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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
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/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE FISCAL YEAR ENDED JANUARY 2, 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
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DOLE FOOD COMPANY, INC.
(Exact Name of Registrant as specified in its charter)
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HAWAII 99-0035300
(State or other (IRS Employer Identification No.)
jurisdiction of
incorporation or
organization)
31365 OAK CREST DRIVE, WESTLAKE VILLAGE, CALIFORNIA 91361
(Address of principal executive offices)
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Registrant's telephone number, including area code: (818) 879-6600
Securities registered pursuant to Section 12(b) of the Act:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, No Par Value New York Stock Exchange Pacific Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark whether registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. /X/
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 18, 1999 was approximately $1,350,721,674.
The number of shares of Common Stock outstanding as of March 18, 1999 was
57,048,894.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's 1998 Annual Report to Stockholders for the year
ended January 2, 1999 are incorporated by reference into Parts I, II and IV.
Portions of the registrant's definitive Proxy Statement for its 1999 Annual
Meeting of Stockholders are incorporated by reference into Part III.
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DOLE FOOD COMPANY, INC.
FORM 10-K
FISCAL YEAR ENDED JANUARY 2, 1999
TABLE OF CONTENTS
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ITEM NUMBER
IN FORM 10-K PAGE
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PART I
1. Business................................................................................... 3
2. Properties................................................................................. 8
3. Legal Proceedings.......................................................................... 11
4. Submission of Matters to a Vote of Security Holders; Executive Officers of the
Registrant............................................................................... 11
PART II
5. Market for the Registrant's Common Equity and Related Stockholder Matters.................. 13
6. Selected Financial Data.................................................................... 13
7. Management's Discussion and Analysis of Financial Condition and Results of Operations...... 13
8. Financial Statements and Supplementary Data................................................ 15
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....... 15
PART III
10. Directors and Executive Officers of the Registrant......................................... 15
11. Executive Compensation..................................................................... 15
12. Security Ownership of Certain Beneficial Owners and Management............................. 16
13. Certain Relationships and Related Transactions............................................. 16
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................ 16
(a) 1. Index to Financial Statements.......................................................... 16
2. Index to Financial Statement Schedules................................................. 16
3. Exhibits............................................................................... 17
(b) Reports on Form 8-K........................................................................ 18
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Signatures........................................................................ 19
Financial Statements and Financial Statement Schedules............................ F-1-F-2
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PART I
ITEM 1. BUSINESS
Dole Food Company, Inc. was founded in Hawaii in 1851 and was incorporated
under the laws of Hawaii in 1894. Unless the context otherwise requires, Dole
Food Company, Inc. and its consolidated subsidiaries are referred to herein as
the "Company" and "Dole".
The Company's principal executive offices are located at 31365 Oak Crest
Drive, Westlake Village, California 91361, telephone (818) 879-6600. At January
2, 1999, the Company had approximately 53,500 full-time employees worldwide.
Dole Food Company is the largest producer of fresh fruits, vegetables and
flowers in the world.
The Company's operations are described below. For detailed financial
information with respect to the Company's business and its operations, see the
Company's Consolidated Financial Statements and the related Notes to
Consolidated Financial Statements, which are included in its 1998 Annual Report
for the fiscal year ended January 2, 1999 (the "Dole Annual Report") and
incorporated by reference in Part II of this report.
GENERAL
Dole is engaged in the worldwide sourcing, growing, processing, distributing
and marketing of high quality, fresh produce and fresh flowers. Dole provides
retail and institutional customers with products which are produced and improved
through research, agricultural assistance and advanced harvesting, processing,
packing, cooling, shipping and marketing techniques and which bear the
DOLE-Registered Trademark- trademarks. Dole is also a leading producer, marketer
and distributor of fresh-cut flowers.
Dole is one of the world's largest producers of bananas and pineapples. Dole
is also a major marketer of citrus and table grapes worldwide and an industry
leader in canned pineapple products, iceberg lettuce, celery, cauliflower and
broccoli and in fresh-cut salads and pre-cut vegetables.
Dole's products are produced both directly on Company-owned or leased land
and through associated producer and independent grower arrangements pursuant to
which Dole provides varying degrees of farming, harvesting, packing, storing,
shipping, stevedoring and marketing services, as well as financing through
advances to growers of certain products. Fresh fruit and vegetable products,
almonds and processed pineapple products and fresh flowers are, for the most
part, packed and/or processed directly by Dole.
Dole utilizes product quality, brand recognition, competitive pricing,
effective customer service and consumer marketing programs to enhance its
position within the highly competitive food industry. Consumer and institutional
recognition of the DOLE-Registered Trademark- trademarks and related brands and
the association of these brands with high quality food products contribute
significantly to Dole's ability to compete in the markets for fresh fruit and
vegetables, packaged foods and dried fruit, nuts and pineapple juice and juice
blends. The Company owns these trademarks in the United States, Canada and in
other countries in which it conducts business and regards them as important
corporate assets with high recognition and acceptance.
PRODUCTS
Dole sources, distributes and markets fresh fruit products, including
bananas, pineapples, table grapes, apples, pears, plums, oranges, grapefruit,
lemons, mangoes, kiwi, tangelos, melons, cherries, strawberries, raspberries and
other deciduous, tropical and citrus fruits.
Dole sources, harvests, cools, distributes and markets more than 20
different types of fresh vegetable products, including iceberg lettuce, red and
green leaf lettuce, romaine lettuce, butter lettuce, celery, cauliflower,
broccoli, carrots, brussels sprouts, spinach, red and green onions, asparagus,
snow peas and artichokes. Dole also markets value-added products such as iceberg
lettuce-based salad mixes, specialty
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lettuce salads, complete salad kits which include dressing and condiments,
blends of specialty lettuces, red cabbage, peeled mini-carrots, shredded
carrots, shredded red cabbage and coleslaw.
Dole sources, processes and markets almonds and markets raisins, prunes and
dates.
Dole's fresh fruit and vegetable products and its consumer dried fruit and
nut products are marketed under the DOLE-Registered Trademark- brand, under
other brand names owned by the Company, and, in limited cases, under private
labels.
Dole produces and markets processed food products, including sliced, chunk,
tidbit and crushed pineapple, tropical fruit salad, mandarin oranges and
pineapple juice in cans, and tropical fruits, pineapple chunks, mixed fruit and
sliced peaches in single-serve plastic bowls.
Dole sources, harvests, distributes and markets more than 35 kinds of fresh
flowers, including roses, spray roses, carnations, miniature carnations, pompons
and standard chrysanthemums.
Dole's products are marketed through more than 50 direct selling offices in
North America, approximately 50 in Europe and 12 in Asia.
DOLE NORTH AMERICA
DOLE NORTH AMERICA distributes and markets DOLE-Registered Trademark- fresh
fruits and vegetables, and processed food products, including processed
pineapple, canned pineapple juices and pineapple juice blend beverages, almonds,
raisins, prunes and dates, in North America.
Dole markets bananas and pineapples grown in Latin America, table grapes,
apples and pears grown in the United States and Chile, melons grown in Costa
Rica and Honduras and citrus fruit grown in the United States, Mexico, South
Africa and Spain, as well as other deciduous and tropical fruit grown in the
United States, Latin America and Mexico. Fresh pineapple destined for North
America is grown by Dole in Hawaii and in Costa Rica and Honduras. These
products are sold primarily to retail chains and wholesalers, which in turn
resell or distribute them to retail food stores.
Fresh vegetables, as well as packaged salads and other value-added products,
marketed by Dole are generally grown under joint growing arrangements with
independent growers in California and Arizona and northern and central Mexico.
The vegetables are generally field packed and transported to Dole's central
cooling and distribution facilities. The products are sold to customers in North
America and, to a lesser extent, Asia and Western Europe.
Almonds are sourced from independent growers and, to a lesser extent,
produced by partnerships managed by Dole North America. They are sold in bulk to
cereal, confectionery and other food processors and to a lesser extent, packaged
for the retail consumer. They are marketed overseas, primarily in Western Europe
and Asia, and domestically. Retail packs of raisins, prunes and dates are
processed and packed through co-production arrangements.
Dole has an agreement with Nestle USA Food Group, Inc., pursuant to which
Dole has licensed to Nestle its rights to market and manufacture processed
products in key segments of the frozen novelty business in the United States and
Canada, including FRUIT 'N JUICE-Registered Trademark- and SORBET 'N
CREAM-Registered Trademark- bars. Dole also markets DOLE-Registered Trademark-
canned pineapple juice and pineapple juice blend beverages.
DOLEWHIP-Registered Trademark-, a soft-serve, non-dairy dessert, is manufactured
and marketed by Precision Food under license from Dole. In connection with the
sale of the majority of its juice business to Tropicana Products, Inc. in May of
1995, Dole granted to Tropicana a royalty-free license to use certain
trademarks.
Dole is the largest importer and marketer of fresh-cut flowers in the United
States. Flowers grown in Colombia, Ecuador and Mexico are imported and marketed
by Dole primarily to wholesale florists and supermarkets.
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DOLE LATIN AMERICA
DOLE LATIN AMERICA grows and sources from independent growers and transports
bananas grown in Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Mexico,
Nicaragua and Venezuela for markets principally in North America, Europe,
Russia, the Mediterranean and selected Asian markets.
Fresh pineapples destined for the North American and Western European
markets are grown by Dole Latin America on plantations in Costa Rica and
Honduras and sourced from independent producers in Costa Rica.
Dole sources table grapes, apples, pears and other deciduous fruit grown in
Chile, melons grown in Brazil, Costa Rica and Honduras, citrus fruit grown in
Honduras, and mangoes from Brazil, Costa Rica, Ecuador, Guatemala, Honduras,
Mexico and Peru for markets in North America and Western Europe.
Dole conducts other food and beverage operations in Honduras. It owns an
approximately 93% interest in, and operates, a beer and soft drink bottling
operation, a bottle crown plant, a plastic injection molding facility used
primarily for the manufacture of beer and soft drink plastic cases, a sugar mill
and sugar cane plantations, as well as a majority interest in an edible oils
refinery, a laundry soap factory, a palm oil extraction operation and a palm oil
plantation. The soft drink bottling operation, which sells its products
primarily in Honduras, competes against other local bottlers.
Dole produces value-added vegetable products, such as iceberg lettuce-based
salad mixes, specialty lettuce salads, complete Caesar salads, broccoli florets,
cauliflower florets and other products for markets in Latin America.
Dole is the largest grower of fresh-cut flowers in Latin America.
DOLE ASIA
DOLE ASIA sources bananas, fresh pineapples, asparagus, mangoes, papaya and
other fruits from the Philippines and transports them to markets principally in
Asia and the Middle East. Pineapples used for processed products distributed
around the world are sourced from a large Company operated farm and independent
growers in the Philippines and primarily from independent growers in Thailand.
Pineapples are processed at Dole's canneries primarily in the Philippines and
Thailand.
Dole distributes domestic and imported fruits and vegetables, including
asparagus, broccoli, tomatoes, cabbage, carrots, citrus fruit, lettuce, cherry
tomatoes, melons and radishes, and pre-cut fruits, vegetables and salads, in
Japan. Through joint ventures with local distributors Dole operates nine
distribution and fresh-cut fruit and vegetable centers in Japan.
Snow Dole Co., Ltd., a joint venture of Dole and Snow Brand Milk Products
Co., Ltd. of Japan, processes and distributes frozen desserts, canned pineapple
and other processed foods in Japan. Dole granted to Snow Brand Milk Products a
royalty-free license to use certain trademarks, including
DOLE-Registered Trademark-, in Snow's juice business.
Dole also produces anthuriums and other tropical flowers in the Philippines
for export to Japan.
DOLE EUROPE
DOLE EUROPE is a major importer of bananas and other fresh fruits, dried
fruits, nuts and canned fruits in Europe and the Near East. Dole sources bananas
from the Cameroons, Guadalupe, the Ivory Coast and Martinique.
Dole operates regional banana ripening facilities in France and Spain. It is
a partner in the largest French banana and pineapple producer and is a minority
partner in a banana export company in Guadeloupe. The Company is a minority
partner with the Jamaican Producer Group (the largest banana producer in
Jamaica) in the Jamaican Producers Fruit Distributors Ltd. in the United
Kingdom. This
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banana ripening and fruit distribution company distributes fresh fruits and
bananas under the DOLE-Registered Trademark- brand, as well as Jamaican bananas,
fruits and vegetables direct to retail stores in the United Kingdom.
Dole is the majority partner, with the Livorno Stevedore Company C.I.L.P.,
in a major port discharge and distribution facility in the Italian port of
Livorno. Dole operates three banana ripening facilities and fruit and vegetable
distribution facilities in Italy. Dole operates a major fresh fruit and
vegetable distributor and banana ripener in northern Germany. Dole owns and
operates a banana ripening and fresh fruit distribution facility near Istanbul,
Turkey.
Dole owns 60% of Saba Trading AB in Sweden. Saba is Scandinavia's leading
importer and distributer of fruit, vegetables and flowers, with imports from
more than 60 countries. Saba has a wholly owned subsidiary in the Netherlands
which is one of Europe's largest exotic fruit import and distribution companies.
Dole Europe is a partner in a Norwegian joint venture which owns and
operates a cut-salad plant which supplies the Norwegian market.
Dole owns and operates Pascual Hermanos, a major Spanish citrus and
vegetable producer and exporter.
Dole is a major exporter of deciduous and citrus fruit from South Africa.
Dole owns and operates a European dried fruit and nut business which sources
products from around the world for processing and packaging in France and
distribution in France and to other European markets.
RESEARCH AND DEVELOPMENT
Dole's research and development programs concentrate on improvements in
productivity, food safety and product quality of existing products and the
development of new value-added products, as well as agricultural research and
packaging design. Agricultural research is directed toward improving product
yields and product quality by examining and improving agricultural practices in
all phases of production (such as development of specifically adapted plant
varieties, land preparation, fertilization, cultural practices, pest and disease
control, and post-harvesting, packing, and shipping procedures), and includes
on-site technical services and the implementation and monitoring of recommended
agricultural practices. Research efforts are also directed towards integrated
pest management and biological pest control. Specialized machinery is also
developed for various phases of agricultural production and packaging which
reduces labor, improves productivity and efficiency and increases product
quality. Agricultural research is conducted at field facilities primarily in
California, Hawaii, Latin America and Asia.
WORLDWIDE OPERATIONS
Dole has significant owned and operated food sourcing and related operations
in Chile, Colombia, Costa Rica, Ecuador, Guatemala, Honduras, the Philippines,
Thailand and the United States. Dole also sources food products in Algeria,
Argentina, Australia, Brazil, Cameroon, Greece, Italy, Ivory Coast, Mexico, New
Zealand, Nicaragua, Peru, South Africa, Spain, Syria, Tunisia, Turkey and
Venezuela. Significant volumes of Dole's fresh fruit and packaged products are
marketed in Canada, Western Europe, Japan and the United States, with lesser
volumes marketed in Australia, Hong Kong, New Zealand, Russia, South Korea, and
certain countries in Asia, Eastern Europe, Scandinavia, the Middle East and
Central and South America.
FORWARD LOOKING STATEMENTS
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
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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.
TRADE ISSUES
Dole's foreign operations are subject to risks of expropriation, civil
disturbances, political unrest, increases in taxes and other restrictive
governmental policies, such as import quotas. Loss of one or more of its foreign
operations could have a material adverse effect on Dole's operating results.
Dole attempts to maintain a cordial working relationship in each country where
it operates. Because Dole's operations are a significant factor in the economies
of certain countries, its activities are subject to intense public and
governmental scrutiny, and may be affected by changes in the status of the host
economies, the makeup of the government or even public opinion in a particular
country.
The European Union ("EU") has changed the EU banana regime, commencing
January 1999 due to a ruling from the World Trade Organization ("WTO")
subsequent to complaints from the United States, Ecuador, Guatemala, Honduras,
Mexico and Panama. There will continue to be a Latin American Quota and an ACP
Quota (i.e., former European colonies in Africa and the Carribean) as well as
licenses and tariffs on Latin American production. The new regime is, on the
date of this report, still being challenged by the United States and Latin
American banana producers and is expected to be subject to new WTO panel
findings in 1999. Trade negotiations and discussions continue between the EU,
the United States and the individual banana exporting countries. These trade
negotiations could lead to further changes in the regulations governing banana
exports to the EU. The net impact of these changing regulations on Dole's future
results of operations is not determinable at this time.
Exports of Dole's products to certain countries, particularly China, Japan,
Russia, South Korea, Taiwan and the Middle East, are subject to various
restrictions which may be increased or reduced in response to international
political pressures, thus affecting Dole's ability to compete in these markets.
The Company distributes its products in more than 90 countries throughout
the world. Dole's international sales are usually transacted in U.S. dollars and
major European and Asian currencies, while certain costs are incurred in
currencies different from those that are received from the sale of products.
Results of operations may be affected by fluctuations in currency exchange rates
in both the sourcing and selling locations.
ENVIRONMENTAL AND REGULATORY MATTERS
Dole's agricultural operations are subject to a broad range of evolving
environmental laws and regulations in each country in which it operates. In the
United States, these laws and regulations include the Food Quality Protection
Act of 1996, the Clean Air Act, the Clean Water Act, the Resource Conservation
and Recovery Act, the Federal Insecticide, Fungicide and Rodenticide Act and the
Comprehensive Environmental Response, Compensation and Liability Act.
Compliance with these foreign and domestic laws and related regulations is
an ongoing process which is not currently expected to have a material effect on
Dole's capital expenditures, earnings or competitive position. Environmental
concerns are, however, inherent in most major agricultural operations, including
those conducted by Dole, and there can be no assurance that the cost of
compliance with environmental laws and regulations will not be material.
Moreover, it is possible that future developments, such as increasingly strict
environmental laws and enforcement policies thereunder, and further restrictions
on the use of agricultural chemicals could result in increased compliance costs.
Dole's food operations are also subject to regulations enforced by, among
others, the U.S. Food and Drug Administration and state, local and foreign
equivalents and to inspection by the U.S. Department of
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Agriculture and other federal, state, local and foreign environmental, health
and safety authorities. The U.S. Food and Drug Administration enforces statutory
standards regarding the labeling and safety of food products, establishes
ingredients and manufacturing procedures for certain foods, establishes
standards of identity for foods and determines the safety of food substances in
the United States. Similar functions are performed by state, local and foreign
governmental entities with respect to food products produced or distributed in
their respective jurisdictions.
Portions of the Company's fresh fruit and vegetable farm properties are
irrigated by surface water supplied by local government agencies using
facilities financed by federal or state agencies, as well as from underground
sources. Water received through federal facilities is subject to acreage
limitations under the 1982 Reclamation Reform Act. The quantity and quality of
these water supplies varies depending on weather conditions and government
regulations. The Company believes that under normal conditions these water
supplies are adequate for current production needs.
COMPETITION AND OTHER FACTORS
The markets for all of Dole's products are highly competitive. Dole sources
products of high quality and seeks to distribute them in worldwide markets on a
timely basis. Dole's competitors in the fresh fruit business include a limited
number of large international food companies, as well as a large number of
smaller independent food companies, grower cooperatives and foreign
government-sponsored producers which have intensified competition in recent
years. With respect to vegetables, a limited number of grower-shippers in the
United States and Mexico supply a significant portion of the domestic fresh
vegetable market. However, numerous smaller independent distributors also
compete with Dole in the market for fresh vegetables. With respect to processed
pineapple, Dole competes against a few large companies, as well as a substantial
number of small foreign competitors and independent canners. Dole's citrus and
dried fruit and nut products compete in North America primarily against large
grower processing and marketing cooperatives with strong brand recognition.
Dole's earnings are sensitive to fluctuations in the volatile market prices
for its products. Excess supplies often cause severe price competition. Growing
conditions in various parts of the world, particularly weather conditions such
as floods, droughts and freezes, and diseases and pests are primary factors
affecting market prices because of their influence on supply and quality of
product. Other factors affecting Dole's operations include the seasonality of
its supplies, the ability to process products during critical harvest periods,
the timing and effects of ripening, the degree of perishability, the
effectiveness of worldwide distribution systems, the terms of various federal
and state marketing orders, total worldwide industry volumes, the seasonality of
consumer demand, foreign currency exchange fluctuations, foreign importation
restrictions and foreign political risks.
ITEM 2. PROPERTIES
The Company maintains executive offices in Westlake Village, California and
auxiliary executive offices in Los Angeles, California, both of which are leased
from third parties. Dole's various divisions also maintain headquarters offices
in Westlake Village and Bakersfield, California, which are leased from third
parties, and in Orland and Salinas, California, Miami, Florida and Wenatchee,
Washington, which are owned by the Company. The Company owns its Latin American
regional headquarters building in Costa Rica, as well as offices in Colombia and
Honduras. Dole Europe maintains its European headquarters in Paris, France and
regional offices in Hamburg, Germany, Brussels, Belgium, Milan, Italy and
Valencia, Spain, which are leased from third parties. It owns its offices in
Aguilas and Alemenara, Spain. Dole Latin America maintains regional offices in
Chile and Ecuador which are leased from third parties. Dole Asia maintains
offices in Dubai, Japan, the People's Republic of China, the Philippines and
Thailand, which are leased from third parties. The inability to renew any of the
above office leases by the Company would not have a material adverse effect on
the Company's operating results. The Company and each of its
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subsidiaries believe that their property and equipment are generally well
maintained, in good operating condition and adequate for their present needs.
The following is a description of the Company's significant properties.
DOLE NORTH AMERICA
Dole's Hawaii pineapple, papaya and coffee operations for the fresh produce
market are located on the island of Oahu and total approximately 8,000 acres,
6,500 of which are owned by the Company and the remainder of which are leased.
Dole produces citrus on approximately 10,000 acres in the San Joaquin Valley
of California owned directly or through partially-owned agricultural
partnerships and on substantial additional acreage under management
arrangements, as well as through independent growing arrangements. Dole, through
joint ventures, also provides care and management services for approximately
17,000 citrus acres in Florida. Citrus is packed in six Company-owned packing
houses--four in California and two in Florida. Two of the California citrus
packing houses will not operate in 1999 due to the December 1998 citrus freeze.
Domestic table grapes are sourced from approximately 3,500 acres on three
Company-owned vineyards in the San Joaquin Valley. Domestic table grapes are
cooled in two Company-owned facilities in the San Joaquin Valley. Dole produces
wine grapes on approximately 400 acres and stone fruit on approximately 800
acres of Company-owned property in the San Joaquin Valley.
Dole produces apples and pears directly from four Company-owned orchards on
approximately 1,250 productive acres in Wenatchee and Chelan, Washington as well
as through independent growing arrangements. The Company also owns apple and
pear storage, processing and packing facilities in Wenatchee, Chelan and
Pateros, Washington.
The Company owns approximately 1,400 acres of farmland in California and
Arizona, and leases approximately 10,000 acres of farmland in California and
another 6,000 acres in Arizona in connection with Dole's vegetable operations.
The majority of this acreage is farmed under joint growing arrangements with
independent growers, while the remainder is farmed by Dole. The Company owns
cooling, packing and shipping facilities in Yuma, Arizona and the following
California cities: Marina, Holtville, Guadalupe, Gonzales and Huron.
Additionally, the Company has partnership interests in facilities in Yuma,
Arizona, Salinas, California and Mexico, and leases facilities in Oxnard,
California. The Company owns and operates state-of-the-art, value-added
processing plants in Yuma, Arizona, Soledad, California and Springfield, Ohio.
Dole produces almonds from approximately 850 acres and pistachios from
approximately 3,000 acres of orchards in the San Joaquin Valley, owned or leased
by the Company, or by agricultural partnerships in which the Company has an
interest.
The Company owns and operates one almond processing and packing plant and
two almond receiving and storage facilities, all of which are located in the San
Joaquin and Sacramento Valleys.
The Company's fresh-cut flower group operates three cooling and distribution
facilities in the Miami area. Each of these facilities is occupied by the
fresh-cut flower group pursuant to leases.
DOLE LATIN AMERICA
Dole produces bananas directly from Company-owned plantations in Costa Rica,
Colombia, Ecuador, Honduras and Venezuela as well as through associated
producers or independent growing arrangements in those countries and in
Guatemala and Nicaragua. The Company owns approximately 28,500 acres in Costa
Rica, 1,730 acres in Ecuador, 18,420 acres in Honduras and 360 acres in
Venezuela. Dole holds a 60% interest in a company which produces bananas on
approximately 7,200 acres and owns and operates 2 corrugated box plants in
Colombia. Dole owns a 50% interest in a Guatemala banana producer which
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owns or controls approximately 9,600 acres in Guatemala. The Company's Honduran
plantations sustained damage in varying degrees of severity as a result of
Hurricane Mitch and will require significant rehabilitation. As of the date of
this report, the Company has not started to rehabilitate selected parts of the
affected areas in Honduras and Guatemala.
