|
|
|
1,101
|
|
|
|
1,145
|
|
Foreign currency exchange gain (loss) on vessel obligation
|
|
|
(3,946
|
)
|
|
|
1,032
|
|
|
|
1,147
|
|
|
|
(5,951
|
)
|
Write-off of debt issuance costs
|
|
|
|
|
|
|
(94
|
)
|
|
|
(4,650
|
)
|
|
|
(5,316
|
)
|
Other
|
|
|
(852
|
)
|
|
|
193
|
|
|
|
(999
|
)
|
|
|
490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net
|
|
$
|
(61,994
|
)
|
|
$
|
(34,582
|
)
|
|
$
|
(62,883
|
)
|
|
$
|
(45,676
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Refer to Note 13 Derivative Financial
Instruments for further discussion regarding Doles cross
currency swap.
|
|
NOTE 3
|
DISCONTINUED
OPERATIONS
|
During the second quarter of 2008, Dole approved and committed
to a formal plan to divest its fresh-cut flowers business.
During the first quarter of 2009, the operations and the
majority of the related assets of this business were sold.
During the third quarter of 2010, Dole sold a building and a
farm located in Colombia to the
9
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
buyer of Doles
fresh-cut
flowers business. Refer to Note 12 - Assets
Held-For-Sale
for further discussion regarding the third quarter 2010 sale.
The operating results of fresh-cut flowers for the quarters and
three quarters ended October 9, 2010 and October 10,
2009 are reported in the following table:
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
October 9,
|
|
|
October 10,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Revenues
|
|
$
|
358
|
|
|
$
|
564
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
$
|
206
|
|
|
$
|
498
|
|
Income taxes
|
|
|
(4
|
)
|
|
|
(53
|
)
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of income taxes
|
|
$
|
202
|
|
|
$
|
445
|
|
|
|
|
|
|
|
|
|
|
Gain on disposal of discontinued operations, net of income taxes
|
|
$
|
4,143
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Quarters Ended
|
|
|
|
October 9,
|
|
|
October 10,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Revenues
|
|
$
|
1,188
|
|
|
$
|
3,745
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
$
|
907
|
|
|
$
|
972
|
|
Income taxes
|
|
|
(31
|
)
|
|
|
(140
|
)
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of income taxes
|
|
$
|
876
|
|
|
$
|
832
|
|
|
|
|
|
|
|
|
|
|
Gain on disposal of discontinued operations, net of income taxes
|
|
$
|
4,143
|
|
|
$
|
1,308
|
|
|
|
|
|
|
|
|
|
|
For all periods presented, noncontrolling interests share
of income from discontinued operations was not material.
Dole recorded $19.8 million of income tax expense on
$19.5 million of pretax income from continuing operations
for the three quarters ended October 9, 2010. Income tax
expense included interest expense of $0.7 million related
to Doles unrecognized tax benefits. Income tax expense of
$15.7 million on $77.7 million of pretax income from
continuing operations was recorded for the three quarters ended
October 10, 2009 which included interest expense of
$2.5 million (net of associated income tax benefits of
approximately $0.5 million) related to Doles
unrecognized tax benefits. Doles effective tax rate varies
significantly from period to period due to the level, mix and
seasonality of earnings generated in its various U.S. and
foreign jurisdictions. Income tax expense for the three quarters
ended October 9, 2010 included $2.4 million recorded
to establish a valuation allowance against deferred income tax
assets in Ecuador which, as the result of a recently enacted tax
law, have been determined to be not recoverable. This was offset
by a reduction in Doles liability for unrecognized tax
benefits related to certain foreign jurisdictions.
Under ASC Topic 270, Interim Reporting
(ASC 270) and ASC Topic 740, Income
Taxes (ASC 740), Dole is required to
adjust its effective tax rate for each quarter to be consistent
with the estimated annual effective tax rate. Jurisdictions with
a projected loss where no tax benefit can be recognized are
excluded from the calculation of the estimated annual effective
tax rate. Applying the provisions of ASC 270 and
ASC 740 could result in a higher
10
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
or lower effective tax rate during a particular quarter, based
upon the mix and timing of actual earnings versus annual
projections.
Historically, Doles income tax provision has differed from
the U.S. federal statutory rate applied to Doles
pretax income primarily due to operations in foreign
jurisdictions that are taxed at a rate lower than the
U.S. federal statutory rate. However, for the three
quarters ended October 9, 2010, income taxes reflect lower
earnings generated in foreign jurisdictions with a lower
statutory rate than experienced in 2009. Income taxes in 2010
also include the impact of increased losses in jurisdictions in
which a tax benefit has not been provided.
As a result of the lapse of the statute of limitations relating
to a state unrecognized tax benefit, Dole expects its income tax
provision in the fourth quarter of 2010 to be reduced by
approximately $14 million, including tax and interest.
Dole recognizes accrued interest and penalties related to its
unrecognized tax benefits as a component of income taxes in the
accompanying condensed consolidated statements of operations.
Accrued interest and penalties before tax benefits were
$29 million and $28.3 million at October 9, 2010
and January 2, 2010, respectively, and are included as a
component of other long-term liabilities in the accompanying
condensed consolidated balance sheets.
Dole Food Company, Inc. or one or more of its subsidiaries file
income tax returns in the U.S. federal jurisdiction, and
various state and foreign jurisdictions. With few exceptions,
Dole is no longer subject to U.S. federal, state and local,
or
non-U.S. income
tax examinations by tax authorities for years prior to 2001.
Income Tax Audits: Dole believes its tax
positions comply with the applicable tax laws and that it has
adequately provided for all tax related matters. Matters raised
upon audit may involve substantial amounts and could result in
material cash payments if resolved unfavorably; however,
management does not believe that any material payments will be
made related to these matters within the next twelve months.
Management considers it unlikely that the resolution of these
matters will have a material adverse effect on Doles
results of operations.
Internal Revenue Service (IRS)
Audit: On August 27, 2009, the IRS completed
its examination of Doles U.S. federal income tax
returns for the years
2002-2005
and issued a Revenue Agents report (RAR) that
includes various proposed adjustments, including with respect to
the going-private merger transaction. The IRS is proposing that
funding used in the going-private merger is taxable and that
some related investment banking fees are not deductible. The net
tax deficiency associated with the RAR is $122 million,
plus interest. On October 27, 2009, Dole filed a protest
letter vigorously challenging the proposed adjustments contained
in the RAR and is pursuing resolution of these issues with the
Appeals Division of the IRS. Dole believes, based in part upon
the advice of its tax advisors, that its tax treatment of such
transactions was appropriate. Although the timing and ultimate
resolution of any issues arising from the IRS examination are
uncertain and are subject to settlement on mutually agreeable
terms at any time, at this time Dole does not anticipate that
the total unrecognized tax benefits will significantly change
within the next twelve months nor does Dole anticipate that any
material tax payments will be made related to these matters
within the next twelve months.
On November 6, 2009, The Worker, Homeownership, and
Business Assistance Act of 2009 was signed into law
allowing companies to carry back net operating losses for up to
five years for losses incurred in taxable years beginning or
ending in either 2008 or 2009. Dole estimates that this new law
effectively reduces the amount of the IRS claim from
$122 million to $91 million. As noted, however, Dole
is pursuing its objection to the proposed adjustments in the RAR.
There was no impact to Dole from the changes made to the tax
treatment of the Medicare Part D program as a result of the
March 2010 enactment of the Patient Protection and
Affordable Care Act.
11
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
The major classes of inventories were as follows:
|
|
|
|
|
|
|
|
|
|
|
October 9,
|
|
|
January 2,
|
|
|
|
2010
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Finished products
|
|
$
|
370,514
|
|
|
$
|
355,387
|
|
Raw materials and work in progress
|
|
|
125,243
|
|
|
|
100,843
|
|
Crop-growing costs
|
|
|
162,005
|
|
|
|
207,312
|
|
Operating supplies and other
|
|
|
65,067
|
|
|
|
54,649
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
722,829
|
|
|
$
|
718,191
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 6
|
CHARGES
FOR RESTRUCTURING AND LONG-TERM RECEIVABLES
|
Charges for restructuring and long-term receivables recorded
during the third quarter of 2010 were as follows (in thousands):
|
|
|
|
|
Severance and other employee-related costs
|
|
$
|
4,252
|
|
Contract termination and other costs
|
|
|
2,736
|
|
Pension-related settlement charges
|
|
|
2,668
|
|
Asset write-downs
|
|
|
4,174
|
|
|
|
|
|
|
Restructuring
|
|
|
13,830
|
|
Long-term receivables
|
|
|
9,688
|
|
|
|
|
|
|
Total charges for restructuring and long-term receivables
|
|
$
|
23,518
|
|
|
|
|
|
|
Charges
for Restructuring
As a result of continued challenging market conditions in
Doles fresh fruit operations, Dole committed to a
restructuring plan during the third quarter of 2010 in its fresh
fruit segment in Europe, Latin America and Asia. These
restructuring efforts are designed to reduce costs by realigning
fruit supply with expected demand. As part of these initiatives,
Dole restructured certain farming operations in Latin America
and Asia, reorganized its European operations and rationalized
vessel charters. As a result of these various initiatives,
beginning in fiscal 2011 Dole expects to realize annual cash
savings in its fresh fruit segment. These savings are expected
to result from lower production costs including lower labor
costs on our farms and in our ports, enhanced farm productivity,
lower distribution costs resulting from more efficient
utilization of our shipping fleet, and lower selling and general
and administrative costs as a result of streamlining its
organization in Europe.
During the third quarter of 2010, Dole incurred costs of
$13.8 million related to these initiatives, of which
$7 million were paid or will be paid in cash. The remaining
amounts relate to the non-cash write-down of long-lived assets
and deferred
crop-growing
costs of $4.1 million as well as pension-related settlement
charges of $2.7 million. The write-down of long-lived
assets included a $1 million impairment charge for
intangible assets due to the end of certain customer
relationships in Europe. Severance charges relating to employee
terminations impacted approximately 1,400 employees.
Dole expects to continue restructuring operations beyond the
third quarter of 2010. Related to these efforts, Dole expects to
incur additional restructuring charges of $11.4 million, of
which $8.7 million is expected to be incurred in the fourth
quarter of 2010 and the remaining $2.7 million in fiscal
2011. These additional charges will primarily consist of
employee severance, pension-related settlement and contract
termination costs. Approximately 700 employees are expected
to be impacted by these initiatives.
12
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
A rollforward of activity for Doles restructuring
liabilities, which are classified in accrued liabilities in the
accompanying condensed consolidated balance sheets, is
summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of
|
|
|
|
|
|
|
|
|
Balance as of
|
|
|
|
June 19,
|
|
|
|
|
|
|
|
|
October 9,
|
|
|
|
2010
|
|
|
Charges
|
|
|
Cash payments
|
|
|
2010
|
|
|
Severance and other employee-related costs
|
|
$
|
|
|
|
$
|
4,252
|
|
|
$
|
(798
|
)
|
|
$
|
3,454
|
|
Contract termination and other costs
|
|
|
|
|
|
|
2,736
|
|
|
|
(411
|
)
|
|
|
2,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
6,988
|
|
|
$
|
(1,209
|
)
|
|
$
|
5,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of the cash paid through the end of the third quarter
of 2010 and expected to be paid for the restructuring
initiatives is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
|
|
|
|
|
|
|
|
|
|
Payments in
|
|
|
Payments in
|
|
|
Expected
|
|
|
|
|
|
|
Third Quarter
|
|
|
Fourth Quarter
|
|
|
Payments in
|
|
|
|
|
|
|
2010
|
|
|
2010
|
|
|
Fiscal 2011
|
|
|
Total
|
|
|
Amounts accrued prior to the third quarter of 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension-related settlement charges
|
|
$
|
4,309
|
|
|
$
|
7,627
|
|
|
$
|
409
|
|
|
$
|
12,345
|
|
Amounts accrued during the third quarter of 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance and other employee-related costs
|
|
|
798
|
|
|
|
2,103
|
|
|
|
1,351
|
|
|
|
4,252
|
|
Contract termination and other costs
|
|
|
411
|
|
|
|
|
|
|
|
2,325
|
|
|
|
2,736
|
|
Amounts to be accrued in future periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance and other employee-related costs
|
|
|
|
|
|
|
1,775
|
|
|
|
413
|
|
|
|
2,188
|
|
Contract termination and other costs
|
|
|
|
|
|
|
2,750
|
|
|
|
1,999
|
|
|
|
4,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,518
|
|
|
$
|
14,255
|
|
|
$
|
6,497
|
|
|
$
|
26,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table above does not include pension-related settlement
charges of $2.7 million incurred in the third quarter of
2010 and pension-related settlement charges of $3 million
expected to be incurred in the fourth quarter of 2010.
Charges
for Long-Term Receivables
During the third quarter of 2010, Dole reclassified gross
receivables totaling $18.8 million for a customer in
Eastern Europe to long-term as the likelihood is that payment
will not be received during the next year. During the quarter
and three quarters ended October 9, 2010, Dole recorded
provisions for bad debt of $9.7 million and
$11.1 million, respectively. During fiscal 2009, Dole
recorded provisions for bad debt of $4.4 million. The net
receivable of $3.3 million represents managements
best estimate of its net realizable value after consideration of
collateral securing the receivable. The net receivable is
classified in other assets in the accompanying condensed
consolidated balance sheets as of October 9, 2010.
|
|
NOTE 7
|
GOODWILL
AND INTANGIBLE ASSETS
|
Goodwill has been allocated to Doles reporting segments as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fresh
|
|
|
Packaged
|
|
|
|
|
|
|
Fresh Fruit
|
|
|
Vegetables
|
|
|
Foods
|
|
|
Total
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Balance as of January 2, 2010 and October 9, 2010
|
|
$
|
275,430
|
|
|
$
|
71,206
|
|
|
$
|
60,611
|
|
|
$
|
407,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
Details of Doles intangible assets were as follows:
|
|
|
|
|
|
|
|
|
|
|
October 9,
|
|
|
January 2,
|
|
|
|
2010
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Amortized intangible assets:
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
$
|
38,501
|
|
|
$
|
39,631
|
|
Other amortized intangible assets
|
|
|
2,113
|
|
|
|
2,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,614
|
|
|
|
41,757
|
|
Accumulated amortization customer relationships
|
|
|
(26,755
|
)
|
|
|
(23,989
|
)
|
Other accumulated amortization
|
|
|
(1,538
|
)
|
|
|
(1,530
|
)
|
|
|
|
|
|
|
|
|
|
Accumulated amortization intangible assets
|
|
|
(28,293
|
)
|
|
|
(25,519
|
)
|
|
|
|
|
|
|
|
|
|
Amortized intangible assets, net
|
|
|
12,321
|
|
|
|
16,238
|
|
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
Trademark and trade names
|
|
|
689,615
|
|
|
|
689,615
|
|
|
|
|
|
|
|
|
|
|
Total identifiable intangible assets, net
|
|
$
|
701,936
|
|
|
$
|
705,853
|
|
|
|
|
|
|
|
|
|
|
Amortization expense of intangible assets totaled
$1.2 million and $1.2 million for the quarters ended
October 9, 2010 and October 10, 2009, respectively,
and $3 million and $2.9 million for the three quarters
ended October 9, 2010 and October 10, 2009,
respectively.
During the third quarter of 2010, Dole recorded a
$1 million impairment charge to intangible assets. Refer to
Note 6 Charges for Restructuring and Long-Term
Receivables for further discussion of the impairment charge.
As of October 9, 2010, the estimated remaining amortization
expense associated with Doles intangible assets for the
remainder of 2010 and in each of the next four fiscal years is
as follows (in thousands):
|
|
|
|
|
Fiscal Year
|
|
Amount
|
|
2010
|
|
$
|
845
|
|
2011
|
|
$
|
3,677
|
|
2012
|
|
$
|
3,677
|
|
2013
|
|
$
|
1,498
|
|
2014
|
|
$
|
842
|
|
Dole performed its annual impairment test for goodwill as
required by ASC Topic 350, Intangibles
Goodwill and Other (ASC 350) for all of
its reporting units during the second quarter of 2010. Further,
Dole evaluates goodwill for impairment indicators on an ongoing
basis. Although Dole does not currently believe that there are
impairment indicators for Doles goodwill, during the third
quarter of 2010 Doles market capitalization declined below
the net book value of Doles equity. A continued decline
in Doles market capitalization or a decline in the
operating results could trigger an impairment indicator in a
subsequent quarter.
14
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
|
|
NOTE 8
|
NOTES PAYABLE
AND LONG-TERM DEBT
|
Notes payable and long-term debt consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
October 9,
|
|
|
January 2,
|
|
|
|
2010
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Unsecured debt:
|
|
|
|
|
|
|
|
|
8.875% notes due 2011
|
|
$
|
|
|
|
$
|
70,000
|
|
8.75% debentures due 2013
|
|
|
155,000
|
|
|
|
155,000
|
|
Secured debt:
|
|
|
|
|
|
|
|
|
13.875% notes due 2014
|
|
|
227,437
|
|
|
|
227,437
|
|
8% notes due 2016
|
|
|
315,000
|
|
|
|
315,000
|
|
Asset-based revolving credit facility
|
|
|
|
|
|
|
|
|
Term loan facilities
|
|
|
831,920
|
|
|
|
739,216
|
|
Contracts and notes, at a weighted-average interest rate of 5.9%
in 2010 (6% in 2009) through 2014
|
|
|
9,349
|
|
|
|
9,349
|
|
Capital lease obligations
|
|
|
61,800
|
|
|
|
65,065
|
|
Notes payable, at a weighted-average interest rate of 3.7% in
2010 (7.3% in 2009)
|
|
|
32,405
|
|
|
|
37,308
|
|
Unamortized debt discount
|
|
|
(25,345
|
)
|
|
|
(20,370
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
1,607,566
|
|
|
|
1,598,005
|
|
Current maturities, net of unamortized debt discount
|
|
|
(39,811
|
)
|
|
|
(45,325
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,567,755
|
|
|
$
|
1,552,680
|
|
|
|
|
|
|
|
|
|
|
Notes
Payable
Dole borrows funds primarily on a short-term basis to finance
current operations. The terms of these borrowings range from one
month to three months. Doles notes payables at
October 9, 2010 consist primarily of foreign borrowings in
Asia and Latin America.
2010
Debt Refinancing
On March 2, 2010, Dole amended its senior secured credit
facilities. The amended senior secured credit facilities
provided $850 million of term loan facilities due 2017 and
a $350 million revolving credit facility due 2014.
On March 2, 2010, Dole called for redemption all of the
remaining 8.875% Senior Notes due 2011 (2011
Notes). On April 1, 2010, Dole redeemed the remaining
$70 million of the 2011 Notes outstanding with the proceeds
from the senior secured credit facilities amendments.
