<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the quarterly period ended March 28, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-4455
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DOLE FOOD COMPANY, INC.
(Exact name of registrant as specified in its charter)
HAWAII 99-0035300
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
31365 OAK CREST DRIVE
WESTLAKE VILLAGE, CALIFORNIA 91361
(Address of principal executive offices and zip code)
Registrant's 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 X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Shares Outstanding at April 30, 1998
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Common Stock, No Par Value 60,355,612
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DOLE FOOD COMPANY, INC.
INDEX
<TABLE>
<CAPTION>
Page
Number
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<S> <C>
Consolidated Statements of Income -- quarter ended
March 28, 1998 and March 22, 1997...................... 3
Consolidated Balance Sheets -- March 28, 1998 and
January 3, 1998........................................ 4
Consolidated Statements of Cash Flow - quarter ended
March 28, 1998 and March 22, 1997...................... 5
Notes to Consolidated Financial Statements............. 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......... 7
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings...................................... 8
ITEM 6. Exhibits and Reports on Form 8-K....................... 9
Signatures............................................. 10
</TABLE>
2
<PAGE>
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DOLE FOOD COMPANY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in 000s, except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended
----------------------
March 28, March 22,
1998 1997
--------- ---------
<S> <C> <C>
Revenue $1,011,984 $964,992
Cost of products sold 872,963 813,254
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Gross margin 139,021 151,738
Selling, marketing and administrative expenses 97,314 90,939
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Operating income 41,707 60,799
Interest income 1,687 2,176
Other income (expense) - net (933) 5,167
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Earnings before interest and taxes 42,461 68,142
Interest expense (14,700) (16,899)
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Income before income taxes 27,761 51,243
Income taxes (5,000) (9,200)
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Net income $22,761 $42,043
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--------- ---------
Net income per common share
Basic $0.38 $0.70
Diluted 0.37 0.70
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--------- ---------
Diluted average number of common shares outstanding 60,837 60,196
--------- ---------
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</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
DOLE FOOD COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(in 000s)
<TABLE>
<CAPTION>
March 28, January 3,
1998 1998
(Unaudited) (Audited)
----------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash and short-term investments $ 31,832 $ 31,202
Receivables - net 558,513 534,844
Inventories
Finished products 171,979 149,933
Raw material and work in progress 120,729 142,623
Growing crop costs 47,917 46,207
Packing materials 26,976 24,803
Operating supplies and other 114,242 105,126
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481,843 468,692
Prepaid expenses 55,690 48,438
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Total current assets 1,127,878 1,083,176
Investments 70,554 69,248
Property, plant and equipment - net 1,022,508 1,024,247
Long-term receivables - net 64,817 63,482
Other assets 245,616 223,742
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TOTAL ASSETS $ 2,531,373 $ 2,463,895
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----------- ----------
CURRENT LIABILITIES
Notes payable $ 10,607 $ 11,290
Current portion of long-term debt 1,826 2,326
Accounts payable and accrued liabilities 653,426 662,823
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Total current liabilities 665,859 676,439
Long-term debt 821,112 754,849
Other long-term liabilities 318,682 328,293
Minority interests 44,342 37,842
Commitments and contingencies
Common shareholders' equity
Common stock 321,006 320,707
Additional paid-in capital 182,392 174,058
Retained earnings 270,157 259,456
Accumulated other comprehensive loss (92,177) (87,749)
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Total common shareholders' equity 681,378 666,472
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TOTAL LIABILITIES AND EQUITY $ 2,531,373 $ 2,463,895
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----------- ----------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
DOLE FOOD COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
(in 000s)
<TABLE>
<CAPTION>
Quarter Ended
-------------------------
March 28, March 22,
1998 1997
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<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 22,761 $ 42,043
Adjustments to net income
Depreciation and amortization 25,410 27,361
Provision for deferred income taxes 1,816 1,775
Other (20) (8,554)
Change in operating assets and liabilities
Receivables - net (28,954) (52,676)
Inventories (11,798) 7,328
Prepaid expenses (8,191) (5,349)
Accounts payable and accrued liabilities (21,662) (3,740)
Internal Revenue Service payment
related to prior years' audits (17,145) -
Other (3,480) (8,612)
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Cash flow used in operating activities (41,263) (424)
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INVESTING ACTIVITIES
Capital additions (18,471) (18,911)
Proceeds from sales of property, plant & equipment 2,670 5,138
Businesses acquired - net of acquired cash (441) (10,300)
Sales (purchases) of investments - net (537) 4,912
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Cash flow used in investing activities (16,779) (19,161)
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FINANCING ACTIVITIES
Short-term debt repayments - net (1,186) (11,966)
Long-term debt borrowings - net 57,253 27,438
Cash dividends paid (6,028) (5,985)
Issuance of common stock 9,127 1,529
Repurchase of common stock (494) -
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Cash flow provided by financing activities 58,672 11,016
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Increase (decrease) in cash and short-term
investments 630 (8,569)
Cash and short-term investments at beginning
of period 31,202 34,342
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Cash and short-term investments at end of period $ 31,832 $ 25,773
--------- ---------
--------- ---------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of management, the accompanying unaudited consolidated
financial statements of Dole Food Company, Inc. (the "Company") include all
adjustments necessary to present fairly its financial position as of March
28, 1998 and January 3, 1998 (audited), and its results of operations and
cash flow for the quarters ended March 28, 1998 and March 22, 1997. For
additional information, refer to the notes to the Company's audited
consolidated financial statements for the year ended January 3, 1998.