Dole also grows pineapple on approximately 7,350 acres of owned land in
Honduras and 875 acres in Costa Rica, primarily for the fresh produce market,
and owns a juice concentrate plant in Honduras for pineapple and citrus.
Dole produces citrus on approximately 1,030 acres of Company-owned land and
operates a grapefruit packing house in Honduras. Coconuts are produced on
approximately 1,230 acres of Company-owned land in Honduras, and melons are
produced on approximately 215 acres in Honduras and 20 acres in Costa Rica.
Dole grows grapes, stone fruit, kiwi and pears on approximately 4,075
Company-owned acres in Chile. Dole owns and operates 11 packing and cold storage
facilities, a corrugated box plant and a wooden grape box plant in Chile.
Dole operates Company-owned corrugated box plants in Chile, Colombia, Costa
Rica, Ecuador and Honduras and a value-added vegetable plant in Costa Rica.
The Company's operations in Honduras include an approximately 93% interest
in a beer and soft drink bottling operation, a bottle crown plant, a plastic
injection molding facility used primarily for the manufacture of beer and soft
drink plastic cases and a sugar mill, as well as a majority interest in an
edible oils refinery, a laundry soap factory, a palm oil extraction operation,
approximately 10,000 acres of sugar plantation and approximately 3,800 acres of
palm oil plantation. These assets sustained damage in varying degrees of
severity due to Hurricane Mitch.
Dole operates a fleet of nine refrigerated containerships, of which four are
owned, three are bareboat chartered and two are long-term chartered. In
addition, Dole operates 23 breakbulk refrigerated ships, of which two are
Company-owned, nine are bareboat chartered and 12 are long-term chartered. Dole
occasionally charters vessels for short periods on a time or voyage basis as and
when required. Howaldtswerke-Deutsch Werft is currently constructing for the
Company two hatchcoverless containerships, each with a capacity of 1,000
refrigerated containers. The Company also owns or leases approximately 10,600
refrigerated containers, 2,600 dry containers and 5,500 chassis and gensets.
Dole produces flowers on approximately 1,840 acres in Colombia, Ecuador and
Mexico. The Company owns and operates packing, cooling and bouquet making
facilities at each of its flower farms.
DOLE ASIA
Dole operates a pineapple plantation of approximately 24,000 leased acres in
the Philippines. Approximately 17,000 acres of the plantation are leased to Dole
by a cooperative of Dole employees that acquired the land pursuant to agrarian
reform law. Approximately 2,000 additional acres in the Philippines are farmed
pursuant to individual farm management contracts. A cannery, freezer, juice
concentrate plant, corrugated box plant and can manufacturing plant, each owned
by Dole, are located at or near the plantation.
Dole owns and operates a cannery, can manufacturing plant and juice
concentrate plant located in central Thailand and a second multi-fruit cannery
in southern Thailand. Through a subsidiary in Thailand controlled by Dole, Dole
grows pineapple on approximately 3,900 acres of leased land and purchases
additional supplies of pineapple in Thailand on the open market.
Dole operates nine distribution facilities in Japan through joint ventures
with local distributors. Two of the distribution centers are located in Tokyo.
Through independent growing arrangements, Dole sources products from over 1,200
Japanese farmers.
10
<PAGE>
Dole also sources bananas through associated producers or independent
growing arrangements in the Philippines. A plastic extruding plant and a box
forming plant, both owned by Dole, are located near the plantations. Dole Asia
is a minority partner in a joint venture which is developing approximately 7,500
acres of citrus orchards in southwestern China.
DOLE EUROPE
Dole owns twelve banana ripening and fruit distribution facilities in
France, seven in Spain, three in Italy and one in Germany. The Company has a
minority interest in a French company which owns a majority interest in banana
and pineapple plantations in Cameroon and the Ivory Coast and has banana
producing interests in the Ivory Coast. Dole owns a minority interest in a
banana ripening and fruit distribution company with five facilities in the
United Kingdom. Dole Europe is the majority owner in a port terminal and
distribution facility in Livorno, Italy. The Company owns a banana ripening and
fruit distribution facility near Istanbul, Turkey.
Dole owns and operates four citrus packing houses and three lettuce packing
houses in Spain. The Company also owns and operates approximately 360 acres of
greenhouses and grows lettuce, tomatoes and citrus fruit on approximately 3,500
acres in Spain. It owns its offices in Aguilas and Alemenara, Spain and leases
offices in Valencia, Spain.
Dole operates 13 distribution centers and nine banana ripening rooms in
Sweden and one port facility in Gothenburg, Sweden. Dole owns and operates one
distribution center in the Netherlands which specializes in the distribution of
exotic fruits throughout Europe.
In France, the Company owns a dried fruit and nut processing, packaging and
warehousing facility in Vitrolles, a date processing and packing plant in
Marseille and a prune processing and packaging plant in Agen.
ITEM 3. LEGAL PROCEEDINGS
In the Company's Form 10-Q for the quarter ended March 28, 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 plaintiffs' home countries are the more
appropriate forums for the claims. A dismissal motion is pending in one Texas
case, and one Louisiana case was remanded to state court. The dismissed cases
are on appeal. The DBCP manufacturers and Company competitors have reported that
they have settled with the majority of the Texas and Louisiana plaintiffs. The
Dow Chemical Company, a manufacturer of DBCP, has filed a lawsuit against a
Company subsidiary seeking indemnification for settlement 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
quarter ended January 2, 1999.
11
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
Below is a list of the names and ages of all executive officers of the
Company as of March 18, 1999 indicating their positions with the Company and
their principal occupations during the past five years. The current terms of the
executive officers will expire at the next organizational meeting of the
Company's Board of Directors or at such time as their successors are elected.
<TABLE>
<CAPTION>
POSITIONS WITH THE COMPANY AND SUBSIDIARIES
NAME AND AGE AND FIVE-YEAR EMPLOYMENT HISTORY
- ------------------------------------ --------- -----------------------------------------------------------------------
<S> <C> <C>
David H. Murdock.................... (75) Chairman of the Board, Chief Executive Officer and Director of the
Company since July 1985. Chairman of the Board, Chief Executive Officer
and Director of Castle & Cooke, Inc. since October 1995. Since June
1982, Chairman of the Board and Chief Executive Officer of Flexi-Van
Leasing, Inc., a Delaware corporation wholly-owned by Mr. Murdock. Sole
owner and developer of the Sherwood Country Club in Ventura County,
California, and numerous other real estate developments; also sole
stockholder of numerous corporations engaged in a variety of business
ventures and in the manufacture of textile-related products and
industrial and building products.
David A. DeLorenzo.................. (52) President and Chief Operating Officer of the Company since March 1996.
President of Dole Food Company--International from September 1993 to
March 1996. Executive Vice President of the Company from July 1990 to
March 1996. Director of the Company since February 1991. President of
Dole Fresh Fruit Company from September 1986 to June 1992.
Gregory L. Costley.................. (45) President of Dole North American Fruit since March 1996. President of
Dole Bakersfield from April 1994 to March 1996. President of Dole
Citrus from February 1992 to April 1994.
Lawrence A. Kern.................... (51) President of Dole Fresh Vegetables, Inc. since January 1993.
Peter M. Nolan...................... (56) President of Dole Packaged Foods Company since February 1995. Senior
Vice President, Sales and Marketing of Dole Packaged Foods from August
1994 to February 1995. Senior Vice President, Sales and Marketing for
Dole Fresh Fruit and Vegetables, North America Division, from October
1992 to August 1994.
John W. Tate........................ (48) Vice President and Chief Financial Officer of the Company since October
1997. Senior Vice President and Chief Financial Officer of Dole Europe
from June 1996 to October 1997. Senior Vice President and Chief
Financial Officer of Dole Fresh Vegetables from November 1994 to June
1996. Vice President, Finance and Administration of Dole Fresh
Vegetables from January 1993 to November 1994.
George R. Horne..................... (61) Vice President--Human Resources of Dole since February 1986. Vice
President of the Company since October 1982.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
POSITIONS WITH THE COMPANY AND SUBSIDIARIES
NAME AND AGE AND FIVE-YEAR EMPLOYMENT HISTORY
- ------------------------------------ --------- -----------------------------------------------------------------------
<S> <C> <C>
Patrick A. Nielson.................. (48) Vice President--International Legal and Regulatory Affairs of the
Company since October 1995. Vice President and General Counsel--Food
Operations of the Company from May 1994 to October 1995. General
Counsel--Food Operations of the Company from July 1991 to May 1994.
J. Brett Tibbitts................... (43) Vice President, Corporate General Counsel and Corporate Secretary of
the Company since October 1995. Vice President and Corporate General
Counsel of the Company from May 1994 to October 1995. General
Counsel--Corporate of the Company from June 1992 to May 1994.
Roberta Wieman...................... (54) Vice President of the Company since February 1995. Executive Assistant
to the Chairman of the Board and Chief Executive Officer from November
1991 to February 1995. Vice President and Corporate Secretary of Castle
& Cooke, Inc. since April 1996. President of Pacific Holding Company (a
sole proprietorship of Mr. Murdock) since January 1999 and Secretary
thereof since January 1992. Director of Flexi-Van Leasing, Inc. (which
is wholly-owned by Mr. Murdock) since August 1996 and Assistant
Secretary thereof for more than 5 years.
James A. Dykstra.................... (37) Controller and Chief Accounting Officer of the Company since October
1997. Chief Financial Officer of Dole Latin America from October 1995
to October 1997. Controller of Dole Latin America from August 1990 to
October 1995.
Beth Potillo........................ (39) Treasurer of the Company since November 1998. Assistant Treasurer of
the Company from July 1997 to November 1998. Manager of Corporate
Finance from July 1995 to July 1997. Manager of Financial Planning from
January 1995 to July 1995. Senior Analyst from December 1993 to January
1995.
</TABLE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock is traded on the New York and Pacific Stock
Exchanges. As of March 18, 1999, there were approximately 11,519 holders of
record of the Company's Common Stock. Additional information required by Item 5
is contained on pages 34, 35 and 38 of the Dole Annual Report. Such information
is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
There is hereby incorporated by reference the information appearing under
the caption "Results of Operations and Selected Financial Data" on page 43 of
the Dole Annual Report.
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
There is hereby incorporated by reference the information appearing under
the caption "Management's Discussion and Analysis of Results of Operations and
Financial Position" on pages 40, 41 and 42 of the Dole Annual Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a result of its global operating and financing activities, the Company is
exposed to certain market risks including changes in commodity pricing,
fluctuations in foreign currency exchange rates in both sourcing and selling
locations and fluctuations in interest rates. Commodity pricing exposure
includes weather phenomena and their effect on industry volumes, prices, product
quality and costs. The Company manages its exposure to commodity price risk
primarily through its regular operating activities. The use of derivative
financial instruments has been limited to certain foreign currency forward
contracts related to specific sales and firm purchase commitments. The Company
has not utilized financial instruments for trading or other speculative
purposes.
INTEREST RATE RISK
As a result of its regular borrowing activities, the Company's operating
results are exposed to fluctuations in interest rates, which it manages
primarily through its regular financing activities. The Company has limited
investments in cash equivalents and does not have investments in marketable
securities or debt instruments with original maturities greater than 90 days.
The Company has short-term and long-term debt with both fixed and variable
interest rates. Short-term debt is primarily comprised of secured and unsecured
notes payable to banks and bank lines of credit used to finance working capital
requirements. Long-term debt represents publicly-held unsecured notes and
debentures and certain notes payable to banks used to finance long-term
investments such as business acquisitions. Generally, the Company's short-term
debt bears interest at variable rates, while long-term debt bears interest at
fixed rates.
The following table provides information about the Company's financial
instruments that are sensitive to changes in interest rates. The table presents
principal cash flows and sinking fund requirements and related weighted-average
interest rates by expected maturity date. Weighted-average interest rates on
variable-rate debt are based on implied forward rates in the yield curve as of
January 2, 1999.
INTEREST RATE SENSITIVITY
LONG-TERM DEBT INSTRUMENTS
AS OF JANUARY 2, 1999
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE
------------------------------------------------------------------------------------------
TOTAL /
WEIGHTED- FAIR
IN MILLIONS 1999 2000 2001 2002 2003 THEREAFTER AVERAGE VALUE
- -------------------------- --------- --------- --------- --------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed-rate debt
Principal cash flows.... $ 3 $ 227 $ 10 $ 2 $ 301 $ 484 $ 1,027 $ 1,044
Average interest rate... 7.54% 6.77% 5.99% 8.59% 7.00% 6.93% 6.91%
Variable-rate debt
Principal cash flows.... 4 14 3 3 67 5 96 96
Average interest rate... 9.35% 4.65% 6.03% 6.00% 5.69% 5.74% 5.71%
</TABLE>
14
<PAGE>
FOREIGN CURRENCY RISK
The Company has production, processing, distribution and marketing
operations worldwide. Sales are primarily recorded in U.S. dollars, Japanese yen
and German marks. Product and operating costs are largely U.S. dollar-based.
While the Company has historically not attempted to hedge foreign currency
fluctuations, it occasionally enters into forward contracts to hedge specific
foreign currency denominated sales and firm purchase commitments. As of January
2, 1998, the Company's forward contracts were limited to the purchase of German
marks to facilitate payment for two German-made vessels currently under
construction. The Company's accounting policy for hedge instruments is disclosed
in Note 2 to the Consolidated Financial Statements.
The following table summarizes the Company's financial instruments and firm
purchase commitments that are sensitive to fluctuations in foreign currency
exchange rates. The summary excludes operating financial instruments, including
trade accounts and notes receivable, where the carrying value approximates fair
value.
FOREIGN CURRENCY EXCHANGE RATE SENSITIVITY
PURCHASE COMMITMENTS AND RELATED DERIVATIVES
AS OF JANUARY 2, 1999
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE
------------------------------------------------------------------------------------------
TOTAL /
WEIGHTED- FAIR
IN MILLIONS 1999 2000 2001 2002 2003 THEREAFTER AVERAGE VALUE
- -------------------------- --------- --------- --------- --------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Firm purchase commitments
Ship purchases (DEM).... 200 -- -- -- -- -- 200
USD equivalent.......... $ 119 -- -- -- -- -- $ 119 $ 119
Spot exchange rate -
USD/DEM (as of January
2, 1999).............. 1.68 -- -- -- -- -- 1.68
Related forward exchange
contracts (receive DEM /
pay USD)
Contracted amount
(DEM)................. 175 -- -- -- -- -- 175
USD equivalent.......... $ 98 -- -- -- -- -- $ 98 $ 106
Average exchange rate
USD/DEM............... 1.78 -- -- -- -- -- 1.78
</TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
There is hereby incorporated by reference the information appearing on pages
25 through 39 of the Dole Annual Report. See also Item 14 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in the Company's independent public accountants
for the 1998 and 1997 fiscal years nor have there been any disagreements with
the Company's independent public accountants on accounting principles or
practices for financial statement disclosures.
15
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There is hereby incorporated by reference the information regarding the
Company's directors to appear under the caption "Election of Directors" in the
Company's definitive proxy statement for its 1999 Annual Meeting of Stockholders
(the "1999 Proxy Statement"). See the list of the Company's executive officers
and related information under "Executive Officers of the Registrant", which is
set forth in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
There is hereby incorporated by reference the information to appear under
the captions "Remuneration of Directors" and "Compensation of Executive
Officers" in the 1999 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is hereby incorporated by reference the information with respect to
security ownership to appear under the captions "General Information",
"Ownership of Common Stock" in the 1999 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is hereby incorporated by reference the information to appear under
the caption "Certain Transactions" in the 1999 Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements:
The following consolidated financial statements are included in the Dole
Annual Report and are incorporated herein by reference:
<TABLE>
<CAPTION>
ANNUAL REPORT
PAGES
-------------
<S> <C>
Consolidated Statements of Income--fiscal years ended January 2, 1999, January
3, 1998 and December 28, 1996................................................ 25
Consolidated Balance Sheets--January 2, 1999 and January 3, 1998............... 26
Consolidated Statements of Cash Flow--fiscal years ended January 2, 1999,
January 3, 1998 and December 28, 1996........................................ 27
Notes to Consolidated Financial Statements..................................... 28 - 38
Report of Independent Public Accountants....................................... 39
2. Financial Statement Schedules:
</TABLE>
The following financial statement schedules are included herein:
<TABLE>
<CAPTION>
FORM 10-K
PAGES
-----------------
<S> <C>
Independent Public Accountants' Report on Financial Statement Schedule......... F-1
Valuation and Qualifying Accounts.............................................. F-2
</TABLE>
16
<PAGE>
All other schedules are omitted because they are not applicable, not
required or the information is included elsewhere in the financial statements or
notes thereto.
17
<PAGE>
3. Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <S>
3.1 The Restated Articles of Association of the Company, as amended through October 16, 1991.
3.2 By-Laws of the Company, as amended through March 25, 1993. Incorporated by reference to Exhibit 3.2 to
the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 1994, File No. 1-4455.
4.1 Credit Agreement dated as of July 29, 1996 among the Company, The Chase Manhattan Bank, as Administrative
Agent and Lender; Bank of America National Trust & Savings Association, as Syndication Agent and
Lender; Citibank, N.A., as Documentation Agent and Lender; and the financial institutions which are
Lenders thereunder, relating to the Company's $400 million revolving credit facility. Incorporated by
reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-QA for the quarter ended October
5, 1996, File No. 1-4455.
4.2 Officers' Certificate dated April 15, 1993 relating to $300 million of the Company's 7% notes due 2003.
4.3 Officers' Certificate dated July 15, 1993 relating to $225 million of the Company's 6.75% notes due 2000
and $175 million of the Company's 7.875% debentures due 2013.
4.4 Officers' Certificate dated October 6, 1998 relating to $300 million of the Company's 6 3/8% notes due
2005. Incorporated by reference to Exhibit 4.1 to the Company's current report on form 8-K, event date
July 15, 19 93, File No. 1-4455.
4.5 Indenture dated as of April 15, 1993 between the Company and Chase Manhattan Bank and Trust Company
(formerly Chemical Trust Company of California). Incorporated by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K, event date May 6, 1993, File No. 1-4455.
4.6 Indenture dated as of July 15, 1993 between the Company and Chase Manhattan Bank and Trust Company
(formerly Chemical Trust Company of California). Incorporated by reference to Exhibit 4 to the
Company's Current Report on Form 8-K, event date July 15, 1993, File No. 1-4455.
4.7 Dole Food Company, Inc. Master Retirement Savings Trust Agreement dated as of February 1, 1999 between
Dole Food Company, Inc. and The Northern Trust Company.
4.8 The Company agrees to furnish to the Securities and Exchange Commission upon request a copy of each
instrument with respect to issues of long-term debt of the Company and its subsidiaries, the authorized
principal amount of which does not exceed 10% of the consolidated assets of the Company and its
subsidiaries.
Executive Compensation Plans and Arrangements--Exhibits 10.1-10.8:
10.1 The Company's 1991 Stock Option and Award Plan, as amended through July 31, 1997. Incorporated by
reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
October 4, 1997, File No. 1-4455.
10.2 The Company's 1982 Stock Option and Award Plan, as amended through July 31, 1997. Incorporated by
reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
October 4, 1997, File No. 1-4455.
10.3 Dole Food Company, Inc. Executive Supplementary Retirement Plan (effective January 1, 1989), First
Restatement. Incorporated by reference to Exhibit 10(c) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 29, 1990, File No. 1-4455.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <S>
10.4 Dole Food Company, Inc. 1998 Combined Annual and Long Term Incentive Plan for Executive Officers.
Incorporated by reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 20, 1998, File No. 1-4455.
10.5 Dole Food Company, Inc. Executive Deferred Compensation Plan. Incorporated by reference to Exhibit 10.9
to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, File No.
1-4455.
10.6 The Company's 1996 Non-Employee Directors Deferred Stock and Cash Compensation Plan, as amended effective
October 9, 1998. Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended October 10, 1998, File No. 1-4455.
10.7 The Company's Stock Ownership Enhancement Program, as effective July 31, 1997. Incorporated by reference
to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended October 4,
1997, File No. 1-4455.
10.8 The Company's 1995 Non-Employee Directors Stock Option Plan. Incorporated by reference to Exhibit 4.1 to
the Company's Registration Statement on Form S-8 filed on June 28, 1995, Registration No. 33-60641.
13 Dole Food Company, Inc. 1998 Annual Report for the fiscal year ended January 2, 1999. (This Report is
furnished for information of the Commission and, except for those portions thereof which are expressly
incorporated by reference herein, is not "filed" as a part of this Annual Report on Form 10-K.)
21 Subsidiaries of Dole Food Company, Inc.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedules.
</TABLE>
(b) Reports on Form 8-K:
No current reports on Form 8-K were filed by the Company during the last
quarter of the year ended January 2, 1999.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C> <C>
March 31, 1999 DOLE FOOD COMPANY, INC.
REGISTRANT
By: /s/ DAVID H. MURDOCK
-----------------------------------------
David H. Murdock
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<C> <S> <C>
/s/ DAVID H. MURDOCK Chairman of the Board and
- ------------------------------ Chief Executive Officer March 31, 1999
David H. Murdock and Director
/s/ DAVID A. DELORENZO
- ------------------------------ President, Chief Operating March 31, 1999
David A. DeLorenzo Officer and Director
/s/ JOHN W. TATE
- ------------------------------ Chief Financial Officer March31, 1999
John W. Tate
Controller and Chief
/s/ JAMES A. DYKSTRA Accounting Officer
- ------------------------------ (Principal Accounting March 31, 1999
James A. Dykstra Officer)
/s/ ELAINE L. CHAO
- ------------------------------ Director March 31, 1999
Elaine L. Chao
/s/ MIKE CURB
- ------------------------------ Director March 31, 1999
Mike Curb
/s/ RICHARD M. FERRY
- ------------------------------ Director March 31, 1999
Richard M. Ferry
/s/ JAMES F. GARY
- ------------------------------ Director March 31, 199
James F. Gary
/s/ ZOLTAN MERSZEI
- ------------------------------ Director March 31, 199
Zoltan Merszei
</TABLE>
19
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS PAGE
- ----------- ---------
<C> <S> <C>
3.1 The Restated Articles of Association of the Company, as amended through October 16, 1991........
3.2 By-Laws of the Company, as amended through March 25, 1993. Incorporated by reference to Exhibit
3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 1994,
File No. 1-4455...............................................................................
4.1 Credit Agreement dated as of July 29, 1996 among the Company, The Chase Manhattan Bank, as
Administrative Agent and Lender; Bank of America National Trust & Savings Association, as
Syndication Agent and Lender; Citibank, N.A., as Documentation Agent and Lender; and the
financial institutions which are Lenders thereunder, relating to the Company's $400 million
revolving credit facility. Incorporated by reference to Exhibit 4.1 to the Company's Quarterly
Report on Form 10-QA for the quarter ended October 5, 1996, File No. 1-4455...................
4.2 Officers' Certificate dated April 15, 1993 relating to $300 million of the Company's 7% notes
due 2003......................................................................................
4.3 Officers' Certificate dated July 15, 1993 relating to $225 million of the Company's 6.75% notes
due 2000 and $175 million of the Company's 7.875% debentures due 2013.........................
4.4 Officers' Certificate dated October 6, 1998 relating to $300 million of the Company's 6 3/8%
notes due 2005. Incorporated by reference to Exhibit 4.1 to the Company's current report on
form 8-K, event date July 15, 19 93, File No. 1-4455..........................................
4.5 Indenture dated as of April 15, 1993 between the Company and Chase Manhattan Bank and Trust
Company (formerly Chemical Trust Company of California). Incorporated by reference to Exhibit
4.1 to the Company's Current Report on Form 8-K, event date May 6, 1993, File No. 1-4455......
4.6 Indenture dated as of July 15, 1993 between the Company and Chase Manhattan Bank and Trust
Company (formerly Chemical Trust Company of California). Incorporated by reference to Exhibit
4 to the Company's Current Report on Form 8-K, event date July 15, 1993, File No. 1-4455......
4.7 Dole Food Company, Inc. Master Retirement Savings Trust Agreement dated as of February 1, 1999
between Dole Food Company, Inc. and The Northern Trust Company................................
4.8 The Company agrees to furnish to the Securities and Exchange Commission upon request a copy of
each instrument with respect to issues of long-term debt of the Company and its subsidiaries,
the authorized principal amount of which does not exceed 10% of the consolidated assets of the
Company and its subsidiaries..................................................................
Executive Compensation Plans and Arrangements--Exhibits 10.1-10.8:
10.1 The Company's 1991 Stock Option and Award Plan, as amended through July 31, 1997. Incorporated
by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended October 4, 1997, File No. 1-4455................................................