Term
Loans and Revolving Credit Facility
As of October 9, 2010, the term loan facilities consisted
of $238.8 million of Term Loan B and $593.1 million of
Term Loan C. The term loan facilities bear interest, at
Doles option, at a rate per annum equal to either
(i) London Interbank Offer Rate (LIBOR) plus a
base rate of 3.25%, with a LIBOR floor of 1.75%; or
(ii) the base rate plus 2.25%. Interest on the term loan
facilities is payable quarterly in arrears. The weighted average
variable interest rate at October 9, 2010 for Term Loan B
and Term Loan C was 5.05%. The term loan facilities require
quarterly principal payments, plus a balloon payment due in
2017. Dole has an interest rate swap to hedge future changes in
15
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
interest rates and a cross currency swap to lower the
U.S. dollar fixed interest rate to a Japanese yen fixed
interest rate on Term Loan C through October 2011. Refer to
Note 13 Derivative Financial Instruments for
additional information related to these instruments.
As of October 9, 2010, the asset-based lending senior
secured revolving credit facility (ABL revolver)
borrowing base was $282.9 million. There were no borrowings
under the ABL revolver at October 9, 2010. Amounts
outstanding under the ABL revolver bear interest, at Doles
option, at a rate per annum equal to either (i) LIBOR plus
3.00% to 3.50%, or (ii) a base rate plus 2.00% to 2.50%, in
each case, based upon Doles historical borrowing
availability under this facility. The ABL revolver matures in
March 2014. After taking into account approximately
$144.7 million of outstanding letters of credit issued
under the ABL revolver, Dole had approximately
$138.2 million available for borrowings as of
October 9, 2010. During the third quarter of 2010,
Doles $100 million pre-funded letter of credit
facility expired and substantially all of the outstanding
letters of credit and bank guarantees were transferred to
Doles ABL revolver. In connection with the expiration of
the pre-funded letter of credit facility, Dole entered into a
45 million ($62.7 million) letter of credit
facility during the third quarter of 2010 to support the bank
guaranty issued in the same amount associated with the European
Commissions Decision in 2009. Refer to
Note 11 Contingencies for further discussion of
the European Union Antitrust Inquiry.
Covenants
Provisions under the senior secured credit facilities and the
indentures governing Doles senior notes and debentures
require Dole to comply with certain covenants. These covenants
include limitations on, among other things, indebtedness,
investments, loans to subsidiaries, employees and third parties,
the issuance of guarantees and the payment of dividends. The ABL
revolver also contains a springing covenant, which
would not be effective unless the availability under the ABL
revolver were to fall below the greater of $37.5 million
and 12.5% of the Total Commitment (as defined) for any three
consecutive business days. To date, the springing covenant has
never been effective and Dole does not currently anticipate that
the springing covenant will become effective.
In addition, as a result of the March 2, 2010 amendments to
Doles senior secured credit facilities, Dole is subject to
a maximum total leverage and a minimum interest coverage ratio.
At October 9, 2010, Doles total leverage ratio was
3.60x and interest coverage ratio was 2.6x as compared with the
required maximum total leverage ratio of 4.75x and the minimum
interest coverage ratio of 1.75x.
A breach of a covenant or other provision in any debt instrument
governing Doles current or future indebtedness could
result in a default under that instrument and, due to customary
cross-default and cross-acceleration provisions, could result in
a default under Doles other debt instruments. Upon the
occurrence of an event of default under the senior secured
credit facilities or other debt instrument, the lenders or
holders of such other debt instruments could elect to declare
all amounts outstanding to be immediately due and payable and
terminate all commitments to extend further credit. If Dole were
unable to repay those amounts, the lenders could proceed against
the collateral granted to them, if any, to secure the
indebtedness. If the lenders under Doles current
indebtedness were to accelerate the payment of the indebtedness,
Dole cannot give assurance that its assets would be sufficiently
liquid to repay in full its outstanding indebtedness on an
accelerated basis.
Debt
Discounts and Debt Issuance Costs
In connection with the March 2, 2010 amendments of the
senior secured credit facilities, Dole incurred debt issuance
costs of $17 million. Debt issuance costs are capitalized
and amortized into interest expense over the term of the
underlying debt. During the quarter and three quarters ended
October 9, 2010, Dole amortized deferred debt issuance
costs of $1.9 million and $4.5 million, respectively.
During the quarter and three quarters ended October 10,
2009, Dole amortized deferred debt issuance costs of
$1.9 million and $4.1 million, respectively.
16
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
Dole wrote off approximately $4.6 million of deferred debt
issuance costs during the three quarters ended October 9,
2010 resulting from the amendments of the senior secured credit
facilities as well as the refinancing of the term loan
facilities in connection with the amendments. In accordance with
ASC Topic 470, Debt, the refinancing of the
term loans and a portion of the ABL revolver, as a result of the
amendments, was accounted for as extinguishment of debt. The
write-off related to these amendments was recorded in other
income (expense), net in the condensed consolidated statement of
operations for the three quarters ended October 9, 2010.
Debt discounts on term loan facilities in connection with the
2010 amendments of the senior secured credit facilities totaled
$8.5 million. Debt discounts are amortized into interest
expense over the term of the underlying debt. During the quarter
and three quarters ended October 9, 2010, Dole amortized
debt discounts of $1.5 million and $3.5 million,
respectively. During the quarter and three quarters ended
October 10, 2009, Dole amortized debt discounts of
$1.3 million and $2.1 million, respectively.
Fair
Value of Debt
Dole estimates the fair value of its secured and unsecured notes
and debentures based on current quoted market prices. The term
loans are traded between institutional investors on the
secondary loan market, and the fair values of the term loans are
based on the last available trading price. The carrying values
and estimated fair values of Doles debt is summarized
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 9, 2010
|
|
January 2, 2010
|
|
|
Carrying
|
|
Estimated
|
|
Carrying
|
|
Estimated
|
|
|
Values
|
|
Fair Values
|
|
Values
|
|
Fair Values
|
|
|
(In thousands)
|
|
Secured and unsecured notes and debentures
|
|
$
|
679,830
|
|
|
$
|
766,324
|
|
|
$
|
747,067
|
|
|
$
|
824,412
|
|
Term loans
|
|
|
824,182
|
|
|
|
838,159
|
|
|
|
739,216
|
|
|
|
743,836
|
|
Carrying values are net of debt discounts.
|
|
NOTE 9
|
EMPLOYEE
BENEFIT PLANS
|
The components of net periodic benefit cost for Doles
U.S. and international pension plans and other
postretirement benefit (OPRB) plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
|
|
|
|
|
|
|
|
|
U.S. Pension Plans
|
|
|
Pension Plans
|
|
|
OPRB Plans
|
|
|
|
Quarter Ended
|
|
|
Quarter Ended
|
|
|
Quarter Ended
|
|
|
|
October 9,
|
|
|
October 10,
|
|
|
October 9,
|
|
|
October 10,
|
|
|
October 9,
|
|
|
October 10,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
60
|
|
|
$
|
51
|
|
|
$
|
1,723
|
|
|
$
|
1,834
|
|
|
$
|
25
|
|
|
$
|
70
|
|
Interest cost
|
|
|
4,853
|
|
|
|
5,337
|
|
|
|
2,121
|
|
|
|
2,247
|
|
|
|
721
|
|
|
|
820
|
|
Expected return on plan assets
|
|
|
(5,032
|
)
|
|
|
(5,198
|
)
|
|
|
(139
|
)
|
|
|
(131
|
)
|
|
|
|
|
|
|
|
|
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized net loss (gain)
|
|
|
1,183
|
|
|
|
72
|
|
|
|
142
|
|
|
|
180
|
|
|
|
(36
|
)
|
|
|
(158
|
)
|
Unrecognized prior service cost (benefit)
|
|
|
|
|
|
|
|
|
|
|
109
|
|
|
|
102
|
|
|
|
(1,084
|
)
|
|
|
(1,062
|
)
|
Unrecognized net transition obligation
|
|
|
|
|
|
|
|
|
|
|
8
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
Curtailments, settlements and terminations, net
|
|
|
|
|
|
|
|
|
|
|
2,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,064
|
|
|
$
|
262
|
|
|
$
|
6,632
|
|
|
$
|
4,247
|
|
|
$
|
(374
|
)
|
|
$
|
(330
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
|
|
|
|
|
|
|
|
|
U.S. Pension Plans
|
|
|
Pension Plans
|
|
|
OPRB Plans
|
|
|
|
Three Quarters Ended
|
|
|
Three Quarters Ended
|
|
|
Three Quarters Ended
|
|
|
|
October 9,
|
|
|
October 10,
|
|
|
October 9,
|
|
|
October 10,
|
|
|
October 9,
|
|
|
October 10,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
150
|
|
|
$
|
127
|
|
|
$
|
4,285
|
|
|
$
|
4,554
|
|
|
$
|
62
|
|
|
$
|
174
|
|
Interest cost
|
|
|
12,131
|
|
|
|
13,343
|
|
|
|
5,288
|
|
|
|
5,606
|
|
|
|
1,803
|
|
|
|
2,050
|
|
Expected return on plan assets
|
|
|
(12,580
|
)
|
|
|
(12,994
|
)
|
|
|
(345
|
)
|
|
|
(327
|
)
|
|
|
|
|
|
|
|
|
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized net loss (gain)
|
|
|
2,959
|
|
|
|
180
|
|
|
|
358
|
|
|
|
456
|
|
|
|
(90
|
)
|
|
|
(396
|
)
|
Unrecognized prior service cost (benefit)
|
|
|
|
|
|
|
|
|
|
|
271
|
|
|
|
256
|
|
|
|
(2,710
|
)
|
|
|
(2,656
|
)
|
Unrecognized net transition obligation
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
Curtailments, settlements and terminations, net
|
|
|
|
|
|
|
|
|
|
|
2,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,660
|
|
|
$
|
656
|
|
|
$
|
12,545
|
|
|
$
|
10,582
|
|
|
$
|
(935
|
)
|
|
$
|
(828
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 10
|
SEGMENT
INFORMATION
|
Dole has three reportable operating segments: fresh fruit, fresh
vegetables and packaged foods. These reportable segments are
managed separately due to differences in their products,
production processes, distribution channels and customer bases.
Management evaluates and monitors segment performance primarily
through, among other measures, earnings before interest expense
and income taxes (EBIT). EBIT is calculated by
adding interest expense and income taxes to income from
continuing operations. Management believes that segment EBIT
provides useful information for analyzing the underlying
business results as well as allowing investors a means to
evaluate the financial results of each segment in relation to
Dole as a whole. EBIT is not defined under U.S. Generally
Accepted Accounting Principles (U.S. GAAP) and
should not be considered in isolation or as a substitute for net
income or cash flow measures prepared in accordance with
U.S. GAAP or as a measure of Doles profitability.
Additionally, Doles computation of EBIT may not be
comparable to other similarly titled measures computed by other
companies, because not all companies calculate EBIT in the same
manner.
Revenues from external customers and EBIT for the reportable
operating segments and corporate were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Three Quarters Ended
|
|
|
|
October 9,
|
|
|
October 10,
|
|
|
October 9,
|
|
|
October 10,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Revenues from external customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fresh fruit
|
|
$
|
1,327,317
|
|
|
$
|
1,329,147
|
|
|
$
|
3,673,718
|
|
|
$
|
3,672,562
|
|
Fresh vegetables
|
|
|
325,992
|
|
|
|
298,849
|
|
|
|
825,387
|
|
|
|
790,378
|
|
Packaged foods
|
|
|
335,028
|
|
|
|
309,784
|
|
|
|
836,332
|
|
|
|
785,526
|
|
Corporate
|
|
|
234
|
|
|
|
393
|
|
|
|
530
|
|
|
|
1,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,988,571
|
|
|
$
|
1,938,173
|
|
|
$
|
5,335,967
|
|
|
$
|
5,249,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Three Quarters Ended
|
|
|
|
October 9,
|
|
|
October 10,
|
|
|
October 9,
|
|
|
October 10,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
EBIT:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fresh fruit
|
|
$
|
35,959
|
|
|
$
|
44,928
|
|
|
$
|
146,958
|
|
|
$
|
240,216
|
|
Fresh vegetables
|
|
|
5,137
|
|
|
|
(3,504
|
)
|
|
|
23,023
|
|
|
|
9,460
|
|
Packaged foods
|
|
|
24,514
|
|
|
|
29,172
|
|
|
|
78,343
|
|
|
|
75,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating segments
|
|
|
65,610
|
|
|
|
70,596
|
|
|
|
248,324
|
|
|
|
324,736
|
|
Corporate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on cross currency swap
|
|
|
(45,562
|
)
|
|
|
(27,984
|
)
|
|
|
(59,863
|
)
|
|
|
(34,687
|
)
|
Net unrealized loss on foreign denominated instruments
|
|
|
(12,491
|
)
|
|
|
(8,725
|
)
|
|
|
(6,026
|
)
|
|
|
(7,144
|
)
|
Operating and other expenses
|
|
|
(4,022
|
)
|
|
|
(18,675
|
)
|
|
|
(32,910
|
)
|
|
|
(39,750
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
(62,075
|
)
|
|
|
(55,384
|
)
|
|
|
(98,799
|
)
|
|
|
(81,581
|
)
|
Interest expense
|
|
|
(49,187
|
)
|
|
|
(69,955
|
)
|
|
|
(127,375
|
)
|
|
|
(157,743
|
)
|
Income taxes
|
|
|
(7,522
|
)
|
|
|
1,307
|
|
|
|
(19,764
|
)
|
|
|
(15,704
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
(53,174
|
)
|
|
$
|
(53,436
|
)
|
|
$
|
2,386
|
|
|
$
|
69,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Doles equity earnings from equity method investments,
which have been included in EBIT in the table above, relate
primarily to the fresh fruit operating segment.
Total assets for the three reportable operating segments,
corporate and fresh-cut flowers were as follows:
|
|
|
|
|
|
|
|
|
|
|
October 9,
|
|
|
January 2,
|
|
|
|
2010
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Total assets:
|
|
|
|
|
|
|
|
|
Fresh fruit
|
|
$
|
2,165,891
|
|
|
$
|
2,165,234
|
|
Fresh vegetables
|
|
|
373,557
|
|
|
|
396,449
|
|
Packaged foods
|
|
|
687,103
|
|
|
|
645,349
|
|
|
|
|
|
|
|
|
|
|
Total operating segments
|
|
|
3,226,551
|
|
|
|
3,207,032
|
|
Corporate
|
|
|
979,367
|
|
|
|
887,352
|
|
Fresh-cut flowers discontinued operation
|
|
|
10,282
|
|
|
|
12,639
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,216,200
|
|
|
$
|
4,107,023
|
|
|
|
|
|
|
|
|
|
|
Dole is a guarantor of indebtedness of some of its key fruit
suppliers and other entities integral to Doles operations.
At October 9, 2010, guarantees of $2.2 million
consisted primarily of amounts advanced under
third-party
bank agreements to independent growers that supply Dole with
product. Dole has not historically experienced any significant
losses associated with these guarantees.
Dole issues letters of credit and bank guarantees through its
ABL revolver and, in addition, separately through major banking
institutions. Dole also provides insurance-company-issued bonds.
These letters of credit, bank guarantees and insurance company
bonds are required by certain regulatory authorities, suppliers
and other operating agreements. As of October 9, 2010,
total letters of credit, bank guarantees and bonds outstanding
under
19
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
these arrangements were $246.6 million, of which
$62.7 million was issued under Doles new 2010
European letter of credit facility.
Dole also provides various guarantees, mostly to foreign banks,
in the course of its normal business operations to support the
borrowings, leases and other obligations of its subsidiaries.
Dole guaranteed $234.6 million of its subsidiaries
obligations to their suppliers and other third parties as of
October 9, 2010.
Dole has change of control agreements with certain key
executives, under which severance payments and benefits would
become payable in the event of specified terminations of
employment in connection with a change of control (as defined)
of Dole.
Dole is involved from time to time in claims and legal actions
incidental to its operations, both as plaintiff and defendant.
Dole has established what management currently believes to be
adequate reserves for pending legal matters. These reserves are
established as part of an ongoing worldwide assessment of claims
and legal actions that takes into consideration such items as
changes in the pending case load (including resolved and new
matters), opinions of legal counsel, individual developments in
court proceedings, changes in the law, changes in business
focus, changes in the litigation environment, changes in
opponent strategy and tactics, new developments as a result of
ongoing discovery, and past experience in defending and settling
similar claims. In the opinion of management, after consultation
with outside counsel, the claims or actions to which Dole is a
party are not expected to have a material adverse effect,
individually or in the aggregate, on Doles financial
position or results of operations.
DBCP Cases: A significant portion of
Doles legal exposure relates to lawsuits pending in the
United States and in several foreign countries, alleging injury
as a result of exposure to the agricultural chemical DBCP
(1,2-dibromo-3-chloropropane).
DBCP was manufactured by several chemical companies including
entities of The Dow Chemical Company and Royal Dutch Shell plc
and registered by the U.S. government for use on food
crops. Dole and other growers applied DBCP on banana farms in
Latin America and the Philippines and on pineapple farms in
Hawaii. Specific periods of use varied among the different
locations. Dole halted all purchases of DBCP, including for use
in foreign countries, when the U.S. EPA cancelled the
registration of DBCP for use in the United States in 1979.
That cancellation was based in part on a 1977 study by a
manufacturer which indicated an apparent link between male
sterility and exposure to DBCP among factory workers producing
the product, as well as early product testing done by the
manufacturers showing testicular effects on animals exposed to
DBCP. To date, there is no reliable evidence demonstrating that
field application of DBCP led to sterility among farm workers,
although that claim is made in the pending lawsuits. Nor is
there any reliable scientific evidence that DBCP causes any
other injuries in humans, although plaintiffs in the various
actions assert claims based on cancer, birth defects and other
general illnesses.
Currently there are 228 lawsuits, in various stages of
proceedings, alleging injury as a result of exposure to DBCP or
seeking enforcement of Nicaragua judgments. In addition, there
are 11 labor cases pending in Costa Rica under that
countrys national insurance program.
Twenty-one of the 228 lawsuits are currently pending in various
jurisdictions in the United States. One case in Los Angeles
Superior Court, the last remaining lawsuit brought in the United
States by Nicaraguan plaintiffs, was recently dismissed after
the Court found that the plaintiffs and their representatives
engaged in blatant fraud, witness tampering, and active
manipulation. In dismissing this lawsuit, the Court vacated an
earlier $1.58 million judgment against Dole in favor of
four of the plaintiffs. This result was the culmination of
hearings conducted by the Court in response to a July 7,
2009 order issued to plaintiffs by the California Second
District Court of Appeal directing them to show cause why the
$1.58 million judgment should not be vacated and judgment
be entered in Doles favor on the grounds that the judgment
was procured through fraud. After hearings held on May 10 and
11, and July 7-9 and 12, 2010, the Court found that the judgment
had been procured through fraud on both Dole and the Court, and
ordered it vacated. Another case pending in Los Angeles Superior
Court involving 569 Costa Rican
20
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
plaintiffs is currently in discovery proceedings. Pursuant to a
case management order, the initial phase of discovery requires
that all plaintiffs travel to the U.S. over the next five
months for preliminary medical testing.
