<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 19, 1999
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
------------------------
DOLE FOOD COMPANY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
HAWAII 99-0035300
(State or other (IRS Employer
jurisdiction of Identification
incorporation or No.)
organization)
</TABLE>
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.
<TABLE>
<S> <C>
CLASS SHARES OUTSTANDING AT JULY 30, 1999
- ---------------------------------- ----------------------------------------
Common Stock, No Par Value 57,050,178
</TABLE>
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- --------------------------------------------------------------------------------
<PAGE>
DOLE FOOD COMPANY, INC.
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
NUMBER
---------
<S> <C> <C>
ITEM 1. FINANCIAL STATEMENTS
3
Consolidated Statements of Income--quarters and half years ended June 19, 1999 and
June 20, 1998.........................................................................
5
Consolidated Balance Sheets--June 19, 1999 and January 2, 1999........................
6
Consolidated Statements of Cash Flows--half years ended June 19, 1999 and June 20,
1998..................................................................................
7
Notes to Consolidated Financial Statements............................................
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of 10
Operations............................................................................
</TABLE>
PART II. OTHER INFORMATION
<TABLE>
<CAPTION>
<S> <C> <C>
ITEM 4. Submission of Matters to a Vote of Security Holders..................................... 13
ITEM 6. Exhibits and Reports on Form 8-K........................................................ 13
Signatures.............................................................................. 14
</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
---------------------------
JUNE 19, JUNE 20,
1999 1998
------------- ------------
<S> <C> <C>
Revenue.............................................................................. $ 1,316,556 $ 1,163,986
Cost of products sold................................................................ (1,137,437) (955,788)
------------- ------------
Gross margin....................................................................... 179,119 208,198
Selling, marketing and administrative expenses....................................... (114,125) (93,412)
Hurricane Mitch insurance--net....................................................... 14,839 --
------------- ------------
Operating income................................................................... 79,833 114,786
Interest income...................................................................... 2,751 1,644
Other expense--net................................................................... (662) (1,167)
------------- ------------
Earnings before interest and taxes................................................. 81,922 115,263
Interest expense..................................................................... (21,259) (15,168)
------------- ------------
Income before income taxes......................................................... 60,663 100,095
Income taxes......................................................................... (13,300) (18,000)
------------- ------------
Net income......................................................................... $ 47,363 $ 82,095
------------- ------------
------------- ------------
Net income per common share
Basic.............................................................................. $ 0.83 $ 1.36
Diluted............................................................................ 0.83 1.35
------------- ------------
------------- ------------
Diluted average number of common shares outstanding.................................. 57,223 60,894
------------- ------------
------------- ------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
DOLE FOOD COMPANY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN 000S, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HALF YEAR ENDED
----------------------------
JUNE 19, JUNE 20,
1999 1998
------------- -------------
<S> <C> <C>
Revenue............................................................................. $ 2,504,991 $ 2,175,970
Cost of products sold............................................................... (2,161,084) (1,828,751)
------------- -------------
Gross margin...................................................................... 343,907 347,219
Selling, marketing and administrative expenses...................................... (222,759) (190,726)
Hurricane Mitch insurance--net...................................................... 26,515 --
------------- -------------
Operating income.................................................................. 147,663 156,493
Interest income..................................................................... 5,296 3,331
Other expense--net.................................................................. (1,051) (2,100)
------------- -------------
Earnings before interest and taxes................................................ 151,908 157,724
Interest expense.................................................................... (42,834) (29,868)
------------- -------------
Income before income taxes........................................................ 109,074 127,856
Income taxes........................................................................ (24,000) (23,000)
------------- -------------
Net income........................................................................ $ 85,074 $ 104,856
------------- -------------
------------- -------------
Net income per common share
Basic............................................................................. $ 1.48 $ 1.74
Diluted........................................................................... 1.48 1.72
------------- -------------
------------- -------------
Diluted average number of common shares outstanding................................. 57,537 60,865
------------- -------------
------------- -------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
DOLE FOOD COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(IN 000S)
<TABLE>
<CAPTION>
JUNE 19, JANUARY 2,
1999 1999
------------ ------------
<S> <C> <C>
(UNAUDITED) (AUDITED)
CURRENT ASSETS
Cash and short-term investments..................................................... $ 65,053 $ 35,352
Receivables--net.................................................................... 653,111 616,579