10.2 The Company's 1982 Stock Option and Award Plan, as amended through July 31, 1997. Incorporated
by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended October 4, 1997, File No. 1-4455................................................
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS PAGE
- ----------- ---------
<C> <S> <C>
10.3 Dole Food Company, Inc. Executive Supplementary Retirement Plan (effective January 1, 1989),
First Restatement. Incorporated by reference to Exhibit 10(c) to the Company's Annual Report
on Form 10-K for the fiscal year ended December 29, 1990, File No. 1-4455.....................
10.4 Dole Food Company, Inc. 1998 Combined Annual and Long Term Incentive Plan for Executive
Officers. Incorporated by reference to Exhibit 10 to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended June 20, 1998, File No. 1-4455..............................
10.5 Dole Food Company, Inc. Executive Deferred Compensation Plan. Incorporated by reference to
Exhibit 10.9 to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1994, File No. 1-4455.....................................................................
10.6 The Company's 1996 Non-Employee Directors Deferred Stock and Cash Compensation Plan, as amended
effective October 1, 1997. Incorporated by reference to Exhibit 10.3 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended October 4, 1997, File No.
1-4455........................................................................................
10.7 The Company's Stock Ownership Enhancement Program, as effective July 31, 1997. Incorporated by
reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended October 4, 1997, File No. 1-4455................................................
10.8 The Company's 1995 Non-Employee Directors Stock Option Plan. Incorporated by reference to
Exhibit 4.1 to the Company's Report on Form S-8 filed on June 28, 1995, Registration No.
33-60641......................................................................................
13 Dole Food Company, Inc. 1997 Annual Report for the fiscal year ended January 3, 1997. (This
Report is furnished for information of the Commission and, except for those portions thereof
which are expressly incorporated by reference herein, is not "filed" as a part of this Annual
Report on Form 10-K.).........................................................................
21 Subsidiaries of Dole Food Company, Inc..........................................................
23 Consent of Arthur Andersen LLP..................................................................
27 Financial Data Schedules........................................................................
</TABLE>
21
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Shareholders and Board of Directors
of Dole Food Company, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in Dole Food Company, Inc.'s
annual report to shareholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated February 5, 1999. Our audit was made for
the purpose of forming an opinion on those statements taken as a whole. The
schedule listed in the preceding index is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Los Angeles, California
February 5, 1999
F-1
<PAGE>
DOLE FOOD COMPANY, INC.
VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED JANUARY 2, 1999
<TABLE>
<CAPTION>
ADDITIONS
--------------------------
BALANCE AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER BALANCE AT
OF YEAR EXPENSES ACCOUNTS(B) DEDUCTIONS(A) END OF YEAR
----------- ----------- ------------- --------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
YEAR ENDED JANUARY 2, 1999
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Trade receivables.......................... 37,869 16,104 880 3,646 51,207
Notes and other current receivables........ 22,230 23,580 (119) 4,133 41,558
Long-term notes and other receivables...... 24,456 13,882 471 4,275 34,534
YEAR ENDED JANUARY 3, 1998
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Trade receivables.......................... 40,766 4,932 -- 7,829 37,869
Notes and other current receivables........ 20,988 4,994 -- 3,752 22,230
Long-term notes and other receivables...... 13,474 10,951 3,300 3,269 24,456
YEAR ENDED DECEMBER 28, 1996
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Trade receivables.......................... 32,329 18,271 -- 9,834 40,766
Notes and other current receivables........ 14,665 8,992 -- 2,669 20,988
Long-term notes and other receivables...... 10,399 5,311 -- 2,336 13,374
</TABLE>
NOTE:
(A) Write-off of uncollectible amounts.
(B) Purchase accounting and transfers among allowance accounts.
F-2
<PAGE>
ARTICLES OF ASSOCIATION
OF
DOLE FOOD COMPANY, INC.
We, the undersigned, do hereby associate ourselves for the purpose of
forming a corporation under the laws of the Hawaiian Islands, the several
signers being the present owners of the business of the co-partnership hitherto
known by the name of "CASTLE & COOKE," and for the purpose of such incorporation
we do hereby adopt and agree to the following articles.
FIRST: The name of the corporation shall be DOLE FOOD COMPANY, INC.
SECOND: The location of the principal office of the corporation shall
be at Honolulu, Island of Oahu, Territory of Hawaii. The corporation
may have such other offices within and without the Territory of Hawaii
as its business may from time to time require.
THIRD: The purposes for which the corporation is organized and its
powers in connection therewith are as follows:
(a) to conduct, carry on and engage in all manner of commerce and
trade, foreign and domestic;
(b) to engage in the business of merchants, commission merchants,
brokers, factors and agents, buying and selling, exporting and
importing, and generally dealing in all kinds of merchandise and
produce by wholesale, jobbing, or retail, either foreign or domestic;
(c) to manage, act as agents, factors or trustees for estates,
plantations, factories, persons and companies, including insurance
companies of all kinds, foreign and domestic;
(d) to engage in agricultural, manufacturing and mercantile pursuits in
the Territory of Hawaii, or elsewhere;
(e) to loan and make advances to plantations and planters in all
branches of agricultural business, and for the purpose of manufacturing
Hawaiian products of whatever nature and kind of raw materials as may
be from time to time imported for planting or other purposes;
(f) to purchase, own, either in whole or in part, and to own a share
<PAGE>
of shares therein, lease, operate, charter, exchange and sell ships and
vessels of all kinds and to act as agents for transportation companies
of all kinds;
(g) to buy, take leases of, or otherwise acquire, hold, own, use,
improve, develop, cultivate, grant, bargain, sell, convey, lease,
mortgage or otherwise dispose of, and in every other manner deal in and
with real property and interests and rights therein, including
easements and licenses and water rights and privileges;
(h) to buy, hire or otherwise acquire, hold, own, use, produce,
manufacture, sell, assign, transfer, pledge or otherwise dispose of and
deal in and with personal property of whatever nature, tangible or
intangible, including any and all kinds of machinery, equipment,
materials, tools and other goods and chattels, and including
franchises, rights, licenses, patents, trademarks, bonds of any
government and of any public or private corporation, notes, choses in
action and other evidences of indebtedness, shares of capital stock and
obligations of public or private corporations, and options for the
purchase of any of the foregoing;
(i) to acquire, construct, lease, own, maintain and operate pumping
plants, irrigation systems and other works for the development,
conservation, storage, transmission and utilization of water, including
artesian wells, shafts, tunnels, pipe lines, ditches, flumes, dams,
reservoirs and other works, and to do all of the things incidental to
or proper in the business of acquiring water for its own use and of
supplying water to others for compensation or otherwise;
(j) to enter into partnership with any other corporation for the
carrying on through such partnership of any business the objects of
which are the same as or are germane, in whole or in part, to the
objects and business of this corporation;
(k) to sell, convey, lease, exchange or otherwise dispose of, either
for cash or on credit, all or any part of the business, property or
assets of the corporation and to accept in payment therefor money or
other property or assets;
2
<PAGE>
(l) to assist or maintain or support such social, charitable,
benevolent, educational, religious or other institutions or objects as
the board of directors deems useful or beneficial for the corporation,
directly or indirectly;
(m) to engage in research of all kinds, either for itself or for
others; to develop or assist in the development of patents, inventions,
improvements, machines, or agricultural or scientific processes; to
own, lease, or otherwise acquire, use, or dispose of laboratories,
factories or workshops for experimental, manufacturing, and development
purposes;
(n) to act as agent for the purchase, sale, lease, hire and handling of
agricultural and other machinery, implements and equipment, and in
general to act as agent for manufacturing, merchandising and jobbing
companies or firms, and to exercise any of the powers mentioned in
these articles for the account of the corporation and/or as factor,
agent, consignee, broker, contractor, attorney, commission agent or
otherwise for or on behalf of any person, firm, association or
corporation;
(o) to issue shares of the capital stock and/or obligations of the
corporation and/or options for the purchase of any thereof in payment
for property acquired by the corporation or for services rendered to
the corporation or any other objects in and about its business, and to
purchase, hold, sell, transfer, accept as security for loans and deal
generally in shares of its capital stock and its obligations in every
lawful manner;
(p) to acquire the whole or any part of the property, assets, business,
good will and rights of any person, firm, association or corporation
engaged in any business or enterprise which may lawfully be undertaken
by the corporation, and to pay for the same in cash and/or shares of
the capital stock and/or obligations of the corporation, or otherwise,
and/or by undertaking and assuming the whole or any part of the
indebtedness and obligations of the transferor, and to hold or in any
manner dispose of the whole or any part of the property and assets so
acquired, and to conduct in any lawful manner the whole or any part of
the business so acquired and to exercise all the powers necessary or
convenient in and about the conduct, management and carrying on of such
business;
3
<PAGE>
(q) to borrow money and to incur indebtedness, without limit as to the
amount, and in excess of the capital stock of the corporation, and to
issue bonds, debentures, debenture stock, warrants, notes or other
obligations therefor, and to secure the same by any lien, charge,
grant, pledge, deed of trust or mortgage of the whole or any part of
the real and/or personal property of the corporation, then owned and/or
thereafter to be acquired, and/or to issue bonds, debentures, debenture
stock, warrants, notes or other obligations without any such security;
(r) to draw, make, accept, endorse, guarantee, execute and issue
promissory notes, bills of exchange, drafts, warrants of all kinds,
obligations and certificates and negotiable or transferable
instruments, to loan money to others with or without security, and to
guarantee the debts or obligations of others and go security on bonds
of others;
(s) to promote or to aid in any manner, financially or otherwise, any
corporation or association any of whose stock or obligations are held
directly or indirectly by the corporation, and for this purpose to
enter into plans of reorganization or readjustment and to guarantee the
whole or any part of the indebtedness and obligations of any such other
corporation or association and the payment of dividends on its stock
and to do any other acts or things designed to protect, preserve,
improve or enhance the value of such stocks or obligations;
(t) to enter into, make, perform and carry out contracts of every kind
for any lawful purpose with any person, firm, association or
corporation, one or more;
(u) to effect any of the purposes mentioned in these articles and to
exercise any powers so mentioned either directly or through the medium
of the acquisition and ownership of shares of stock of any other
corporation or association and holding and voting the same or otherwise
exercising and enjoying the rights and advantages incidental to such
shares of stock, and if deemed desirable to operate wholly or partially
as a holding company through the acquisition and ownership of shares of
stock of any other corporation or association, whether or not such
shares of stock so acquired or owned by this corporation shall give to
this corporation control of such other corporation or association;
4
<PAGE>
(v) to carry on any other lawful business whatsoever which may seem to
the corporation capable of being carried on in connection with the
foregoing purposes and powers, or calculated directly or indirectly to
promote the interest of the corporation or to enhance the value of its
properties, and to have, enjoy and exercise all rights, powers and
privileges which are now or which may hereafter be conferred upon
similar corporations organized under the laws of Hawaii;
(w) to carry out the foregoing purposes and to exercise the foregoing
powers or any thereof in the Territory of Hawaii and/or elsewhere in
the world.
The foregoing clauses shall each be construed as purposes and powers,
and the matters expressed in each clause or any part of any clause
shall be in no ways limited by reference to or interference from any
other clause or any other part of the same clause but shall be regarded
as independent purposes and powers and the enumeration of specific
purposes and powers shall not be construed to limit or restrict in any
manner the meaning of the general purposes and powers of the
corporation, nor shall the expression of one thing be deemed to exclude
another, although it be of like nature, not expressed.
FOURTH: In accordance with the laws of the Territory of Hawaii and
applicable to corporations formed thereunder, the corporation shall be
entitled to and shall have power:
(a) to have succession and corporate existence perpetually;
(b) to sue and be sued in any court;
(c) to make and use a common seal, and alter the same at its pleasure;
(d) to hold, purchase and convey such property as the purposes of the
corporation shall require, without limit as to amount, and to mortgage,
pledge and hypothecate the same to secure any debt of the corporation;
(e) to appoint such subordinate officers and agents as the business of
the corporation shall require;
(f) to make by-laws not in conflict with law or these articles of
5
<PAGE>
association; and may possess and exercise any and all powers, not
inconsistent with law, reasonably incidental to the fulfillment of its
purposes as set forth in these articles of association, or reasonably
incidental to the exercise of its powers set forth therein.
FIFTH:
(a) The amount of capital stock of the corporation shall be eighty
million (80,000,000) shares of common stock without par value and
thirty million (30,000,000) shares of preferred stock without par
value.
(b) No holder of the shares of stock of any class of the corporation
shall have any preemptive or preferential right of subscription for or
to purchase any shares of any class of stock or other securities of the
corporation, whether now or hereafter authorized.
(c) In connection with any offering to stockholders, or with any stock
dividend, or with any other change in the capitalization of the
corporation, or with any merger or consolidation, the board of
directors may provide for the issuance of fractional shares of the
capital stock of the corporation, or the board of directors may provide
that no fractional shares shall be issued in connection therewith and
that the issuance of fractional shares may be avoided by the sale of
shares representing fractions or by the issuance of scrip or in such
other manner as may be approved by the board of directors. The
stockholders shall not have the right to split whole shares into
fractions or to split fractions.
(d) The board of directors is authorized to provide for the issuance
from time to time of authorized but unissued shares of the capital
stock of the corporation and to determine and approve the consideration
for which such shares shall be issued, the portion if any of such
consideration which shall be paid-in surplus, and the other terms and
conditions of the offering.
6
<PAGE>
(e) The board of directors is authorized to provide for the issuance
from time to time of authorized but unissued shares of preferred stock
of the corporation, and to divide authorized and unissued shares of
preferred stock into series and issue any such series, and to fix the
terms, preferences, voting powers, restrictions and qualifications of
the preferred stock or any series of the preferred stock.
Notwithstanding the provisions of Section 415-18 of Hawaii Revised
Statutes, the board of directors is authorized (i) to provide for the
issuance from time to time of authorized but unissued shares of capital
stock of any class or any series of any class as and for a stock
dividend or dividends on shares of the same class or series or any
other class or any other series of any class and (ii) to determine
whether any of the capital stock of any class or any series of any
class shall be exchangeable for or convertible into shares of the same
class or series or any other class or any other series of any class,
and to fix, before issuance, the terms and conditions with or without
limitations on which the capital stock of any class or any series of
any class shall be so exchangeable or convertible.
(f) Part IX of Chapter 416, Hawaii Revised Statutes relating to Control
Share Acquisitions as amended from time to time, and such Part, as
transferred to the Hawaii Business Corporation Act by amendment to Act
167, Session Laws of Hawaii 1983, as redesignated and as amended from
time to time, shall not apply to any acquisition of shares of stock of
any class of the corporation.
SIXTH: There shall be a board of directors of the corporation to
consist of not less than five nor more than twenty members, who shall
be elected at such times, in such manner, and for such terms as may be
prescribed by the by-laws, which also may provide for the filling of
vacancies and temporary vacancies. The directors need not be
stockholders of the corporation. The board of directors shall have full
power to control and direct the business and affairs of the
corporation, subject, however, to instructions by the stockholders, and
to any limitations which may be set forth in statutory provisions, in
these articles of association and in the by-laws of the corporation.
The board of directors may create and authorize the operation of any
division or divisions of the corporation, and the board of directors
may determine the name under which any division shall operate and may
determine the property of the division and may provide that the
management of the business and property of the
7
<PAGE>
division be vested in and delegated to a board of directors of the
division, and may provide that the division shall have its own officers
and agents and employees and may establish other provisions with regard
to the division, all upon such terms and conditions as may be approved
by the board of directors. There may be an executive committee of the
board of directors as provided for in the by-laws.
SEVENTH: The board of directors shall elect each year a president, one
or more vice presidents, a secretary, a treasurer and a controller, and
from time to time such other officers as the conduct of the business of
the corporation may require. The president and at least one vice
president shall be elected from among the directors. Additional vice
presidents, if any, the secretary, the treasurer, the controller, and
such other officers as may be elected may or may not be directors. No
officer need be a stockholder.
EIGHTH: An auditor shall be elected annually by the stockholders. The
auditor may be an individual, partnership or corporation. The auditor
shall not be an officer of the corporation.
NINTH: No stockholder shall be liable for the debts of the corporation
beyond such amount as may be due and unpaid upon the share or shares
held by him.
TENTH: Service of process may be made upon any officer of the
corporation.
ELEVENTH: In the absence of fraud, no contract or other transaction
between the corporation and any other corporation, and no act of the
corporation, shall in any way be affected or invalidated by the fact
that any of the directors of the corporation are pecuniarily or
otherwise interested in, or are directors or officers of, such other
corporation; and any director of the corporation who is also a director
or officer of such other corporation or who is so interested may be
counted in determining the existence of a quorum at any meeting of the
board of directors of the corporation which shall authorize or approve
any such contract or transaction or act and may vote thereat to
authorize or approve any such contract, transaction or act with like
force and effect as if he were not such director or officer of such
other corporation or not so interested.
8
<PAGE>
IN WITNESS WHEREOF, the incorporators have hereunto set their hands
this 28th day of December, 1894.
(Sig.) MARY CASTLE
Mary Castle
(Sig.) JOSEPH B. ATHERTON
Joseph B. Atherton
(Sig.) GEO. P. CASTLE
Geo. P. Castle
(Sig.) WILLIAM A. BOWEN
William A. Bowen
(Sig.) E. D. TENNEY
E. D. Tenney
HAWAIIAN ISLANDS )ss
ISLAND OF OAHU )
On this 28th day of December, 1894, personally appeared before me MARY
CASTLE, JOSEPH B. ATHERTON, GEO. P. CASTLE, WILLIAM A. BOWEN AND E. D. TENNEY,
to me known to be the persons described in and who executed the foregoing
instrument and acknowledged that they executed the same freely and voluntarily
for the uses and purposes therein set forth.
W. R. Castle,
Notary Public
(SEAL)
9
<PAGE>
CERTIFICATE OF
EXECUTIVE VICE PRESIDENT AND CORPORATE SECRETARY,
AND TREASURER
PURSUANT TO SECTIONS 201, 301 AND 303
OF THE INDENTURE
The undersigned, Alan B. Sellers and David B. Cooper, Jr., do hereby
certify that they are the duly appointed and acting Executive Vice President and
Corporate Secretary, and Treasurer, respectively, of DOLE FOOD COMPANY, INC., a
Hawaii corporation (the "Company"). Each of the undersigned also hereby
certifies in such capacities, pursuant to Sections 201, 301 and 303 of the
Indenture, dated as of April 15, 1993, between the Company and Chemical Trust
Company of California, as Trustee (the "Indenture"), that:
A. There has been established pursuant to resolutions duly adopted
by the Board of Directors of the Company and of a Pricing Committee thereof (a
copy of such resolutions being attached hereto as Exhibits B and C,
respectively) a series of Securities (as that term is defined in the Indenture)
to be issued under the Indenture, with the following terms:
1. The title of the Securities of the series is "7% Notes due 2003"
(the "Notes").
2. The limit upon the aggregate principal amount of the Notes which
may be authenticated and delivered under the Indenture (except for
Notes authenticated and delivered upon registration of, transfer of,
or in exchange for, or in lieu of other Notes pursuant to Sections
304, 305, 306, 906 or 1107 of the Indenture) is $300,000,000.
3. Interest on the Notes shall be payable to the persons in whose
name the Notes are registered at the close of business on the Regular
Record Date (as defined in the Indenture) for such interest payment,
except that interest payable on May 15, 2003 shall be payable to the
persons to whom principal is payable on such date.
4. The date on which the principal of the Notes is payable, unless
accelerated pursuant to the Indenture, shall be May 15, 2003.
5. The rate at which the Notes shall bear interest shall be 7% per
annum. The date from which interest shall accrue for the Notes shall
be May 13, 1993. The Interest Payment Dates on which interest on the
Notes shall be payable are May 15 and November 15. The initial
interest payment on the Notes shall be made on November 15, 1993. The
Regular Record Dates for the interest payable on the Notes on any
Interest
<PAGE>
Payment Date shall be the May 1 and November 1, as the case may be,
immediately preceding such Interest Payment Date.
6. The place or places where the principal of and interest on the
Notes shall be payable is at the agency of the Trustee maintained for
that purpose at the office of Chemical Bank, 55 Water Street, North
Building, Securities Window, Second Floor, New York, New York, 10041,
provided that payment of interest, other than at Stated Maturity (as
defined in the Indenture), may be made at the option of the Company by
check mailed to the address of the person entitled thereto as such
address shall appear in the Security Register (as defined in the
Indenture), and provided further that the Depositary (as defined
below), or its nominee, as holder of Global Securities (as defined in
the Indenture), shall be entitled to receive payments of interest by
wire transfer of immediately available funds.
7. The Notes are not redeemable prior to May 15, 2003.
8. There is no obligation of the Company to redeem or purchase the
Notes pursuant to any sinking fund or analogous provisions, or to
repay any of the Notes prior to Stated Maturity at the option of a
holder thereof.
9. The Notes shall be issued in fully registered form in
denominations of $1,000 or any amount in excess thereof which is an
integral multiple of $1,000.
10. The principal amount of the Notes shall be payable upon
declaration of acceleration of the maturity thereof pursuant to
Section 502 of the Indenture.
11. The provisions of Sections 1008 and 1009 of the Indenture shall
apply to the Notes. The provisions of Sections 1301 and 1302 of the
Indenture shall not apply to the Notes.
12. The Notes shall be defeasible as provided in Article FOURTEEN of
the Indenture.
13. Interest on the Notes shall be computed on the basis of a 360-day
year of twelve 30-day months.
14. The Notes will be issued in the form of Global Securities (as
defined in the Indenture). The Depository Trust Company shall be the
Depositary (as defined in the Indenture) for the Global Securities.
The Notes shall only be transferred in accordance with the provisions
of Section 305 of the Indenture.
B. The form of the Global Security representing the Notes is
attached
<PAGE>
hereto as Exhibit A.
C. The Trustee is appointed a Paying Agent.
D. The foregoing form and terms of the Notes have been established
in conformity with the provisions of the Indenture.
E. The undersigned has read the provisions of Sections 301 and 303
of the Indenture and the definitions relating thereto and the resolutions
adopted by the Board of Directors of the Company and a Pricing Committee thereof
and delivered herewith and has examined the form of Global Security representing
the Notes. In the opinion of the undersigned, he has made such examination or
investigation as is necessary to enable him to express an informed opinion as to
whether or not all conditions precedent provided in the Indenture relating to
the establishment, authentication and delivery of a series of Securities under
the Indenture, designated as the Notes in this Certificate, have been complied
with. In the opinion of the undersigned, all such conditions precedent have
been complied with.
F. The undersigned Corporate Secretary, by execution of this
Certificate, hereby certifies the actions taken by a Pricing Committee of the
Board of Directors of the Company in determining and setting the specific terms
of the Notes, and hereby further certifies that attached hereto as Exhibits A, B
and C, respectively, are the form of Global Security representing the Notes as
duly approved by a Pricing Committee of the Board of Directors of the Company, a
copy of resolutions duly adopted by the Board of Directors of the Company on
June 24, 1991 and a copy of resolutions duly adopted by a Pricing Committee of
the Board of Directors as of May 6, 1993, pursuant to which the terms of the
Notes set forth above have been established.
IN WITNESS WHEREOF, the undersigned have hereunto executed this
Certificate as of the 13th day of May, 1993.
______________________________
Alan B. Sellers
Executive Vice President
and Corporate Secretary
______________________________
David B. Cooper, Jr.
Treasurer
<PAGE>
CERTIFICATE OF
EXECUTIVE VICE PRESIDENT AND CORPORATE SECRETARY,
VICE PRESIDENT AND TREASURER
PURSUANT TO SECTIONS 201, 301 AND 303
OF THE INDENTURE
The undersigned, Alan B. Sellers and David B. Cooper, Jr., do hereby
certify that they are the duly appointed and acting Executive Vice President
and Corporate Secretary, and Vice President and Treasurer, respectively, of
DOLE FOOD COMPANY, INC., a Hawaii corporation (the "Company"). Each of the
undersigned also hereby certifies in such capacities, pursuant to Sections
201, 301 and 303 of the Indenture, dated as of July 15, 1993, between the
Company and Chemical Trust Company of California, as Trustee (the
"Indenture"), that:
A. There has been established pursuant to resolutions duly adopted
by the Board of Directors of the Company and of a Pricing Committee
thereof (a copy of such resolutions being attached hereto as Exhibits C
and D, respectively) two series of Securities (as that term is defined
in the Indenture) to be issued under the Indenture, with the following
terms:
1. The titles of the Securities of the series are "6-3/4%
Notes due July 15, 2000 (the "Notes") and "7-7/8% Debentures due
July 15, 2013" (the "Debentures"; the Notes and the Debentures are
collectively referred to as the "Designated Securities").