The remaining lawsuits are pending in Latin America and the
Philippines. Claimed damages in DBCP cases worldwide total
approximately $45 billion, with lawsuits in Nicaragua
representing approximately 87% of this amount. Typically, in
these cases Dole is a joint defendant with the major DBCP
manufacturers. Except as described below, none of these lawsuits
has resulted in a verdict or judgment against Dole.
In Nicaragua, 195 cases are currently filed (of which 33 are
active) in various courts throughout the country, all but two of
which were brought pursuant to Law 364, an October 2000
Nicaraguan statute that contains substantive and procedural
provisions that Nicaraguas Attorney General formally
opined are unconstitutional. In October 2003, the Supreme Court
of Nicaragua issued an advisory opinion, not connected with any
litigation, that Law 364 is constitutional. Thirty-two cases
have resulted in judgments in Nicaragua: $489.4 million
(nine cases consolidated with 465 claimants) on
December 11, 2002; $82.9 million (one case with 58
claimants) on February 25, 2004; $15.7 million (one
case with 20 claimants) on May 25, 2004; $4 million
(one case with four claimants) on May 25, 2004;
$56.5 million (one case with 72 claimants) on June 14,
2004; $64.8 million (one case with 85 claimants) on
June 15, 2004; $27.7 million (one case with 36
claimants) on March 17, 2005; $98.5 million (one case
with 150 claimants) on August 8, 2005;
$46.4 million (one case with 62 claimants) on
August 20, 2005; $809 million (six cases consolidated
with 1,248 claimants) on December 1, 2006;
$38.4 million (one case with 192 claimants) on
November 14, 2007; and $357.7 million (eight cases
with 417 claimants) on January 12, 2009, which Dole learned
of unofficially. Except for the latest one, Dole has appealed
all judgments, with Doles appeal of the August 8,
2005 $98.5 million judgment currently pending before the
Nicaragua Court of Appeal. Dole will appeal the
$357.7 million judgment once it has been served. On
August 5, 2010, the Nicaragua Court of Appeal issued a
ruling upholding the December 1, 2006 $809 million
judgment. Dole has appealed that ruling.
In all but one of the active cases where the proceeding has
reached the appropriate stage, Dole has sought to have the cases
returned to the United States. In all of the cases where
Doles request to return the case to the United States
has been ruled upon, the courts have denied Doles request
and Dole has appealed those decisions.
On October 20, 2009, the United States District Court for
the Southern District of Florida issued an order denying
recognition and enforcement of the $98.5 million Nicaragua
judgment against Dole and another U.S. company. That order
cited separate and independent grounds for non-recognition: the
Nicaragua trial court did not have jurisdiction over the
defendant companies; the judgment did not arise out of
proceedings that comported with the international concept of due
process; the judgment was rendered under a system which does not
provide an impartial tribunal or procedures compatible with the
requirements of due process of law; and the cause of action or
claim for relief on which the judgment is based is repugnant to
the public policy of Florida. Final judgment in favor of Dole
(and the other defendant companies) was entered
November 10, 2009, and the Court ordered the case closed.
On March 10, 2010, Plaintiffs filed an appeal, which is
currently pending before the United States Court of Appeals for
the Eleventh Circuit. Dole has sought to recover its costs
associated with this enforcement action. On July 7, 2010,
the magistrate judge to whom Doles costs motion was
referred issued a report and recommendation to the district
court to award Dole costs of $34 thousand. On July 26,
2010, plaintiffs filed an objection to the report and
recommendation. On August 12, 2010, the district court
adopted the magistrates report and recommendation and
awarded Dole costs of $34 thousand.
Dole believes that none of the Nicaraguan judgments will be
enforceable against any Dole entity in the U.S. or in any
other country, because Nicaraguas Law 364 is
unconstitutional and violates international principles of due
process. Among other things, Law 364 is an improper
special law directed at particular parties; it
requires defendants to pay large, non-refundable deposits in
order to even participate in the litigation; it provides a
severely truncated procedural process; it establishes an
irrebuttable presumption of causation that is contrary to the
evidence and scientific data; and it sets unreasonable minimum
damages that must be awarded in every case.
21
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
On October 23, 2006, Dole announced that Standard Fruit de
Honduras, S.A. reached an agreement with the Government of
Honduras and representatives of Honduran banana workers. This
agreement establishes a Worker Program that is intended by the
parties to resolve in a fair and equitable manner the claims of
male banana workers alleging sterility as a result of exposure
to DBCP. The Honduran Worker Program will not have a material
effect on Doles financial position or results of
operations. The official start of the Honduran Worker Program
was announced on January 8, 2007. On August 15, 2007,
Shell Oil Company was included in the Worker Program.
As to all the DBCP matters, Dole has denied liability and
asserted substantial defenses. While Dole believes there is no
reliable scientific basis for alleged injuries from the
agricultural field application of DBCP, Dole continues to seek
reasonable resolution of pending litigation and claims in the
U.S. and Latin America. For example, as in Honduras, Dole
is committed to finding a prompt resolution to the DBCP claims
in Nicaragua, and is prepared to pursue a structured worker
program in Nicaragua with science- based criteria. The Los
Angeles Superior Court previously appointed a mediator to
explore possible settlement of all DBCP cases currently pending
before the court.
Although, no assurance can be given concerning the outcome of
the DBCP cases, in the opinion of management, after consultation
with legal counsel and based on past experience defending and
settling DBCP claims, the pending lawsuits are not expected to
have a material adverse effect on Doles financial position
or results of operations.
European Union Antitrust Inquiry: On
October 15, 2008, the European Commission (EC)
adopted a Decision against Dole Food Company, Inc. and Dole
Fresh Fruit Europe OHG and against other unrelated banana
companies, finding violations of the European competition
(antitrust) laws. The Decision imposes 45.6 million
in fines on Dole.
The Decision follows a Statement of Objections, issued by the EC
on July 25, 2007, and searches carried out by the EC in
June 2005 at certain banana importers and distributors,
including two of Doles offices.
Dole received the Decision on October 21, 2008 and appealed
the Decision to the European Court of First Instance in
Luxembourg on December 24, 2008.
Dole made an initial $10 million (7.6 million)
provisional payment towards the 45.6 million fine on
January 22, 2009, which is classified as other assets, net
in the accompanying condensed consolidated balance sheets. As
agreed with the European Commission (DG Budget), Dole provided
the required bank guaranty for the remaining balance of the fine
plus interest to the EC by the deadline of April 30, 2009.
The bank guaranty renews annually during the appeals process
(which may take several years) and carries interest of 6.15%
(accrued from January 23, 2009). If the European Court of
First Instance fully agrees with Doles arguments presented
in its appeal, Dole will be entitled to the return of all monies
paid, plus interest.
Although, no assurances can be given, and although there could
be a material adverse effect on Dole, Dole believes that it has
not violated the European competition laws. No accrual for the
Decision has been made in the accompanying condensed
consolidated financial statements, since Dole cannot determine
at this time the amount of probable loss, if any, incurred as a
result of the Decision.
Honduran Tax Case: In 2005, Dole received a
tax assessment from Honduras of approximately $137 million
(including the claimed tax, penalty, and interest through the
date of assessment) relating to the disposition of all of
Doles interest in Cervecería Hondurea, S.A in 2001.
Dole believes the assessment is without merit and filed an
appeal with the Honduran tax authorities, which was denied. As a
result of the denial in the administrative process, in order to
negate the tax assessment, on August 5, 2005, Dole
proceeded to the next stage of the appellate process by filing a
lawsuit against the Honduran government in the Honduran
Administrative Tax Trial Court. The Honduran government sought
dismissal of the lawsuit and attachment of assets, which Dole
challenged. The Honduran Supreme Court affirmed the decision of
the Honduran intermediate appellate court that a statutory
prerequisite to challenging the tax assessment on the merits is
the payment of the tax assessment or the filing of a payment
plan with the Honduran courts; Dole has challenged the
constitutionality of the statute requiring such
22
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
payment or payment plan. Although no assurance can be given
concerning the outcome of this case, in the opinion of
management, after consultation with legal counsel, the pending
lawsuits and tax-related matters are not expected to have a
material adverse effect on Doles financial position or
results of operations.
Former Shell Site: Shell Oil Company and Dole
are defendants in several cases filed in Los Angeles Superior
Court alleging property damage and personal injury by persons
claiming to be current or former residents of a housing
development built in the 1960s by a predecessor of what is now a
Dole subsidiary, on land that had been owned and used by Shell
as a crude oil storage facility for 40 years prior to the
housing development. The California Regional Water Quality
Control Board is supervising a testing program on the former
Shell site. Although no assurance can be given concerning the
outcome of these actions, Dole believes the housing development
was done properly, more than 40 years ago, in conformity
with all applicable governmental laws and regulations. No
accrual for any possible liability has been made in the
accompanying condensed consolidated financial statements, since
Dole cannot determine at this time the amount of probable loss,
if any, incurred as a result of these actions.
Arbitration Settlement: During the third
quarter of 2010, Dole, as plaintiff, settled a dispute for
$30 million that was the subject of an arbitration
proceeding. The dispute involved faulty manufactured containers
sold to Dole. The settlement payment was received by Dole during
the third quarter of 2010. In connection with the settlement,
Dole recorded a $2.7 million non-cash impairment charge
related to obsolete containers during the third quarter of 2010.
As a result, Dole has presented $27.3 million as gain on
arbitration settlement on the accompanying condensed
consolidated statement of operations.
Supplier Settlement: During the fourth quarter
of 2010, Dole and a fresh vegetables supplier settled a dispute.
Pursuant to the settlement, the supplier agreed to pay Dole
$5.3 million, which was received during the fourth quarter
and will be included in income in Doles fourth quarter
2010.
|
|
NOTE 12
|
ASSETS
HELD-FOR-SALE
|
Dole continuously reviews its assets in order to identify those
assets that do not meet Doles future strategic direction
or internal economic return criteria. As a result of this
review, Dole has identified and is in the process of selling
specific businesses and long-lived assets. In accordance with
ASC Topic 205, Presentation of Financial
Statements, Dole has reclassified these assets as
held-for-sale.
Total assets
held-for-sale
by segment were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fresh-Cut
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flowers -
|
|
|
|
|
|
|
|
|
|
Fresh
|
|
|
Packaged
|
|
|
Discontinued
|
|
|
Total Assets
|
|
|
|
Fresh Fruit
|
|
|
Vegetables
|
|
|
Foods
|
|
|
Operation
|
|
|
Held-For-Sale
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Balance as of January 2, 2010
|
|
$
|
76,317
|
|
|
$
|
3,850
|
|
|
$
|
3,214
|
|
|
$
|
12,639
|
|
|
$
|
96,020
|
|
Additions
|
|
|
4,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,947
|
|
Reclassification
|
|
|
|
|
|
|
(3,251
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,251
|
)
|
Sales
|
|
|
(6,623
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,357
|
)
|
|
|
(8,980
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of October 9, 2010
|
|
$
|
74,641
|
|
|
$
|
599
|
|
|
$
|
3,214
|
|
|
$
|
10,282
|
|
|
$
|
88,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
held-for-sale
included in Doles balance sheet at October 9, 2010
consist of property, plant and equipment, net of accumulated
depreciation. There were no liabilities
held-for-sale
at October 9, 2010 and January 2, 2010.
Dole received total cash proceeds of approximately
$29.8 million during the three quarters ended
October 9, 2010, which are related to Doles asset
sale program. The total realized gains recorded from the asset
sale program were $4.1 million and $7 million for the
quarter and three quarters ended October 9, 2010,
respectively, which
23
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
included $4.1 million related to the fresh-cut flowers
discontinued operation. Realized gains related to continuing
operations for the three quarter ended October 9, 2010, of
$2.9 million are shown as a separate component of operating
income in the condensed consolidated statement of operations.
There were no realized gains from continuing operations during
the quarter ended October 9, 2010.
Dole received total cash proceeds of approximately
$118.1 million on assets sold during the three quarters
ended October 10, 2009, which are related to Doles
asset sale program. The total realized gain recorded from the
asset sale program were $16.4 million and
$34.4 million for the quarter and three quarters ended
October 10, 2009, respectively, which included
$1.3 million related to the fresh-cut flowers discontinued
operation. Realized gains related to continuing operations of
$16.4 million and $33.1 million are shown as a
separate component of operating income in the condensed
consolidated statement of operations for the quarter and three
quarters ended October 10, 2009.
Fresh
Fruit
During the first quarter of 2010, Dole added $4.9 million
to the assets
held-for-sale
balance, which represented approximately 1,000 acres of
land in Hawaii. During the first quarter, Dole sold a farm
located in Chile and land in Hawaii. During the second quarter,
Dole sold a facility in Chile and land in Hawaii. For the three
quarters ended October 9, 2010, Dole received cash proceeds
on assets sold of $8.5 million and recorded a gain of
$2.9 million. In addition, Dole collected $1.1 million
during the first quarter of 2010 related to the sale of a
Colombian container port yard in the fourth quarter of 2009 and
recorded a gain of $1.1 million. Dole also collected
$8 million in receivables during the three quarters ended
October 9, 2010 related to the sale of a portion of its
Latin American banana operations and certain box plants
completed during fiscal 2009.
Fresh
Vegetables
During the first quarter of 2010, Dole decided to cease to
actively market a former headquarters facility located in
California due to weakness in the California real estate market.
As a result, the assets related to the California campus
facility were reclassified from assets
held-for-sale
to property, plant, and equipment.
Fresh-Cut
Flowers Discontinued Operation
As of October 9, 2010, the assets
held-for-sale
balance in the fresh-cut flowers discontinued
operation consists of a portion of the real estate of the former
flowers division. During the third quarter of 2010, Dole sold a
building and a farm located in Colombia to the buyer of the
flowers business. Dole received cash proceeds of
$6.5 million and recorded a gain of approximately
$4.1 million, which is included as a component of gain on
disposal of discontinued operations, net of income taxes in the
condensed consolidated statement of operations for the quarter
and three quarters ended October 9, 2010, respectively.
Citrus
Discontinued Operations
During fiscal 2007, two of Doles non-wholly-owned
subsidiaries sold land parcels located in Central California to
subsidiaries of Castle for $40.3 million, of which
$30.5 million was in cash and $9.8 million was a note
receivable. Castle is owned by David H. Murdock, Doles
Chairman. During the third quarter of 2010, Dole collected
$5.7 million which represented its share of the note
receivable. The remaining $4.1 note receivable balance was
ultimately disbursed to Doles minority partner during the
third quarter of 2010 as a non-cash distribution.
24
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
|
|
NOTE 13
|
DERIVATIVE
FINANCIAL INSTRUMENTS
|
Dole is exposed to foreign currency exchange rate fluctuations,
bunker fuel price fluctuations and interest rate changes in the
normal course of its business. As part of its risk management
strategy, Dole uses derivative instruments to hedge certain
foreign currency, bunker fuel and interest rate exposures.
Doles objective is to offset gains and losses resulting
from these exposures with losses and gains on the derivative
contracts used to hedge them, thereby reducing volatility of
earnings. Dole does not hold or issue derivative financial
instruments for trading or speculative purposes.
Cash
Flow Hedges
During the first quarter of 2010, Dole designated a majority of
its foreign currency derivative instruments as cash flow hedges
in accordance with guidance provided by ASC Topic 815,
Derivatives and Hedging. Specifically, Dole
designated a majority of its foreign currency exchange forward
contracts and participating forward contracts as cash flow
hedges of its forecasted revenue and operating expense
transactions. As a result, changes in fair value of the foreign
currency derivative instruments since hedge designation, to the
extent effective, are recorded as a component of accumulated
other comprehensive income (loss) (AOCI) in the
condensed consolidated balance sheet and are reclassified into
earnings in the same period the underlying transactions affect
earnings. Any portion of a cash flow hedge deemed ineffective is
recognized into current period earnings.
In connections with the March 2010 refinancing transaction, some
of the terms of Doles senior secured credit facilities
were amended. Dole evaluated the impact of these amendments on
its hedge designation for its interest rate swap and determined
not to re-designate the interest rate swap as a cash flow hedge
of its interest rate risk associated with Term Loan C. As a
result, changes in the fair value of the interest rate swap
after de-designation on March 2, 2010 are recorded in
interest expense. The unrealized loss in AOCI will be recognized
into interest expense through October 2011 as the underlying
Term Loan C interest payments are made.
Interest
Rate Swap, Cross Currency Swap and Restricted
Deposits
Dole entered into an interest rate swap in 2006 to hedge future
changes in interest rates. This agreement effectively converted
$320 million of borrowings under Term Loan C, which was
variable-rate debt, to a fixed-rate basis through 2011. The
interest rate swap fixed the interest rate at 7.2%. The paying
and receiving rates under the interest rate swap were 5.5% and
0.5% as of October 9, 2010, with an outstanding notional
amount of $320 million.
During 2006 (subsequently amended in 2009), Dole executed a
cross currency swap to synthetically convert $320 million
of Term Loan C into Japanese yen denominated debt in order to
effectively lower the U.S. dollar fixed interest rate of
7.2% to a Japanese yen interest rate of 3.6%. Payments under the
cross currency swap were converted from U.S. dollars to
Japanese yen at an exchange rate of ¥114.9.
Dole also entered into a collateral arrangement which requires
Dole to provide collateral to its counterparties when the fair
market value of the cross currency and interest rate swaps
exceeds a combined liability of $35 million. The
measurement date for the collateral required at October 9,
2010 was October 6, 2010, and the fair value of the swaps
at the measurement date was a liability of approximately
$132.8 million. Dole provided cash collateral of
$37.8 million, which was recorded as restricted deposits in
the accompanying condensed consolidated balance sheet, and the
remaining $60 million of collateral was issued through
letters of credit.
At October 9, 2010, the exchange rate of U.S. dollar
to Japanese yen was ¥82.4. The value of the cross currency
swap will fluctuate based on changes in the U.S. dollar to
Japanese yen exchange rate and market interest rates until
maturity in June 2011, at which time it will settle in cash at
the then current exchange rate.