Inventories
Finished products................................................................. 190,950 168,423
Raw materials and work in progress................................................ 135,047 156,623
Growing crops..................................................................... 44,774 47,676
Operating supplies and other...................................................... 114,567 102,802
------------ ------------
485,338 475,524
Prepaid expenses.................................................................... 48,778 43,200
------------ ------------
Total current assets.............................................................. 1,252,280 1,170,655
Investments........................................................................... 76,577 71,923
Property, plant and equipment--net.................................................... 1,104,790 1,102,285
Goodwill--net......................................................................... 298,394 277,962
Other assets.......................................................................... 267,303 292,228
------------ ------------
TOTAL ASSETS...................................................................... $ 2,999,344 $ 2,915,053
------------ ------------
------------ ------------
CURRENT LIABILITIES
Notes payable....................................................................... $ 20,465 $ 29,637
Current portion of long-term debt................................................... 4,889 6,451
Accounts payable and accrued liabilities............................................ 794,992 768,790
------------ ------------
Total current liabilities......................................................... 820,346 804,878
Long-term debt........................................................................ 1,194,854 1,116,422
Other long-term liabilities........................................................... 319,709 314,527
Minority interests.................................................................... 52,763 57,394
Commitments and contingencies
Common shareholders' equity
Common stock........................................................................ 317,693 319,937
Additional paid-in capital.......................................................... 79,886 144,515
Retained earnings................................................................... 321,126 247,508
Accumulated other comprehensive loss................................................ (107,033) (90,128)
------------ ------------
Total common shareholders' equity................................................. 611,672 621,832
------------ ------------
TOTAL LIABILITIES AND EQUITY...................................................... $ 2,999,344 $ 2,915,053
------------ ------------
------------ ------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
DOLE FOOD COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN 000S)
<TABLE>
<CAPTION>
HALF YEAR ENDED
-----------------------
JUNE 19, JUNE 20,
1999 1998
---------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income............................................................................. $ 85,074 $ 104,856
Adjustments to net income
Depreciation and amortization........................................................ 58,236 51,769
Provision for deferred income taxes.................................................. 13,169 11,767
Hurricane Mitch insurance proceeds................................................... (38,331) --
Other................................................................................ (2,080) 3,013
Change in operating assets and liabilities,
net of effects from acquisitions and non-cash transactions
Receivables--net..................................................................... (70,677) (52,798)
Inventories.......................................................................... (15,140) 28,658
Prepaid expenses and other assets.................................................... (36,485) (8,233)
Accounts payable and accrued liabilities............................................. 62,866 3,527
Internal Revenue Service refund (payment) related to prior years' audits............. 14,550 (17,145)
Other................................................................................ 9,379 (19,722)
---------- -----------
Cash flow provided by operating activities............................................. 80,561 105,692
---------- -----------
INVESTING ACTIVITIES
Proceeds from sales of assets.......................................................... 3,613 4,019
Capital additions...................................................................... (55,631) (40,015)
Purchases of investments and acquisitions, net of cash acquired........................ (18,792) (73,262)
Hurricane Mitch insurance proceeds..................................................... 38,331 --
---------- -----------
Cash flow used in investing activities................................................. (32,479) (109,258)
---------- -----------
FINANCING ACTIVITIES
Short-term debt repayments--net........................................................ (23,605) (3,338)
Long-term borrowings--net.............................................................. 83,552 11,670
Cash dividends paid.................................................................... (11,455) (12,059)
Issuance of common stock............................................................... 717 9,349
Repurchase of common stock............................................................. (67,590) (494)
---------- -----------
Cash flow provided by (used in) financing activities................................... (18,381) 5,128
---------- -----------
Increase in cash and short-term investments.............................................. 29,701 1,562
Cash and short-term investments at beginning of period................................... 35,352 31,202
---------- -----------
Cash and short-term investments at end of period......................................... $ 65,053 $ 32,764
---------- -----------
---------- -----------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6
<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 June 19,
1999 and January 2, 1999 (audited), its results of operations for the quarters
and half years ended June 19, 1999 and June 20, 1998 and its cash flows for the
half years then ended. For additional information, refer to the notes to the
Company's audited consolidated financial statements for the year ended January
2, 1999.