Interim results are subject to significant seasonal variations and are not
necessarily indicative of the results of operations for a full year. The
Company's fresh fruit and vegetable operations are sensitive to a number of
factors including foreign currency fluctuations; and weather conditions
and their effect on industry volumes, prices, product quality and costs.
Certain prior year amounts have been reclassified to conform with the 1998
presentation.
2. During the first quarter of 1998, the Company declared dividends on its
common stock of $12.1 million of which $6.0 million were paid. The
dividends declared during the first quarter of 1998 include regular
quarterly dividends for the first and second quarters of 1998. For the same
period of 1997, the Company declared and paid dividends of $6.0 million
representing the regular quarterly dividend of $0.10 cents per share.
3. The Company paid interest of $18.0 million in the first quarter of 1998 and
$11.9 million for the same period in 1997. The Company paid income taxes
of $21.8 million for the first quarter of 1998 which included $17.1 million
related to prior years' audits. The Company received income tax refunds
(net of income taxes paid) of $1.8 million for the first quarter of 1997.
4. In accordance with Statement of Financial Accounting Standards No. 130
(SFAS 130) "Reporting Comprehensive Income," the Company recognized $18.4
million and $30.5 million of comprehensive income which consists of net
income and unrealized foreign currency translation losses of $4.4 million
and $11.5 million for the quarters ended March 28, 1998 and March 22, 1997,
respectively.
5. The weighted average number of common shares outstanding before the
dilutive effect of stock options at average prices for the quarters ended
March 28, 1998 and March 22, 1997 was 60,197,000 and 59,858,000,
respectively.
6
<PAGE>
DOLE FOOD COMPANY, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenue for the first quarter of 1998 increased 5% to $1,012.0 million from
$965.0 million for the same period in 1997. Net income for the first quarter of
1998 was $22.8 million, or $0.37 per diluted share, compared to $42.0 million,
or $0.70 per diluted share, for the first quarter of 1997.
Revenue increased due to European distribution businesses acquired in the
fourth quarter of 1997 and favorable volume and pricing in the vegetable and
Honduran beverage operations. The decrease in earnings was primarily due to
weaker pricing in the North American banana market caused by high industry
volume. The decrease was also caused by weakening currency markets, especially
in Japan. This was somewhat offset by strong vegetable operations.
Operating income was $41.7 million for the first quarter of 1998 compared to
$60.8 million for the first quarter of 1997.
Interest expense decreased 13% for the first quarter of 1998 compared to the
same period of the prior year as a result of lower average debt levels.
In the prior year, other income (expense) - net included a gain from the sale
of an investment.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131). In accordance with SFAS 131,
the Company is currently evaluating the additional business segments to be
reported in its 1998 Annual Report on Form 10-K. Since the statement requires
additional disclosure only, it will have no effect on the financial condition or
results of operations of the Company.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow used in operating activities increased to $41.3 million for the
first quarter of 1998 from $0.4 million for the comparable period of the
prior year. This was primarily due to lower earnings, a payment to the
Internal Revenue Service related to prior years' audits, lower accounts
payable and accrued liabilities levels and an increase in inventory. The
Company is currently pursuing a refund of the payment to the Internal Revenue
Service. During the first quarter of 1997, the Company experienced an
underlying decrease in its working capital requirements as a result of the
closure of its Fresno, California dried fruit operations.
Capital expenditures of $18.5 million for the first quarter of 1998 were for the
acquisition and maintenance of productive assets and were funded largely by the
proceeds from borrowings.
As of March 28, 1998, the Company had no borrowings outstanding under its $400
million, five year revolving credit facility.
During the first quarter of 1998, the Company repurchased 10,000 shares at a
cost of $0.5 million.
7
<PAGE>
PART II. OTHER INFORMATION
DOLE FOOD COMPANY, INC.