2. The limit upon the aggregate principal amount of the Notes
and the Debentures which may be authenticated and delivered under
the Indenture (except for Notes or Debentures, as the case may be,
authenticated and delivered upon registration of, transfer of, or
in exchange for, or in lieu of other Notes or Debentures, as the
case may be, pursuant to Sections 304, 305, 306, 906 or 1107 of the
Indenture) is $225,000,000 and $175,000,000, respectively.
3. Interest on the Designated Securities shall be payable to
the persons in whose name the Designated Securities are registered
at the close of business on the Regular Record Date (as defined in
the Indenture) for such interest payment, except that interest
payable on July 15, 2000 with respect to the Notes and on July 15,
2013 with respect to the Debentures shall be payable to the persons
to whom principal is payable on such dates.
1
<PAGE>
4. The date on which the principal of the Notes is payable,
unless accelerated pursuant to the Indenture, shall be July 15, 2000
and the date on which the principal of the Debentures is payable,
unless accelerated pursuant to the Indenture, shall be July 15, 2013.
5. The rates at which the Notes and the Debentures shall bear
interest shall be 6-3/4% per annum and 7-7/8% per annum,
respectively. The date from which interest shall accrue for the
Designated Securities shall be August 3, 1993. The Interest Payment
Dates on which interest on the Designated Securities shall be
payable are January 15 and July 15. The initial interest payment on
the Designated Securities shall be made on January 15, 1994. The
Regular Record Dates for the interest payable on the Designated
Securities on any Interest Payment Date shall be the January 1 and
July 1, as the case may be, immediately preceding such Interest
Payment Date.
6. The place or places where the principal of and interest on
the Designated Securities shall be payable is at the agency of the
Trustee maintained for that purpose at the office of Chemical Bank,
55 Water Street, North Building, Securities Window, Second Floor,
New York, New York, 10041, provided that payment of interest, other
than at Stated Maturity (as defined in the Indenture), may be made
at the option of the Company by check mailed to the address of the
person entitled thereto as such address shall appear in the
Security Register (as defined in the Indenture), and provided
further that the Depositary (as defined below), or its nominee, as
holder of Global Securities (as defined in the Indenture), shall be
entitled to receive payments of interest by wire transfer of
immediately available funds.
7. The Notes are not redeemable prior to July 15, 2000 and the
Debentures are not redeemable prior to July 15, 2013.
8. There is no obligation of the Company to redeem or
purchase the Designated Securities pursuant to any sinking fund or
analogous provisions, or to repay any of the Designated Securities
prior to Stated Maturity at the option of a holder thereof.
9. The Designated Securities shall be issued in fully
registered form in denominations of $1,000 or any amount in excess
thereof which is an integral multiple of $1,000.
2
<PAGE>
10. The principal amount of the Notes or the Debentures shall
be payable upon declaration of acceleration of the maturity thereof
pursuant to Section 502 of the Indenture.
11. Section 501(5) of the Indenture shall be deemed to be
amended for purposes of the Designated Securities only to delete
the figure "$25,000,000" appearing twice therein and to replace
such figure with the figure "$10,000,000" in both places. The
following provisions set forth below as Sections 1008 and 1009
(including the definitions set forth thereafter) shall apply to the
Designated Securities as if such provisions had been included in
the Indenture as Sections 1008 and 1009, respectively, and as if
the related definitions had been included in alphabetical order in
Section 101 of the Indenture:
"Section 1008. Limitation upon Mortgages.
The Company will not itself, and will not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become liable for or suffer to exist any indebtedness
for money borrowed or evidenced by a bond, debenture, note or other similar
instrument, whether or not for money borrowed or given in connection with the
acquisition of any business, properties or assets, including securities (such
indebtedness being hereinafter in this Section called "Indebtedness") secured
by a Mortgage on (i) any Principal Property of the Company or any Restricted
Subsidiary or (ii) any shares of capital stock or Indebtedness of any
Restricted Subsidiary (which Indebtedness is then held by the Company or any
Restricted Subsidiary), without effectively providing that the Designated
Securities (together with, if the Company shall so determine, any other
Indebtedness of the Company or such Restricted Subsidiary then existing or
thereafter created which is not Subordinated Debt) shall be secured equally
and ratably with (or, at the option of the Company, prior to) such secured
Indebtedness, so long as such secured Indebtedness shall be so secured,
unless immediately thereafter, after giving effect thereto, the aggregate
amount of all such secured Indebtedness plus all Attributable Debt of the
Company and its Restricted Subsidiaries in respect of Sale and Leaseback
Transactions (as defined in Section 1009, but excluding leases exempt from the
prohibition of Section 1009 by Clauses (2) through (6) thereof) would not
exceed 10% of Net Tangible Assets; provided, however, that this Section shall
not apply to, and there shall be excluded from secured Indebtedness in any
computation under this Section, Indebtedness secured by:
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(1) Mortgages on, and limited to, property of or shares of
capital stock or Indebtedness of any corporation existing at
July 15, 1993 or at the time such corporation becomes a Restricted
Subsidiary;
(2) Mortgages in favor of the Company or any Restricted
Subsidiary;
(3) Mortgages in favor of any governmental body to secure
progress, advance or other payments pursuant to any contract or
provision of any statute;
(4) (i) if made in the ordinary course of business, any
Mortgage as security for the performance of any contract or
undertaking not directly or indirectly in connection with the
borrowing of money or the securing of Indebtedness, or (ii) any
Mortgage with any governmental agency required or permitted to
qualify the Company or any Restricted Subsidiary to conduct
business, to maintain self-insurance or to obtain the benefits of
any law pertaining to workmen's compensation, employment insurance,
old age pensions, social security or similar matters;
(5) Mortgages for taxes, assessments or governmental charges
or levies if such taxes, assessments, governmental charges or
levies shall not at the time be due and payable, or if the same
thereafter can be paid without penalty, or if the same are being
contested in good faith by appropriate proceedings;
(6) Mortgages created by or resulting from any litigation or
legal proceeding which at the time is currently being contested in
good faith by appropriate proceedings; or Mortgages arising out of
judgments or awards as to which the time for prosecuting an appeal
or proceeding for review has not expired;
(7) Mortgages on, and limited to, property (including
leasehold estates) or shares of capital stock or Indebtedness,
existing at the time of acquisition thereof (including acquisition
through merger or consolidation) or to secure the payment of all or
any part of the purchase price thereof or construction thereon or
to secure any Indebtedness incurred prior to, at the time of, or
within 120 days after the latest of the acquisition, the completion
of construction or the commencement of full operation of such
property for the purpose of financing all or any part of the
purchase price thereof or construction thereon;
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<PAGE>
(8) Mortgages securing obligations issued by a state,
territory or possession of the United States, or any political
subdivision of any of the foregoing or the District of Columbia, to
finance the acquisition or construction or development of property,
and on which the interest is not, in the opinion of tax counsel of
recognized standing or in accordance with a ruling issued by the
Internal Revenue Service, includible (in whole or in part) in gross
income of the holder by reason of Section 103(a)(1) of the Internal
Revenue Code (or any successor to such provision) as in effect at
the time of the issuance of such obligations;
(9) Mortgages created in connection with a project financed
with, and created to secure, a Nonrecourse Obligation. For this
purpose, "Nonrecourse Obligation" shall mean indebtedness or lease
payment obligations substantially related to (i) the acquisition of
assets not previously owned by the Company or any of its Restricted
Subsidiaries or (ii) the financing of a project involving the
development or expansion of properties of the Company or any of its
Restricted Subsidiaries, as to which the obligee with respect to
such indebtedness or obligation has no recourse to the general
corporate funds of the Company or any of its Restricted
Subsidiaries or any assets of the Company or any of its Restricted
Subsidiaries other than the assets which were acquired with the
proceeds of such transaction or the project financed with the
proceeds of such transaction (and funds generated by such assets or
project) except pursuant to a covenant to pay to such obligee or to
the obligor of such indebtedness or obligation an amount equal to
all or a portion of the amount of any dividends received from such
obligor within the previous 12 months; or
(10) any extension, renewal or replacement (or successive
extensions, renewals or replacements), as a whole or in part, of
any Mortgage referred to in the foregoing Clauses (1) through (9),
to the extent the Indebtedness secured by such Mortgage is not
increased from the amount originally so secured, provided that such
extension, renewal or replacement Mortgage shall be limited to all
or a part of the same property or shares of capital stock or
Indebtedness that secured the Mortgage extended, renewed or
replaced (plus improvements on such property).
Section 1009.Limitation upon Sale and Leaseback Transactions.
Except as hereinafter provided, the Company will not itself, and will
not permit any Restricted Subsidiary to, enter into any transaction with any
bank, insurance
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company or other lender or investor, or to which any such bank, company,
lender or investor is a party, providing for the leasing by the Company or a
Restricted Subsidiary of any Principal Property which has been or is to be
sold or transferred more than 180 days after the latest of the acquisition,
completion of construction or commencement of full operation by the Company
or a Restricted Subsidiary to such bank, company, lender or investor, or to
any Person to whom funds have been or are to be advanced by such bank,
company, lender or investor on the security of such Principal Property
(herein referred to as a "Sale and Leaseback Transaction"); provided,
however, that this covenant shall not apply to any Sale and Leaseback
Transaction if:
(1) the Company or such Restricted Subsidiary could create
Indebtedness secured by a Mortgage pursuant to Section 1008,
excluding from secured Indebtedness in any computation under that
Section Indebtedness secured by Mortgages of the type described in
Clauses (1) through (10) thereof, on the Principal Property to be
leased in an amount equal to the Attributable Debt with respect to
such Sale and Leaseback Transaction without equally and ratably
securing the Designated Securities, or
(2) the Company or a Restricted Subsidiary, within 180 days
after the sale or transfer shall have been made by the Company or
by a Restricted Subsidiary, applies an amount equal to the greater
of the net proceeds from the sale of the Principal Property leased
pursuant to such arrangement or the fair market value of the
Principal Property so leased at the time of entering into such
arrangement (as determined in any manner approved by the Board of
Directors) to either (x) the retirement of Senior Funded Debt of
the Company or Funded Debt of a Restricted Subsidiary; provided,
however, that notwithstanding the foregoing, no retirement referred
to in this Clause (2) may be effected by payment at maturity or
pursuant to any mandatory sinking fund payment or any mandatory
prepayment provision, or (y) purchase of other property which will
constitute Principal Property of the Company or its Restricted
Subsidiaries having a fair market value, in the opinion of the
Board of Directors of the Company, at least equal to the fair
market value of the Principal Property leased in such sale and
leaseback transaction, or
(3) the lease in such Sale and Leaseback Transaction is for a
period, including renewals, of no more than three years, or
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<PAGE>
(4) the lease in such sale and leaseback transaction secures
or relates to obligations issued by a state, territory or
possession of the United States, or any political subdivision of
any of the foregoing, or the District of Columbia, to finance the
acquisition or construction of property, and on which the interest
is not, in the opinion of tax counsel of recognized standing or in
accordance with a ruling issued by the Internal Revenue Service,
includible (in whole or in part) in gross income of the holder by
reason of Section 103(a)(1) of the Internal Revenue Code (or any
successor to such provision) as in effect at the time of the
issuance of such obligations, or
(5) the lease payment obligation is created in connection
with a project financed with, and such obligation constitutes, a
Nonrecourse Obligation as defined in Section 1008(9), or
(6) such arrangement is between the Company and a Restricted
Subsidiary or between Restricted Subsidiaries.
"Attributable Debt" means, as to any particular lease under which the
Company or any Restricted Subsidiary is at the time liable and at any date as
of which the amount thereof is to be determined, the total net amount of rent
required to be paid under such lease during the remaining term thereof
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended), discounted from the respective due dates
thereof to such date at a rate per annum equal to the weighted average
interest rate per annum borne by the Securities of each series outstanding
hereunder compounded semi-annually. The net amount of rent required to be
paid under any such lease for any such period shall be the aggregate amount
of the rent payable by the lessee with respect to such period after excluding
amounts required to be paid on account of maintenance and repairs, insurance,
taxes, assessments, water rates and similar charges. In the case of any
lease which is terminable by the lessee upon the payment of a penalty, such
net amount shall also include the amount of such penalty, but no rent shall
be considered as required to be paid under such lease subsequent to the first
date upon which it may be so terminated.
"Funded Debt" means (a) all indebtedness of the Company and its
Restricted Subsidiaries for money borrowed, or evidenced by a bond,
debenture, note or other similar instrument, whether or not for money
borrowed or given in connection with the acquisition of any business, or the
properties or assets thereof, including securities thereof, maturing on, or
renewable or extendible at the option of the
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<PAGE>
obligor to, a date more than one year from the date of the determination
thereof that is or would be classified as long-term debt on a balance sheet
prepared in accordance with generally accepted accounting principles
(including indebtedness under any revolving credit arrangement with banks),
(b) guarantees, direct or indirect, and other contingent obligations of the
Company and its Restricted Subsidiaries in respect of, or to purchase or
otherwise acquire or be responsible or liable for (through the investment of
funds or otherwise), any such indebtedness of others (but not including
contingent liabilities on customers' receivables sold with recourse) and (c)
amendments, renewals, extensions and refundings of any such indebtedness.
"Mortgage" means and includes any mortgage, pledge, lien, security
interest, conditional sale or other title retention agreement or other
similar encumbrance.
"Net Tangible Assets" means the net book value of all assets of the
Company and Restricted Subsidiaries, excluding any amounts carried as assets
for shares of capital stock held in treasury, debt discount and expense,
investments in and advances to Subsidiaries other than Restricted
Subsidiaries, good will, patents and trademarks, less all liabilities of the
Company and Restricted Subsidiaries (except Funded Debt, minority interests
in Restricted Subsidiaries, deferred taxes and general contingency reserves
of the Company and Restricted Subsidiaries), all as determined on a
consolidated basis in accordance with generally accepted accounting
principles.
"Principal Property" means any manufacturing plant or processing
facility, including the equipment constituting a part thereof, which is
located within the United States or its territories or possessions, of the
Company or a Restricted Subsidiary, having a net book value exceeding 1% of
Net Tangible Assets.
"Restricted Subsidiary" means any Subsidiary of the Company other than
any Subsidiary that is engaged primarily in the management, development and
sale or financing of real property.
"Sale and Leaseback Transaction" has the meaning assigned to that term
in Section 1009 hereof.
"Senior Funded Debt" means all Funded Debt except Subordinated Funded
Debt.
"Subordinated Funded Debt" means any unsecured Funded Debt of the Company
which is expressly made subordinate and junior in rank and right of payment
to the
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Securities of each series outstanding hereunder in the event of any
insolvency or bankruptcy proceedings, and any receivership, liquidation,
reorganization or other similar proceedings in connection therewith, relative
to the Company or to its creditors, as such, or to its property, or in the
event of any proceedings for voluntary liquidation, dissolution or other
winding up of the Company, whether or not involving insolvency or bankruptcy.
"Unrestricted Subsidiary" means any Subsidiary of the Company that is
not a Restricted Subsidiary."
12. The Designated Securities shall be defeasible as provided
in Article THIRTEEN of the Indenture. Section 1303 of the
Indenture shall be deemed to be amended for purposes of the
Designated Securities only to delete the phrase "Sections 1005
through 1007" appearing twice therein and to replace such phrase
with the phrase "Sections 1005 through 1009" in both places.
13. Interest on the Designated Securities shall be computed
on the basis of a 360-day year of twelve 30-day months.
14. The Designated Securities will be issued in the form of
Global Securities (as defined in the Indenture). The Depository
Trust Company shall be the Depositary (as defined in the Indenture)
for the Global Securities. The Designated Securities shall only be
transferred in accordance with the provisions of Section 305 of the
Indenture.
B. The forms of the Global Securities representing the Notes and the
Debentures are attached hereto as ExhibitsA and B, respectively.
C. The Trustee is appointed a Paying Agent.
D. The foregoing forms and terms of the Designated Securities have been
established in conformity with the provisions of the Indenture.
E. The undersigned has read the provisions of Sections 301 and 303 of
the Indenture and the definitions relating thereto and the resolutions
adopted by the Board of Directors of the Company and a Pricing Committee
thereof and delivered herewith and has examined the forms of Global
Securities representing the Designated Securities. In the opinion of the
undersigned, he has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not all conditions
precedent provided in the Indenture relating to the establishment,
authentication and delivery of the series of
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<PAGE>
Securities under the Indenture, designated as the Notes and the Debentures in
this Certificate, have been complied with. In the opinion of the
undersigned, all such conditions precedent have been complied with.
F. The undersigned Corporate Secretary, by execution of this
Certificate, hereby certifies the actions taken by a Pricing Committee of the
Board of Directors of the Company in determining and setting the specific
terms of the Notes and the Debentures, and hereby further certifies that
attached hereto as Exhibits A, B, C and D, respectively, are the forms of
Global Securities representing the Notes and the Debentures as duly approved
by a Pricing Committee of the Board of Directors of the Company, a copy of
resolutions duly adopted by the Board of Directors of the Company on May 19,
1993 and a copy of resolutions duly adopted by a Pricing Committee of the
Board of Directors as of July 27, 1993, pursuant to which the terms of the
Designated Securities set forth above have been established.
IN WITNESS WHEREOF, the undersigned have hereunto executed this
Certificate as of the 3rd day of August, 1993.
/s/ ALAN B. SELLERS
----------------------------
Alan B. Sellers
Executive Vice President
and Corporate Secretary
/s/ DAVID B. COOPER, JR.
----------------------------
David B. Cooper, Jr.
Vice President and Treasurer
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DOLE FOOD COMPANY, INC.
MASTER RETIREMENT SAVINGS TRUST
(DAILY VALUATION)
THIS AGREEMENT is made effective as of the 1st day of February, 1999
between DOLE FOOD COMPANY, INC., a Hawaiian corporation of Westlake Village,
California, herein referred to as the "Company", and THE NORTHERN TRUST
COMPANY an Illinois corporation, of Chicago, Illinois, as Trustee and
constitutes an amendment and restatement of the trust agreement serving as
the funding medium for the 401(k) Plan for Salaried Employees of Dole Food
Company, Inc. and Participating Subsidiaries and Divisions and the 401(k)
Plan for Hourly Employees of Dole Food Company, Inc. and Participating
Subsidiaries and Divisions to be known as the DOLE FOOD COMPANY, INC. MASTER
RETIREMENT SAVINGS TRUST (DAILY VALUATION) and under which the Trustee is
accepting appointment as successor trustee.
With respect to each Plan for which this agreement is adopted by the
Committee as the funding medium, the Committee shall appoint the Trustee as
successor under the trust agreement which is the predecessor funding medium
for the Plan, shall direct the Trustee as successor under that trust
agreement to add the assets held thereunder to the assets of the Trust Fund
and shall appoint the Committee as the fiduciary which has the responsibility
for administering the Plan and as the fiduciary which has the responsibility
for Plan investments.
The Trust Fund shall consist of all assets held by the Trustee as of the
date of this agreement or hereafter acquired by the Trustee as trustee or
successor trustee under any other trust agreement made by the Company or by a
Subsidiary in connection with a Plan for which this agreement is adopted as
the funding medium, all investments and reinvestments thereof and all
additions thereto by way of contributions, earnings and increments, and shall
be held upon the following terms:
ARTICLE ONE: DEFINITIONS
For the purposes of this agreement:
1.1 "Beneficiary" means a person designated to receive a benefit under
the Plan after the death of a Participant;
1.2 "Code" means the Internal Revenue Code of 1986, as amended;
1.3 "Committee" means the Corporate Compensation and Benefits Committee
of the Board of Directors of Dole Food Company, Inc. as constituted from time to
time which has the responsibility for administering the Plan and the
responsibility for allocating the assets of the Trust Fund among the Separate
Accounts and any Trustee Investment Accounts, for monitoring the diversification
of the investments of the Trust Fund, for determining the propriety of
investment of the Trust Fund in foreign securities and of maintaining the
custody
<PAGE>
of foreign investments abroad, for assuring that the Plan does not violate
any provisions of ERISA limiting the acquisition or holding of "employer
securities" or "employer real property" and for the appointment and removal
of Investment Advisers and shall be deemed for purposes of ERISA to be named
fiduciary for Plan investments and the Plan administrator and the named
fiduciary for Plan administration;
1.4 "Company" means Dole Food Company, Inc. and any corporation which
is the successor thereto;
1.5 "Company Stock" means common stock of the Company;
1.6 "Company Stock Investment Fund" means any Investment Fund composed
of investments in Company Stock as provided in ARTICLE FIVE;
1.7 "Custodial Agent" means one or more persons or entities designated
by the Committee to maintain custody of assets of a Separate Investment
Account pursuant to 4.1(c);
1.8 "ERISA" means the Employee Retirement Income Security Act of 1974
as in effect from time to time and the regulations issued thereunder;
1.9 "Investment Adviser" means an Investment Manager or an Investment
Trustee to whom the Committee has delegated investment responsibility for a
Separate Account or the Committee with respect to any assets for which the
Committee has investment responsibility;
1.10 "Investment Fund" means each of the investment funds established
pursuant to ARTICLE FIVE; any of such Investment Funds may be composed of one
or more Separate Accounts and Trustee Investment Accounts designated by the
Committee;
1.11 "Investment Manager" means an investment manager registered as an
investment advisor under the Investment Advisers Act of 1940, a bank as
defined in that Act or an insurance company qualified to manage, acquire or
dispose of any asset of the Trust Fund, which is appointed by the Committee
to manage a Separate Investment Account; but the Trustee shall have no
responsibility to determine whether a person or entity acting as an
Investment Adviser meets or continues to meet this definition;
1.12 "Investment Trustee" means the trustee appointed by the Committee
to manage a Separate Investment Trust Account;
1.13 "Participant" means a person who is an employee or former employee
of the Company or of a Subsidiary and who is or was actually participating in
the Plan;
1.14 "Plan" means the 401(k) Plan for Salaried Employees of Dole Food
Company, Inc. and Participating Subsidiaries and Divisions and the 401(k)
Plan for Hourly Employees of Dole Food Company, Inc. and Participating
Subsidiaries and Divisions and any separate savings plan for employees of the
Company or of a Subsidiary for which this agreement has been adopted as the
funding medium;
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1.15 "Plan Account" means the interest of each Plan in the Trust Fund;
1.16 "Separate Account" means a Separate Investment Account, a Separate
Investment Trust Account or a Separate Insurance Contract Account;
1.17 "Separate Insurance Contract Account" means assets of the Trust
Fund allocated by the Committee to a Separate Account for investment in
insurance contracts directed by the Committee;
1.18 "Separate Investment Account" means assets of the Trust Fund
allocated by the Committee to a Separate Account to be managed by an
Investment Manager or the Committee;
1.19 "Separate Investment Trust Account" means assets of the Trust Fund
allocated by the Committee to a Separate Account to be managed by an
Investment Trustee;
1.20 "Subsidiary" means a subsidiary or affiliate of the Company;
1.21 "Subtrust" means assets of a Separate Investment Account which are
held by a Subtrustee pursuant to an agreement which the Committee has
approved and directed the Trustee to enter into;
1.22 "Subtrustee" means the trustee appointed by the Committee to act
as trustee of a Subtrust;
1.23 "Trust Fund" means all assets subject to this agreement;
1.24 "Trustee" means THE NORTHERN TRUST COMPANY and any successor to it
as trustee or trustees of the Trust Fund under this agreement; and
1.25 "Trustee Investment Account" means assets of the Trust Fund for
which investment responsibility has been allocated by the Committee to the
Trustee with the written consent of the Trustee.
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<PAGE>
ARTICLE TWO: VALUATION AND ALLOCATION
The Trustee shall hold the Trust Fund as a commingled fund or commingled
funds in which each separate Plan shall be deemed to have a proportionate
undivided interest in the fund or funds in which it participates, except that
each fund or asset identified by the Committee as allocable to a particular
Plan Account, herein referred to as an "identified fund" or "identified
asset", and income, appreciation or depreciation and expenses attributable to
a particular Plan Account or to an identified asset thereof, shall be
allocated or charged to that Plan Account. Contributions shall be designated
by the Committee as allocable, and distributions shall be designated by the
Committee as chargeable, to a particular Plan Account and shall be so
allocated or charged. Upon the direction of the Committee or its designee,
the Trustee shall periodically determine the value of each Plan Account on
such basis as the Trustee and the Committee or its designee shall from time
to time agree (considering the fair market value of the assets initially
received from the predecessor trustee or the Company with respect to the Plan
and subsequent contributions and distributions, net income, net appreciation
or depreciation and expenses attributable to the Plan) and shall render a
statement thereof to the Committee within 60 days after each valuation date.