25
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
At October 9, 2010, the gross notional value and fair value
of Doles derivative instruments were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Assets (Liabilities)
|
|
|
|
Average Strike
|
|
Notional
|
|
|
Balance Sheet
|
|
Fair
|
|
|
|
Price
|
|
Amount
|
|
|
Classification
|
|
Value
|
|
|
|
(In thousands)
|
|
|
Derivatives designated as cash flow hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency hedges (buy/sell):
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. dollar/Euro
|
|
$1.44/EUR
|
|
$
|
33,922
|
|
|
Receivables, net
|
|
|
1,225
|
|
Chilean peso/U.S. dollar
|
|
CLP 530
|
|
|
3,210
|
|
|
Receivables, net
|
|
|
309
|
|
Philippine peso/U.S. dollar
|
|
PHP 47.1
|
|
|
91,125
|
|
|
Receivables, net
|
|
|
7,113
|
|
Thai Baht/U.S. dollar
|
|
THB 32.1
|
|
|
78,764
|
|
|
Receivables, net
|
|
|
5,376
|
|
Philippine peso/U.S. dollar
|
|
PHP 47.4
|
|
|
22,819
|
|
|
Other assets, net
|
|
|
1,591
|
|
Thai Baht/U.S. dollar
|
|
THB 32.1
|
|
|
25,376
|
|
|
Other assets, net
|
|
|
1,704
|
|
U.S. dollar/Canadian dollar
|
|
CAD 1.10
|
|
|
6,050
|
|
|
Accrued liabilities
|
|
|
(265
|
)
|
U.S. dollar/Euro
|
|
$1.26/EUR
|
|
|
33,181
|
|
|
Accrued liabilities
|
|
|
(3,301
|
)
|
U.S. dollar/Japanese yen
|
|
JPY 93
|
|
|
205,245
|
|
|
Accrued liabilities
|
|
|
(25,539
|
)
|
|
|
|
|
|
|
|
|
Other long-term
|
|
|
|
|
U.S. dollar/Japanese yen
|
|
JPY 91.1
|
|
|
46,059
|
|
|
liabilities
|
|
|
(5,211
|
)
|
|
|
|
|
|
|
|
|
Other long-term
|
|
|
|
|
U.S. dollar/Euro
|
|
$1.27/EUR
|
|
|
8,806
|
|
|
liabilities
|
|
|
(807
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives designated as cash flow hedging instruments
|
|
|
|
|
|
|
|
|
|
|
(17,805
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency hedges (buy/sell):
|
|
|
|
|
|
|
|
|
|
|
|
|
South African rand/U.S. dollar
|
|
ZAR 8.9
|
|
|
6,190
|
|
|
Receivables, net
|
|
|
516
|
|
U.S. dollar/Swedish krona
|
|
SEK6.9
|
|
|
2,132
|
|
|
Accrued liabilities
|
|
|
(85
|
)
|
Cross currency swap
|
|
|
|
|
320,000
|
|
|
Receivables, net
|
|
|
1,784
|
|
Cross currency swap
|
|
|
|
|
|
|
|
Accrued liabilities
|
|
|
(123,186
|
)
|
Interest rate swap
|
|
|
|
|
320,000
|
|
|
Accrued liabilities
|
|
|
(15,278
|
)
|
Bunker fuel hedges
|
|
$448
|
|
|
58,552
|
|
|
Receivables, net
|
|
|
1,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(per metric ton)
|
|
|
(metric tons
|
)
|
|
|
|
|
|
|
Total derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
(134,886
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
(152,691
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
Settlement of the foreign currency and bunker fuel hedges will
occur during 2010 and 2011.
The effects of the interest rate swap and foreign currency
hedges designated as cash flow hedging instruments on
accumulated other comprehensive income (loss) and the condensed
consolidated statements of operations for the quarters and three
quarters ended October 9, 2010 and October 10, 2009
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (Losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized in
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
due to Hedge
|
|
|
|
|
|
|
|
|
|
|
Ineffectiveness
|
|
|
|
|
|
|
|
|
|
|
or Amounts
|
|
|
Gains (Losses)
|
|
|
|
Gains (Losses)
|
|
Excluded
|
|
|
Recognized in
|
|
|
|
Reclassified
|
|
from Effectiveness
|
|
|
AOCI During
|
|
|
|
Into Income
|
|
Testing
|
|
|
Quarter Ended
|
|
|
|
Quarter Ended
|
|
Quarter Ended
|
|
|
October 9,
|
|
October 10,
|
|
Income Statement
|
|
October 9,
|
|
October 10,
|
|
October 9,
|
|
October 10,
|
|
|
2010
|
|
2009
|
|
Classification
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
(In thousands)
|
|
Interest rate swap
|
|
$
|
|
|
|
$
|
(3,072
|
)
|
|
Interest expense
|
|
$
|
(5,098
|
)
|
|
$
|
(3,517
|
)
|
|
$
|
|
|
|
$
|
|
|
Foreign currency hedges
|
|
|
(22,240
|
)
|
|
|
|
|
|
Cost of products sold
|
|
|
2,916
|
|
|
|
|
|
|
|
1,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (Losses)
|
|
|
|
|
|
|
|
|
|
|
Recognized in Income
|
|
|
|
|
|
|
|
|
|
|
due to Hedge
|
|
|
|
|
|
|
|
|
|
|
Ineffectiveness
|
|
|
Gains (Losses) Recognized in
|
|
|
|
Gains (Losses)
|
|
or Amounts Excluded
|
|
|
AOCI During
|
|
|
|
Reclassified
|
|
from Effectiveness
|
|
|
Three Quarters
|
|
|
|
into Income
|
|
Testing
|
|
|
Ended
|
|
|
|
Three Quarters Ended
|
|
Three Quarters Ended
|
|
|
October 9,
|
|
October 10,
|
|
Income Statement
|
|
October 9,
|
|
October 10,
|
|
October 9,
|
|
October 10,
|
|
|
2010
|
|
2009
|
|
Classification
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
(In thousands)
|
|
Interest rate swap
|
|
$
|
680
|
|
|
$
|
(2,220
|
)
|
|
Interest expense
|
|
$
|
(10,138
|
)
|
|
$
|
(7,524
|
)
|
|
$
|
|
|
|
$
|
|
|
Foreign currency hedges
|
|
|
(15,380
|
)
|
|
|
|
|
|
Cost of products sold
|
|
|
5,671
|
|
|
|
|
|
|
|
1,663
|
|
|
|
|
|
Unrealized gains and losses on the interest rate swap were
recorded through AOCI through the de-designation date.
Unrecognized losses of $10.3 million related to the
interest rate swap are expected to be realized into earnings
through October 2011. To the extent effective, unrecognized
gains and losses on the foreign currency hedges are recorded
through AOCI from the designation date. Unrecognized losses of
$17.9 million related to the foreign currency hedges are
expected to be realized into earnings in the next twelve months
with the remaining $3.2 million gains expected to be
realized through December 2011.
27
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
Net unrealized gains (losses) and realized gains (losses) on
derivatives not designated as hedging instruments for the
quarters and three quarters ended October 9, 2010 and
October 10, 2009 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
|
|
Unrealized Gains
|
|
|
Realized Gains
|
|
|
|
|
|
(Losses)
|
|
|
(Losses)
|
|
|
|
Income Statement
|
|
October 9,
|
|
|
October 10,
|
|
|
October 9,
|
|
|
October 10,
|
|
|
|
Classification
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Foreign currency exchange contracts
|
|
Cost of products sold
|
|
$
|
501
|
|
|
$
|
(10,490
|
)
|
|
$
|
(42
|
)
|
|
$
|
(1,576
|
)
|
Bunker fuel contracts
|
|
Cost of products sold
|
|
|
1,665
|
|
|
|
(1,927
|
)
|
|
|
(442
|
)
|
|
|
2,217
|
|
Cross currency swap
|
|
Other income (expense), net
|
|
|
(45,562
|
)
|
|
|
(27,984
|
)
|
|
|
2,115
|
|
|
|
2,301
|
|
Interest rate swap
|
|
Interest expense
|
|
|
3,735
|
|
|
|
|
|
|
|
(4,195
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
(39,661
|
)
|
|
$
|
(40,401
|
)
|
|
$
|
(2,564
|
)
|
|
$
|
2,942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Quarters Ended
|
|
|
|
|
|
Unrealized Gains
|
|
|
Realized Gains
|
|
|
|
|
|
(Losses)
|
|
|
(Losses)
|
|
|
|
Income Statement
|
|
October 9,
|
|
|
October 10,
|
|
|
October 9,
|
|
|
October 10,
|
|
|
|
Classification
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Foreign currency exchange contracts
|
|
Cost of products sold
|
|
$
|
432
|
|
|
$
|
(2,999
|
)
|
|
$
|
(60
|
)
|
|
$
|
(281
|
)
|
Bunker fuel contracts
|
|
Cost of products sold
|
|
|
858
|
|
|
|
4,415
|
|
|
|
(357
|
)
|
|
|
(567
|
)
|
Cross currency swap
|
|
Other income (expense), net
|
|
|
(59,863
|
)
|
|
|
(34,687
|
)
|
|
|
6,662
|
|
|
|
7,242
|
|
Interest rate swap
|
|
Interest expense
|
|
|
8,482
|
|
|
|
|
|
|
|
(8,383
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
(50,091
|
)
|
|
$
|
(33,271
|
)
|
|
$
|
(2,138
|
)
|
|
$
|
6,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 14
|
FAIR
VALUE MEASUREMENTS
|
Doles financial instruments primarily consist of
short-term trade and grower receivables, trade payables, notes
receivable and notes payable, as well as long-term grower
receivables, capital lease obligations, term loans, a revolving
loan, and notes and debentures. For short-term instruments, the
carrying amount approximates fair value because of the short
maturity of these instruments. For the long-term financial
instruments, excluding Doles secured and unsecured notes
and debentures, and term loans, the carrying amount approximates
fair value since they bear interest at variable rates or fixed
rates which approximate market.
Dole performs fair value measurements in accordance with
guidance provided by ASC Topic 820, Fair Value
Measurements and Disclosures (ASC 820).
ASC 820 provides a fair value hierarchy that prioritizes
observable and unobservable inputs to valuation techniques used
to measure fair value. These levels, in order of highest to
lowest priority are described below:
Level 1: Quoted prices (unadjusted) in active
markets that are accessible at the measurement date for
identical assets or liabilities.
Level 2: Observable prices that are based on
inputs not quoted on active markets, but corroborated by market
data.
Level 3: Unobservable inputs that are not
corroborated by market data.
28
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
The following table provides a summary of the assets and
liabilities measured at fair value on a recurring basis under
the ASC 820 hierarchy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 9, 2010
|
|
|
January 2, 2010
|
|
|
|
|
|
|
Fair Value
|
|
|
|
|
|
Fair Value
|
|
|
|
|
|
|
Measurements Using
|
|
|
|
|
|
Measurements Using
|
|
|
|
|
|
|
Significant
|
|
|
|
|
|
Significant
|
|
|
|
|
|
|
Other Observable
|
|
|
|
|
|
Other Observable
|
|
|
|
|
|
|
Inputs
|
|
|
|
|
|
Inputs
|
|
|
|
Total
|
|
|
(Level 2)
|
|
|
Total
|
|
|
(Level 2)
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange contracts
|
|
$
|
17,834
|
|
|
$
|
17,834
|
|
|
$
|
2,738
|
|
|
$
|
2,738
|
|
Bunker fuel contracts
|
|
|
1,363
|
|
|
|
1,363
|
|
|
|
505
|
|
|
|
505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,197
|
|
|
$
|
19,197
|
|
|
$
|
3,243
|
|
|
$
|
3,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange contracts
|
|
$
|
35,208
|
|
|
$
|
35,208
|
|
|
$
|
247
|
|
|
$
|
247
|
|
Interest rate swap
|
|
|
15,278
|
|
|
|
15,278
|
|
|
|
20,560
|
|
|
|
20,560
|
|
Cross currency swap, net
|
|
|
121,402
|
|
|
|
121,402
|
|
|
|
61,540
|
|
|
|
61,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
171,888
|
|
|
$
|
171,888
|
|
|
$
|
82,347
|
|
|
$
|
82,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Dole, the assets and liabilities that are required to be
recorded at fair value on a recurring basis are the derivative
instruments. The fair values of Doles derivative
instruments are determined using Level 2 inputs, which are
defined as significant other observable inputs. The
fair values of the foreign currency exchange contracts, bunker
fuel contracts, interest rate swap and cross currency swap were
estimated using internal discounted cash flow calculations based
upon forward foreign currency exchange rates, bunker fuel
futures, interest-rate yield curves or quotes obtained from
brokers for contracts with similar terms less any credit
valuation adjustments. Dole recorded a credit valuation
adjustment at October 9, 2010 which reduced the derivative
liability balances. The credit valuation adjustment was
$1.1 million and $2.3 million at October 9, 2010
and January 2, 2010 respectively. For the three quarters
ended October 9, 2010, the net change in the credit
valuation adjustment resulted in a loss of $1.3 million. Of
this loss, $0.5 million was recorded as interest expense
and $0.8 million was recorded as other income (expense),
net. For the three quarters ended October 10, 2009, the net
change in credit valuation adjustment resulted in a loss of
$13.8 million. Of this loss, $2.1 million was recorded
as interest expense and $11.7 million was recorded as other
income (expense), net. For the quarter ended October 9,
2010, there was no net change in the credit valuation
adjustment. For the quarter ended October 10, 2009, the net
change in credit valuation adjustment resulted in a loss of
$0.6 million. Of this loss, $0.4 million was recorded
as interest expense and $0.2 million was recorded as other
income (expense), net.
In addition to assets and liabilities that are recorded at fair
value on a recurring basis, Dole is required to record assets
and liabilities at fair value on a nonrecurring basis.
Nonfinancial assets such as goodwill, indefinite-lived
intangible assets and long-lived assets are measured at fair
value when there is an indicator of impairment and recorded at
fair value only when an impairment is recognized.
As discussed in Note 6 Charges for
Restructuring and Long-Term Receivables, Dole impaired an
intangible asset during the third quarter of 2010. In addition,
an equity method investment was impaired in the third quarter of
2010. These impairments totaled $1.8 million and resulted
in the assets being written down to zero. The estimated fair
value of these assets was determined using Level 3 inputs.
The goodwill and indefinite-lived intangible asset impairment
analysis was performed in the second quarter of 2010 using a
combination of discounted cash flow models and market multiples.
The discounted cash flow models
29
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
used estimates and assumptions including pricing and volume
data, anticipated growth rates, profitability levels, tax rates
and discount rates. The fair value of the goodwill and
indefinite-lived intangible asset are highly sensitive to
differences between estimates and actual cash flows and changes
in the related discount rate used to evaluate the fair value of
these assets.
Credit
Risk
The counterparties to the foreign currency and bunker fuel
forward contracts and the interest rate and cross currency swaps
consist of a number of major international financial
institutions. Dole has established counterparty guidelines and
regularly monitors its positions and the financial strength of
these institutions. While counterparties to hedging contracts
expose Dole to credit-related losses in the event of a
counterpartys non-performance, the risk would be limited
to the unrealized gains on such affected contracts. Dole does
not anticipate any such losses.
|
|
NOTE 15
|
EARNINGS
PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Three Quarters Ended
|
|
|
|
October 9,
|
|
|
October 10,
|
|
|
October 9,
|
|
|
October 10,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Income (loss) from continuing operations
|
|
$
|
(53,174
|
)
|
|
$
|
(53,436
|
)
|
|
$
|
2,386
|
|
|
$
|
69,708
|
|
Income from discontinued operations
|
|
|
202
|
|
|
|
445
|
|
|
|
876
|
|
|
|
832
|
|
Gain on disposal of discontinued operations
|
|
|
4,143
|
|
|
|
|
|
|
|
4,143
|
|
|
|
1,308
|
|
Less: Net income attributable to noncontrolling interests
|
|
|
(1,547
|
)
|
|
|
(830
|
)
|
|
|
(3,307
|
)
|
|
|
(2,704
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Dole Food Company, Inc.
|
|
$
|
(50,376
|
)
|
|
$
|
(53,821
|
)
|
|
$
|
4,098
|
|
|
$
|
69,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding Basic
|
|
|
87,425
|
|
|
|
51,710
|
|
|
|
87,425
|
|
|
|
51,710
|
|
Diluted effects of stock incentive plan
|
|
|
|
|
|
|
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding Diluted
|
|
|
87,425
|
|
|
|
51,710
|
|
|
|
87,525
|
|
|
|
51,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
(0.61
|
)
|
|
$
|
(1.03
|
)
|
|
$
|
0.03
|
|
|
$
|
1.35
|
|
Income from discontinued operations
|
|
|
|
|
|
|
0.01
|
|
|
|
0.01
|
|
|
|
0.02
|
|
Gain on disposal of discontinued operations
|
|
|
0.05
|
|
|
|
|
|
|
|
0.05
|
|
|
|
0.02
|
|
Less: Net income attributable to noncontrolling interests
|
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
|
|
(0.04
|
)
|
|
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Dole Food Company, Inc.
|
|
$
|
(0.58
|
)
|
|
$
|
(1.04
|
)
|
|
$
|
0.05
|
|
|
$
|
1.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
(0.61
|
)
|
|
$
|
(1.03
|
)
|
|
$
|
0.03
|
|
|
$
|
1.35
|
|
Income from discontinued operations
|
|
|
|
|
|
|
0.01
|
|
|
|
0.01
|
|
|
|
0.02
|
|
Gain on disposal of discontinued operations
|
|
|
0.05
|
|
|
|
|
|
|
|
0.05
|
|
|
|
0.02
|
|
Less: Net income attributable to noncontrolling interests
|
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
|
|
(0.04
|
)
|
|
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Dole Food Company, Inc.
|
|
$
|
(0.58
|
)
|
|
$
|
(1.04
|
)
|
|
$
|
0.05
|
|
|
$
|
1.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive shares of 148 thousand have been excluded from the
calculation of diluted weighted average shares outstanding for
the quarter ended October 9, 2010.
30
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
|
|
NOTE 16
|
SHARE-BASED
COMPENSATION
|
In connection with the IPO, in October 2009, the 2009 Stock
Incentive Plan was approved by Doles Board of Directors
and stockholder, in which 6 million shares of Dole common
stock have been authorized for issuance. As of October 9,
2010, 796,289 restricted shares and 35,211 restricted stock
units and 1,395,001 nonqualified stock options were outstanding
to officers, directors, and eligible employees. During the three
quarters ended October 9, 2010, there were no grants or
exercises. Cancellations during the three quarters ended
October 9, 2010 were not significant. Share-based
compensation expense totaled $2.1 million and
$4.8 million for the quarter and three quarters ended
October 9, 2010, respectively.
|
|
NOTE 17
|
GUARANTOR
FINANCIAL INFORMATION
|
Doles wholly-owned domestic subsidiaries
(Guarantors) have fully and unconditionally
guaranteed, on a joint and several basis, Doles
obligations under the indentures related to Doles
8.75% debentures due 2013, the 13.875% senior secured
notes due 2014 and the 8% senior secured notes due 2016.
Each Guarantee is subordinated in right of payment to the
Guarantors existing and future senior debt, including
obligations under the senior secured credit facilities and will
rank pari passu with all senior subordinated indebtedness of the
applicable Guarantor.
The accompanying Guarantor consolidating financial information
is presented on the equity method of accounting for all periods
presented. Under this method, investments in subsidiaries are
recorded at cost and adjusted for subsidiaries cumulative
results of operations, capital contributions and distributions
and other changes in equity. Elimination entries relate to the
elimination of investments in subsidiaries and associated
intercompany balances and transactions as well as cash overdraft
and income tax reclassifications.
The following are condensed consolidating statements of
operations of Dole for the quarters and three quarters ended
October 9, 2010 and October 10, 2009; condensed
consolidating balance sheets as of October 9, 2010 and
January 2, 2010; and condensed consolidating statements of
cash flows for the three quarters ended October 9, 2010 and
October 10, 2009.
31
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
CONDENSED
CONSOLIDATING STATEMENT OF OPERATIONS
For the Quarter Ended October 9, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dole Food
|
|
|
|
|
|
Non
|
|
|
|
|
|
|
|
|
|
Company, Inc.