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 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 currency
exchange rates in both sourcing and selling locations. While the Company has
historically not attempted to hedge foreign currency fluctuations, it
occasionally enters into forward contracts related to specific foreign currency
denominated purchase commitments and sales.
As of June 19, 1999, the Company had contracted to purchase German marks,
primarily at fixed exchange rates, to facilitate payment for two German-made
refrigerated container vessels at a weighted-average exchange rate of DM 1.81 to
$1.00 for a total notional value of $96.7 million. Of the DM 175 million under
contract, DM 50 million of contracts carry a variable rate component whereby the
contracted exchange rates vary with the spot rate to the extent the spot rate
exceeds the initial contracted rates. If the spot rate meets or exceeds DM 2.00
to $1.00 during the lives of the contracts, the exchange rates revert to the
initial contracted rates. These contracts will be settled during the fourth
quarter of 1999, and as of June 19, 1999, their fair value was approximately
$93.8 million.
Certain prior year amounts have been reclassified to conform with the 1999
presentation.
2. During the first two quarters of 1999, the Company declared and paid
dividends of $11.5 million on its common stock representing two regular
quarterly dividends of 10 cents per share. For the same period of 1998, the
Company declared dividends of $18.1 million of which $12.1 million were paid.
The dividends declared during the first two quarters of 1998 represented regular
quarterly dividends of 10 cents per share for the first three quarters of that
year.
3. The Company paid interest of $41.7 million during the first half of 1999
and $29.4 million for the same period of 1998. In the first half of 1999, the
Company paid a net amount of $1.0 million for income taxes, which was comprised
of $15.6 million of payments offset by $14.6 million of refunds related to the
partial settlement of disputed items from prior years' audits. For the same
period of 1998, the Company paid $28.8 million of income taxes, of which $17.1
million related to disputed items from prior years' audits.
7
<PAGE>
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. During the latter part of 1998, the Company acquired and invested in
operations in Latin America, North America and Europe. The acquisitions were
comprised primarily of the purchases of Sunburst Farms, Inc., Four Farmers,
Inc., Finesse Farms, Colombian Carnations, Inc. and their affiliated companies
and 60% of the SABA Trading AB Scandinavian distribution business. If the
acquisitions had taken place on January 4, 1998, pro forma revenue and net
income for the quarter and half year ended June 20, 1998 would have been
$1,352.7 million and $83.9 million, and $2,504.1 million and $113.4 million,
respectively. Basic and diluted net income per common share for the quarter and
half year ended June 20, 1998 would have been $1.39 and $1.38, and $1.88 and
$1.86, respectively.
These pro forma results of operations have been prepared for comparative
purposes only and may not be indicative of the Company's results of operations
had the acquisitions occurred on the date indicated or of its future results of
operations.