ARTICLE THREE: DISTRIBUTIONS
The Trustee shall make distributions from the Trust Fund to such
persons, in such amounts (but not exceeding the then value of the Plan
Account to which the distribution is chargeable), at such times and in such
manner as the Committee or its designee shall from time to time direct
pursuant to the service description attached as Exhibit A as may be amended
by the Trustee from time to time. The Trustee shall have no responsibility
to ascertain whether any direction received by the Trustee from the Committee
or its designee in accordance with the preceding sentence is proper and in
compliance with the terms of the Plan or to see to the application of any
distribution. The Trustee shall not be liable for any distribution made in
good faith without actual notice or knowledge of the changed condition or
status of any recipient. If any distribution made by the Trustee is returned
unclaimed, the Trustee shall notify the Committee or its designee and shall
dispose of the distribution as the Committee or its designee shall direct.
The Trustee shall have no obligation to search for or ascertain the
whereabouts of any payee of benefits of the Trust Fund.
Notwithstanding the foregoing, the Committee or its designee may make
distributions from the Trust Fund through a commercial banking account in a
federally insured banking institution (including the Trustee) established by the
Committee or its designee for such purpose after written notice to the Trustee
that the commercial banking account has been so established. Upon such written
notice, the Committee shall have the responsibility to assure that any such
commercial banking account is established and maintained in accordance with
ERISA and is properly insured. The Trustee shall make such deposits from the
Trust Fund to the commercial banking account as the Committee or its designee
may from time to time direct. The Trustee shall have no responsibility to
account for funds held in or disbursed from
4
<PAGE>
any such commercial banking account, or to prepare any information returns
for tax purposes as to distributions made therefrom.
ARTICLE FOUR: SEPARATE ACCOUNTS AND INVESTMENT ADVISERS
The Trust Fund shall consist of one or more Separate Accounts and, with
the Trustee's written consent, one or more Trustee Investment Accounts. All
Separate Accounts and any Trustee Investment Accounts shall be established by
the Trustee at the direction of the Committee or its designee. The Committee
or its designee shall designate assets of the Trust Fund to be allocated to
each Separate Account and each Trustee Investment Account and shall direct
the Trustee with respect to any transfer of assets between Separate Accounts
or between a Separate Account and a Trustee Investment Account; provided that
no asset shall be allocated or transferred to a Trustee Investment Account
without the Trustee's written consent. The Committee shall have investment
responsibility for any assets of the Trust Fund not otherwise allocated to a
Separate Account or Trustee Investment Account, and such assets shall
comprise a Separate Investment Account for which the Committee serves as
Investment Adviser. The following provisions shall apply to the Separate
Accounts:
4.1 With respect to each Separate Investment Account, the Committee or
its designee shall appoint an Investment Adviser, who shall acknowledge by a
writing delivered to the Committee and to the Trustee that the Investment
Adviser is a fiduciary with respect to the assets allocated thereto. The
Trustee shall act with respect to assets allocated to a Separate Investment
Account only as directed by the Investment Adviser. The Committee may direct
that any or all of the assets of a Separate Investment Account be held by a
Subtrustee. The Trustee shall have custody of and custodial responsibility
for all assets of the Trust Fund held in a Separate Investment Account except
as otherwise provided in this agreement or as follows:
(a) The Subtrustee of a Subtrust shall have custody of and
custodial responsibility for any assets of a Separate Investment Account
allocated to it by the Committee;
(b) The trustee of a collective or group trust fund (including
without limitation an Investment Manager or its bank affiliate) shall have
custody of and custodial responsibility for any assets of a Separate
Investment Account invested in such collective or group trust fund; and
(c) The Committee may direct in writing that the custody of
additional assets of a Separate Investment Account (other than those
referred to in paragraphs (a) and (b) of this Section 4.1) be maintained
with a Custodial Agent. In such event, the Committee shall approve, and
direct the Trustee to enter into, a custody agreement with the Custodial
Agent (which custody agreement may authorize the Custodial Agent to
maintain custody of such assets with one or more subagents, including a
broker or dealer registered under the Securities Exchange Act of 1934 or a
nominee of such broker or dealer). The Custodial Agent shall have
custodial responsibility for any
5
<PAGE>
assets maintained with the Custodial Agent or its subagents pursuant to
the custody agreement. Notwithstanding any other provision of this
agreement, the Company (which has the authority to do so under the laws
of its state of incorporation) agrees to indemnify THE NORTHERN TRUST
COMPANY from any liability, loss and expense, including reasonable legal
fees and expenses, which THE NORTHERN TRUST COMPANY may sustain by
reason of acting in accordance with any directions of the Committee
pursuant to this paragraph (c). This paragraph shall survive the
termination of this agreement.
4.2 With respect to each Separate Investment Trust Account, the
Trustee and the Investment Trustee thereof shall upon the direction of the
Committee execute an investment trust agreement with respect thereto. The
Investment Trustee shall have custody of all of the assets of the Separate
Investment Trust Account except such assets as the Committee may from time to
time determine shall be held in the custody of the Trustee with the Trustee's
written consent; the Trustee shall act with respect to any such assets in its
custody only as directed by the Investment Trustee.
4.3 With respect to each Separate Insurance Contract Account, from
assets allocated thereto the Trustee shall purchase or continue in effect
such insurance contracts as the Committee shall direct, the issuing insurance
company may credit those assets to its general account or to one or more of
its separate accounts, and the Trustee shall act with respect to those
contracts only as directed by the Committee.
4.4 The Committee shall have investment responsibility for assets held
in any Separate Account for which an Investment Manager or Investment Trustee
has not been retained, has been removed, or is for any reason unwilling or
unable to act. With respect to assets or Separate Accounts for which the
Committee has investment responsibility, the Trustee, acting only as directed
by the Committee, shall enter into such agreements as are necessary to
facilitate any investment, including agreements entering into a limited
partnership, Subtrust or the participation in real estate funds. The Trustee
shall not make any investment review of, or consider the propriety of holding
or selling, or vote any assets for which the Committee has investment
responsibility.
4.5 With respect to each Separate Account, the Investment Adviser
thereof shall have the investment powers granted to the Trustee by ARTICLE
SIX, as limited by 7.1 through 7.3 of ARTICLE SEVEN, as if all references
therein to the Trustee referred to the Investment Adviser.
4.6 The Committee may direct the Trustee to (i) enter into such
agreements as are necessary to implement investment in futures contracts and
options on futures contracts; (ii) transfer initial margin to a futures
commission merchant or third party safekeeping bank pursuant to directions
from an Investment Adviser and (iii) pay or demand variation margin in
accordance with industry practice to or from such futures commission merchant
based on daily marking to market calculations. The Trustee shall have no
investment or custodial responsibility with respect to assets transferred to
a futures commission merchant or third party safekeeping bank.
6
<PAGE>
ARTICLE FIVE: INVESTMENT FUNDS
The Trust Fund shall be composed of assets of the Company Stock
Investment Fund and any other Investment Funds designated in writing by the
Committee. The Committee is authorized to terminate the existing Investment
Funds and establish new Investment Funds by giving advance written notice to
the Trustee describing the fund to be terminated or established and the
effective date thereof; provided that in no event shall the Trustee's duties
be modified without its consent. The Committee or its representative shall
direct the Trustee with respect to the allocation of assets to Investment
Funds and with respect to transfers among such Investment Funds. The Trustee
shall use its best efforts to move funds as soon as practicable when
transfers are delayed for any reason, but shall in no event be required to
advance its own funds for such purpose. Pending directions from the Committee
to allocate contributions among the Investment Funds, the Trustee shall hold
the contributions in a separate account invested in short term investments,
including common or collective short term investment funds of the Trustee.
Any cash held from time to time in any Investment Fund may be invested in
common or collective funds of the Trustee or its affiliate, or participations
in regulated investment companies (including those for which the Trustee or
its affiliate is adviser).
To the extent that any Investment Fund is invested in mutual fund shares
or bank commingled funds, the Committee shall initially select funds to be
invested in and shall be responsible for retaining the availability of or
terminating the availability of such funds. To the extent the Trustee is
required to enter into a custody agreement with the sponsor of a bank
commingled fund or such other type of fund, the Committee shall direct the
Trustee to enter into such agreement.
The Company Stock Investment Fund shall be composed of investments in
Company Stock. The Committee shall notify the Trustee in writing from time
to time of the amount of the fund to be maintained in the collective short
term investment fund and the Trustee shall not be required to advance funds
to make any transfers or distributions. Any cash held by the Trustee from
time to time in the Company Stock Investment Fund may be invested in common
or collective short term investment funds of the Trustee.
The Company has determined that daily movement of Participant balances
among the Investment Funds is an important design feature and objective of
the Plan and that timely transfers and distributions from the Company Stock
Investment Fund need to be facilitated in order to achieve such objective.
The Committee may authorize and direct the Trustee in writing to seek to
obtain settlement for sales of Company Stock on an expedited basis under
certain circumstances in which case the Trustee shall carry out its
responsibilities for execution of Company Stock sale transactions in
accordance with such direction and subject to any limitations expressed
therein.
7
<PAGE>
ARTICLE SIX: POWERS OF TRUSTEE
Except as otherwise provided in this agreement and subject to the
limitations on powers set forth in Article Seven and elsewhere hereof, the
Trustee shall hold, manage, care for and protect the assets of the Trust fund
and shall have until actual distribution thereof the following powers and,
except to the extent inconsistent herewith, those now or hereafter conferred
by law:
6.1 To retain any asset originally included in the Trust Fund or
subsequently added thereto;
6.2 To invest and reinvest the assets without distinction between
income and principal in bonds, stocks, mortgages, notes, options, futures
contracts, options on futures contracts, limited partnership interests,
participations in regulated investment companies (including those for which
the Trustee or its affiliate is adviser), or other property of any kind, real
or personal, foreign or domestic, and to enter into insurance contracts;
6.3 To deposit any part or all of the assets with the Trustee or its
affiliate as trustee, or another person or entity acting as trustee of any
collective or group trust fund which is now or hereafter maintained as a
medium for the collective investment of funds of pension, profit sharing or
other employee benefit plans, and which is qualified under Section 401(a) and
exempt from taxation under Section 501(a) of the Code, and to withdraw any
part or all of the assets so deposited; any assets deposited with the trustee
of a collective or group trust fund shall be held and invested by the trustee
thereunder pursuant to all the terms and conditions of the trust agreement or
declaration of trust establishing the fund, which are hereby incorporated
herein by reference and shall prevail over any contrary provision of this
agreement;
6.4 To deposit cash in any depository, including the banking
department of the Trustee or its affiliate and any organization acting as a
fiduciary with respect to the Trust Fund;
6.5 To hold any part of the assets in cash without liability for
interest, pending investment thereof or the payment of expenses or making of
distributions therewith, notwithstanding the Trustee's receipt of "float"
from such uninvested cash;
6.6 To cause any asset, real or personal, to be held in a corporate
depository or federal book entry account system or registered in the
Trustee's name or in the name of a nominee or in such other form as the
Trustee deems best without disclosing the trust relationship;
6.7 To vote, either in person or by general or limited proxy, or
refrain from voting, any corporate securities for any purpose, except that
any security as to which the Trustee's possession of voting discretion would
subject the issuing company or the Trustee to any law, rule or regulation
adversely affecting either the company or the Trustee's ability to retain or
vote company securities, shall be voted as directed by the Committee; to
exercise or sell any
8
<PAGE>
subscription or conversion rights; to consent to and join in or oppose any
voting trusts, reorganizations, consolidations, mergers, foreclosures and
liquidations and in connection therewith to deposit securities and accept and
hold other property received therefor;
6.8 To lease any assets for any period of time though commencing in
the future or extending beyond the term of the trust;
6.9 To borrow money from any lender, to extend or renew any existing
indebtedness and to mortgage or pledge any assets;
6.10 To sell at public or private sale, contract to sell, convey,
exchange, transfer and otherwise deal with the assets in accordance with
industry practice, and to sell put and covered call options from time to time
for such price and upon such terms as the Trustee sees fit; the Company
acknowledges that the Trustee may reverse any credits made to the Trust Fund
by the Trustee prior to receipt of payment in the event that payment is not
received;
6.11 To employ agents, attorneys and proxies and to delegate to any one
or more of them any power, discretionary or otherwise, granted to the Trustee;
6.12 To compromise, contest, prosecute or abandon claims in favor of or
against the Trust Fund;
6.13 To appoint foreign custodians as agent of the Trustee to custody
foreign securities holdings of any Separate Account established by the
Committee or of any Trustee Investment Account;
6.14 To utilize any tax refund claim procedures with respect to taxes
withheld to which the Trust Fund may be entitled under applicable tax laws,
treaties and regulations; any exercise of such power by the Trustee shall be
on a best efforts basis; and
6.15 To perform other acts necessary or appropriate for the proper
administration of the Trust Fund, execute and deliver necessary instruments
and give full receipts and discharges.
9
<PAGE>
ARTICLE SEVEN: LIMITATIONS ON POWERS
For purposes of this agreement, the powers and responsibilities
allocated to the Trustee shall be limited as follows:
7.1 The powers of the Trustee shall be exercisable for the exclusive
purpose of providing benefits to the Participants and Beneficiaries under the
Plans and in accordance with the care, skill, prudence and diligence under
the circumstances then prevailing that a prudent man acting in like capacity
and familiar with such matters and consistent with the standards of a prudent
man under ERISA;
7.2 Subject to 7.1 and 7.3, the Trustee shall diversify the
investments of that portion of the Trust Fund for which it has investment
responsibility so as to minimize the risk of large losses;
7.3 Subject to 7.1, the Trustee shall, with respect to that portion of
the Trust Fund for which it has investment responsibility, follow the
investment guidelines established by the Committee given in exercise of that
Committee's responsibility;
7.4 The Trustee shall not make any investment review of, consider the
propriety of holding or selling, or vote other than as directed by the
Investment Adviser, any assets of the Trust Fund allocated to a Separate
Account in accordance with ARTICLE FOUR, except that if the Trustee shall
not have received contrary instructions from the Investment Adviser thereof,
the Trustee shall invest for short term purposes any cash consisting of U.S.
dollars of a Separate Account in its custody in bonds, notes and other
evidences of indebtedness having a maturity date not beyond five years from
the date of purchase, United States Treasury bills, commercial paper,
bankers' acceptances and certificates of deposit, and undivided interests or
participations therein and (if subject to withdrawal on a daily or weekly
basis) participations in common or collective funds composed thereof. For
currencies other than U.S. dollars, the Trustee shall invest cash of a
Separate Account as directed by the Investment Adviser with respect to that
Separate Account and such investments may include an interest bearing account
of a foreign custodian; and
7.5 The Trustee shall vote shares of Company Stock held in the Company
Stock Investment Fund and respond to a tender or exchange offer in accordance
with (a) of the following provisions:
(a) The Trustee, or the Company upon written notice to the Trustee,
shall furnish to each Participant who has Company Stock credited to his or
her individual account under the Company Stock Investment Fund the date and
purpose of each meeting of the stockholders of the Company at which Company
Stock is entitled to be voted. The Trustee, or the Company if it has
furnished the above information, shall request from each Participant
instructions to be furnished to the Trustee (or to a tabulating agent
appointed by the Trustee) as to the voting at that meeting of Company Stock
credited to the Participant's account. If the Participant furnishes such
10
<PAGE>
instructions to the Trustee or its agent within the time specified in the
notification, the Trustee shall vote such Company Stock in accordance with
the Participant's instructions. All Company Stock credited to Participant
accounts as to which the Trustee or its agent do not receive instructions
as specified above, and all unallocated Company Stock held in the Company
Stock Investment Fund shall be voted by the Trustee proportionately in the
same manner as it votes Company Stock as to which the Trustee or its agent
have received voting instructions as specified above. Similarly, the
Trustee, or the Company upon written notice to the Trustee, shall furnish
to each Participant who has Company Stock credited to his or her individual
account under the Company Stock Investment Fund notice of any tender offer
for, or a request or invitation for tenders of, Company Stock received by
the Trustee. The Trustee, or the Company if it has furnished such notice,
shall request from each such Participant instructions to be furnished to
the Trustee (or to a tabulating agent appointed by the Trustee) as to the
tendering of Company Stock credited to the Participant's account and for
this purpose the Trustee or the Company, as the case may be, shall provide
Participants with a reasonable period of time in which they may consider
any such tender offer for, or request or invitation for tender of, Company
Stock of which the Trustee has been advised by the Committee. The Trustee
shall tender such Company Stock as to which the Trustee or its agent have
received instructions to tender from Participants within the time specified
by the Trustee or the Company, as the case may be. Company Stock credited
to Participant accounts as to which the Trustee or its agent have not
received instructions from Participants shall not be tendered. As to all
unallocated Company Stock held by the Trustee, the Trustee shall tender the
shares pursuant to the Direction of the Committee. The Committee shall
provide the Trustee with timely information regarding proxy voting and
tender offers and in carrying out its responsibilities under this provision
the Trustee may conclusively rely on information furnished to it by the
Committee, including the names and current addresses of Participants, the
number of shares of Company Stock credited to Participant accounts under
the Company Stock Investment Fund, and the number of shares of Company
Stock held by the Trustee in the Company Stock Investment Fund that have
not yet been allocated.
A Participant shall be a "named fiduciary" under ERISA to the extent
of the Participant's authority to direct the investment in, voting, tender,
exchange or sale of Company Stock allocated to the Participant's account
and their proportionate share of unallocated Company Stock held by the
Trustee.
(b) No provision of this Section 7.5 shall prevent the Trustee from
taking any action relating to its duties under this Section 7.5 if the
Trustee determines in its sole discretion that such action is necessary in
order for the Trustee to fulfill its fiduciary responsibilities under
ERISA.
(c) Purchases and sales of Company Stock may be made to, from or
through any source, provided that such purchases from or sales to a party
in interest (as defined in Section 3(14) of ERISA) shall comply with the
requirements of Section 408(e) of ERISA. Rights, options or warrants
offered to purchase Company Stock
11
<PAGE>
shall be exercised by the Trustee to the extent that there is cash
available for the investment; to the extent cash is not available, the
same shall be sold on the open market.
(d) Except for the short term investment of cash, the Company has
limited the investment power of the Trustee in the Company Stock Investment
Fund to the purchase of Company Stock. The Trustee shall not be liable for
the purchase, retention, voting, tender, exchange or sale of Company Stock
and the Company (which has the authority to do so under the laws of the
state of its incorporation) agrees to indemnify THE NORTHERN TRUST COMPANY
from any liability, loss and expense, including reasonable legal fees and
expenses which THE NORTHERN TRUST COMPANY may sustain by reason of
purchase, retention, voting, tender, exchange or sale of Company Stock.
This paragraph shall survive the termination of this agreement.
7.6 The Committee shall have sole responsibility for the decision to
maintain the custody of foreign investments abroad. Except as otherwise
directed by the Committee, custody of foreign investments shall be maintained
with foreign custodians selected by the Trustee. The Trustee shall have no
responsibility for losses to the Trust Fund resulting from the acts or
omissions of any foreign custodian appointed by the Trustee unless due to the
foreign custodian's fraud, negligence or willful misconduct. The Trustee
shall maintain custody of foreign investments in any jurisdiction where the
Trustee has not selected a custodian solely as directed by the Committee.
The Trustee shall have no responsibility for the financial condition, acts or
omissions of any foreign custodian holding assets of the Trust fund at the
direction of the Committee.
ARTICLE EIGHT: ACCOUNTS
The Trustee shall keep accurate and detailed accounts of all
investments, receipts and disbursements and other transactions hereunder, and
all accounts, books and records relating thereto shall be open at all
reasonable times to inspection and audit by any person designated by the
Company or entitled thereto, under ERISA. Such accounts of all receipts and
disbursements shall include accounts of all contributions, distributions,
purchases, sales and other transactions of the Trust Fund. Within 60 days
after the close of each fiscal year of the Trust Fund and of any other period
agreed upon by the Trustee and the Committee the Trustee shall render to the
Committee a statement of account for the Trust Fund for the period commencing
with the close of the last preceding period and a list showing each asset
thereof as of the close of the current period and its cost and fair market
value. The Trustee shall rely conclusively upon the determination of the
issuing insurance company with respect to the fair market value of each
insurance contract and upon the determination of the Investment Adviser of
each Separate Account with respect to the fair market value of those assets
allocated thereto for which the Trustee deems not to have a readily
ascertainable value, and the Trustee shall have no responsibility with
respect thereto.
12
<PAGE>
An account of the Trustee may be approved by the Committee by written
notice delivered to the Trustee or by failure to object to the account by
written notice delivered to the Trustee within eighteen (18) months of the
date upon which the account was delivered to the Committee. The approval of
an account shall constitute a full and complete discharge to the Trustee as
to all matters set forth in that account as if the account had been settled
by a court of competent jurisdiction in an action or proceeding to which the
Trustee, the Company and the Committee were parties. In no event shall the
Trustee be precluded from having its accounts settled by a judicial
proceeding. Nothing in this article shall relieve the Trustee of any
responsibility, or liability for any responsibility, under ERISA.
ARTICLE NINE: TRUSTEE SUCCESSION
The Trustee may resign at any time by written notice to the Committee,
or the Committee may remove the Trustee by written notice to the Trustee.
The resignation or removal shall be effective 60 days after the date of the
Trustee's resignation or receipt of the notice of removal or at such earlier
date as the Trustee and the Committee may agree.
In case of the resignation or removal of the Trustee, the Committee
shall appoint a successor trustee by delivery to the Trustee of a written
instrument executed by the Committee appointing the successor trustee and a
written instrument executed by the successor trustee accepting the
appointment, whereupon the Trustee shall deliver the assets of the Trust Fund
to the successor trustee but may reserve such reasonable amount as the
Trustee may deem necessary for outstanding and accrued charges against the
Trust Fund.
The successor trustee, and any successor to the trust business of the
Trustee by merger, consolidation or otherwise, shall have all the powers
given the originally named Trustee. No successor trustee shall be personally
liable for any act or omission of any predecessor. Except as otherwise
provided in ERISA, the receipt of the successor trustee and the approval of
the Trustee's final account by the Committee in the manner provided in
ARTICLE EIGHT shall constitute a full and complete discharge to the Trustee.
ARTICLE TEN: MISCELLANEOUS
10.1 Any action required to be taken by the Company or by a Subsidiary
shall be by resolution of its board of directors or by written direction of
one or more of its president, any vice president or treasurer. The Trustee
may rely upon a resolution or direction filed with the Trustee and shall have
no responsibility for any action taken by the Trustee in accordance with any
such resolution or direction.
10.2 The Company shall certify to the Trustee the names of the members of
the Committee acting from time to time, and the Trustee shall not be charged
with knowledge of a change in the membership of the Committee until so notified
by the Company. Any action required to be taken by the Committee shall be by
direction of such person or persons as shall be designated by the Committee to
act for the Committee. The Trustee may rely upon an
13
<PAGE>
instrument of designation signed by the secretary or chairman of the
Committee and filed with the Trustee and shall have no responsibility for any
action taken by the Trustee in accordance with any such direction.
Notwithstanding anything herein to the contrary, the Committee may delegate
any of its responsibilities hereunder to a representative by giving to the
Trustee in writing a letter which identifies the representative and sets
forth the list of its responsibilities under this agreement that it has
authorized the representative to carry out.
10.3 The Trustee may consult with legal counsel, who may also be
counsel for the Company, with respect to its responsibilities under this
Agreement and shall be fully protected in acting or refraining from acting in
reliance upon the written advice of legal counsel for the Company. The
Company shall have no obligation to cause its legal counsel to provide any
advice to the Trustee.
10.4 In no event shall the terms of any Plan, either expressly or by
implication, be deemed to impose upon the Trustee any power or responsibility
other than those set forth in this agreement. The Trustee may assume until
advised to the contrary that each Plan and the Trust Fund is qualified under
Section 401(a) and exempt from taxation under Section 501(a) of the Code, or
under corresponding provisions of subsequent federal tax laws. The Trustee
shall be accountable for contributions made to a Plan and included among the
assets of the Trust Fund but shall have no responsibility to determine
whether the contributions comply with the provisions of the Plan or of ERISA.
10.5 In any judicial proceeding to settle the accounts of the Trustee,
the Trustee, the Company and the Committee shall be the only necessary
parties; in any other judicial proceeding with respect to the Trustee or the
Trust Fund, the Trustee, the Company and each affected Subsidiary shall be
the only necessary parties; and no Participant or Beneficiary shall be
entitled to any notice of process. A final judgment in any such proceeding
shall be binding upon the parties to the proceeding and all Participants and
Beneficiaries.
10.6 The Trustee shall be reimbursed for all reasonable expenses
incurred in the management and protection of the Trust Fund, including
reasonable accounting and legal fees, and shall receive such reasonable
compensation for its services and as the Trustee and the Company shall from
time to time agree. The initial fees of the Trustee for its services
hereunder are set forth on Exhibit B attached hereto and incorporated herein
by this reference.