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Revenues, net
|
|
$
|
26,223
|
|
|
$
|
913,456
|
|
|
$
|
1,494,733
|
|
|
$
|
(445,841
|
)
|
|
$
|
1,988,571
|
|
Cost of products sold
|
|
|
(23,068
|
)
|
|
|
(813,191
|
)
|
|
|
(1,377,645
|
)
|
|
|
424,819
|
|
|
|
(1,789,085
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
3,155
|
|
|
|
100,265
|
|
|
|
117,088
|
|
|
|
(21,022
|
)
|
|
|
199,486
|
|
Selling, marketing and general and administrative expenses
|
|
|
(6,082
|
)
|
|
|
(69,823
|
)
|
|
|
(82,829
|
)
|
|
|
21,022
|
|
|
|
(137,712
|
)
|
Charges for restructuring and long-term receivables
|
|
|
|
|
|
|
|
|
|
|
(23,518
|
)
|
|
|
|
|
|
|
(23,518
|
)
|
Gain on arbitration settlement, net
|
|
|
|
|
|
|
|
|
|
|
27,271
|
|
|
|
|
|
|
|
27,271
|
|
Gain on asset sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(2,927
|
)
|
|
|
30,442
|
|
|
|
38,012
|
|
|
|
|
|
|
|
65,527
|
|
Equity in subsidiary income
|
|
|
(29,430
|
)
|
|
|
(47,729
|
)
|
|
|
|
|
|
|
77,159
|
|
|
|
|
|
Other income (expense), net
|
|
|
|
|
|
|
|
|
|
|
(61,994
|
)
|
|
|
|
|
|
|
(61,994
|
)
|
Interest income
|
|
|
394
|
|
|
|
39
|
|
|
|
1,173
|
|
|
|
|
|
|
|
1,606
|
|
Interest expense
|
|
|
(29,931
|
)
|
|
|
(29
|
)
|
|
|
(19,227
|
)
|
|
|
|
|
|
|
(49,187
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes and equity
earnings
|
|
|
(61,894
|
)
|
|
|
(17,277
|
)
|
|
|
(42,036
|
)
|
|
|
77,159
|
|
|
|
(44,048
|
)
|
Income taxes
|
|
|
11,518
|
|
|
|
(12,211
|
)
|
|
|
(6,829
|
)
|
|
|
|
|
|
|
(7,522
|
)
|
Losses from equity method investments
|
|
|
|
|
|
|
(106
|
)
|
|
|
(1,498
|
)
|
|
|
|
|
|
|
(1,604
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(50,376
|
)
|
|
|
(29,594
|
)
|
|
|
(50,363
|
)
|
|
|
77,159
|
|
|
|
(53,174
|
)
|
Income from discontinued operations, net of income taxes
|
|
|
|
|
|
|
|
|
|
|
202
|
|
|
|
|
|
|
|
202
|
|
Gain on disposal of discontinued operations, net of income taxes
|
|
|
|
|
|
|
|
|
|
|
4,143
|
|
|
|
|
|
|
|
4,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(50,376
|
)
|
|
|
(29,594
|
)
|
|
|
(46,018
|
)
|
|
|
77,159
|
|
|
|
(48,829
|
)
|
Less: Net income attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
(1,547
|
)
|
|
|
|
|
|
|
(1,547
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Dole Food Company, Inc.
|
|
$
|
(50,376
|
)
|
|
$
|
(29,594
|
)
|
|
$
|
(47,565
|
)
|
|
$
|
77,159
|
|
|
$
|
(50,376
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
Quarter Ended October 10, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dole Food
|
|
|
|
|
|
Non
|
|
|
|
|
|
|
|
|
|
Company, Inc.
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Revenues, net
|
|
$
|
24,095
|
|
|
$
|
886,174
|
|
|
$
|
1,486,797
|
|
|
$
|
(458,893
|
)
|
|
$
|
1,938,173
|
|
Cost of products sold
|
|
|
(19,200
|
)
|
|
|
(800,417
|
)
|
|
|
(1,397,327
|
)
|
|
|
455,573
|
|
|
|
(1,761,371
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
4,895
|
|
|
|
85,757
|
|
|
|
89,470
|
|
|
|
(3,320
|
)
|
|
|
176,802
|
|
Selling, marketing and general and administrative expenses
|
|
|
(21,918
|
)
|
|
|
(58,973
|
)
|
|
|
(71,408
|
)
|
|
|
3,320
|
|
|
|
(148,979
|
)
|
Gain on asset sales
|
|
|
|
|
|
|
|
|
|
|
16,359
|
|
|
|
|
|
|
|
16,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(17,023
|
)
|
|
|
26,784
|
|
|
|
34,421
|
|
|
|
|
|
|
|
44,182
|
|
Equity in subsidiary income
|
|
|
(19,948
|
)
|
|
|
(13,778
|
)
|
|
|
|
|
|
|
33,726
|
|
|
|
|
|
Other income (expense), net
|
|
|
196
|
|
|
|
|
|
|
|
(34,778
|
)
|
|
|
|
|
|
|
(34,582
|
)
|
Interest income
|
|
|
378
|
|
|
|
42
|
|
|
|
1,945
|
|
|
|
|
|
|
|
2,365
|
|
Interest expense
|
|
|
(43,759
|
)
|
|
|
(31
|
)
|
|
|
(26,165
|
)
|
|
|
|
|
|
|
(69,955
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes and
equity earnings
|
|
|
(80,156
|
)
|
|
|
13,017
|
|
|
|
(24,577
|
)
|
|
|
33,726
|
|
|
|
(57,990
|
)
|
Income taxes
|
|
|
26,335
|
|
|
|
(33,338
|
)
|
|
|
8,310
|
|
|
|
|
|
|
|
1,307
|
|
Earnings from equity method investments
|
|
|
|
|
|
|
(73
|
)
|
|
|
3,320
|
|
|
|
|
|
|
|
3,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(53,821
|
)
|
|
|
(20,394
|
)
|
|
|
(12,947
|
)
|
|
|
33,726
|
|
|
|
(53,436
|
)
|
Income from discontinued operations, net of income taxes
|
|
|
|
|
|
|
|
|
|
|
445
|
|
|
|
|
|
|
|
445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(53,821
|
)
|
|
|
(20,394
|
)
|
|
|
(12,502
|
)
|
|
|
33,726
|
|
|
|
(52,991
|
)
|
Less: Net income attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
(830
|
)
|
|
|
|
|
|
|
(830
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Dole Food Company, Inc.
|
|
$
|
(53,821
|
)
|
|
$
|
(20,394
|
)
|
|
$
|
(13,332
|
)
|
|
$
|
33,726
|
|
|
$
|
(53,821
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
CONDENSED
CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Quarters Ended October 9, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dole Food
|
|
|
|
|
|
Non
|
|
|
|
|
|
|
|
|
|
Company, Inc.
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Revenues, net
|
|
$
|
66,346
|
|
|
$
|
2,393,927
|
|
|
$
|
4,006,821
|
|
|
$
|
(1,131,127
|
)
|
|
$
|
5,335,967
|
|
Cost of products sold
|
|
|
(56,538
|
)
|
|
|
(2,111,236
|
)
|
|
|
(3,699,758
|
)
|
|
|
1,104,058
|
|
|
|
(4,763,474
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
9,808
|
|
|
|
282,691
|
|
|
|
307,063
|
|
|
|
(27,069
|
)
|
|
|
572,493
|
|
Selling, marketing and general and administrative expenses
|
|
|
(39,270
|
)
|
|
|
(170,397
|
)
|
|
|
(190,194
|
)
|
|
|
27,069
|
|
|
|
(372,792
|
)
|
Charges for restructuring and long-term receivables
|
|
|
|
|
|
|
|
|
|
|
(24,888
|
)
|
|
|
|
|
|
|
(24,888
|
)
|
Gain on arbitration settlement, net
|
|
|
|
|
|
|
|
|
|
|
27,271
|
|
|
|
|
|
|
|
27,271
|
|
Gain on asset sales
|
|
|
580
|
|
|
|
|
|
|
|
2,341
|
|
|
|
|
|
|
|
2,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(28,882
|
)
|
|
|
112,294
|
|
|
|
121,593
|
|
|
|
|
|
|
|
205,005
|
|
Equity in subsidiary income
|
|
|
86,630
|
|
|
|
(3,364
|
)
|
|
|
|
|
|
|
(83,266
|
)
|
|
|
|
|
Other income (expense), net
|
|
|
(1,825
|
)
|
|
|
|
|
|
|
(61,058
|
)
|
|
|
|
|
|
|
(62,883
|
)
|
Interest income
|
|
|
959
|
|
|
|
217
|
|
|
|
3,548
|
|
|
|
|
|
|
|
4,724
|
|
Interest expense
|
|
|
(77,539
|
)
|
|
|
(82
|
)
|
|
|
(49,754
|
)
|
|
|
|
|
|
|
(127,375
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes and
equity earnings
|
|
|
(20,657
|
)
|
|
|
109,065
|
|
|
|
14,329
|
|
|
|
(83,266
|
)
|
|
|
19,471
|
|
Income taxes
|
|
|
24,755
|
|
|
|
(23,594
|
)
|
|
|
(20,925
|
)
|
|
|
|
|
|
|
(19,764
|
)
|
Earnings from equity method investments
|
|
|
|
|
|
|
231
|
|
|
|
2,448
|
|
|
|
|
|
|
|
2,679
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
4,098
|
|
|
|
85,702
|
|
|
|
(4,148
|
)
|
|
|
(83,266
|
)
|
|
|
2,386
|
|
Income from discontinued operations, net of income taxes
|
|
|
|
|
|
|
|
|
|
|
876
|
|
|
|
|
|
|
|
876
|
|
Gain on disposal of discontinued operations, net of income taxes
|
|
|
|
|
|
|
|
|
|
|
4,143
|
|
|
|
|
|
|
|
4,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
4,098
|
|
|
|
85,702
|
|
|
|
871
|
|
|
|
(83,266
|
)
|
|
|
7,405
|
|
Less: Net income attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
(3,307
|
)
|
|
|
|
|
|
|
(3,307
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Dole Food Company, Inc.
|
|
$
|
4,098
|
|
|
$
|
85,702
|
|
|
$
|
(2,436
|
)
|
|
$
|
(83,266
|
)
|
|
$
|
4,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
Three Quarters Ended October 10, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dole Food
|
|
|
|
|
|
Non
|
|
|
|
|
|
|
|
|
|
Company, Inc.
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Revenues, net
|
|
$
|
55,691
|
|
|
$
|
2,347,105
|
|
|
$
|
3,984,401
|
|
|
$
|
(1,137,712
|
)
|
|
$
|
5,249,485
|
|
Cost of products sold
|
|
|
(46,740
|
)
|
|
|
(2,109,049
|
)
|
|
|
(3,619,735
|
)
|
|
|
1,128,828
|
|
|
|
(4,646,696
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
8,951
|
|
|
|
238,056
|
|
|
|
364,666
|
|
|
|
(8,884
|
)
|
|
|
602,789
|
|
Selling, marketing and general and administrative expenses
|
|
|
(45,976
|
)
|
|
|
(144,450
|
)
|
|
|
(178,787
|
)
|
|
|
8,884
|
|
|
|
(360,329
|
)
|
Gain on asset sales
|
|
|
|
|
|
|
10,093
|
|
|
|
23,059
|
|
|
|
|
|
|
|
33,152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(37,025
|
)
|
|
|
103,699
|
|
|
|
208,938
|
|
|
|
|
|
|
|
275,612
|
|
Equity in subsidiary income
|
|
|
161,054
|
|
|
|
104,969
|
|
|
|
|
|
|
|
(266,023
|
)
|
|
|
|
|
Other income (expense), net
|
|
|
(246
|
)
|
|
|
|
|
|
|
(45,430
|
)
|
|
|
|
|
|
|
(45,676
|
)
|
Interest income
|
|
|
913
|
|
|
|
112
|
|
|
|
4,476
|
|
|
|
|
|
|
|
5,501
|
|
Interest expense
|
|
|
(100,740
|
)
|
|
|
(88
|
)
|
|
|
(56,915
|
)
|
|
|
|
|
|
|
(157,743
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes and equity
earnings
|
|
|
23,956
|
|
|
|
208,692
|
|
|
|
111,069
|
|
|
|
(266,023
|
)
|
|
|
77,694
|
|
Income taxes
|
|
|
45,188
|
|
|
|
(49,055
|
)
|
|
|
(11,837
|
)
|
|
|
|
|
|
|
(15,704
|
)
|
Earnings from equity method investments
|
|
|
|
|
|
|
92
|
|
|
|
7,626
|
|
|
|
|
|
|
|
7,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
69,144
|
|
|
|
159,729
|
|
|
|
106,858
|
|
|
|
(266,023
|
)
|
|
|
69,708
|
|
Income from discontinued operations, net of income taxes
|
|
|
|
|
|
|
|
|
|
|
832
|
|
|
|
|
|
|
|
832
|
|
Gain on disposal of discontinued operations, net of income taxes
|
|
|
|
|
|
|
|
|
|
|
1,308
|
|
|
|
|
|
|
|
1,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
69,144
|
|
|
|
159,729
|
|
|
|
108,998
|
|
|
|
(266,023
|
)
|
|
|
71,848
|
|
Less: Net income attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
(2,704
|
)
|
|
|
|
|
|
|
(2,704
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Dole Food Company, Inc.
|
|
$
|
69,144
|
|
|
$
|
159,729
|
|
|
$
|
106,294
|
|
|
$
|
(266,023
|
)
|
|
$
|
69,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
CONDENSED
CONSOLIDATING BALANCE SHEET
As of October 9, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dole Food
|
|
|
|
|
|
Non
|
|
|
|
|
|
|
|
|
|
Company, Inc.
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
ASSETS
|
Cash and cash equivalents
|
|
$
|
13,528
|
|
|
$
|
1,725
|
|
|
$
|
185,598
|
|
|
$
|
|
|
|
$
|
200,851
|
|
Restricted deposits
|
|
|
|
|
|
|
|
|
|
|
37,840
|
|
|
|
|
|
|
|
37,840
|
|
Receivables, net of allowances
|
|
|
507,610
|
|
|
|
133,265
|
|
|
|
519,297
|
|
|
|
(400,116
|
)
|
|
|
760,056
|
|
Inventories
|
|
|
7,713
|
|
|
|
280,694
|
|
|
|
434,422
|
|
|
|
|
|
|
|
722,829
|
|
Prepaid expenses and other assets
|
|
|
9,214
|
|
|
|
13,951
|
|
|
|
54,578
|
|
|
|
|
|
|
|
77,743
|
|
Deferred income tax assets
|
|
|
4,938
|
|
|
|
21,725
|
|
|
|
|
|
|
|
(17,054
|
)
|
|
|
9,609
|
|
Assets
held-for-sale
|
|
|
76,704
|
|
|
|
3,813
|
|
|
|
8,219
|
|
|
|
|
|
|
|
88,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
619,707
|
|
|
|
455,173
|
|
|
|
1,239,954
|
|
|
|
(417,170
|
)
|
|
|
1,897,664
|
|
Investments
|
|
|
2,483,253
|
|
|
|
1,875,081
|
|
|
|
84,253
|
|
|
|
(4,356,570
|
)
|
|
|
86,017
|
|
Property, plant and equipment, net
|
|
|
156,323
|
|
|
|
265,707
|
|
|
|
510,697
|
|
|
|
|
|
|
|
932,727
|
|
Goodwill
|
|
|
|
|
|
|
131,818
|
|
|
|
275,429
|
|
|
|
|
|
|
|
407,247
|
|
Intangible assets, net
|
|
|
689,615
|
|
|
|
11,885
|
|
|
|
436
|
|
|
|
|
|
|
|
701,936
|
|
Other assets, net
|
|
|
62,997
|
|
|
|
18,573
|
|
|
|
117,915
|
|
|
|
(8,876
|
)
|
|
|
190,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
4,011,895
|
|
|
$
|
2,758,237
|
|
|
$
|
2,228,684
|
|
|
$
|
(4,782,616
|
)
|
|
$
|
4,216,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
Accounts payable
|
|
$
|
5,053
|
|
|
$
|
534,105
|
|
|
$
|
342,243
|
|
|
$
|
(400,116
|
)
|
|
$
|
481,285
|
|
Accrued liabilities
|
|
|
55,766
|
|
|
|
213,405
|
|
|
|
361,281
|
|
|
|
|
|
|
|
630,452
|
|
Current portion of long-term debt
|
|
|
(1,651
|
)
|
|
|
285
|
|
|
|
8,772
|
|
|
|
|
|
|
|
7,406
|
|
Deferred income tax liabilities
|
|
|
|
|
|
|
|
|
|
|
17,054
|
|
|
|
(17,054
|
)
|
|
|
|
|
Notes payable
|
|
|
|
|
|
|
|
|
|
|
32,405
|
|
|
|
|
|
|
|
32,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
59,168
|
|
|
|
747,795
|
|
|
|
761,755
|
|
|
|
(417,170
|
)
|
|
|
1,151,548
|
|
Intercompany payables (receivables)
|
|
|
1,681,753
|
|
|
|
(495,931
|
)
|
|
|
(1,185,822
|
)
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
918,005
|
|
|
|
2,995
|
|
|
|
646,755
|
|
|
|
|
|
|
|
1,567,755
|
|
Deferred income tax liabilities
|
|
|
218,610
|
|
|
|
|
|
|
|
|
|
|
|
(8,876
|
)
|
|
|
209,734
|
|
Other long-term liabilities
|
|
|
286,772
|
|
|
|
19,841
|
|
|
|
108,519
|
|
|
|
|
|
|
|
415,132
|
|
Equity attributable to Dole Food Company, Inc.
|
|
|
847,587
|
|
|
|
2,483,537
|
|
|
|
1,873,032
|
|
|
|
(4,356,570
|
)
|
|
|
847,586
|
|
Equity attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
24,445
|
|
|
|
|
|
|
|
24,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
847,587
|
|
|
|
2,483,537
|
|
|
|
1,897,477
|
|
|
|
(4,356,570
|
)
|
|
|
872,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
4,011,895
|
|
|
$
|
2,758,237
|
|
|
$
|
2,228,684
|
|
|
$
|
(4,782,616
|
)
|
|
$
|
4,216,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
CONDENSED
CONSOLIDATING BALANCE SHEET
As of January 2, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dole Food
|
|
|
|
|
|
Non
|
|
|
|
|
|
|
|
|
|
Company, Inc.