5. The Company recognized comprehensive income which consisted of net
income and unrealized foreign currency translation losses as follows (in
millions):
<TABLE>
<CAPTION>
QUARTER ENDED HALF YEAR ENDED
---------------------- ----------------------
JUNE 19, JUNE 20, JUNE 19, JUNE 20,
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income........................................................ $ 47,363 $ 82,095 $ 85,074 $ 104,856
Foreign currency translation loss................................. (11,242) (1,814) (16,905) (6,242)
---------- ---------- ---------- ----------
Comprehensive income.............................................. $ 36,121 $ 80,281 $ 68,169 $ 98,614
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
The change in operating assets and liabilities shown in the Consolidated
Statements of Cash Flows excludes the effects of foreign currency translation.
Such translation reduced assets and liabilities by $65.7 million and $48.8
million, respectively, during the half year ended June 19, 1999 and by $9.4
million and $3.2 million, respectively, during the half year ended June 20,
1998.
6. The weighted-average number of common shares outstanding used to
calculate basic net income per share was 57.1 million and 60.4 million for the
quarters ended and 57.4 million and 60.3 million for the half years ended June
19, 1999 and June 20, 1998, respectively.
8
<PAGE>
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
7. The Company has four reportable segments: fresh fruit, fresh vegetables,
processed foods and fresh-cut flowers. Businesses in the Company's fresh-cut
flowers segment source, import and market fresh-cut flowers grown in Colombia,
Ecuador and Mexico primarily to wholesale florists and supermarkets in the
United States. Businesses in this segment were acquired during the latter part
of 1998 and reported in other operating segments in the Company's 1998 Annual
Report on Form 10-K.
Management evaluates and monitors segment performance primarily through
earnings before interest and taxes (EBIT). Revenue and EBIT for the reportable
segments, other operating segments, and corporate and other were as follows (in
thousands):
<TABLE>
<CAPTION>
QUARTER ENDED HALF YEAR ENDED
-------------------------- --------------------------
JUNE 19, JUNE 20, JUNE 19, JUNE 20,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue
Fresh fruit............................................ $ 864,283 $ 772,886 $ 1,598,609 $ 1,385,515
Fresh vegetables....................................... 197,212 190,696 409,780 388,604
Processed foods........................................ 193,623 190,457 374,435 383,361
Fresh-cut flowers...................................... 55,373 -- 109,762 --
Other operating segments............................... 6,065 9,947 12,405 18,490
------------ ------------ ------------ ------------
$ 1,316,556 $ 1,163,986 $ 2,504,991 $ 2,175,970
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
EBIT
Fresh fruit............................................ $ 28,281 $ 85,015 $ 59,168 $ 112,157
Fresh vegetables....................................... 18,580 16,618 30,632 27,352
Processed foods........................................ 19,801 21,125 34,254 38,267
Fresh-cut flowers...................................... 5,804 -- 15,412 --
Other operating segments............................... (205) 233 (636) 414
------------ ------------ ------------ ------------
Reportable segment EBIT................................ 72,261 122,991 138,830 178,190
Corporate and other.................................... (5,178) (7,728) (13,437) (20,466)
Hurricane Mitch insurance-net.......................... 14,839 -- 26,515 --
------------ ------------ ------------ ------------
$ 81,922 $ 115,263 $ 151,908 $ 157,724
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
Corporate and other EBIT includes general and administrative costs not
allocated to operating segments. Corporate and other EBIT in 1998 includes
certain costs related to the reorganization of the European processed pineapple
business.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DOLE FOOD COMPANY, INC.
RESULTS OF OPERATIONS
Revenue for the first half of 1999 increased 15% to $2,505 million from
$2,176 million during the same period of 1998. Revenue for the second quarter of
1999 increased 13% to $1,317 million from $1,164 million for the second quarter
of 1998. Revenues increased primarily due to the inclusion of the SABA Trading
AB Scandinavian distribution business and the fresh-cut flower businesses
acquired during the latter part of 1998. These acquisitions added approximately
$320 million and $180 million to revenues for the first half and second quarter
of 1999, respectively. For the first half of 1999, revenue from the Company's
ongoing operations improved slightly versus the same period of 1998. Growth in
the Company's European distribution, North American fresh-cut salad and
processed pineapple businesses was offset by decreases in the banana business as
a result of significantly weaker pricing in world markets during the second
quarter. Weak pricing in the banana business is expected to continue through the
third quarter of 1999. Additionally, revenue for the California citrus business
decreased as a result of crop damage due to freezing temperatures in
California's San Joaquin Valley at the end of 1998.