10.7 Without limiting the rights of the Trustee as otherwise provided
in this agreement, pursuant to direction by the Committee, the Trustee shall
pay from the Trust Fund expenses of a Plan or compensation to parties
providing services to a Plan including but not by way of limitation, expenses
or compensation related to actuarial, legal, accounting, office space,
printing, computer, record-keeping, investment, performance evaluation or any
other material or service provided to a Plan.
10.8 In the event that THE NORTHERN TRUST COMPANY incurs any liability,
loss, claim, suit or expense (including reasonable attorneys fees) in connection
with or arising out of its provision of services under this agreement, or its
status as Trustee hereunder, under circumstances where THE NORTHERN TRUST
COMPANY cannot obtain or would be
14
<PAGE>
precluded by law from obtaining payment or reimbursement of such liability,
loss, claim, suit or expense (including reasonable attorneys fees) from the
Trust Fund, then the Company (which has the authority to do so under the laws
of the state of its incorporation) shall indemnify and hold THE NORTHERN
TRUST COMPANY harmless from and against such liability, loss, claim, suit or
expense, except to the extent such liability, loss, claim, suit or expense
arises directly from a breach by the Trustee of responsibilities specifically
allocated to it by the terms of this agreement. Notwithstanding the
foregoing, THE NORTHERN TRUST COMPANY shall not be indemnified for any loss,
liability, claim, suit or expense to the extent the Trustee participated
knowingly in, or knowingly undertook to conceal, an act or omission of any
other person or entity constituting a breach of such person or entity's
fiduciary responsibility hereunder, knowing such act or omission was a
breach; provided however, that the Trustee shall not be deemed to have
"participated" in a breach for purposes of this undertaking solely as a
result of the performance by the Trustee or its officers, employees, or
agents of any custodial, reporting, recording and bookkeeping functions with
respect to any assets of the Trust Fund managed by an Investment Manager or
the Committee or solely as a result of settling purchase and sale
transactions entered into or directed by an Investment Manager or the
Committee or to have "knowledge" of any breach solely as a result of the
normal information received by the Trustee or its officers, employees, or
agents in the normal course of performing such functions or settling such
transactions. This paragraph shall survive the termination of this agreement.
10.9 Neither the Company nor the Committee shall direct the Trustee to
cause any part of the Trust Fund to be diverted to any purpose other than the
exclusive benefit of the Participants and Beneficiaries or, except as
otherwise permitted under the relevant Plan and under ERISA, to be remitted
to the Company or a Subsidiary.
10.10 Any person dealing with the Trustee shall not be required to see
to the application of any money paid or property delivered to the Trustee or
inquire into the provisions of this agreement or of a Plan or the Trustee's
authority thereunder or compliance therewith, and may rely upon the statement
of the Trustee that the Trustee is acting in accordance with this agreement.
10.11 Except as otherwise directed by the Committee, which direction
shall be in compliance with all applicable provisions of the 1984 Retirement
Equity Act, the relevant Plan and Section 401(a)(13) of the Code, any
interest of a Participant or Beneficiary in the Trust Fund or a Plan or in
any distribution therefrom shall not be subject to the claim of any creditor,
any spouse for alimony or support, or others, or to legal process, and may
not be voluntarily or involuntarily alienated or encumbered.
10.12 If for any reason the Trustee is unwilling or unable to act as to
any property, such person or qualified corporation as the Trustee shall from
time to time designate in writing, with the consent of the Committee provided
such consent shall not be unreasonably withheld, shall act as special trustee
as to that property. Any person or corporation acting as special trustee may
resign at any time by written notice to the Trustee provided that such trust
agreement appointing such special trustee shall require the special trustee
to hold all assets transferred to such special trustee to be held in trust
until a successor trustee shall be
15
<PAGE>
appointed. Each special trustee shall have the powers granted to the Trustee
by this agreement, to be exercised only with the approval of the Trustee, to
which the net income and the proceeds from sale of any part or all of the
property shall be remitted to be administered under this agreement.
10.13 Loans to Participants as provided for in a Plan shall be granted
and administered by the Committee. The Trustee shall distribute cash to such
Participants who are granted loans in such amount and at such times as the
Committee shall from time to time direct in writing. Loan payments collected
by the Committee shall be forwarded to the Trustee. The amount of such loans
shall be carried by the Trustee as an asset of the trust equal to the
combined unpaid principal balance of all Participants. The Trustee shall
rely conclusively upon the determination of the Committee with respect to the
amount of the combined unpaid principal balance of all Participants. The
Trustee shall have no responsibility to ascertain whether a loan complies
with the provisions of a Plan, for the decision to grant a loan or for the
collection and repayment of a loan.
ARTICLE ELEVEN: GOVERNING LAW
The provisions of ERISA and the internal laws of Illinois shall govern
the validity, interpretation and enforcement of this agreement, and in case
of conflict, the provisions of ERISA shall prevail. The invalidity of any
part of this agreement shall not affect the remaining parts thereof.
ARTICLE TWELVE: AMENDMENT AND TERMINATION
The Company may at any time or times with the consent of the Trustee
amend this agreement in whole or in part by instrument in writing delivered
to the Trustee and effective upon the date therein provided.
This agreement shall terminate with respect to a Plan by action of the
Company or Subsidiary responsible for making contributions to the Plan
Account. Upon termination with respect to a Plan, the Trustee shall
distribute the Plan Account in the manner directed by the Committee, in cash
or in kind or partly in each as the Trustee and the Committee shall agree,
except that the Trustee shall be entitled to prior receipt of such rulings
and determinations from such administrative agencies as it may deem necessary
or advisable to assure itself that the distribution directed is in accordance
with law and will not subject the Trust Fund or the Trustee to liability, and
except, further, that the Trustee may reserve such reasonable amount as the
Trustee may deem necessary for outstanding and accrued charges against the
Plan Account. This agreement shall terminate in its entirety when there is
no asset included in the Trust Fund.
16
<PAGE>
IN WITNESS WHEREOF, the Company and the Trustee have executed this
agreement by their respective duly authorized officers and have caused their
respective corporate seals to be affixed hereto the day and year first above
written.
DOLE FOOD COMPANY, INC.
By:
--------------------------------------
Its:
-------------------------------------
ATTEST:
- ---------------------
(CORPORATE SEAL)
The undersigned, _____________________, does hereby certify that he/she
is the duly elected, qualified and acting Secretary of DOLE FOOD COMPANY,
INC. (the "Company") and further certifies that the person whose signature
appears above is a duly elected, qualified and acting officer of the Company
with full power and authority to execute this Trust Agreement on behalf of
the Company and to take such other actions and execute such other documents
as may be necessary to effectuate this Agreement.
- -------------------------
Secretary
DOLE FOOD COMPANY, INC.
THE NORTHERN TRUST COMPANY
By:
---------------------------------------
Its:
--------------------------------------
ATTEST:
- ----------------------
(CORPORATE SEAL)
17
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $ 4,424,160 $ 4,336,120 $ 3,840,303
Cost of products sold 3,785,745 3,692,277 3,256,345
- ------------------------------------------------------------------------------------------------------------------------------
Gross margin 638,415 643,843 583,958
Selling, marketing and administrative expenses 433,509 399,800 369,675
Hurricane Mitch charge 100,000 - -
Citrus charge 20,000 - -
Dried Fruit restructuring charge - - 50,000
- ------------------------------------------------------------------------------------------------------------------------------
Operating income 84,906 244,043 164,283
Interest income 9,312 7,776 8,412
Other income (expense) - net (7,996) 8,034 4,535
- ------------------------------------------------------------------------------------------------------------------------------
Earnings before interest and taxes 86,222 259,853 177,230
Interest expense 68,943 64,589 68,699
- ------------------------------------------------------------------------------------------------------------------------------
Income from operations before income taxes 17,279 195,264 108,531
Income taxes 5,200 35,100 19,500
- ------------------------------------------------------------------------------------------------------------------------------
Net income $ 12,079 $ 160,164 $ 89,031
- ------------------------------------------------------------------------------------------------------------------------------
Net income per common share
Basic $ 0.20 $ 2.67 $ 1.48
Diluted 0.20 2.65 1.47
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
25
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
------------------------------------------------
(IN THOUSANDS) 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets
Cash and short-term investments $ 35,352 $ 31,202
Receivables - net 616,579 534,844
Inventories 475,524 468,692
Prepaid expenses 43,200 48,438
- ------------------------------------------------------------------------------------------------------------------------------
Total current assets 1,170,655 1,083,176
Investments 71,923 69,248
Property, plant and equipment - net 1,102,285 1,024,247
Goodwill - net 277,962 65,942
Other assets 292,228 221,282
- ------------------------------------------------------------------------------------------------------------------------------
Total assets $ 2,915,053 $ 2,463,895
- ------------------------------------------------------------------------------------------------------------------------------
Current liabilities
Notes payable $ 29,637 $ 11,290
Current portion of long-term debt 6,451 2,326
Accounts payable 264,732 230,143
Accrued liabilities 504,058 432,680
- ------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 804,878 676,439
Long-term debt 1,116,422 754,849
Deferred income taxes and other long-term liabilities 314,527 328,293
Minority interests 57,394 37,842
Commitments and contingencies
Common shareholders' equity 621,832 666,472
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities and equity $ 2,915,053 $ 2,463,895
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
26
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
-------------------------------------------------------------------
(IN THOUSANDS) 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Income from operations $ 12,079 $ 160,164 $ 89,031
Adjustments to operations
Depreciation and amortization 122,058 112,081 111,073
Equity earnings, net of distributions (4,421) 373 (2,875)
Provision for deferred income taxes (33,288) 11,575 (1,741)
Hurricane Mitch charge, net 86,312 -- --
Citrus charge 20,000 -- --
Dried Fruit restructuring charge -- -- 50,000
Other (1,342) (23,005) (8,203)
Change in operating assets and liabilities,
net of effects from acquisitions
Receivables - net 39,027 (10,438) (89,176)
Inventories 2,463 72,066 27,222
Prepaid expenses and other assets (9,716) (1,167) (8,846)
Accounts payable and accrued liabilities (41,537) (7,487) (34,270)
Internal Revenue Service payment
related to prior years' audits (17,145) -- --
Other (17,392) (23,126) (37,262)
- ------------------------------------------------------------------------------------------------------------------------------
Cash flow provided by operating activities 157,098 291,036 94,953
- ------------------------------------------------------------------------------------------------------------------------------
Investing activities
Proceeds from sales of assets 19,291 38,700 58,855
Capital additions (150,207) (129,171) (109,686)
Purchases of investments and acquisitions,
net of cash acquired (332,100) (40,010) (58,775)
Hurricane Mitch insurance proceeds 22,500 -- --
- ------------------------------------------------------------------------------------------------------------------------------
Cash flow used in investing activities (440,516) (130,481) (109,606)
- ------------------------------------------------------------------------------------------------------------------------------
Financing activities
Short-term borrowings 39,508 28,414 19,694
Repayments of short-term debt (38,693) (40,887) (20,449)
Long-term borrowings 366,785 35,232 168,060
Repayments of long-term debt (25,692) (169,110) (163,799)
Cash dividends paid (24,027) (23,988) (24,020)
Issuance of common stock 11,773 6,644 11,232
Repurchase of common stock (42,086) -- (13,874)
- ------------------------------------------------------------------------------------------------------------------------------
Cash flow provided by (used in) financing activities 287,568 (163,695) (23,156)
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and short-term investments 4,150 (3,140) (37,809)
Cash and short term investments at beginning of year 31,202 34,342 72,151
- ------------------------------------------------------------------------------------------------------------------------------
Cash and short term investments at end of year $ 35,352 $ 31,202 $ 34,342
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- NATURE OF OPERATIONS
Dole Food Company, Inc. and its consolidated subsidiaries ("the Company") are
engaged in the worldwide sourcing, processing, distributing and marketing of
high quality, branded food products including fresh fruits and vegetables, as
well as processed foods including packaged fruits, fruit juices and beverage
operations in Honduras. Additionally, the Company sources and markets a full
line of premium fresh-cut flowers.
Operations are conducted throughout North America, Latin America, Europe
(including eastern European countries) and Asia (primarily in Japan and the
Philippines).
The Company's principal products are produced on both Company-owned and
leased land and are also acquired through associated producer and independent
grower arrangements. The Company's products are primarily packed and processed
by the Company and sold to retail and institutional customers and other food
product and flower companies.
NOTE 2 -- SUMMARY OF ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The Consolidated Financial Statements include the
accounts of all significant majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
ANNUAL CLOSING DATE: The Company's fiscal year ends on the Saturday closest to
December 31. Fiscal year 1998 ended January 2, 1999 and included 52 weeks, while
fiscal years 1997 and 1996 included 53 weeks and 52 weeks, respectively.
CASH AND SHORT-TERM INVESTMENTS: Cash and short-term investments include cash
on hand and time deposits with original maturities of three months or less.
INVENTORIES: Inventories are valued at the lower of cost or market. Cost is
determined principally on a first-in, first-out basis. Specific identification
and average cost methods are also used for certain packing materials and
operating supplies.
RECURRING AGRICULTURAL COSTS: The costs of growing bananas and pineapples are
charged to operations as incurred. Growing costs related to other crops are
recognized when the crops are harvested and sold.
INVESTMENTS: Investments in affiliates and joint ventures with ownership of 20%
to 50% are generally recorded on the equity method. Other investments are
accounted for using the cost method.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at cost,
less accumulated depreciation. Depreciation is computed principally by the
straight-line method over the estimated useful lives of the assets. As
necessary, the Company reviews the recoverability of these assets, as well as
certain intangible assets including goodwill, based on analyses of undiscounted
expected future cash flows without interest charges (see Note 4).
GOODWILL AND OTHER INTANGIBLE ASSETS: Goodwill and other intangible assets,
generally representing the excess of the cost over the net asset value of
acquired businesses, are stated at cost and are amortized principally on a
straight-line basis over the estimated future periods to be benefited (not
exceeding 40 years).
FOREIGN EXCHANGE: For subsidiaries in which the functional currency is the
United States dollar, net foreign exchange transaction gains or losses are
included in determining net income. These resulted in net losses of $4.8
million, $5.0 million and $2.1 million for 1998, 1997 and 1996, respectively.
Net foreign exchange gains or losses resulting from the translation of assets
and liabilities of foreign subsidiaries whose local currency is the
functional currency are accumulated as a separate component of common
shareholders' equity.
INCOME TAXES: Deferred income taxes are recognized for the tax consequences of
temporary differences by applying enacted statutory tax rates to the differences
between financial statement carrying amounts and the tax bases of assets and
liabilities. Income taxes which would be due upon the distribution of foreign
subsidiary earnings have not been provided where the undistributed earnings are
considered permanently invested.
EARNINGS PER COMMON SHARE: In accordance with Statement of Financial Accounting
Standards No. 128, "Earnings per Share", basic earnings per common share are
calculated using the weighted-average number of common shares outstanding during
the period without consideration of the dilutive effect of stock options. The
basic weighted-average number of common shares outstanding was 60.0 million for
1998, 1997 and 1996. Diluted earnings per common share are calculated using the
weighted-average number of common shares outstanding during the period after
consideration of the dilutive effect of stock options. The diluted
weighted-average number of common shares and equivalents outstanding was 60.4
million for 1998, 1997 and 1996.
FINANCIAL INSTRUMENTS: The Company's financial instruments are primarily
composed of short-term trade and grower receivables, notes receivable and notes
payable, as well as long-term grower receivables, notes receivable, notes
payable and debentures. For short-term instruments, the historical carrying
amount is a reasonable estimate of fair value. Fair values for long-term
financial instruments not readily marketable were estimated based upon
discounted future cash flows at prevailing market interest rates. Based on these
assumptions, management believes the fair market values of the Company's
financial instruments, other than certain debt instruments (see Note 7), are not
materially different from their recorded amounts as of January 2, 1999.
28
<PAGE>
The Company has historically not attempted to hedge fluctuations resulting
from foreign currency denominated transactions in both sourcing and selling
locations. However, the Company occasionally enters into forward contracts
related to specific foreign currency denominated purchase commitments and sales.
Such contracts are designated as hedges and meet the criteria for correlation
and risk mitigation. Accordingly, unrealized gains or losses on the fair value
of hedge instruments are deferred. Gains or losses on these contracts are
recognized when the underlying transactions settle and are recorded in the
income statement or as a component of the underlying asset or liability, as
appropriate. As of January 2, 1999, the Company had contracted to purchase
German marks to facilitate payment for two German-made refrigerated container
vessels (see Note 11) at a weighted-average exchange rate of DM 1.78 to $1.00
for a total notional value of $98.3 million. These fixed-rate contracts will be
settled during the fourth quarter of 1999, and as of January 2, 1999, their fair
value was approximately $105.8 million.
STOCK-BASED COMPENSATION: Statement of Financial Accounting Standards No. 123
("SFAS 123"), "Accounting for Stock-Based Compensation", defines a fair value
method of accounting for employee stock-based compensation cost but allows for
the continuation of the intrinsic value method prescribed by Accounting
Principles Board Opinion No. 25 ("APB 25"). In accordance with SFAS 123, the
Company has elected to continue to utilize the accounting method prescribed by
APB 25 and has adopted the disclosure requirements of SFAS 123 (see Note 9).
COMPREHENSIVE INCOME: Effective January 4, 1998, the Company adopted Statement
of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive
Income". SFAS 130 established standards for the reporting of comprehensive
income and its components, which consist of net income and other comprehensive
income. Other comprehensive income is comprised of changes to shareholders'
equity, other than contributions from or distributions to shareholders, excluded
from the determination of net income under generally accepted accounting
principles. The Company's other comprehensive income is comprised of unrealized
foreign currency translation gains and losses and is presented in the Company's
changes in shareholders' equity (see Note 10). Adoption of SFAS 130 did not
impact the Company's net income or shareholders' equity for the years presented.
USE OF ESTIMATES: The preparation of financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
RECLASSIFICATIONS: Certain prior year amounts have been reclassified to conform
to the 1998 presentation.
NOTE 3 -- ACQUISITIONS
During the second half of 1998, the Company acquired and invested in operations
in Latin America, North America and Europe with an aggregate cash purchase
price, net of cash acquired, of approximately $332 million. 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. Each
acquisition was accounted for as a purchase, and accordingly, the purchase price
was allocated to the net assets acquired based upon their estimated fair values
as of the date of acquisition. Preliminary allocations of purchase price
resulted in approximately $217 million of goodwill, which is being amortized
over 30 years. The fair values of assets acquired and liabilities assumed were
approximately $493 million and $161 million, respectively. Net income from
acquired operations included in the Company's results for 1998 was $1.7 million.
The following unaudited pro forma information presents the results of
operations of the Company as if the acquisitions had taken place on December 29,
1996:
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C>
Revenues $ 4,954,428 $5,050,709
Net income 20,638 163,044
Net income per common share:
Basic $ 0.34 $ 2.72
Diluted 0.34 2.70
- ------------------------------------------------------------------------------
</TABLE>
These pro forma results of operations have been prepared for comparative
purposes only and may not be indicative of the results of operations had the
acquisitions occurred on the date indicated or of future results of operations
of the Company.
The Company acquired and invested in production and distribution
operations in Europe, Latin America and Asia with an aggregate purchase
price, net of cash acquired, of approximately $40 million in 1997 and $59
million in 1996. Each acquisition was accounted for as a purchase, and
accordingly, the purchase price was allocated to the net assets acquired
based upon their estimated fair values as of the date of acquisition. The
allocations of purchase price resulted in approximately $11 million and $4
million of goodwill in 1997 and 1996, respectively. The goodwill is being
amortized over a period of up to 40 years. The fair values of assets acquired
and liabilities assumed were approximately $79 million and $39 million,
respectively, in 1997 and approximately $107 million and $48 million,
respectively, in 1996. Results of acquired operations were not significant in
1997 or 1996.
29
<PAGE>
NOTE 4 -- SPECIAL CHARGES
During the fourth quarter of 1998, the Company recorded a $100 million charge,
net of insurance proceeds received, for losses sustained from Hurricane Mitch.
The charge has been classified as a separate caption in the Consolidated
Statements of Income. The hurricane impacted over 30,000 acres of agricultural
plantings and severely damaged the Company's general agricultural infrastructure
at both its Honduran banana and beverage operations. A majority of the charge is
for write-downs of fixed assets, grower and trade receivables, inventories and
certain deferred crop growing costs that were completely or partially destroyed
or impaired by the hurricane. The Company has started to rehabilitate selected
parts of the affected areas. In this regard, the Company spent $13.7 million on
rehabilitation and relief efforts during 1998. Future rehabilitation costs, net
of insurance recoveries, will continue to be reported on a separate line in the
Consolidated Statements of Income in future years.
Included in the charge is $61.8 million related to property, plant and
equipment which consists of $23.7 million of asset write-offs for property
destroyed by the hurricane and $38.1 million of assets impaired by the
hurricane. The Company reviewed the impaired assets to determine whether
expected future cash flows from them (undiscounted and without interest charges)
would result in the recovery of the carrying amount of such property. As a
result of this review, the Company determined that these assets were impaired in
accordance with generally accepted accounting principles, and accordingly, an
impairment loss was recognized. The Company also recorded $3.1 million of
accrued liabilities for lease settlements and committed relief efforts as of
January 2, 1999. The amounts recorded, utilized and to be utilized in each
asset, liability and expense category are as follows:
<TABLE>
<CAPTION>
1998 UTILIZED TO BE
(IN THOUSANDS) CHARGE 1998 UTILIZED
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Receivables $ 19,283 $ 19,283 $ -
Inventory 13,266 13,266 -
Investment 2,000 2,000 -
Property, plant and
equipment 61,750 61,750 -
Deferred costs 9,442 9,442 -
Accrued liabilities 3,071 - 3,071
Rehabilitation expenses 13,688 13,688 -
Insurance recoveries (22,500) (22,500) -
- ------------------------------------------------------------------------------
Total Hurricane
Mitch charge $ 100,000 $ 96,929 $ 3,071
- ------------------------------------------------------------------------------
</TABLE>
From December 21 to December 24, 1998 freezing temperatures destroyed or
severely damaged citrus crops in California. The Company has ownership interests
in approximately 6,500 acres of citrus in the areas affected by the freeze. As a
result of the freeze and changes in industry economics, the Company recorded a
$20 million charge. Of the $20 million charge, $13.3 million related to
write-downs of deferred crop costs and property, plant and equipment as well as
reductions in grower receivable recovery estimates due to damages sustained
during the freeze. The remaining $6.7 million of the charge related to
reductions in grower receivable recovery estimates in other areas of the
Company's North American citrus operations due to the recognition of changes in
industry economics that impacted certain independent growers. The charge has
been classified as a separate caption in the Consolidated Statements of Income.
This loss was largely not covered by insurance.
Included in the charge is $3.1 million of property, plant and equipment
impaired by the freeze. The Company reviewed these assets to determine whether
expected future cash flows from them (undiscounted and without interest charges)
would result in the recovery of the carrying amount of such assets. As a result
of this review, the Company determined that these assets were impaired in
accordance with generally accepted accounting principles, and accordingly, an
impairment loss was recognized. Included in accrued liabilities is $0.2 million
related to the severance of 29 employees, as well as $0.6 million of incremental
freeze protection costs incurred in 1998. During 1999, crop costs to finish the
crop year and unutilized overhead in idled packing facilities will be charged to
cost of products sold as incurred. The amounts recorded, utilized and to be
utilized in each asset and liability category are as follows:
<TABLE>
<CAPTION>
1998 UTILIZED TO BE
(IN THOUSANDS) CHARGE 1998 UTILIZED
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Grower receivables -
freeze areas $ 6,177 $ 6,177 $ -
Grower receivables -
other areas 6,737 6,737 -
Crop costs inventory 3,171 3,171 -
Property, plant and
equipment 3,148 3,148 -
Accrued liabilities 767 - 767
- ------------------------------------------------------------------------------
Total citrus charge $ 20,000 $ 19,233 $ 767
- ------------------------------------------------------------------------------
</TABLE>
In 1996, the Company implemented a formal plan to close its dried fruit facility
located in Fresno, California, which had suffered continued losses. During the
fourth quarter of 1996, a restructuring charge of $50.0 million was recorded
related to the closure of this facility. The principal component of the charge
was a provision for asset write-downs of $38.5 million. The closure of this
facility was essentially completed in the second quarter of 1997. During 1997,
$30.0 million for asset write-downs, $2.2 million for contract terminations and
$2.6 million for severance payments were charged against this provision.
30
<PAGE>
During 1998, $1.3 million for asset write-downs, $0.3 million for contract
terminations and $0.3 million for sever ance payments were charged against this
provision. In total, 466 employees were terminated as a result of the closure of
this facility.
NOTE 5 -- CURRENT ASSETS AND LIABILITIES
Short-term investments of $0.6 million and $1.8 million as of January 2, 1999
and January 3, 1998, respectively, consisted principally of time deposits.