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
ASSETS
|
Cash and cash equivalents
|
|
$
|
20,913
|
|
|
$
|
2,118
|
|
|
$
|
96,639
|
|
|
$
|
|
|
|
$
|
119,670
|
|
Receivables, net of allowances
|
|
|
499,542
|
|
|
|
130,114
|
|
|
|
496,617
|
|
|
|
(400,116
|
)
|
|
|
726,157
|
|
Inventories
|
|
|
6,954
|
|
|
|
284,247
|
|
|
|
426,990
|
|
|
|
|
|
|
|
718,191
|
|
Prepaid expenses and other assets
|
|
|
6,955
|
|
|
|
9,449
|
|
|
|
52,261
|
|
|
|
|
|
|
|
68,665
|
|
Deferred income tax assets
|
|
|
6,940
|
|
|
|
20,831
|
|
|
|
|
|
|
|
(19,275
|
)
|
|
|
8,496
|
|
Assets
held-for-sale
|
|
|
72,623
|
|
|
|
7,064
|
|
|
|
16,333
|
|
|
|
|
|
|
|
96,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
613,927
|
|
|
|
453,823
|
|
|
|
1,088,840
|
|
|
|
(419,391
|
)
|
|
|
1,737,199
|
|
Restricted deposits
|
|
|
|
|
|
|
|
|
|
|
23,290
|
|
|
|
|
|
|
|
23,290
|
|
Investments
|
|
|
2,402,350
|
|
|
|
1,959,795
|
|
|
|
84,516
|
|
|
|
(4,361,657
|
)
|
|
|
85,004
|
|
Property, plant and equipment, net
|
|
|
161,847
|
|
|
|
258,970
|
|
|
|
541,430
|
|
|
|
|
|
|
|
962,247
|
|
Goodwill
|
|
|
|
|
|
|
131,818
|
|
|
|
275,429
|
|
|
|
|
|
|
|
407,247
|
|
Intangible assets, net
|
|
|
689,615
|
|
|
|
14,729
|
|
|
|
1,509
|
|
|
|
|
|
|
|
705,853
|
|
Other assets, net
|
|
|
66,680
|
|
|
|
18,684
|
|
|
|
115,740
|
|
|
|
(14,921
|
)
|
|
|
186,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
3,934,419
|
|
|
$
|
2,837,819
|
|
|
$
|
2,130,754
|
|
|
$
|
(4,795,969
|
)
|
|
$
|
4,107,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
Accounts payable
|
|
$
|
5,152
|
|
|
$
|
531,244
|
|
|
$
|
357,394
|
|
|
$
|
(419,391
|
)
|
|
$
|
474,399
|
|
Accrued liabilities
|
|
|
71,533
|
|
|
|
199,981
|
|
|
|
169,326
|
|
|
|
|
|
|
|
440,840
|
|
Current portion of long-term debt
|
|
|
(1,781
|
)
|
|
|
269
|
|
|
|
9,529
|
|
|
|
|
|
|
|
8,017
|
|
Notes payable
|
|
|
|
|
|
|
|
|
|
|
37,308
|
|
|
|
|
|
|
|
37,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
74,904
|
|
|
|
731,494
|
|
|
|
573,557
|
|
|
|
(419,391
|
)
|
|
|
960,564
|
|
Intercompany payables (receivables)
|
|
|
1,559,112
|
|
|
|
(320,925
|
)
|
|
|
(1,238,187
|
)
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
922,754
|
|
|
|
3,224
|
|
|
|
626,702
|
|
|
|
|
|
|
|
1,552,680
|
|
Deferred income tax liabilities
|
|
|
219,488
|
|
|
|
|
|
|
|
|
|
|
|
(14,921
|
)
|
|
|
204,567
|
|
Other long-term liabilities
|
|
|
319,186
|
|
|
|
21,023
|
|
|
|
183,024
|
|
|
|
|
|
|
|
523,233
|
|
Equity attributable to Dole Food Company, Inc.
|
|
|
838,975
|
|
|
|
2,403,003
|
|
|
|
1,958,654
|
|
|
|
(4,361,657
|
)
|
|
|
838,975
|
|
Equity attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
27,004
|
|
|
|
|
|
|
|
27,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
838,975
|
|
|
|
2,403,003
|
|
|
|
1,985,658
|
|
|
|
(4,361,657
|
)
|
|
|
865,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
3,934,419
|
|
|
$
|
2,837,819
|
|
|
$
|
2,130,754
|
|
|
$
|
(4,795,969
|
)
|
|
$
|
4,107,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
CONDENSED
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Three Quarters Ended October 9, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dole Food
|
|
|
|
|
|
Non
|
|
|
|
|
|
|
|
|
|
Company, Inc.
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow provided by operating activities
|
|
$
|
11,115
|
|
|
$
|
25,903
|
|
|
$
|
101,870
|
|
|
|
|
|
|
$
|
138,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash received from sales of assets and businesses, net of cash
disposed
|
|
|
1,514
|
|
|
|
74
|
|
|
|
30,994
|
|
|
|
|
|
|
|
32,582
|
|
Capital expenditures
|
|
|
(708
|
)
|
|
|
(23,969
|
)
|
|
|
(35,286
|
)
|
|
|
|
|
|
|
(59,963
|
)
|
Restricted deposits
|
|
|
|
|
|
|
|
|
|
|
(14,550
|
)
|
|
|
|
|
|
|
(14,550
|
)
|
Other
|
|
|
(114
|
)
|
|
|
|
|
|
|
(453
|
)
|
|
|
|
|
|
|
(567
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow provided by (used in) investing activities
|
|
|
692
|
|
|
|
(23,895
|
)
|
|
|
(19,295
|
)
|
|
|
|
|
|
|
(42,498
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt repayments, net of borrowings
|
|
|
(527
|
)
|
|
|
(2,189
|
)
|
|
|
(9,418
|
)
|
|
|
|
|
|
|
(12,134
|
)
|
Long-term debt borrowings
|
|
|
329,100
|
|
|
|
|
|
|
|
594,225
|
|
|
|
|
|
|
|
923,325
|
|
Long-term debt repayments
|
|
|
(336,706
|
)
|
|
|
(212
|
)
|
|
|
(574,207
|
)
|
|
|
|
|
|
|
(911,125
|
)
|
Payment of debt issuance costs
|
|
|
(10,100
|
)
|
|
|
|
|
|
|
(6,900
|
)
|
|
|
|
|
|
|
(17,000
|
)
|
Payment of initial public offering costs
|
|
|
(959
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(959
|
)
|
Dividends paid to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
(1,792
|
)
|
|
|
|
|
|
|
(1,792
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow provided by (used in) financing activities
|
|
|
(19,192
|
)
|
|
|
(2,401
|
)
|
|
|
1,908
|
|
|
|
|
|
|
|
(19,685
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency exchange rate changes on cash
|
|
|
|
|
|
|
|
|
|
|
4,476
|
|
|
|
|
|
|
|
4,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
(7,385
|
)
|
|
|
(393
|
)
|
|
|
88,959
|
|
|
|
|
|
|
|
81,181
|
|
Cash and cash equivalents at beginning of period
|
|
|
20,913
|
|
|
|
2,118
|
|
|
|
96,639
|
|
|
|
|
|
|
|
119,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
13,528
|
|
|
$
|
1,725
|
|
|
$
|
185,598
|
|
|
|
|
|
|
$
|
200,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
DOLE FOOD
COMPANY, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
CONDENSED
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Three Quarters Ended October 10, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dole Food
|
|
|
|
|
|
Non
|
|
|
|
|
|
|
|
|
|
Company, Inc.
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow provided by (used in) operating activities
|
|
$
|
239,156
|
|
|
$
|
(45,759
|
)
|
|
$
|
79,667
|
|
|
$
|
9,836
|
|
|
$
|
282,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash received from sales of assets and businesses, net of cash
disposed
|
|
|
|
|
|
|
46,544
|
|
|
|
47,860
|
|
|
|
|
|
|
|
94,404
|
|
Capital expenditures
|
|
|
(2,027
|
)
|
|
|
(10,150
|
)
|
|
|
(24,034
|
)
|
|
|
|
|
|
|
(36,211
|
)
|
Restricted deposits
|
|
|
(302,453
|
)
|
|
|
|
|
|
|
(40,360
|
)
|
|
|
|
|
|
|
(342,813
|
)
|
Other
|
|
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow provided by (used in) investing activities
|
|
|
(304,525
|
)
|
|
|
36,394
|
|
|
|
(16,534
|
)
|
|
|
|
|
|
|
(284,665
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt repayments, net of borrowings
|
|
|
285
|
|
|
|
9,397
|
|
|
|
(18,495
|
)
|
|
|
|
|
|
|
(8,813
|
)
|
Long-term debt borrowings
|
|
|
1,202,053
|
|
|
|
|
|
|
|
(28
|
)
|
|
|
|
|
|
|
1,202,025
|
|
Long-term debt repayments
|
|
|
(1,102,632
|
)
|
|
|
(32
|
)
|
|
|
(34,950
|
)
|
|
|
|
|
|
|
(1,137,614
|
)
|
Payment of debt issuance costs
|
|
|
(20,404
|
)
|
|
|
|
|
|
|
(4,918
|
)
|
|
|
|
|
|
|
(25,322
|
)
|
Dividends paid to parent
|
|
|
(15,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,000
|
)
|
Dividends paid to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
(5,541
|
)
|
|
|
|
|
|
|
(5,541
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow provided by (used in) financing activities
|
|
|
64,302
|
|
|
|
9,365
|
|
|
|
(63,932
|
)
|
|
|
|
|
|
|
9,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency exchange rate changes on cash
|
|
|
|
|
|
|
|
|
|
|
3,234
|
|
|
|
|
|
|
|
3,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
(1,067
|
)
|
|
|
|
|
|
|
2,435
|
|
|
|
9,836
|
|
|
|
11,204
|
|
Cash and cash equivalents at beginning of period
|
|
|
16,811
|
|
|
|
|
|
|
|
85,460
|
|
|
|
(11,442
|
)
|
|
|
90,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
15,744
|
|
|
$
|
|
|
|
$
|
87,895
|
|
|
$
|
(1,606
|
)
|
|
$
|
102,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37
Item 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS
This Managements Discussion and Analysis contains
forward-looking statements that involve a number of risks and
uncertainties. Forward-looking statements, which are based on
managements assumptions and describe Doles future
plans, strategies and expectations, are generally identifiable
by the use of terms such as anticipate,
will, expect, believe,
should or similar expressions. The potential risks
and uncertainties that could cause Doles actual results to
differ materially from those expressed or implied herein are set
forth in Item 1A and Item 7A of Doles Annual
Report on
Form 10-K
for the year ended January 2, 2010 and include:
weather-related phenomena; market responses to industry volume
pressures; product and raw materials supplies and pricing;
changes in interest and currency exchange rates; economic
crises; quotas, tariffs and other governmental actions and
international conflict.
Overview
Significant highlights for Dole Food Company, Inc. and its
consolidated subsidiaries (Dole or the
Company) for the quarter and three quarters ended
October 9, 2010 were as follows:
|
|
|
|
|
Revenue for the third quarter of 2010 increased
$50.4 million, or 3%. Sales in our fresh vegetables segment
rose 9% on better pricing for packaged salads and better pricing
and higher volumes for fresh-packed vegetables. Packaged foods
sales increased 8% on higher worldwide volumes.
|
|
|
|
Operating income for the third quarter of 2010 was
$65.5 million compared to $44.2 million in the third
quarter of 2009, an increase of 48%. Earnings increased as a
result of improved performance in our fresh vegetables segment,
partially offset by lower results from our fresh fruit and
packaged foods segments.
|
|
|
|
|
|
Fresh vegetables earnings increased in the third quarter of
2010, primarily due to improved pricing for iceberg lettuce,
celery, strawberries and packaged salads, as well as lower costs
in our packaged salads business.
|
|
|
|
Fresh fruit earnings decreased in the third quarter due to lower
earnings in our European ripening and distribution operations,
lower banana earnings in Asia as well as the absence of 2009
asset sale gains. Earnings were also impacted by
$23.5 million of charges related to restructuring and
long-term receivables as well as the net $27.3 million gain
on the container arbitration settlement.
|
|
|
|
Packaged foods earnings decreased in the third quarter due to
higher product costs impacting our North America packaged foods
operations.
|
|
|
|
|
|
For the first three quarters of 2010, we reduced our net debt by
$72 million. Net debt is defined as total debt less cash
and cash equivalents. We ended the third quarter of 2010 with
$201 million of cash and cash equivalents.
|
|
|
|
Dole committed to a restructuring plan during the third quarter
of 2010 in its fresh fruit segment in Europe, Latin America and
Asia. These restructuring efforts are designed to reduce costs
by realigning fruit supply with expected demand. As part of
these initiatives, Dole restructured certain farming operations
in Latin America and Asia, reorganized its European operations
and rationalized vessel charters. During the third quarter of
2010, Dole incurred $13.8 million of restructuring costs
related to these initiatives, of which $7 million were paid
or will be paid in cash. Dole expects to continue restructuring
operations beyond the third quarter of 2010. Related to these
efforts, Dole expects to incur additional restructuring charges
of $11.4 million, of which $8.7 million is expected to
be incurred in the fourth quarter of 2010 and $2.7 million
during fiscal 2011. As a result of these various initiatives,
beginning in fiscal 2011 Dole expects to realize annual cash
savings in our fresh fruit segment of approximately
$34 million. These savings are expected to result from
lower production costs including lower labor costs on our farms
and in our ports, enhanced farm productivity, lower distribution
costs resulting from more efficient utilization of our shipping
fleet, and lower selling and general and administrative costs as
a result of streamlining our organization in Europe.
|
|
|
|
During the third quarter of 2010, Dole, as plaintiff, settled a
dispute for $30 million that was the subject of an
arbitration proceeding. The dispute involved faulty manufactured
containers sold to Dole. The settlement payment was received by
Dole during the third quarter of 2010. In connection with the
settlement, Dole
|
38
|
|
|
|
|
recorded a $2.7 million non-cash impairment charge related
to obsolete containers during the third quarter of 2010.
|
|
|
|
|
|
During the fourth quarter of 2010, Dole and a fresh vegetables
supplier settled a dispute. Pursuant to the settlement, the
supplier agreed to pay Dole $5.3 million, which was
received during the fourth quarter and will be included in
income in Doles fourth quarter 2010.
|
Non-GAAP Financial
Measures
The following is a reconciliation of adjusted earnings before
interest expense, income taxes, depreciation and amortization
(Adjusted EBITDA) to the most directly comparable
U.S. Generally Accepted Accounting Principle
(U.S. GAAP) financial measure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Three Quarters Ended
|
|
|
|
October 9,
|
|
|
October 10,
|
|
|
October 9,
|
|
|
October 10,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Net income (loss)
|
|
$
|
(48,829
|
)
|
|
$
|
(52,991
|
)
|
|
$
|
7,405
|
|
|
$
|
71,848
|
|
Income from discontinued operations, net of income taxes
|
|
|
(202
|
)
|
|
|
(445
|
)
|
|
|
(876
|
)
|
|
|
(832
|
)
|
Gain on disposal of discontinued operations, net of income taxes
|
|
|
(4,143
|
)
|
|
|
|
|
|
|
(4,143
|
)
|
|
|
(1,308
|
)
|
Interest expense
|
|
|
49,187
|
|
|
|
69,955
|
|
|
|
127,375
|
|
|
|
157,743
|
|
Income taxes
|
|
|
7,522
|
|
|
|
(1,307
|
)
|
|
|
19,764
|
|
|
|
15,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBIT
|
|
|
3,535
|
|
|
|
15,212
|
|
|
|
149,525
|
|
|
|
243,155
|
|
Depreciation and amortization
|
|
|
37,599
|
|
|
|
37,564
|
|
|
|
87,621
|
|
|
|
92,386
|
|
Net unrealized loss on derivative instruments
|
|
|
43,527
|
|
|
|
40,401
|
|
|
|
59,164
|
|
|
|
33,271
|
|
Foreign currency exchange (gain) loss on vessel obligations
|
|
|
3,946
|
|
|
|
(1,032
|
)
|
|
|
(1,147
|
)
|
|
|
5,951
|
|
Net unrealized loss on foreign denominated instruments
|
|
|
12,579
|
|
|
|
8,716
|
|
|
|
6,581
|
|
|
|
7,355
|
|
Gain on asset sales
|
|
|
|
|
|
|
(16,359
|
)
|
|
|
(2,921
|
)
|
|
|
(33,152
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
101,186
|
|
|
$
|
84,502
|
|
|
$
|
298,823
|
|
|
$
|
348,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before interest expense and income taxes
(EBIT) and Adjusted EBITDA are measures commonly
used by financial analysts in evaluating the performance of
companies. EBIT is calculated by subtracting income from
discontinued operations, net of incomes taxes, from net income,
by subtracting the gain on disposal of discontinued operations,
net of income taxes, by adding interest expense and by adding
income tax expenses to net income. Adjusted EBITDA is calculated
by adding depreciation and amortization from continuing
operations to EBIT, by adding the net unrealized loss or
subtracting the net unrealized gain on certain derivative
instruments (foreign currency and bunker fuel hedges and the
cross currency swap), to or from EBIT, respectively, by adding
the foreign currency loss or subtracting the foreign currency
gain on the vessel obligations to or from EBIT, respectively, by
adding the net unrealized loss or subtracting the net unrealized
gain on foreign denominated instruments to or from EBIT,
respectively, and by subtracting the gain on asset sales from
EBIT. These items have been adjusted because management excludes
these amounts when evaluating the performance of Dole.
EBIT and Adjusted EBITDA are not calculated or presented in
accordance with U.S. GAAP and EBIT and Adjusted EBITDA are
not a substitute for net income attributable to Dole Food
Company, Inc., net income, income from continuing operations,
cash flows from operating activities or any other measure
prescribed by U.S. GAAP. Further, EBIT and Adjusted EBITDA
as used herein are not necessarily comparable to similarly
titled measures of other companies. However, Dole has included
EBIT and Adjusted EBITDA herein because management believes that
EBIT and Adjusted EBITDA are useful performance measures for
Dole. In addition, EBIT and Adjusted EBITDA are presented
because management believes that these measures are frequently
used by securities analysts, investors and others in the
evaluation of Dole.
39
EBIT and Adjusted EBITDA have limitations as analytical tools
and should not be considered in isolation from, or as an
alternative to, operating income, cash flow or other combined
income or cash flow data prepared in accordance with
U.S. GAAP. Because of their limitations, EBIT and Adjusted
EBITDA and the related ratios presented throughout this
Item 2 should not be considered as measures of
discretionary cash available to invest in business growth or
reduce indebtedness. Dole compensates for these limitations by
relying primarily on its U.S. GAAP results and using EBIT
and Adjusted EBITDA only supplementally.