Gross margin for the first half of 1999 decreased 1% to $344 million from
$347 million for the same period of 1998. Gross margin for the second quarter of
1999 decreased 14% to $179 million from $208 million for the second quarter of
1998. Gross margin decreased primarily due to the effect of weaker
second-quarter banana pricing in world markets combined with higher costs in the
aftermath of last year's Hurricane Mitch. Gross margin was also negatively
impacted by lower revenue in the California citrus business as well as reduced
margins in the California almond business, which are not expected to improve in
the near term. Growth in the Company's processed pineapple and fresh-cut salad
businesses along with increased revenue from operations acquired in the latter
half of 1998 partially offset the overall decrease in gross margin.
Selling, marketing and administrative expenses ("SM&A") for the first half
of 1999 increased 17% to $223 million from $191 million for the same period of
1998. SM&A expenses for the second quarter of 1999 increased 22% to $114 million
from $93 million for the second quarter of 1998. The increased expenses were
largely due to the inclusion of businesses acquired during the latter part of
1998. As a percentage of revenue, SM&A expenses increased only slightly from
8.8% to 8.9% for the first half of 1999 and from 8.0% to 8.7% for the second
quarter of 1999. This increase was due to slightly higher costs on lower
revenues in the banana business and higher selling costs in the Honduran
beverage business due to infrastructure damage from last year's Hurricane Mitch.
Marketing expenses were higher in the processed pineapple business due to new
product introduction costs and in the fresh-cut salad business due to product
introductions and growth in the customer base.
In the fourth quarter of 1998, the Company took a $100 million charge, net
of insurance proceeds received, for damages sustained from Hurricane Mitch. In
the first half of 1999, the Company received $38 million of additional insurance
proceeds and incurred $12 million of rehabilitation expenses. In the second
quarter of 1999, the Company received $18 million of insurance proceeds and
incurred $3 million of rehabilitation expenses. The net proceeds of $27 million
and $15 million for the first half and second quarter of 1999, respectively,
have been reported on a separate line in the Consolidated Statements of Income.
The Company continues to pursue recovery under various insurance policies for
losses sustained. Future insurance proceeds, net of rehabilitation costs will
continue to be reported separately.
Other expense--net consists primarily of minority interest expense and gains
and losses on the sale of property.
Interest expense for the first half of 1999 increased to $43 million from
$30 million for the same period of 1998. For the second quarter of 1999,
interest expense increased to $21 million from $15 million
10
<PAGE>
for the second quarter of 1998. The increase was primarily due to higher average
debt levels resulting from the acquisition of businesses during the latter part
of 1998 as well as repurchases of the Company's common shares during the fourth
quarter of 1998 and the first quarter of 1999.
During the first half of 1999, the Company's effective tax rate increased to
22% from 18% during the same period of 1998. The increase was primarily due to
income from net insurance proceeds related to last year's Hurricane Mitch.
The Company has assessed the effect of Year 2000 issues on its information
technology, including computer hardware, software, telecommunications and
embedded chip technology. Remediation to critical information and operating
systems has been completed at the Company's operating units. Certain minor
issues with non-critical equipment are still being addressed in several
divisions as well as the North American portion of the fresh-cut flower
businesses and the SABA Trading AB Scandinavian distribution business, both of
which were acquired in the latter part of 1998. The Company expects that it will
resolve these issues and complete integrated testing by September 30, 1999. The
Company is also in the process of confirming Year 2000 compliance with its
critical business partners, including key suppliers and service providers.