Outstanding checks, which are funded as presented for payment, totaled $33.5
million and $22.1 million as of January 2, 1999 and January 3, 1998,
respectively, and were included in accounts payable.
Details of certain current assets were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C>
Receivables
Trade $ 494,587 $ 434,781
Notes and other 190,331 142,820
Affiliated operations 24,426 17,342
- ------------------------------------------------------------------------------
709,344 594,943
Allowance for doubtful accounts (92,765) (60,099)
- ------------------------------------------------------------------------------
$ 616,579 $ 534,844
- ------------------------------------------------------------------------------
Inventories
Finished products $ 168,423 $ 149,933
Raw materials and work in progress 156,623 167,426
Crop growing costs 47,676 46,207
Operating supplies and other 102,802 105,126
- ------------------------------------------------------------------------------
$ 475,524 $ 468,692
- ------------------------------------------------------------------------------
</TABLE>
Included in notes receivable is a $10 million note from Castle & Cooke, Inc.
which bears interest at the rate of 7% per annum and is due December 8, 2000.
Accrued liabilities as of January 2, 1999 and January 3, 1998 included $92.9
million and $86.4 million, respectively, of amounts due to growers.
NOTE 6 -- PROPERTY, PLANT AND EQUIPMENT
Major classes of property, plant and equipment were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C>
Land and land improvements $ 448,151 $ 444,686
Buildings and improvements 314,460 264,494
Machinery and equipment 957,478 864,431
Construction in progress 101,130 84,954
- ------------------------------------------------------------------------------
1,821,219 1,658,565
Accumulated depreciation (718,934) (634,318)
- ------------------------------------------------------------------------------
$1,102,285 $1,024,247
- ------------------------------------------------------------------------------
</TABLE>
Depreciation expense for 1998, 1997 and 1996 totaled $103.4 million, $101.9
million and $102.5 million, respectively.
NOTE 7 -- DEBT
Notes payable consisted primarily of short-term borrowings required to fund
certain foreign operations and totaled $29.6 million with a weighted-average
interest rate of 13.0% as of January 2, 1999 and $11.3 million with a
weighted-average interest rate of 19.3% as of January 3, 1998.
Long-term debt consisted of:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C>
Unsecured debt
Notes payable to banks at an
average interest rate of 5.5 %
(6.2% - 1997) $ 63,500 $ 14,600
6.75% notes due 2000 225,000 225,000
7% notes due 2003 300,000 300,000
6.375% notes due 2005 300,000 --
7.875% debentures due 2013 175,000 175,000
Various other notes due
1999 - 2004 at an average
interest rate of 5.8% (7.8% - 1997) 38,064 36,102
Secured debt
Mortgages, contracts and notes
due 1999 - 2012 at an average
interest rate of 6.4% (9.2% - 1997) 23,824 8,525
Unamortized debt discount and
issue costs (2,515) (2,052)
- -------------------------------------------------------------------------
1,122,873 757,175
Current maturities (6,451) (2,326)
- -------------------------------------------------------------------------
$ 1,116,422 $ 754,849
- -------------------------------------------------------------------------
</TABLE>
The Company estimates the fair value of its fixed interest rate unsecured debt
based on current quoted market prices. The estimated fair value of unsecured
notes (face value $1,000 million in 1998 and $700 million in 1997) was
approximately $1,017 million at January 2, 1999 and $716 million at January 3,
1998.
In July 1998, the Company extended its 5-year $400 million revolving credit
facility (the "Facility") to 2003. At the Company's option, borrowings under the
Facility bear interest at a certain percentage over the agent's prime rate or
the London Interbank Offered Rate ("LIBOR"). Provisions under the Facility
require the Company to comply with certain financial covenants which include a
maximum permitted ratio of consolidated debt to net worth and a minimum required
fixed charge coverage ratio. At January 2, 1999 and January 3, 1998, there were
no borrowings outstanding under the Facility. The Company may also borrow under
uncommitted lines of credit at rates offered from time to time by various banks
that may not
31
<PAGE>
be lenders under the Facility. Net borrowings out standing under the uncommitted
lines of credit totaled $63.5 million and $14.6 million at January 2, 1999 and
January 3, 1998, respectively.
On October 6, 1998 the Company issued $300 million of unsecured notes in a
public offering for which it received cash proceeds of $297.2 million. The notes
bear interest at 6.375% and mature in 2005. Net proceeds from the sale of the
notes were used to repay amounts outstanding under the Facility and to fund
acquisitions during the fourth quarter of 1998.
Sinking fund requirements and maturities with respect to long-term debt as
of January 2, 1999 were as follows (in millions): 1999 - $6.5; 2000 - $240.6;
2001 - $13.4; 2002 - $5.1; 2003 - $368.4; and thereafter - $488.9.
Interest payments totaled $67.1 million, $66.2 million and $68.4 million,
during 1998, 1997 and 1996, respectively.
NOTE 8 -- EMPLOYEE BENEFIT PLANS
The Company has qualified and non-qualified defined benefit pension plans
covering certain full-time employees. Benefits under these plans are generally
based on each employee's eligible compensation and years of service except for
certain hourly plans which are based on negotiated benefits. In addition to
providing pension benefits, the Company has other plans that provide certain
health care and life insurance benefits for eligible retired employees. Covered
employees may become eligible for such benefits if they fulfill established
requirements upon reaching retirement age.
For U.S. plans, the Company's policy is to fund the net periodic pension
cost plus a 15-year amortization of the unfunded liability. Most of the
Company's international pension plans and all of the Company's plans other than
pensions are unfunded.
The status of the defined benefit pension plans and other plans was as
follows:
<TABLE>
<CAPTION>
U.S. PENSION PLANS INTERNATIONAL PENSION PLANS OTHER PLANS
------------------------- ----------------------------- -----------------------
(IN THOUSANDS) 1998 1997 1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Change in projected benefit obligation
Benefit obligation at beginning of year $ 276,767 $ 248,676 $ 30,535 $ 30,776 $ 71,507 $ 73,176
Service cost 4,238 4,083 1,826 1,828 186 212
Interest cost 19,492 18,405 4,079 3,650 5,031 5,423
Participant contributions -- -- 28 41 -- --
Plan amendments 2,686 -- 195 -- -- --
Exchange rate changes -- -- 605 (9,497) -- --
Actuarial loss (gain) 20,621 26,825 (1,635) 5,559 (3,063) (1,182)
Curtailments and settlements -- -- -- (404) -- --
Benefits paid (21,716) (21,222) (1,693) (1,418) (5,737) (6,122)
- ----------------------------------------------------------------------------------------------------------------------------------
Benefit obligation at end of year $ 302,088 $ 276,767 $ 33,940 $ 30,535 $ 67,924 $ 71,507
- ----------------------------------------------------------------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets at
beginning of year $ 281,944 $ 250,154 $ 1,737 $ 2,473 -- --
Actual return on plan assets 39,704 46,222 150 60 -- --
Company contributions 7,443 6,790 1,679 2,162 5,737 6,122
Participant contributions -- -- 28 41 -- --
Exchange rate changes -- -- 128 (831) -- --
Settlements -- -- -- (750) -- --
Benefits paid (21,716) (21,222) (1,693) (1,418) (5,737) (6,122)
- ----------------------------------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year $ 307,375 $ 281,944 $ 2,029 $ 1,737 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Funded status $ 5,287 $ 5,177 $ (31,911) $ (28,798) $ (67,924) $ (71,507)
Unrecognized net loss (gain) (419) (2,967) 1,172 2,588 (18,232) (15,968)
Unrecognized prior service cost (benefit) 4,539 2,099 3,589 3,815 (1,407) (1,740)
Unrecognized net transition
obligation (asset) (467) (650) 1,655 1,677 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net amount recognized $ 8,940 $ 3,659 $ (25,495) $ (20,718) $ (87,563) $ (89,215)
- ----------------------------------------------------------------------------------------------------------------------------------
Amounts recognized in the
Consolidated Balance Sheets
Prepaid benefit cost $ 16,234 $ 9,410 -- -- -- --
Accrued benefit liability (11,045) (7,455) (25,897) (20,858) (87,563) (89,215)
Additional minimum liability 3,751 1,704 402 140 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net amount recognized $ 8,940 $ 3,659 $ (25,495) $ (20,718) $ (87,563) $ (89,215)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
For U.S. plans, the projected benefit obligation was determined using assumed
discount rates of 7.0% in 1998 and 7.25% in 1997 and assumed rates of increase
in future compensation levels of 4.5% in 1998 and 1997. The expected long-term
rate of return on assets was 9.25% in 1998 and 1997. For international plans,
the projected benefit obligation was determined using assumed discount rates of
7.0% to 20.0% in 1998 and 7.25% to 20.0% in 1997 and assumed rates of increase
in future compensation levels of 4.5% to 17.5% in 1998 and 1997. The expected
long-term rate of return on assets for international plans was 9.25% to 20.0% in
1998 and 1997.
The accumulated plan benefit obligation ("APBO") for the Company's other
plans in 1998 was determined using an annual rate of increase in the per
capita cost of covered health care benefits of 8.5% in 1999 decreasing to
5.0% in 2006 and thereafter. The annual rate of increase assumed in the 1997
APBO was 9.0% in 1998 decreasing to 5.0% in 2006 and thereafter. An increase
in the assumed health care cost trend rate of one percentage point in each
year would have increased the Company's APBO as of January 2, 1999 by
approximately $5.6 million and would have increased the service and interest
cost components of postretirement benefit expense for 1998 by $0.5 million,
in aggregate. A decrease in the assumed health care cost trend rate by one
percentage point in each year would have decreased the Company's APBO as of
January 2, 1999 by approximately $5.5 million and would have decreased the
service and interest cost components of postretirement benefit expense for
1998 by $0.4 million, in aggregate. The weighted-average discount rate used
in determining the APBO was 7.0% for the U.S. and international plans in 1998
and 7.25% for the U.S. and international plans in 1997.
The Company's U.S. ERISA Excess Plan had an APBO of $11.0 million in 1998
and $7.5 million in 1997. Due to the nature of the plan, it remains unfunded.
The remainder of the Company's domestic pension plans were fully funded. The
APBO for the Company's unfunded international pension plans, in aggregate, was
$15.9 million in 1998 and $13.2 million in 1997.
The components of net periodic benefit cost for the U.S. and
international plans were as follows:
<TABLE>
<CAPTION>
PENSION PLANS OTHER PLANS
--------------------- -----------------------------------------------
(IN THOUSANDS) 1998 1997 1996 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Components of net periodic benefit cost
Service cost $ 6,064 $ 5,911 $ 9,143 $ 186 $ 212 $ 237
Interest cost 23,571 22,055 21,968 5,031 5,423 5,482
Expected return on plan assets (22,712) (21,312) (20,156) -- -- --
Amortization of:
Unrecognized net loss (gain) 500 200 486 (799) -- (156)
Unrecognized prior service cost (benefit) 681 688 673 (333) (333) (325)
Unrecognized net obligation (asset) (29) (41) 59 -- -- --
Curtailment (gain) -- -- -- -- (600) (577)
- --------------------------------------------------------------------------------------------------------------------------------
$ 8,075 $ 7,501 $ 12,173 $ 4,085 $ 4,702 $ 4,661
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company recognized net curtailment losses of $1.3 million in 1996 for the
domestic plans and $2.4 million in 1997 for the international plans. These
losses were due to additional benefit payments resulting from reductions in
workforce.
The Company offers two 401(k) plans to salaried U.S. employees. Eligible
employees may defer a percentage of their annual compensation up to a maximum
allowable amount under federal income tax law to supplement their retirement
income. These plans provide for Company contributions based on a certain per
centage of each participant's contribution, subject to a maximum contribution by
the Company. Total Company contributions to these plans in 1998, 1997 and 1996
were $3.4 million, $3.2 million and $3.8 million, respectively.
The Company is also a party to various industry-wide collective bargaining
agreements which provide pension benefits. Total contributions to these plans
plus direct payments to pensioners in 1998, 1997 and 1996 were $0.6 million,
$0.8 million and $1.2 million, respectively.
In 1998, the Company adopted Statements of Financial Accounting Standards
No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits". Such adoption did not impact the Company's financial position or
results of operations.
33
<PAGE>
NOTE 9 -- STOCK OPTIONS AND AWARDS
Under the 1982 and 1991 Stock Option and Award Plans ("the Option Plans"), the
Company can grant incentive stock options, non-qualified stock options, stock
appreciation rights, restricted stock awards and performance share awards to
officers and key employees of the Company. Stock options vest over time or based
on stock price appreciation and may be exercised for up to 10 years from the
date of grant, as determined by the committee of the Company's Board of
Directors administering the Option Plans. No stock appreciation rights,
restricted stock awards or performance share awards were outstanding at January
2, 1999.
Under the 1995 Non-Employee Directors Stock Option Plan (the "Directors
Plan"), each active non-employee director will receive a grant of 1,500
non-qualified stock options (the "Options") on February 15th (or the first
trading day thereafter) of each year. The Options vest over three years and
expire 10 years after the date of the grant or upon early termination as defined
by the plan agreement.
Changes in outstanding stock options were as follows:
<TABLE>
<CAPTION>
WEIGHTED-
SHARES AVERAGE PRICE
- -----------------------------------------------------------------------------
<S> <C> <C>
Outstanding, December 30, 1995 1,960,420 $ 29.23
Granted 711,000 38.52
Exercised (373,952) 30.04
Canceled (103,661) 33.39
- -----------------------------------------------------------------------------
Outstanding, December 28, 1996 2,193,807 31.91
Granted 449,630 38.65
Exercised (249,365) 28.36
Canceled (25,288) 36.78
- -----------------------------------------------------------------------------
Outstanding, January 3, 1998 2,368,784 33.51
Granted 595,682 52.31
Exercised (413,016) 29.56
Canceled (158,587) 39.09
- -----------------------------------------------------------------------------
Outstanding, January 2, 1999 2,392,863 $ 38.50
- -----------------------------------------------------------------------------
Exercisable, January 2, 1999 1,286,370 $ 32.34
- -----------------------------------------------------------------------------
</TABLE>
The following table summarizes information about stock options outstanding at
January 2, 1999:
<TABLE>
<CAPTION>
(SHARES IN THOUSANDS) OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ---------------------------------------------------------------------------------------
NUMBER WEIGHTED- WEIGHTED- NUMBER WEIGHTED-
OUTSTANDING AVERAGE AVERAGE EXERCISABLE AVERAGE
RANGE OF AT JANUARY 2, REMAINING EXERCISE AT JANUARY 2, EXERCISE
EXERCISE PRICES 1999 YEARS PRICE 1999 PRICE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$25.32 - $30.92 629 4.6 $ 27.30 629 $ 27.30
33.72 - 44.25 1,193 5.8 37.79 657 37.13
50.19 - 54.81 571 9.1 52.32 -- --
- ----------------------------------------------------------------------------------------
$25.32 - $54.81 2,393 6.3 $ 38.50 1,286 $ 32.34
- ---------------------------------------------------------------------------------------
</TABLE>
The fair value of each option grant was estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions for grants in 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend yields 0.8% 1.0% 1.0%
Expected volatility 28.0% 29.0% 30.0%
Risk free interest rate 5.7% 6.5% 5.8%
Expected lives 10 years 9 years 9 years
Weighted-average
fair value $ 24.69 $ 17.29 $ 15.08
- ---------------------------------------------------------------------------
</TABLE>
The Company accounts for stock-based compensation under APB 25, and accordingly,
no compensation costs have been recognized in the accompanying Consolidated
Statements of Income for 1998, 1997 or 1996. Had compensation costs been
determined under SFAS 123, pro forma net income and net income per share would
have been as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1998 1997 1996
- ------------------------------------------------------------------------------
<C> <C> <C> <C>
Net income $ 7,547 $156,779 $ 86,022
- ------------------------------------------------------------------------------
Net income per share - basic $ 0.13 $ 2.61 $ 1.43
Net income per share - diluted 0.12 2.59 1.42
- ------------------------------------------------------------------------------
</TABLE>
Since SFAS 123 was only applied to options granted subsequent to December 31,
1994, the resulting pro forma compensation cost may not be representative of
that to be expected in future years.
NOTE 10 -- SHAREHOLDERS' EQUITY
Authorized capital at January 2, 1999 consisted of 80 million shares of no par
value common stock and 30 million shares of no par value preferred stock
issuable in series. At January 2, 1999, approximately 4.7 million shares and 0.1
million shares of common stock were reserved for issuance under the Option Plans
and the Directors Plan, respectively. There was no preferred stock outstanding.
The Company's current policy is to pay quarterly dividends on common shares
at an annual rate of 40 cents per share.
During 1996, the Company announced a program to repurchase up to 5% of its
outstanding common stock. During 1998, the Company increased the number of
shares authorized for repurchase to 4.5 million, which approximated 7.6% of its
common shares outstanding. As of January 2, 1999, the Company had repurchased
1,560,600 shares at a cost of approximately $56.0 million.
34
<PAGE>
Comprehensive income and changes in shareholders' equity were as follows:
<TABLE>
<CAPTION>
COMMON ADDITIONAL
SHARES COMMON PAID-IN RETAINEDIVE
(IN THOUSANDS, EXCEPT SHARE DATA) OUTSTANDING STOCK CAPITAL EARNINGS
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 30, 1995 59,854,739 $ 320,497 $ 170,266 $ 58,269
Net income - - - 89,031
Cash dividends declared
($.40 per share) - - - (24,020)
Translation adjustments - - - -
Issuance of common stock 373,952 374 10,858 -
Repurchase of common stock (395,400) (395) (13,479) -
- -----------------------------------------------------------------------------------------
Comprehensive income -- 1996 - - - -
Balance, December 28, 1996 59,833,291 320,476 167,645 123,280
Net income - - - 160,164
Cash dividends declared
($.40 per share) - - - (23,988)
Translation adjustments - - - -
Issuance of common stock 231,156 231 6,413 -
- -----------------------------------------------------------------------------------------
Comprehensive income -- 1997 - - - -
Balance, January 3, 1998 60,064,447 320,707 174,058 259,456
Net income - - - 12,079
Cash dividends declared
($.40 per share) - - - (24,027)
Translation adjustments - - - -
Issuance of common stock 394,652 395 11,378 -
Repurchase of common stock (1,165,200) (1,165) (40,921) -
- -----------------------------------------------------------------------------------------
Comprehensive income -- 1998 - - - -
Balance, January 2, 1999 59,293,899 $ 319,937 $ 144,515 $ 247,508
- -----------------------------------------------------------------------------------------
<CAPTION>
ACCUMULATED OTHER TOTAL COMMON
COMPREHENSIVE SHAREHOLDERS' COMPREHENSIVE
(IN THOUSANDS, EXCEPT SHARE DATA) LOSS EQUITY INCOME
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, December 30, 1995 $ (40,597) $ 508,435
Net income - 89,031 $ 89,031
Cash dividends declared
($.40 per share) - (24,020) -
Translation adjustments (21,244) (21,244) (21,244)
Issuance of common stock - 11,232 -
Repurchase of common stock - (13,874) -
- -------------------------------------------------------------------------------------------------
Comprehensive income -- 1996 - - 67,787
---------------
Balance, December 28, 1996 (61,841) 549,560
Net income - 160,164 160,164
Cash dividends declared
($.40 per share) - (23,988) -
Translation adjustments (25,908) (25,908) (25,908)
Issuance of common stock - 6,644 -
- -------------------------------------------------------------------------------------------------
Comprehensive income -- 1997 - - 134,256
---------------
Balance, January 3, 1998 (87,749) 666,472
Net income - 12,079 12,079
Cash dividends declared
($.40 per share) - (24,027) -
Translation adjustments (2,379) (2,379) (2,379)
Issuance of common stock - 11,773 -
Repurchase of common stock - (42,086) -
- -------------------------------------------------------------------------------------------------
Comprehensive income -- 1998 -- - $ 9,700
---------------
Balance, January 2, 1999 $ (90,128) $ 621,832
- -----------------------------------------------------------------------------
</TABLE>
NOTE 11 -- CONTINGENCIES
At January 2, 1999, the Company was guarantor of approximately $76 million of
indebtedness of certain key fruit suppliers and other entities integral to the
Company's operations.
The Company has ordered two refrigerated container vessels from HDW in Kiel,
Germany, which are scheduled for delivery in late 1999. The cost per ship is
approximately DM 100 million.
The Company is involved from time to time in various claims and legal
actions incident to its operations, both as plaintiff and defendant. In the
opinion of management, after consultation with legal counsel, none of such
claims is expected to have a material adverse effect on the Company's financial
position or results of operations.
NOTE 12 -- LEASE COMMITMENTS
The Company has obligations under non-cancelable operating leases, primarily for
ship charters and containers, and certain equipment and office facilities. Lease
terms are for less than the economic life of the property. Certain agricultural
land leases provide for increases in minimum rentals based on production. Lease
payments under a significant portion of the Company's operating leases are based
on variable interest rates. Total rental expense was $150.7 million, $182.2
million and $158.7 million (net of sublease income of $8.7 million, $10.6
million and $12.4 million) for 1998, 1997 and 1996, respectively.
At January 2, 1999, the Company's aggregate minimum rental commitments,
before sublease income, were as follows (in millions): 1999 - $131.1; 2000 -
$103.1; 2001 - $114.7; 2002 - $158.3; 2003 - $28.4; and thereafter - $197.1.
Total future sublease income is $25.1 million.
NOTE 13 -- INCOME TAXES
Income tax expense (benefit) was as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal, state and local $ 19,427 $ 2,810 1,882
Foreign 19,061 20,715 19,359
- -------------------------------------------------------------------------------
38,488 23,525 21,241
- -------------------------------------------------------------------------------
Deferred
Federal, state and local (29,407) 12,285 (444)
Foreign (3,881) (710) (1,297)
- -------------------------------------------------------------------------------
(33,288) 11,575 (1,741)
- -------------------------------------------------------------------------------
$ 5,200 $ 35,100 $ 19,500
- -------------------------------------------------------------------------------
</TABLE>
Pretax earnings attributable to foreign operations were $44 million, $170
million and $173 million for 1998, 1997 and 1996, respectively. Undistributed
earnings of foreign subsidiaries, which have been or are intended to be
permanently invested, aggregated $1.3 billion at January 2, 1999.
35
<PAGE>
The Company's reported income tax expense varied from the expense calculated
using the U.S. federal statutory tax rate for the following reasons:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expense computed at
U.S. federal statutory
income tax rate $ 6,048 $ 68,341 $ 37,986
Foreign income taxed
at different rates (28,097) (36,437) (21,656)
Dividends from
subsidiaries 486 456 618
State and local income
tax, net of federal
income tax benefit 762 602 1,100
Interest on prior
years taxes (3,752) -- --
Hurricane losses taxed
at different rates 9,886 -- --
Valuation allowance on
foreign hurricane losses 18,742 -- --
Other 1,125 2,138 1,452
- --------------------------------------------------------------------------------------------------
Reported income
tax expense $ 5,200 $ 35,100 $ 19,500
- --------------------------------------------------------------------------------------------------
</TABLE>
Total income tax payments (net of refunds) for 1998, 1997 and 1996 were $36.7
million, $17.3 million and ($1.6) million, respectively
Deferred tax assets (liabilities) were comprised of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating reserves $ 44,591 $ 24,892 $ 45,246
Accelerated depreciation (16,538) (25,290) (21,717)
Inventory valuation
methods 4,699 3,024 3,670
Effect of differences
between book values
assigned in prior
acquisitions and
historical tax values (34,032) (33,100) (36,941)
Postretirement benefits 34,098 34,278 33,946
Current year acquisitions (114) -- (6,560)
Tax credit carryforward 1,263 1,263 4,987
Net operating loss
carryforward 100,221 86,670 77,685
Reserves for
hurricane losses 22,847 -- --
Valuation allowance on
foreign hurricane losses (18,742) -- --
Other, net (25,178) (11,729) (12,117)
- --------------------------------------------------------------------------------------------------
$ 113,115 $ 80,008 $ 88,199
- --------------------------------------------------------------------------------------------------
</TABLE>
In connection with the fourth quarter losses related to Hurricane Mitch, a
valuation allowance in the amount of $18.7 million has been recognized to offset
the deferred tax assets related to these losses.
The Company has recorded deferred tax assets of $100.2 million reflecting
the benefit of approximately $269 million in federal and state net operating
loss carryovers which will, if unused, begin to expire in 2009.
The tax credit carryforward amount of $1.3 million is comprised of general
business credits which begin to expire in 2008.