Results
of Operations
Selected results of operations for the quarters and three
quarters ended October 9, 2010 and October 10, 2009
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
Three Quarters Ended
|
|
|
October 9,
|
|
October 10,
|
|
October 9,
|
|
October 10,
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
(In thousands)
|
|
Revenues, net
|
|
$
|
1,988,571
|
|
|
$
|
1,938,173
|
|
|
$
|
5,335,967
|
|
|
$
|
5,249,485
|
|
Operating income
|
|
|
65,527
|
|
|
|
44,182
|
|
|
|
205,005
|
|
|
|
275,612
|
|
Other income (expense), net
|
|
|
(61,994
|
)
|
|
|
(34,582
|
)
|
|
|
(62,883
|
)
|
|
|
(45,676
|
)
|
Interest expense
|
|
|
(49,187
|
)
|
|
|
(69,955
|
)
|
|
|
(127,375
|
)
|
|
|
(157,743
|
)
|
Income taxes
|
|
|
(7,522
|
)
|
|
|
1,307
|
|
|
|
(19,764
|
)
|
|
|
(15,704
|
)
|
Net income (loss)
|
|
|
(48,829
|
)
|
|
|
(52,991
|
)
|
|
|
7,405
|
|
|
|
71,848
|
|
Less: Net income attributable to noncontrolling interests
|
|
|
(1,547
|
)
|
|
|
(830
|
)
|
|
|
(3,307
|
)
|
|
|
(2,704
|
)
|
Net income (loss) attributable to Dole Food Company, Inc.
|
|
|
(50,376
|
)
|
|
|
(53,821
|
)
|
|
|
4,098
|
|
|
|
69,144
|
|
Revenues
Revenues increased in the quarter ended October 9, 2010
compared to the quarter ended October 10, 2009. Higher
sales were reported in Doles fresh vegetables and packaged
foods segments. Fresh vegetables sales increased
$27.1 million primarily due to higher sales in North
America fresh-packed vegetables and higher pricing in the
packaged salads business. Packaged foods sales increased
$25.2 million as a result of higher sales worldwide. Fresh
fruit sales decreased $2 million due to lower volumes of
bananas and fresh pineapples sold in North America. In addition,
fresh fruit revenues were impacted by the sale of Doles
Latin America box plants during the third and fourth quarters of
2009. The box plants contributed $32 million to third
quarter 2009 revenues. These decreases were partially offset by
higher sales in Doles European ripening and distribution
businesses, higher sales of bananas, citrus and other fresh
fruit in Asia. Net unfavorable foreign currency exchange
movements in Doles selling locations resulted in lower
revenues of approximately $18 million.
Revenues increased in the three quarters ended October 9,
2010 compared to the three quarters ended October 10, 2009.
Higher sales were reported in all three of Doles operating
segments. Packaged foods sales increased $50.8 million as a
result of higher volumes worldwide. Fresh vegetables sales
increased $35 million mainly due to higher pricing in North
America fresh-packed vegetables, improved volumes in Asia
fresh-packed vegetables, and higher sales of packaged salads.
Fresh fruit sales increased slightly due to higher sales in the
European ripening and distribution businesses, higher sales of
citrus and other fresh fruit in Asia, and higher volumes of
fresh pineapples sold in North America. These improvements were
partially offset by lower sales of bananas worldwide, and the
absence of Latin America box plant sales. The box plants
contributed $100 million to revenues for the first three
quarters of 2009. Net favorable foreign currency exchange
movements in Doles selling locations resulted in higher
revenues of approximately $35 million.
Operating
Income
For the quarter ended October 9, 2010, operating income was
$65.5 million compared to $44.2 million for the
quarter ended October 10, 2009. Fresh fruit operating
results increased primarily due to higher earnings in
Doles
40
North America banana and fresh pineapple operations as a result
of a $27.3 million benefit from an arbitration settlement
involving faulty manufactured containers sold to Dole. In
addition, Europe bananas earnings benefitted from lower
distribution costs related to the June 2010 EU banana tariff
settlement agreements. These improvements were partially offset
by lower sales and higher product costs in North America and
Europe bananas as well as lower local banana pricing in Asia. As
a result of challenging market conditions in Doles fresh
fruit operations, Dole commenced restructuring initiatives
during the third quarter in its fresh fruit segment in Europe,
Latin America and Asia and incurred $13.8 million of
restructuring charges. In addition, Dole recorded provisions for
bad debt of $9.7 million for a customer in Eastern Europe.
Fresh fruit operating results were also impacted by the absence
of $16.4 million of asset sale gains generated during the
third quarter of 2009. Fresh vegetables operating results
increased due to higher pricing of iceberg lettuce, celery,
strawberries. Packaged salads also benefited from higher
pricing, lower raw material costs and improved plant
utilization. Packaged foods operating results decreased
primarily due to higher product costs and higher selling,
marketing and general and administrative expenses in North
America.
For the three quarters ended October 9, 2010, operating
income was $205 million compared to $275.6 million for
the three quarters ended October 10, 2009. Operating income
for the three quarters of 2010 included a net benefit of
$3.6 million due to asset sale and unrealized hedging
gains, compared with a net benefit of $34.6 million for the
three quarters of 2009 due to asset sale and unrealized hedging
gains. Fresh fruit operating results decreased primarily as a
result of lower banana and fresh pineapple earnings in Europe
and Asia, as well as in the European ripening and distribution
businesses. Doles banana earnings worldwide were impacted
by lower sales and higher fruit costs. Fresh fruit operating
results were also impacted by $13.8 million of
restructuring charges recorded in the third quarter of 2010.
These factors were partially offset by the third quarter 2010
arbitration settlement of $27.3 million. Fresh vegetables
operating results increased primarily due to higher pricing of
major product lines in North America fresh-packed vegetables.
Packaged salads operating results benefitted form higher
pricing, favorable product mix and lower product costs. Packaged
foods operating results increased primarily due to higher
earnings in North America frozen fruit, Europe, and Asia, as a
result of improved pricing for concentrate worldwide and lower
product costs in frozen fruit. If foreign currency exchange
rates in Doles significant foreign operations during the
three quarters ended October 9, 2010 had remained unchanged
from those experienced during the three quarters ended
October 10, 2009, Dole estimates that its operating income
would have been lower by approximately $5 million.
Other
Income (Expense), Net
For the quarter ended October 9, 2010, other income
(expense), net was an expense of $62 million compared to
expense of $34.6 million in the prior year. The change was
primarily due to an increase in unrealized losses of
$17.6 million generated on Doles cross currency swap,
an increase in foreign currency exchange losses of
$5 million on Doles British pound sterling vessel
obligation (vessel obligation) and an increase in
unrealized losses of $3.8 million generated on Doles
foreign denominated borrowings.
For the three quarters ended October 9, 2010, other income
(expense), net was an expense of $62.9 million compared to
expense of $45.7 million for the three quarters ended
October 10, 2009. The change was primarily due to an
increase in unrealized losses of $25.2 million for
Doles cross currency swap partially offset by a
$7.1 million increase in foreign currency exchange gains on
Doles vessel obligation and a decrease of
$2.3 million in unrealized gains on Doles foreign
denominated borrowings.
Interest
Expense
Interest expense for the quarter ended October 9, 2010 was
$49.2 million compared to $70 million for the quarter
ended October 10, 2009. Interest expense for the three
quarters ended October 9, 2010 was $127.4 million
compared to $157.7 million for the three quarters ended
October 10, 2009. Interest expense for both periods
decreased primarily as a result of debt reduction during 2009
and 2010. In addition, interest expense in the third quarter of
2010 benefitted from lower effective borrowing rates related to
Doles March 2010 senior secured credit facilities
amendments.
41
Income
Taxes
Dole recorded $19.8 million of income tax expense on
$19.5 million of pretax income from continuing operations
for the three quarters ended October 9, 2010. Income tax
expense included interest expense of $0.7 million related
to Doles unrecognized tax benefits. Income tax expense of
$15.7 million on $77.7 million of pretax income from
continuing operations was recorded for the three quarters ended
October 10, 2009 which included interest expense of
$2.5 million (net of associated income tax benefits of
approximately $0.5 million) related to Doles
unrecognized tax benefits. Doles effective tax rate varies
significantly from period to period due to the level, mix and
seasonality of earnings generated in its various U.S. and
foreign jurisdictions. Income tax expense for the three quarters
ended October 9, 2010 included $2.4 million recorded
to establish a valuation allowance against deferred income tax
assets in Ecuador which, as the result of a recently enacted tax
law, have been determined to not be recoverable. This was offset
by a reduction in Doles liability for unrecognized tax
benefits related to certain foreign jurisdictions.
Income taxes for the quarter ended October 9, 2010 and
October 10, 2009 were $7.5 million and
$(1.3) million, respectively.
Under ASC Topic 270, Interim Reporting
(ASC 270) and ASC Topic 740, Income
Taxes (ASC 740), Dole is required to
adjust its effective tax rate for each quarter to be consistent
with the estimated annual effective tax rate. Jurisdictions with
a projected loss where no tax benefit can be recognized are
excluded from the calculation of the estimated annual effective
tax rate. Applying the provisions of ASC 270 and
ASC 740 could result in a higher or lower effective tax
rate during a particular quarter, based upon the mix and timing
of actual earnings versus annual projections.
Historically, Doles income tax provision has differed from
the U.S. federal statutory rate applied to Doles
pretax income primarily due to operations in foreign
jurisdictions that are taxed at a rate lower than the
U.S. federal statutory rate. However, for the three
quarters ended October 9, 2010, income taxes reflect lower
earnings generated in foreign jurisdictions with a lower
statutory rate than experienced in 2009. Income taxes in 2010
also include the impact of increased losses in jurisdictions in
which a tax benefit has not been provided.
As a result of the lapse of the statute of limitations relating
to a state unrecognized tax benefit, Dole expects its income tax
provision in the fourth quarter of 2010 to be reduced by
approximately $14 million, including tax and interest.
Segment
Results of Operations
Dole has three reportable operating segments: fresh fruit, fresh
vegetables and packaged foods. These reportable segments are
managed separately due to differences in their products,
production processes, distribution channels and customer bases.
Management evaluates and monitors segment performance primarily
through, among other measures, EBIT. EBIT is calculated by
adding interest expense and income taxes to income from
continuing operations. Management believes that segment EBIT
provides useful information for analyzing the underlying
business results as well as allowing investors a means to
evaluate the financial results of each segment in relation to
Dole as a whole. EBIT is not defined under U.S. GAAP and
should not be considered in isolation or as a substitute for net
income or cash flow measures prepared in accordance with
U.S. GAAP or as a measure of Doles profitability.
Additionally, Doles computation of EBIT may not be
comparable to other similarly titled measures computed by other
companies, because not all companies calculate EBIT in the same
manner.
42
Revenues from external customers and EBIT for the reportable
operating segments and corporate were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Three Quarters Ended
|
|
|
|
October 9,
|
|
|
October 10,
|
|
|
October 9,
|
|
|
October 10,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Revenues from external customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fresh fruit
|
|
$
|
1,327,317
|
|
|
$
|
1,329,147
|
|
|
$
|
3,673,718
|
|
|
$
|
3,672,562
|
|
Fresh vegetables
|
|
|
325,992
|
|
|
|
298,849
|
|
|
|
825,387
|
|
|
|
790,378
|
|
Packaged foods
|
|
|
335,028
|
|
|
|
309,784
|
|
|
|
836,332
|
|
|
|
785,526
|
|
Corporate
|
|
|
234
|
|
|
|
393
|
|
|
|
530
|
|
|
|
1,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,988,571
|
|
|
$
|
1,938,173
|
|
|
$
|
5,335,967
|
|
|
$
|
5,249,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Three Quarters Ended
|
|
|
|
October 9,
|
|
|
October 10,
|
|
|
October 9,
|
|
|
October 10,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
EBIT:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fresh fruit
|
|
$
|
35,959
|
|
|
$
|
44,928
|
|
|
$
|
146,958
|
|
|
$
|
240,216
|
|
Fresh vegetables
|
|
|
5,137
|
|
|
|
(3,504
|
)
|
|
|
23,023
|
|
|
|
9,460
|
|
Packaged foods
|
|
|
24,514
|
|
|
|
29,172
|
|
|
|
78,343
|
|
|
|
75,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating segments
|
|
|
65,610
|
|
|
|
70,596
|
|
|
|
248,324
|
|
|
|
324,736
|
|
Corporate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on cross currency swap
|
|
|
(45,562
|
)
|
|
|
(27,984
|
)
|
|
|
(59,863
|
)
|
|
|
(34,687
|
)
|
Net unrealized gain (loss) on foreign denominated instruments
|
|
|
(12,491
|
)
|
|
|
(8,725
|
)
|
|
|
(6,026
|
)
|
|
|
(7,144
|
)
|
Operating and other expenses
|
|
|
(4,022
|
)
|
|
|
(18,675
|
)
|
|
|
(32,910
|
)
|
|
|
(39,750
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
(62,075
|
)
|
|
|
(55,384
|
)
|
|
|
(98,799
|
)
|
|
|
(81,581
|
)
|
Interest expense
|
|
|
(49,187
|
)
|
|
|
(69,955
|
)
|
|
|
(127,375
|
)
|
|
|
(157,743
|
)
|
Income taxes
|
|
|
(7,522
|
)
|
|
|
1,307
|
|
|
|
(19,764
|
)
|
|
|
(15,704
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
(53,174
|
)
|
|
$
|
(53,436
|
)
|
|
$
|
2,386
|
|
|
$
|
69,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fresh
Fruit
Fresh fruit revenues for the quarter ended October 9, 2010
decreased slightly from revenues for the quarter ended
October 10, 2009. The primary reason for the decrease in
revenue was the sale of Doles box plants in
Latin America. Excluding third quarter 2009 box plant
sales, fresh fruit revenues increased $30.2 million during
the third quarter of 2010. Worldwide banana sales increased as a
result of higher volumes sold in Asia partially offset by lower
volumes sold in North America. European ripening and
distribution sales increased $5 million as a result of
higher local pricing partially offset by lower volumes sold in
Germany and Sweden and net unfavorable foreign currency exchange
movements. Revenues also increased due to higher sales of citrus
and other fresh fruit in Asia. Fresh pineapple sales decreased
due to lower volumes sold in North America. Net unfavorable
foreign currency exchange movements in Doles foreign
selling locations resulted in lower revenues of approximately
$20 million during the third quarter ended October 9,
2010.
Fresh fruit revenues for the three quarters ended
October 9, 2010 increased slightly from revenues for the
three quarters ended October 10, 2009. Excluding box
plant sales for the first three quarters of 2009, fresh fruit
revenues increased $101.2 million. Worldwide banana sales
increased as a result of higher sales in North America partially
offset by lower sales in Asia. European ripening and
distribution revenues increased $51 million primarily as a
result of higher local pricing and favorable Swedish krona
foreign currency exchange movement and higher
43
volumes sold in Spain and Italy partially offset by unfavorable
euro foreign currency exchange movements. Revenues also
increased due to higher sales of citrus and other fresh fruit in
Asia. Fresh pineapple sales were unchanged as higher sales in
North America were offset by lower sales Asia. Chilean deciduous
fruit revenues increased primarily as a result of improved
pricing. Net favorable foreign currency exchange movements in
Doles foreign selling locations resulted in higher
revenues of approximately $28 million during the three
quarters ended October 9, 2010.
Doles fresh fruit segment EBIT is significantly impacted
by certain items, which are included in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Three Quarters Ended
|
|
|
|
October 9,
|
|
|
October 10,
|
|
|
October 9,
|
|
|
October 10,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Fresh fruit products
|
|
$
|
34,618
|
|
|
$
|
40,745
|
|
|
$
|
141,008
|
|
|
$
|
223,202
|
|
Charges for restructuring and long-term receivables
|
|
|
(23,518
|
)
|
|
|
|
|
|
|
(24,888
|
)
|
|
|
|
|
Gain on arbitration settlement, net
|
|
|
27,271
|
|
|
|
|
|
|
|
27,271
|
|
|
|
|
|
Unrealized gain (loss) on foreign currency and fuel hedges
|
|
|
1,625
|
|
|
|
(12,917
|
)
|
|
|
82
|
|
|
|
418
|
|
Foreign currency exchange gain (loss) on vessel obligations
|
|
|
(3,946
|
)
|
|
|
1,032
|
|
|
|
1,147
|
|
|
|
(5,951
|
)
|
Net unrealized gain (loss) on foreign denominated instruments
|
|
|
(91
|
)
|
|
|
(291
|
)
|
|
|
(583
|
)
|
|
|
(512
|
)
|
Gains on asset sales
|
|
|
|
|
|
|
16,359
|
|
|
|
2,921
|
|
|
|
23,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fresh fruit EBIT
|
|
$
|
35,959
|
|
|
$
|
44,928
|
|
|
$
|
146,958
|
|
|
$
|
240,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fresh fruit EBIT for the quarter ended October 9, 2010
decreased to $36 million from $44.9 million for the
quarter ended October 10, 2009. Fresh fruit products
earnings in the third quarter of 2010 decreased to
$34.6 million from $40.7 million in the third quarter
of 2009. Bananas earnings in the third quarter of 2010 were
lower mainly due to higher fruit costs in North America and
Europe as a result of higher Latin American purchased fruit
costs and lower local pricing in Asia. Lower EBIT was reported
in the European ripening and distribution business primarily due
to lower earnings from Doles equity method investments.
Fresh pineapple EBIT decreased worldwide primarily as a result
of lower sales and higher fruit costs. Fresh fruit EBIT
benefitted from lower distribution costs as a result of the
June 2010 EU banana tariff settlement agreements. Dole
estimates that the EU banana tariff settlement agreements will
benefit fiscal 2010 EBIT by approximately $15 million at
current foreign exchange rates.
Fresh fruit EBIT for the three quarters October 9, 2010
decreased to $147 million from $240.2 million for the
three quarters ended October 10, 2009. The change in EBIT
was primarily due to the same factors that impacted EBIT during
the third quarter. If foreign currency exchange rates in
Doles significant fresh fruit foreign operations during
the three quarters ended October 9, 2010 had remained
unchanged from those experienced during the three quarters ended
October 10, 2009, Dole estimates that fresh fruit EBIT
would have been lower by approximately $10 million.
Fresh
Vegetables
Fresh vegetables revenues for the quarter ended October 9,
2010 increased 9% to $326 million from $298.8 million
for the quarter ended October 10, 2009. Higher revenues in
the packaged salads business resulted from improved pricing, a
favorable change in product mix resulting from a shift in sales
from lower to higher priced products, and improved volumes.
Revenues in the North America fresh-packed vegetable business
increased primarily due to higher sales of iceberg lettuce,
higher volumes of strawberries, and improved pricing of celery.
Asia fresh-packed vegetables revenues increased primarily to
higher volumes sold and net favorable foreign currency exchange
movements. Fresh vegetables revenues for the three quarters
ended October 9, 2010 increased 4% to $825.4 million
from $790.4 million for the three quarters ended
October 10, 2009. Higher revenues in the packaged salads
business and Asia fresh-packed vegetables resulted from the same
factors that impacted sales during the third
44
quarter. North America fresh-packed vegetable revenues increased
primarily due to improved pricing of strawberries and higher
sales of celery partially offset by lower sales of romaine
lettuce.
Fresh vegetables EBIT for the quarter ended October 9, 2010
increased to $5.1 million from a loss of $3.5 million
for the quarter ended October 10, 2009. EBIT increased as a
result of higher pricing across all major product lines in the
North America fresh-packed vegetables business. Higher earnings
in the packaged salads business resulted from improved pricing,
lower raw material costs, continued production efficiencies and
favorable product mix. Fresh vegetables EBIT for the three
quarters ended October 9, 2010 increased to
$23 million from $9.5 million for the three quarters
ended October 10, 2009. EBIT in 2009 benefitted from a gain
of $9.2 million from the sale of vegetable property in
California. EBIT excluding the gain increased
$22.7 million. The increase in EBIT was primarily due to
the same factors that impacted EBIT during the third quarter.