Contingency plans are being developed related to these critical business
partners to reduce, to the extent possible, the risk associated with disruption
of the Company's supply chain or critical services. Although the Company is
currently on schedule to complete its contingency plans by September 30, 1999,
management anticipates this effort will extend into the fourth quarter as
additional compliance information is obtained from critical business partners.
Based on work performed to date, the Company believes that the total cost of its
Year 2000 efforts will not be material to its results of operations, liquidity
or capital resources.
The preceding discussion contains forward-looking statements regarding the
Company's timetable for solving its year 2000 issues, costs to remediate and the
ultimate impact on its finances, which involve a number of risks and
uncertainties. The potential risks and uncertainties that could cause actual
results to differ materially include: the continuing availability of key
information technology personnel and consultants, the ability of third parties
to complete their own year 2000 remediations on time, unforeseen responses by
the public to the perceived situation and, if necessary, the ability of the
Company to identify and implement contingency plans.
The European Union ("EU") banana regulations, which impose quotas and
tariffs on bananas, remained in full effect during the first half of 1999. On
April 6, 1999, the World Trade Organization ("WTO") ruled that the United States
could impose tariffs on up to $191 million of EU exports. The EU has responded
by stating that it will propose changes to its rules on banana imports. The net
impact of the WTO ruling and future changes to EU import regulations on the
Company's future results of operations is not determinable at this time.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting
for Derivative Instruments and Hedging Activities." In June 1999, the FASB
issued Statement of Financial Accounting Standards No. 137 ("SFAS 137"),
"Accounting for Derivative Instruments and Hedging Activities--Deferral of the
Effective Date of FASB Statement No. 133," which delayed the effective date of
SFAS 133 by one year. The Company is assessing the impact of accounting for
derivative instruments in accordance with SFAS 133. The Company's derivative
transactions are currently limited to hedging of certain foreign currency
denominated purchase commitments. Therefore, adoption of SFAS 133 is not
expected to have a material impact on the Company's financial condition or
results of operations.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash flow provided by operating activities decreased to $81 million for the
first half of 1999 from $106 million for the same period of 1998. The decrease
was primarily due to lower earnings as a result of weak second-quarter pricing
in the banana business. In addition, working capital requirements increased as
product inventory levels in the processed pineapple business began to recover
from drought conditions experienced in prior years. During the second quarter of
1999, the Company received a refund from the Internal Revenue Service of $15
million related to the partial settlement of certain disputed items from prior
years' audits. During the first quarter of 1998, the Company made a payment of
$17 million to the Internal Revenue Service related to disputed items from prior
years' audits.
Capital expenditures of $56 million for the first half of 1999 were for the
acquisition and improvement of productive assets, which included $12 million for
the replacement or capitalizable repair of assets destroyed or damaged by
Hurricane Mitch.
During the first half of 1999, the Company increased its ownership in its
Honduran beverage business and acquired banana production operations in South
America, which totaled $19 million.
In February 1999, the Company increased the number of common shares
authorized under its repurchase program to 8.3 million shares. During January
and February 1999, the Company repurchased 2,271,000 of its common shares for
$68 million, which was funded by debt. Approximately 4.5 million shares remain
authorized for repurchase under the Company's stock repurchase program after
these transactions.
As of June 19, 1999 the Company had $65 million outstanding under its $400
million, 5-year revolving credit facility. In addition, the Company had
borrowings outstanding under uncommitted lines of credit totaling $78 million.
The Company's total debt increased to $1.22 billion as of June 19, 1999 from
$1.15 billion at the end of 1998 primarily to fund repurchases of the Company's
common shares during the first quarter of 1999, which also decreased paid-in
capital. As a result, the Company's net debt to net debt and equity ratio
increased slightly from 64% at January 2, 1999 to 65% as of June 19, 1999.