ITEM 1. LEGAL PROCEEDINGS
In the Company's Form 10-K for the fiscal year ended January 3, 1998, the
Company described certain lawsuits that had been filed in Texas, Louisiana,
Mississippi, and Hawaii against some of the manufacturers of a formerly
widely used agricultural chemical called DBCP, the Company and several of its
competitors. In these lawsuits, a large number of foreign nationals allege
personal injuries caused by contact with DBCP. The plaintiffs claim that
during the 1960's and 1970's they were employees of Company subsidiaries,
competitors and independent local growers. All cases were removed to federal
court and most have been dismissed on the grounds that the plaintiff's home
countries are the more appropriate forums for the claims. Dismissal motions
are pending in one Texas case and two Hawaii cases, and one Louisiana case
was remanded to state court. The dismissed Texas cases are on appeal. The
DBCP manufacturers have reported that they have settled with the majority of
Texas and Louisiana plaintiffs. In April 1998, the Dow Chemical Company, a
manufacturer of DBCP, filed a lawsuit against a Company subsidiary seeking
indemnification for settlements and defense costs. As to all such matters,
the Company has denied liability and asserted substantial defenses. In the
opinion of management, after consultation with outside counsel, the pending
lawsuits are not expected to have a material adverse effect on the Company's
financial position or results of operations.
The Company is involved from time to time in various claims and legal actions
incident to its operations, both as plaintiff and defendant. In the opinion of
management, after consultation with outside counsel, none of the claims or
actions to which the Company is a party is expected to have a material adverse
effect on the Company's financial position or results of operations.
8
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
<TABLE>
<CAPTION>
Exhibit Page
No. Number
------- ------
<S> <C> <C>
11 Computations of earnings per common share 11
27 Financial data schedule
</TABLE>
(b) No reports on Form 8-K were filed for the quarter
ended March 28, 1998.
9
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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
May 12, 1998 By /s/ James A. Dykstra
----------------------
James A. Dykstra
Controller and
Chief Accounting Officer
10
<PAGE>
EXHIBIT 11
DOLE FOOD COMPANY, INC.
COMPUTATIONS OF EARNINGS PER COMMON SHARE
(Unaudited)
(in 000s, except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended
--------------------------
March 28, March 22,
1998 1997
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<S> <C> <C>
BASIC
Net income applicable to common shares $22,761 $42,043
Weighted average number of common shares
outstanding during the period 60,197 59,858
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Basic earnings per common share $0.38 $0.70
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DILUTED
Net income applicable to common shares $22,761 $42,043
--------- ---------
Weighted average number of common shares
outstanding during the period 60,197 59,858
Add:
Dilutive effect of stock options at average
prices during the period 640 338
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Total diluted shares 60,837 60,196
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Diluted earnings per common share $0.37 $0.70
--------- ---------
--------- ---------
</TABLE>
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JAN-02-1999<F1>
<PERIOD-START> JAN-04-1998
<PERIOD-END> MAR-28-1998
<CASH> 31,832
<SECURITIES> 0
<RECEIVABLES> 619,639
<ALLOWANCES> 61,126
<INVENTORY> 481,843
<CURRENT-ASSETS> 1,127,878
<PP&E> 1,683,824
<DEPRECIATION> 661,316
<TOTAL-ASSETS> 2,531,373
<CURRENT-LIABILITIES> 665,859
<BONDS> 821,112
0
0
<COMMON> 321,006
<OTHER-SE> 360,372
<TOTAL-LIABILITY-AND-EQUITY> 2,531,373
<SALES> 1,011,984
<TOTAL-REVENUES> 1,011,984
<CGS> 872,963
<TOTAL-COSTS> 872,963
<OTHER-EXPENSES> 98,247
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,700
<INCOME-PRETAX> 27,761
<INCOME-TAX> 5,000
<INCOME-CONTINUING> 22,761
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,761
<EPS-PRIMARY> 0.38<F2>
<EPS-DILUTED> 0.37<F3>
<FN>
<F1>THE COMPANY'S FISCAL YEAR ENDS ON THE SATURDAY CLOSEST TO DECEMBER 31.
FISCAL YEAR 1998 ENDS JANUARY 2, 1999 AND INCLUDES 52 WEEKS. ALL QUARTERS
IN 1998 HAVE 12 WEEKS, EXCEPT THE THIRD QUARTER WHICH HAS 16 WEEKS.
<F2>IN ACCORDANCE WITH SFAS NO. 128, "EARNINGS PER SHARE", THIS ITEM REFLECTS
BASIC EARNINGS PER SHARE.
<F3>IN ACCORDANCE WITH SFAS NO. 128, "EARNINGS PER SHARE", THIS ITEM REFLECTS
DILUTED EARNINGS PER SHARE.
</FN>
</TABLE>