Packaged
Foods
Packaged foods revenues for the quarter ended October 9,
2010 increased 8% to $335 million from $309.8 million
for the quarter ended October 10, 2009. Revenues increased
primarily due to higher volumes sold of packaged and frozen
fruit, higher sales of concentrate worldwide, higher sales of
mandarin oranges sold in Asia, and higher net pricing of solid
pine and fruit bowls in North America as a result of a reduction
in trade promotions. Packaged foods revenues for the three
quarters ended October 9, 2010 increased 6% to
$836.3 million from $785.5 million for the three
quarters ended October 10, 2009. The increase in revenues
was mainly due to the same factors that impacted sales during
the third quarter.
EBIT in the packaged foods segment for the quarter ended
October 9, 2010 decreased to $24.5 million from
$29.2 million for the quarter ended October 10, 2009.
The decrease in EBIT was due primarily to higher selling,
marketing and general administrative expenses and higher product
costs in North America. The increase in product costs in North
America resulted from higher commodity costs and unfavorable
foreign currency exchange movement in Thailand and the
Philippines, where product is sourced. These factors were
partially offset by higher pricing of concentrate worldwide.
EBIT for the three quarters ended October 9, 2010 increased
to $78.3 million from $75.1 million for the three
quarters ended October 10, 2009. The increase in EBIT was
attributable to improved earnings worldwide as a result of
higher pricing for concentrate, as well as lower product costs
in North America due in part to lower commodity costs
experienced in the first part of fiscal 2010. If foreign
currency exchange rates in Doles packaged foods foreign
operations during the quarter and the three quarters ended
October 9, 2010 had remained unchanged from those
experienced during the quarter and the three quarters ended
October 10, 2009, Dole estimates that packaged foods EBIT
would have been higher by approximately $3 million and
$5 million, respectively.
Corporate
Corporate EBIT was a loss of $62.1 million for the quarter
ended October 9, 2010 compared to a loss of
$55.4 million for the quarter ended October 10, 2009.
The decrease in EBIT was primarily due to an increase in
unrealized losses of $17.6 million generated on the cross
currency swap and an increase in unrealized losses on foreign
denominated instruments of $3.8 million. These factors were
partially offset by lower levels of general and administrative
expenses related to a decrease in incentive compensation
accruals. Corporate EBIT was a loss of $98.8 million for
the three quarters ended October 9, 2010 compared to a loss
of $81.6 million for the three quarters ended
October 10, 2009. The decrease in EBIT was primarily due to
an increase in unrealized losses of $25.2 million generated
on the cross currency swap and lower of general and
administrative expenses related to a decrease in incentive
compensation accruals.
Discontinued
Operations
During the second quarter of 2008, Dole approved and committed
to a formal plan to divest its fresh-cut flowers business.
During the first quarter of 2009, the operations and the
majority of the related assets of this business were sold.
During the third quarter of 2010, Dole sold a building and farm
in Colombia to the buyer of Doles Flowers business. The
sale resulted in a gain of $4.1 million.
45
Liquidity
and Capital Resources
Cash flows provided by operating activities were
$138.9 million for the three quarters ended October 9,
2010, compared to $282.9 million for the three quarters
ended October 10, 2009. Cash flows provided by operating
activities decreased $144 million primarily due to lower
net income and higher receivables due in part to timing of
collections, higher levels of inventory purchases and higher
levels of accrued liabilities. These factors were partially
offset by lower payments of prepaid expenses and other assets
and higher accounts payable.
Cash flows used in investing activities were $42.5 million
for the three quarters ended October 9, 2010, compared to
$284.7 million for the three quarters ended
October 10, 2009. The change was primarily due to a
$302.5 million decrease in restricted deposits from
Doles third quarter 2009 debt offering, as well as lower
proceeds received from asset sales offset by higher capital
expenditures.
Cash flows used in financing activities was $19.7 million
for the three quarters ended October 9, 2010, compared to
cash flows provided by financing activities of $9.7 million
for the three quarters ended October 10, 2009. The change
was primarily due to higher net debt borrowings and lower
dividends paid to noncontrolling interests.
On March 2, 2010, Dole amended its senior secured credit
facilities. The amendments, among other things: (i) reduced
the applicable Eurodollar interest rate for the term loan
facilities to London Interbank Offer Rate (LIBOR)
plus 3.25%, with a LIBOR floor of 1.75%, or the base rate plus
2.25%; (ii) for the revolving credit facility, kept
interest rates on borrowed funds unchanged at a range of LIBOR
plus 3.00% to 3.50% or the base rate plus 2.00% to 2.50%, with
the rate at any time determined by the average historical
borrowing availability; (iii) changed the financial
covenant metrics to a maximum total leverage ratio and a minimum
interest coverage ratio; (iv) added significant operating
and financial flexibility for Dole; and (v) provided for
other technical and clarifying changes. The amended senior
secured credit facilities provided $850 million of term
loan facilities due 2017 and a $350 million revolving
credit facility due 2014.
On March 2, 2010, Dole called the remaining 2011 Notes for
redemption. On April 1, 2010, Dole redeemed the remaining
$70 million of the 2011 Notes outstanding with the proceeds
from the senior secured credit facilities amendments.
As of October 9, 2010, Dole had a cash balance of
$200.9 million and an ABL revolver borrowing base of
$282.9 million. There were no borrowings under the ABL
revolver at October 9, 2010. After taking into account
approximately $144.7 million of outstanding letters of
credit issued under the ABL revolver, Dole had approximately
$138.2 million available for borrowings as of
October 9, 2010. During the third quarter of 2010,
Doles $100 million pre-funded letter of credit
facility expired and all of the outstanding letters of credit
and bank guarantees were transferred to Doles ABL
revolver. Dole entered into a 45 million
($62.7 million) letter of credit facility during the third
quarter of 2010 to support the bank guaranty issued in the same
amount for the 2009 European Commission fine.
As of October 9, 2010 Doles cross currency swap had a
liability of $121.4 million. The cross currency swap
matures in June 2011 at which time the liability will come due.
Dole is currently exploring various alternatives related to next
years maturity.
Dole believes that available borrowing capacity under the
revolving credit facility and subsidiaries uncommitted
lines of credit, together with its existing cash balances,
future cash flow from operations, planned asset sales and access
to capital markets will enable it to meet its working capital,
capital expenditure, debt maturity and other commitments and
funding requirements over the next 12 months.
Managements plan is dependent upon the occurrence of
future events which will be impacted by a number of factors
including the general economic environment in which Dole
operates, Doles ability to generate cash flow from its
operations, and its ability to attract buyers for assets being
marketed for sale. Factors impacting Doles cash flow from
operations include, but are not limited to, items such as
product pricing, commodity prices, interest rates and foreign
currency exchange rates.
46
Other
Matters
Recently Issued and Adopted Accounting
Pronouncements: There were no recently issued
accounting pronouncements that impact Doles condensed
consolidated financial statements. In addition, Dole did not
adopt any new accounting pronouncements during the quarter ended
October 9, 2010.
European Union (EU) Banana Import
Regime: On January 1, 2006, the EU
implemented a new tariff only import regime for
bananas. Under this regime, the EU mandated a tariff of 176 euro
per metric ton on all banana imports to the EU market from Latin
America. The EU also mandated that 775,000 metric tons of
bananas from African, Caribbean, and Pacific (ACP)
countries could be imported to the EU duty-free.
The preferential treatment of a zero tariff on up to 775,000
metric tons of ACP banana imports, as well as the 176 euro per
metric ton tariff applied to Latin banana imports, was
challenged by Panama, Honduras, Nicaragua and Colombia in
consultation proceedings at the World Trade Organization
(WTO). In addition, both Ecuador and the United
States formally requested the WTO Dispute Settlement Body
(DSB), to appoint panels to review the matter.
The DSB issued final and definitive written rulings in favor of
Ecuador and the United States on November 27, 2008,
concluding that the 176 euro per metric ton tariff is
inconsistent with WTO trade rules. The DSB also considered that
the prior duty-free tariff reserved for ACP countries was
inconsistent with WTO trade rules but also recognized that, with
the current entry into force of Economic Partnership Agreements
between the EU and ACP countries, ACP bananas now may have
duty-free, quota-free access to the EU market.
In light of these WTO rulings, the EU proposed a settlement in
resolution of the dispute, which was accepted and initialed by
the EU, the U.S., and 11 Latin American banana producing
countries (Brazil, Colombia, Costa Rica, Ecuador, Guatemala,
Honduras, Mexico, Nicaragua, Peru, Panama, and Venezuela) on
December 15, 2009. The EUs settlement with the Latin
American countries provides for a specific tariff reduction
schedule, with an initial reduction of the tariff to 148 euros
per metric ton and a final tariff of 114 euro per metric ton
reached on January 1, 2017 or January 1, 2019 (the
extended schedule of reduction applies if no further trade
agreements are reached in the ongoing DDA or Doha
Development Agenda global trade discussions). The EUs
settlement with the U.S. provides that the EU shall not
reintroduce measures that discriminate among banana distributors
based on either the ownership or control of the distributors or
on the source of the bananas and that the EU will maintain a
non-discriminatory, tariff-only regime for the importation of
bananas.
The settlement agreements were fully signed by the EU, the Latin
American countries, and the U.S. by October 8, 2010;
however, the tariff schedule must still be formally enacted in
European legislation through the act of the European Parliament.
While this may take several additional months, the lowered
tariff of 148 euro per metric ton has been provisionally applied
to all Latin American banana imports to the EU since the full
signing date of October 8, 2010. In addition, while not all
of the EU Member States custom authorities have finalized
the specific reimbursement procedures, importers may now seek
retroactive reimbursement for the excess 28 euros per metric ton
paid since December 15, 2009, which was the effective date
of the agreement for the lowered 148 euro tariff, from the
applicable customs authorities in the importing EU Member State.
Dole recorded tariff refunds of $8 million during the
second and third quarter of 2010 of which $5 million was
collected during the third quarter of 2010. Dole expects the
remaining balance to be collected during the fourth quarter of
2010. Dole estimates that the EU banana tariff settlement
agreements will benefit fiscal 2010 EBIT by approximately
$15 million at current foreign exchange rates.
Although Dole views the reduction in the tariff applied to Latin
American banana imports as a favorable development, it is too
early to determine the extent to which Doles operations
will benefit. In addition, the EU has recently negotiated
several free trade areas agreements (FTA) which,
once ratified, will allow for an even lower import tariff on
specified volumes of banana exports from certain countries. An
EU-Colombia-Peru FTA has been negotiated and an EU-Central
America (i.e. Costa Rica, El Salvador, Guatemala, Honduras,
Nicaragua and Panama) -FTA has been negotiated. Both these FTAs
must be ratified by the European Parliament. Ecuador has not yet
negotiated an FTA with the EU on bananas and may not benefit,
like the other Latin American countries party to an FTA, from a
preferential banana tariff unless a similar FTA can be
negotiated with the EU. Dole continues to monitor these
developments but cannot yet anticipate how, or if, they will be
implemented.
47
Derivative Instruments and Hedging
Activities: Dole uses derivative instruments to
hedge against fluctuations in interest rates, foreign currency
exchange rate movements and bunker fuel prices. Dole does not
utilize derivatives for trading or other speculative purposes.
During the first quarter of 2010, Dole designated the majority
of its foreign currency derivative instruments as cash flow
hedges in accordance with guidance provided by ASC Topic 815,
Derivatives and Hedging (ASC
815). As a result, changes in fair value of the foreign
currency derivative instruments since hedge designation, to the
extent effective, are recorded as a component of accumulated
other comprehensive income (loss) (AOCI) in the
condensed consolidated balance sheet and are reclassified into
earnings in the same period the underlying transactions affect
earnings.
Prior to the March 2010 refinancing transactions, the interest
rate swap was designated as a cash flow hedge in accordance with
guidance provided by ASC 815. As a result of the March 2010
refinancing transactions, certain terms of Doles senior
secured credit facilities were amended. Dole has evaluated the
impact of these amendments on its hedge designation for its
interest rate swap and has determined not to re-designate the
interest rate swap as a cash flow hedge of its interest rate
risk associated with Term Loan C. As a result, changes in the
fair value of the interest rate swap after de-designation on
March 2, 2010 are recorded into interest expense instead of
as a component of AOCI.
Included in the condensed consolidated statements of operations
are unrealized gains (losses) on Doles foreign currency
and bunker fuel hedges and the cross currency and interest rate
swaps by reporting segment as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended October 9, 2010
|
|
|
Quarter Ended October 10, 2009
|
|
|
|
Foreign
|
|
|
Bunker
|
|
|
Cross
|
|
|
Interest
|
|
|
|
|
|
Foreign
|
|
|
Bunker
|
|
|
Cross
|
|
|
|
|
|
|
Currency
|
|
|
Fuel
|
|
|
Currency
|
|
|
Rate
|
|
|
|
|
|
Currency
|
|
|
Fuel
|
|
|
Currency
|
|
|
|
|
|
|
Hedges
|
|
|
Hedges
|
|
|
Swap
|
|
|
Swap
|
|
|
Total
|
|
|
Hedges
|
|
|
Hedges
|
|
|
Swap
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Fresh fruit
|
|
$
|
(40
|
)
|
|
$
|
1,665
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,625
|
|
|
$
|
(10,990
|
)
|
|
$
|
(1,927
|
)
|
|
$
|
|
|
|
$
|
(12,917
|
)
|
Packaged foods
|
|
|
410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
410
|
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
500
|
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
(45,562
|
)
|
|
|
3,735
|
|
|
|
(41,827
|
)
|
|
|
|
|
|
|
|
|
|
|
(27,984
|
)
|
|
|
(27,984
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
370
|
|
|
$
|
1,665
|
|
|
$
|
(45,562
|
)
|
|
$
|
3,735
|
|
|
$
|
(39,792
|
)
|
|
$
|
(10,490
|
)
|
|
$
|
(1,927
|
)
|
|
$
|
(27,984
|
)
|
|
$
|
(40,401
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Quarters Ended October 9, 2010
|
|
|
Three Quarters Ended October 10, 2009
|
|
|
|
Foreign
|
|
|
Bunker
|
|
|
Cross
|
|
|
Interest
|
|
|
|
|
|
Foreign
|
|
|
Bunker
|
|
|
Cross
|
|
|
|
|
|
|
Currency
|
|
|
Fuel
|
|
|
Currency
|
|
|
Rate
|
|
|
|
|
|
Currency
|
|
|
Fuel
|
|
|
Currency
|
|
|
|
|
|
|
Hedges
|
|
|
Hedges
|
|
|
Swap
|
|
|
Swap
|
|
|
Total
|
|
|
Hedges
|
|
|
Hedges
|
|
|
Swap
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Fresh fruit
|
|
$
|
(776
|
)
|
|
$
|
858
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
82
|
|
|
$
|
(3,997
|
)
|
|
$
|
4,415
|
|
|
$
|
|
|
|
$
|
418
|
|
Packaged foods
|
|
|
617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
617
|
|
|
|
998
|
|
|
|
|
|
|
|
|
|
|
|
998
|
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
(59,863
|
)
|
|
|
8,482
|
|
|
|
(51,381
|
)
|
|
|
|
|
|
|
|
|
|
|
(34,687
|
)
|
|
|
(34,687
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(159
|
)
|
|
$
|
858
|
|
|
$
|
(59,863
|
)
|
|
$
|
8,482
|
|
|
$
|
(50,682
|
)
|
|
$
|
(2,999
|
)
|
|
$
|
4,415
|
|
|
$
|
(34,687
|
)
|
|
$
|
(33,271
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For information regarding Doles derivative instruments and
hedging activities, refer to Note 13 to the condensed
consolidated financial statements.
Goodwill: As discussed in Note 7 to the
condensed consolidated financial statements contained in this
Quarterly Report, continued decline in Doles market
capitalization or a decline in the operating results could
trigger an impairment indicator in a subsequent quarter. If such
impairment indicator were triggered, Dole would be required to
perform an interim goodwill impairment analysis, and it is
possible that such analysis could result in an impairment of
goodwill. Specifically, the impairment test related to the
approximately $275 million goodwill of Doles Fresh
Fruit operations is sensitive to declines in value such that a
decrease of approximately 10% in the estimated value determined
during Doles most recent second quarter annual impairment
testing would have indicated an impairment of the related
goodwill, thereby requiring Dole to perform additional tests to
determine if such goodwill was impaired. Further, the goodwill
impairment test involves a discounted cash flow analysis
containing assumptions such as sales growth and gross margin
levels that impact the value estimated for the
48
respective reporting units. These assumptions are developed
based on a number of factors including historical experience,
current industry and customer trends, and managements best
estimates of future performance. Some of the key uncertainties
surrounding these assumptions include changes in commodity and
growing costs related to Doles products and the potential
for variations in customer demand and buying trends. While Dole
believes that its goodwill was not impaired at October 9,
2010, Dole will continue to closely monitor its market
capitalization, along with other operational performance
measures and general economic conditions, for indicators of
impairment of Doles goodwill.
For the three quarters ended October 9, 2010, there have
been no material changes in the market risk disclosure presented
in Doles Annual Report on
Form 10-K
for the fiscal year ended January 2, 2010. For information
regarding Doles derivative instruments and hedging
activities, refer to Note 13 to the condensed consolidated
financial statements contained in this Quarterly Report.
An evaluation was carried out as of October 9, 2010 under
the supervision and with the participation of Doles
management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of our disclosure
controls and procedures, as defined in
Rule 13a-15(e)
and
Rule 15d-15(e)
under the Securities Exchange Act. Based upon this evaluation,
Doles Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures were
effective as of October 9, 2010. No change in our internal
control over financial reporting identified in connection with
this evaluation that occurred during our third quarter of 2010
has materially affected, or is reasonably likely to materially
affect, Doles internal control over financial reporting.
49
PART II.
OTHER INFORMATION
DOLE FOOD COMPANY, INC.
|
|
Item 1.
|
Legal
Proceedings
|
For information regarding legal matters, refer to Note 11
to the condensed consolidated financial statements contained in
this Quarterly Report.
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
|
|
|
31
|
.1*
|
|
Certification by the Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act
|
|
31
|
.2*
|
|
Certification by the Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act
|
|
32
|
.1
|
|
Certification by the Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act
|
|
32
|
.2
|
|
Certification by the Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act
|
|
|
|
* |
|
Filed herewith |
|
|
|
Furnished herewith |
50
SIGNATURES
Pursuant to the requirements 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
|
|
|
|
By:
|
/s/ Joseph
S. Tesoriero
|
Joseph S. Tesoriero
Executive Vice President and
Chief Financial Officer
Yoon J. Hugh
Vice President, Controller and
Chief Accounting Officer
(Principal Accounting Officer)
November 22, 2010
51
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
|
|
|
31
|
.1*
|
|
Certification by the Chief Executive Officer pursuant to
Section 302 of the Sarbanes- Oxley Act.
|
|
31
|
.2*
|
|
Certification by the Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act.
|
|
32
|
.1
|
|
Certification by the Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act.
|
|
32
|
.2
|
|
Certification by the Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act.
|
|
|
|
* |
|
Filed herewith |
|
|
|
Furnished herewith |
52