This filing contains forward-looking statements based on current
expectations that involve a number of risks and uncertainties. The potential
risks and uncertainties that could cause the Company's actual results to differ
materially from those expressed or implied herein include weather-related
phenomena; market responses to industry volume pressures; economic crises in
developing countries; quotas, tariffs and other governmental actions; changes in
currency exchange rates; product supply and pricing; and computer conversion and
Year 2000 issues.
12
<PAGE>
PART II.
OTHER INFORMATION
DOLE FOOD COMPANY, INC.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Dole Food Company, Inc. held its Annual Meeting of Stockholders (the
"Meeting") on May 13, 1999, at which the Company's stockholders: (1) elected the
nominated slate of seven directors, each to serve until the next meeting and
until his or her successor has been duly elected and qualified: Elaine L. Chao,
Mike Curb, David A. DeLorenzo, Richard M. Ferry, James F. Gary, Zoltan Merszei
and David H. Murdock, and (2) elected Arthur Andersen LLP as the Company's
independent public accountants and auditors for the 1999 fiscal year.
Holders of record of the Company's common stock as of March 30, 1999 were
entitled to vote at the Meeting. On March 30, 1999, there were 57,048,894 shares
of common stock outstanding and entitled to vote and 52,428,271 of such shares
were represented at the Meeting. Of the shares cast, each of the directors
received at least 99.3% in favor of his or her election. The shares cast for
each director were as follows: Elaine L. Chao: 52,076,964 for and 351,307
withheld; Mike Curb: 52,092,310 for and 335,961 withheld; David A. DeLorenzo:
52,099,165 for and 329,106 withheld; Richard M. Ferry: 52,103,815 for and
324,456 withheld; James F. Gary: 52,082,349 for and 345,922 withheld; Zoltan
Merszei: 52,082,384 for and 345,887 withheld; and David H. Murdock: 52,074,401
for and 353,870 withheld. With respect to the election of Arthur Andersen LLP,
the shares cast were 52,318,639 for, 46,227 shares against and 63,405 shares in
abstention.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ------
<C> <S>
27 Financial data schedule
</TABLE>
(B) No reports on Form 8-K were filed during the quarter ended June 19, 1999
13
<PAGE>
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.
<TABLE>
<S> <C> <C>
DOLE FOOD COMPANY, INC.
REGISTRANT
By: /s/ JAMES A. DYKSTRA
-----------------------------------------
James A. Dykstra
CONTROLLER AND
August 3, 1999 CHIEF ACCOUNTING OFFICER
</TABLE>
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JAN-01-2000<F1>
<PERIOD-START> JAN-03-1999<F1>
<PERIOD-END> JUN-19-1999<F1>
<CASH> 65,053
<SECURITIES> 0
<RECEIVABLES> 748,996
<ALLOWANCES> 95,885
<INVENTORY> 485,338
<CURRENT-ASSETS> 1,252,280
<PP&E> 1,870,235
<DEPRECIATION> 765,445
<TOTAL-ASSETS> 2,999,344
<CURRENT-LIABILITIES> 820,346
<BONDS> 1,194,854
0
0
<COMMON> 317,693
<OTHER-SE> 293,979
<TOTAL-LIABILITY-AND-EQUITY> 2,999,344
<SALES> 2,504,991
<TOTAL-REVENUES> 2,504,991
<CGS> 2,161,084
<TOTAL-COSTS> 2,161,084
<OTHER-EXPENSES> 191,999
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,834
<INCOME-PRETAX> 109,074
<INCOME-TAX> 24,000
<INCOME-CONTINUING> 85,074
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 85,074
<EPS-BASIC> 1.48<F2>
<EPS-DILUTED> 1.48<F3>
<FN>
<F1>THE COMPANY'S FISCAL YEAR ENDS ON THE SATURDAY CLOSEST TO DECEMBER 31. FISCAL
YEAR 1999 ENDS JANUARY 1, 2000 AND INCLUDES 52 WEEKS. ALL QUARTERS INCLUDE 12
WEEKS, EXCEPT FOR 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>