Total deferred tax assets and deferred tax liabilities were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 1997 1996
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax assets $ 238,212 $ 226,028 $ 253,831
Deferred tax liabilities (125,097) (146,020) (165,632)
- ---------------------------------------------------------------------
$ 113,115 $ 80,008 $ 88,199
- ---------------------------------------------------------------------
</TABLE>
The Company remains contingently liable with respect to certain tax credits sold
to Norfolk and Southern Railway ("Norfolk") with recourse by Flexi-Van
Corporation ("Flexi-Van"), the Company's former transportation equipment leasing
business. Litigation with the Internal Revenue Service involving these credits
concluded during the year. Litigation and settlement negotiations involving
Flexi-Van and Norfolk (and the Company due to its contingent liability) are
ongoing. Flexi-Van, which separated from the Company in 1987 and was
subsequently acquired by David H. Murdock, has indemnified the Company against
obligations that might result from the resolution of the matter.
NOTE 14 -- BUSINESS SEGMENTS
In accordance with Statement of Financial Accounting Standards No. 131 ("SFAS
131"), "Disclosures about Segments of an Enterprise and Related Information",
the Company has three reportable segments: Fresh Fruit, Fresh Vegetables, and
Processed Foods. The Fresh Fruit segment contains several operating segments
that produce and market fresh fruit to wholesale, retail and institutional
customers worldwide. The Fresh Vegetables segment contains three operating
segments that produce and market commodity and fresh packaged vegetables to
wholesale, retail and institutional customers primarily in North America, Europe
and Asia. Both the Fresh Fruit and Fresh Vegetable segments sell produce grown
by a combination of Company-owned and independent farms. The Processed Foods
segment contains several operating segments that produce and market packaged
foods including fruits, beverages and snack foods. The reportable segments are
managed separately due to varying products, production processes, distribution
channels and customer bases.
The Company has other operating segments which include fresh-cut flower
businesses acquired during 1998 and certain diversified operations.
36
<PAGE>
Accounting policies for the three reportable segments and other operating
segments are the same as those described in the summary of significant
accounting policies. Company management evaluates and monitors segment
performance primarily through earnings before interest and taxes (EBIT). The
results of operations and financial position of the three reportable
segments, other operating segments, and Corporate and other were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 1997 1996
- ---------------------------------------------------------------
<S> <C> <C> <C>
Revenue
Fresh Fruit $ 2,692,147 $2,583,277 $2,238,257
Fresh Vegetables 790,149 756,176 653,730
Processed Foods 834,966 962,127 915,335
Other operating
segments 106,898 34,540 32,981
- ---------------------------------------------------------------
$ 4,424,160 $4,336,120 $3,840,303
- ---------------------------------------------------------------
EBIT
Fresh Fruit $ 110,505 $ 149,997 $ 172,205
Fresh Vegetables 49,418 40,196 30,300
Processed Foods 89,462 89,805 52,226
Other operating
segments 2,788 912 136
- ---------------------------------------------------------------
Total operating
segments 252,173 280,910 254,867
Corporate and other (45,951) (21,057) (27,637)
Special charges (120,000) - (50,000)
- ---------------------------------------------------------------
$ 86,222 $ 259,853 $ 177,230
- ---------------------------------------------------------------
Assets
Fresh Fruit $ 1,516,551 $1,459,204 $1,383,064
Fresh Vegetables 361,544 335,827 302,698
Processed Foods 591,188 532,629 658,977
Other operating
segments 286,578 15,470 10,652
- ---------------------------------------------------------------
Total operating
segments 2,755,861 2,343,130 2,355,391
Corporate and other 159,192 120,765 131,416
- ---------------------------------------------------------------
$ 2,915,053 $2,463,895 $2,486,807
- ---------------------------------------------------------------
Depreciation and
amortization
Fresh Fruit $ 75,993 $ 77,634 $ 76,944
Fresh Vegetables 12,788 9,145 10,061
Processed Foods 21,864 20,727 22,164
Other operating
segments 7,969 164 188
Corporate and other 3,444 4,411 1,716
- ---------------------------------------------------------------
$ 122,058 $ 112,081 $ 111,073
- ---------------------------------------------------------------
Capital additions
Fresh Fruit $ 79,746 $ 63,052 $ 52,211
Fresh Vegetables 20,724 35,647 8,118
Processed Foods 47,078 25,672 36,651
Other operating
segments 2,222 - 100
Corporate and other 437 4,800 12,606
- ---------------------------------------------------------------
$ 150,207 $ 129,171 $ 109,686
- ---------------------------------------------------------------
</TABLE>
NOTE: CORPORATE AND OTHER EBIT IN 1997 AND 1996 INCLUDES CERTAIN GAINS ON THE
DISPOSITION OF INVESTMENTS AND ASSETS.
The Company's revenue from external customers and net property, plant and
equipment by geographic area were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 1997 1996
- -----------------------------------------------------------------
<S> <C> <C> <C>
Revenue
United States $ 1,886,237 $1,943,057 $1,741,741
Japan 585,658 595,131 551,073
Germany 318,787 306,418 238,575
Honduras 275,050 240,390 216,375
France 232,429 197,580 150,607
Other international 1,125,999 1,053,544 941,932
- -----------------------------------------------------------------
$ 4,424,160 $4,336,120 $3,840,303
- -----------------------------------------------------------------
Property, plant and
equipment -- net
United States $ 408,385 $ 396,254 $ 397,141
Honduras 109,650 145,404 125,320
Costa Rica 96,293 78,592 58,178
Colombia 89,279 29,531 28,037
Oceangoing assets 82,213 94,947 104,756
Philippines 67,061 66,071 61,561
Other international 249,404 213,448 249,142
- -----------------------------------------------------------------
$ 1,102,285 $1,024,247 $1,024,135
- -----------------------------------------------------------------
</TABLE>
NOTE 15 -- SUBSEQUENT EVENT
In February 1999, the Company increased the number of common shares authorized
under its repurchase program to 8.3 million, which approximated 14% of its
common shares outstanding. In January and February 1999, the Company repurchased
2,271,000 common shares, in aggregate, at a weighted-average price of $29.72 per
share.
37
<PAGE>
NOTE 16 -- QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table presents summarized quarterly results:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
(IN THOUSANDS, EXCEPT PER SHARE DATA) QUARTER QUARTER QUARTER QUARTER YEAR
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998
Revenue $ 1,011,984 $ 1,163,986 $ 1,209,794 $ 1,038,396 $ 4,424,160
Gross margin 139,021 208,198 174,482 116,714 638,415
Net income (loss) 22,761 82,095 15,562 (108,339) 12,079
- -------------------------------------------------------------------------------------------------------------------------------
Net income (loss) per common share-- diluted $ 0.37 $ 1.35 $ 0.26 $ (1.82) $ 0.20
- -------------------------------------------------------------------------------------------------------------------------------
1997
Revenue $ 964,992 $ 1,107,804 $ 1,178,301 $ 1,085,023 $ 4,336,120
Gross margin 151,738 191,006 156,157 144,942 643,843
Net income 42,043 70,429 24,443 23,249 160,164
- -------------------------------------------------------------------------------------------------------------------------------
Net income per common share - diluted $ 0.70 $ 1.17 $ 0.40 $ 0.38 $ 2.65
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The net loss for the fourth quarter of 1998 includes pre-tax charges of $100
million, net of insurance proceeds, and $20 million related to Hurricane Mitch
and the Company's North American citrus operations, respectively. The cumulative
total of net income (loss) per common share reported in each quarter of 1998
differs from the full-year amount. The difference is due to the timing and
significance of the special charges recorded in the fourth quarter combined with
the repurchase of approximately 1.2 million common shares at the end of the
third quarter. All quarters have twelve weeks, except the fourth quarter of 1997
which has thirteen weeks and the third quarters of both years which have sixteen
weeks.
NOTE 17 -- COMMON STOCK DATA (UNAUDITED)
The following table shows the market price range of the Company's common stock
for each quarter in 1998 and 1997:
<TABLE>
<CAPTION>
HIGH LOW
- -------------------------------------------------------------------------
<S> <C> <C>
1998
First Quarter $ 57 1/8 $ 43 1/2
Second Quarter 49 1/8 43 15/16
Third Quarter 52 7/16 32 3/8
Fourth Quarter 35 28 5/16
- -------------------------------------------------------------------------
Year $ 57 1/8 $ 28 5/16
- -------------------------------------------------------------------------
1997
First Quarter $ 40 1/4 $ 33 3/8
Second Quarter 43 3/8 37 3/4
Third Quarter 46 15/16 39 1/16
Fourth Quarter 49 5/8 43 9/16
- -------------------------------------------------------------------------
Year $ 49 5/8 $ 33 3/8
- -------------------------------------------------------------------------
</TABLE>
38
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Dole Food Company, Inc.:
We have audited the accompanying consolidated balance sheets of Dole Food
Company, Inc., (a Hawaii corporation) and subsidiaries as of January 2, 1999 and
January 3, 1998, and the related consolidated statements of income and cash flow
for the years ended January 2, 1999, January 3, 1998, and December 28, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Dole Food Company,
Inc. and subsidiaries as of January 2, 1999 and January 3, 1998 and the results
of its operations and its cash flow for the years ended January 2, 1999, January
3, 1998, and December 28, 1996, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Los Angeles, California
February 5, 1999
39
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL POSITION
OVERVIEW
In 1998, the Company's results were negatively impacted by the effects of the El
Nino weather pattern, Hurricane Mitch and the California citrus freeze.
Additionally, economic turmoil in Asia, Eastern Europe and Latin America
undermined the financial condition of emerging markets and impacted the fruit
business worldwide. Also in 1998, the Company expanded its product offering to
include fresh-cut flowers, increased its productive capacity in the growing
pre-cut salad category and extended its European distribution network into
Scandinavia.
During 1998, the Company's fruit operations were impacted by the following
weather-related events:
- The El Nino weather pattern reduced industry banana volumes from
Ecuador by 18%, impacted production operations in California and
reduced banana volumes from the Philippines and pineapple volumes from
the Philippines and Thailand. Production volumes from these areas are
anticipated to begin returning to normal during 1999.
- Hurricane Mitch impacted over 30,000 acres of agricultural plantings
and caused severe damage to the Company's general agricultural
infrastructure at both its Honduran banana and beverage operations.
During the fourth quarter of 1998, the Company recorded a $100 million
charge, net of insurance proceeds received, for losses sustained from
Hurricane Mitch. Production in the impacted areas is not expected to
fully recover in 1999. However, due to price sensitivity in worldwide
banana markets, the impact on future operating results is not
currently determinable. The Company has started to rehabilitate
selected parts of the affected areas and will incur additional
rehabilitation expenses in the future. The Company also continues to
pursue recovery under various insurance policies for losses sustained.
Future rehabilitation costs and insurance recoveries will be reported
on a separate line in the Consolidated Statements of Income.
- Following severe freezing temperatures in California's San Joaquin
Valley from December 21 to December 24, 1998, the Company recorded a
$20 million charge in its citrus operations. The charge primarily
related to write-downs of deferred crop costs, property, plant and
equipment and grower receivables in the freeze areas. The charge also
included write-downs of grower receivables in other locations due to
the recognition of changes in industry economics. In addition to the
charge taken in 1998, the Company currently estimates that the freeze
damage will negatively impact its 1999 operating results by
approximately $10 million to $15 million.
The Company has substantial sales outside of the United States which had been
expanding rapidly as personal incomes in developing countries rose. The
economic crises in Asia, the collapse of the Russian economy and economic
slowdowns in Latin America have affected the international fruit business and
slowed its growth.
During 1998, the Company entered the fresh-cut flower business in North
America, which is relatively fragmented, and continued expanding its European
fresh produce distribution network. Acquisitions during the second half of 1998
added approximately $150 million to 1998 revenue, and the Company anticipates
they will add an additional $550 million to 1999 revenue when included for the
full year. These businesses added approximately $2 million to net income in
1998. In 1999, category growth, efficiencies in production and distribution
methodologies, and improved marketing leverage are expected to further
strengthen the performance of these businesses.
EUROPEAN UNION QUOTA: The European Union ("E.U.") banana regulations, which
impose quotas and tariffs on bananas, remained in full effect in 1998 and
continue in effect with some modifications as of the date of these financial
statements. The World Trade Organization ("WTO") issued a ruling during 1997,
on the complaint made by the United States, Ecuador, Guatemala, Honduras,
Panama and Mexico, that the European banana trade regime violated basic
General Agreement on Tariffs and Trade ("GATT") principles. The WTO found
certain aspects of the regime discriminatory and asked the E.U. to modify the
regime to eliminate these discriminatory aspects. In June 1998, E.U. farm
ministers responded with certain modifications to the regime. The United
States does not consider the changes sufficient to regulate banana sales
consistent with the WTO ruling and has imposed tariffs on a variety of E.U.
goods. Trade negotiations and discussions continue between the E.U., the
United States and the individual banana exporting countries. These trade
negotiations could lead to further changes in the regulations governing
banana exports to the E.U. The net impact of these changing regulations on
the Company's future results of operations is not determinable at this time.
FOREIGN CURRENCIES: The Company distributes its products in more than 90
countries throughout the world. Its international sales are usually transacted
in U.S. dollars and major European and Asian currencies. Certain costs are
incurred in currencies different from those that are received from the sale of
products. While results of operations may be affected by fluctuations in
currency exchange rates in both the sourcing and selling locations, the Company
has historically followed a policy, with certain exceptions, of not attempting
to hedge these exposures. Additionally, the 1999 adoption of the Euro currency
by the E.U. is not expected to materially impact the Company's results of
operations or financial position.
NEW ACCOUNTING PRONOUNCEMENTS: In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 133
("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities".
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 certain foreign currency denominated purchase
commitments. The Company will adopt the statement during the first quarter of
2000. Such adoption is not expected to have a material impact on the
Company's financial condition or results of operations.
YEAR 2000: The Company has assessed the effect of Year 2000 issues on its
information technology, including computer hardware, software and embedded
chip technology. Remediation has been completed at the majority of the
Company's operating units with most of the remaining operating units
currently undergoing tests of remediated systems and software. The Company
has now identified certain specific upgrade projects
40
<PAGE>
and personal computer replacements that will be completed during the first half
of 1999. Remediation efforts related to companies acquired during 1998 and
Honduran operating units impacted by Hurricane Mitch are scheduled to be
completed by June 1999. All other remediation work has been completed as of the
December 1998 target date. The Company is also in the process of confirming Year
2000 compliance with key vendors and service providers, including suppliers of
embedded chip technology. Once completed, the Company will develop a contingency
plan related to its key vendors and service providers. Based on work performed
to date, the Company believes that the total cost to remediate 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 remediation 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.
1998 COMPARED WITH 1997
REVENUE: Revenue increased 2% to $4,424.2 million in 1998 from $4,336.1 million
in 1997. The inclusion of the newly acquired flower businesses and SABA Trading
AB toward the end of the year increased revenue by 4% in 1998. Revenue from
existing businesses was up slightly after considering a 2% reduction due to the
closure of the Company's California dried fruit facility in the second quarter
of 1997 and the inclusion of an additional week in fiscal year 1997. While the
fresh-cut salad and Honduran beverage businesses had strong growth rates,
processed pineapple suffered from El Nino induced product shortages, and the
North American citrus and deciduous fruit businesses had reduced volumes and
product quality due to El Nino. Revenues from bananas increased as higher sales
in the Company's European distribution businesses, including sales from
businesses acquired late in 1997, served to offset decreased import volumes due
largely to the closure of the Russian market.
SELLING, MARKETING AND ADMINISTRATIVE EXPENSES: Selling, marketing and
administrative expenses were $433.5 million or 9.8% of revenue in 1998 compared
to $399.8 million or 9.2% of revenue in 1997. The increase resulted from growth
in businesses with higher operating cost percentages such as the Honduran
beverage, fresh-cut salad and European distribution businesses. At the same
time, the banana import business experienced higher receivable write-offs
related to the collapse of the Russian market, higher promotional costs as a
result of market supply conditions and lower total revenues.
OPERATING INCOME: Operating income decreased from $244.0 million in 1997 to
$204.9 million before special charges in 1998. The decrease was largely driven
by lower earnings in the banana import business as a result of the Company's
inability to pass on higher El Nino related costs in the form of higher prices.
This was partially offset by improved European distribution earnings. The
Company's North American citrus and deciduous operations also had significant
declines due to El Nino related cost issues compared to very strong results in
1997. Operating results improved in the Honduran beverage, processed pineapple,
fresh-cut salad and European distribution categories, as well as through the
addition of the acquired flower businesses and SABA Trading AB.
INTEREST EXPENSE, NET: Interest expense, net of interest income, increased to
$59.6 million in 1998 from $56.8 million in 1997 due to increased debt levels in
the second half of the year to fund acquisitions.
OTHER INCOME (EXPENSE), NET: Other income (expense) - net consists primarily of
minority interest expense and gains and losses on sales of property. In 1997,
other income included larger gains from sales of investments and fixed assets.
INCOME TAXES: The Company's effective tax rate increased in 1998 from 18% to
30% primarily due to the Hurricane Mitch charge, which was not fully tax
benefitted.
1997 COMPARED WITH 1996
REVENUE: Revenue increased 13% to $4,336.1 million in 1997 from $3,840.3 million
in 1996. The increase in revenue is primarily attributable to higher worldwide
banana volumes; increased volumes in fresh-cut salads and favorable pricing for
the fresh vegetable business; continued growth at the Honduran beverage
operation; newly acquired businesses; and an additional week in fiscal year
1997. The Company was able to grow revenue in spite of adverse currency
movements in 1997.
SELLING, MARKETING AND ADMINISTRATIVE EXPENSES: Selling, marketing and
administrative expenses were $399.8 million or 9.2% of revenue in 1997 compared
to $369.7 million or 9.6% of revenue in 1996. The increased expense is due to
higher sales activity in existing product lines and the acquisition of new
businesses, partially offset by the closure of the Company's California dried
fruit facility.
RESTRUCTURING CHARGE: In 1996, the Company implemented a formal plan to close
its dried fruit facility located in Fresno, California which had suffered
continued losses. During the fourth quarter of 1996, a restructuring charge of
$50.0 million was recorded related to the closure of this facility. Principal
components of the charge were provisions for asset write-downs, contract
terminations and severance payments. The closure of this facility was completed
in the second quarter of 1997.
OPERATING INCOME: Operating income improved to $244.0 million in 1997 from
$214.3 million before the restructuring charge in 1996. Higher earnings in 1997
were the result of increased volumes of fresh-cut salads, favorable pricing in
the fresh vegetables business and growth in the banana business. In addition,
the processed pineapple and Honduran beverage businesses posted higher results
in 1997, and the closure of the dried fruit facility in the second quarter
reduced losses.
INTEREST EXPENSE, NET: Interest expense, net of interest income, decreased to
$56.8 million in 1997 from $60.3 million in 1996, due to lower average debt
levels.
41
<PAGE>
OTHER INCOME (EXPENSE): Other income for 1997 increased $3.5 million from 1996
primarily due to the gain on sales of certain investments and fixed assets.
INCOME TAXES: The Company's effective income tax rate was 18% in 1997 and
1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations and capital expenditures were financed primarily by
funds generated internally during 1998. The Company pursued an aggressive growth
strategy of acquisitions in the fresh-cut flower industry and in its European
product distribution network. In addition, the Company repurchased 1,165,200 of
its common shares for $42.1 million. The acquisitions and stock repurchases were
substantially funded by debt. The Hurricane Mitch and citrus fourth quarter
special charges decreased equity. This resulted in a year-to-year increase in
the net debt to net debt and equity percentage from 53% to 64%. During 1997, the
Company used its cash flow from operations to reduce this ratio from 62% in 1996
to 53% in 1997. Cash and short-term investments increased from $31.2 million at
January 3, 1998 to $35.4 million at January 2, 1999.
Operating activities generated cash flow of $157.1 million in 1998 compared
to $291.0 million in 1997. The decrease is primarily due to lower net earnings,
a payment to the Internal Revenue Service related to prior years' audits and the
1997 closure of the Company's California dried fruit facility. The Company is
currently pursuing a refund of the payment to the Internal Revenue Service.
During 1997, the Company experienced a decrease in its working capital
requirements as a result of the closure of its California dried fruit facility.
The liquidation of inventory and other operating and fixed assets related to
this closed facility provided approximately $70 million of cash flow in 1997.
Capital expenditures for the acquisition and improvement of productive
assets increased to $150.2 million in 1998 from $129.2 million in 1997 and were
funded largely by operating cash flow. The Company expects the capital
expenditure level to continue growing next year due to the Hurricane Mitch
rehabilitation effort and acquisitions during 1998.
The Company acquired a series of businesses in the fresh-cut flower industry
during 1998 to form a new flower division. In addition, the Company acquired 60%
of Saba Trading AB, a Scandinavian distributor of fresh fruits, vegetables and
flowers, to complement its growing distribution network in Europe. The aggregate
cash purchase price of these businesses and smaller acquisitions in 1998 was
approximately $332 million.
The Company is scheduled to take delivery of two new refrigerated container
vessels in late 1999. The vessels are being manufactured by HDW in Kiel,
Germany, and the cost per ship is approximately DM 100 million. In order to
facilitate payment for these ships, the Company has contracted to purchase
German marks at a weighted-average exchange rate of DM 1.78 to $1.00 for a total
notional value of $98.3 million. These fixed rate contracts will be settled in
the fourth quarter of 1999, and their fair value was approximately $105.8
million as of January 2, 1999.
In January 1998, the Company announced plans to move to a new headquarters
facility in Westlake Village, California. Construction of the complex is
anticipated to be completed in late 1999, at which time the Company plans to
occupy these leased facilities.
The Company has in place a $400 million 5-year revolving credit facility
(the "Facility") which matures in 2003. Provisions under the Facility require
the Company to comply with certain financial covenants which include a maximum
permitted ratio of consolidated debt to net worth and a minimum required fixed
charge coverage ratio. At January 2, 1999, no borrowings were outstanding under
the Facility. The Company may also borrow under uncommitted lines of credit at
rates offered from time to time by various banks that may not be lenders under
the Facility. Net borrowings outstanding under the uncommitted lines of credit
totaled $63.5 million at January 2, 1999.
On October 6, 1998, the Company issued $300 million of 7-year 6.375%
unsecured notes in a public offering for which it received cash proceeds of
$297.2 million. The Company used a portion of the cash proceeds for acquisitions
during the fourth quarter and the remainder to repay amounts outstanding under
the Facility. Such credit facility borrowings were primarily incurred to fund
business acquisitions made earlier in the year.
In December 1998, the Board of Directors authorized an increase in the
Company's stock repurchase program to 4.5 million shares. In February 1999, the
Board of Directors increased this authorization to 8.3 million shares. During
1998, the Company repurchased 1,165,200 of its common shares at a cost of $42.1
million. During January and February 1999, the Company repurchased an additional
2,271,000 of its common shares for $67.6 million. Approximately 4.5 million
shares remain authorized for repurchase under the Company's stock repurchase
program after these transactions.
The Company paid four quarterly dividends of 10 cents per share on its
common stock totaling $24.0 million in 1998.
The Company believes that cash from operations and its cash position and
revolving credit facility will enable it to meet its capital expenditure, debt
maturity, common stock repurchase, dividend payment and other funding
requirements.
This Annual Report 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.
42
<PAGE>
RESULTS OF OPERATIONS AND SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE DATA) 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue $ 4,424 $ 4,336 $ 3,840 $ 3,804 $ 3,499
Cost of products sold 3,786 3,692 3,256 3,218 2,966
- ------------------------------------------------------------------------------------------------------------------------------
Gross margin 638 644 584 586 533
Selling, marketing, and administrative expenses 433 400 370 393 395
Hurricane Mitch charge 100 -- -- -- --
Citrus charge 20 -- -- -- --
Dried Fruit restructuring charge -- -- 50 -- --
- ------------------------------------------------------------------------------------------------------------------------------
Operating income 85 244 164 193 138
Interest expense - net (60) (57) (60) (74) (67)
Net gain on assets sold or held for disposal -- -- -- 62 --
Other income (expense) - net (8) 8 5 (5) (3)
- ------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes 17 195 109 176 68
Income taxes (5) (35) (20) (56) (10)
- ------------------------------------------------------------------------------------------------------------------------------
Net income from continuing operations 12 160 89 120 58
Net income (loss) from discontinued operations -- -- -- (97) 10
- ------------------------------------------------------------------------------------------------------------------------------
Net income $ 12 $ 160 $ 89 $ 23 $ 68
- ------------------------------------------------------------------------------------------------------------------------------
Diluted net income (loss) per common share
Continuing operations $ 0.20 $ 2.65 $ 1.47 $ 2.00 $ 0.98
Discontinued operations -- -- -- (1.61) 0.16
- ------------------------------------------------------------------------------------------------------------------------------
Net income $ 0.20 $ 2.65 $ 1.47 $ 0.39 $ 1.14
- ------------------------------------------------------------------------------------------------------------------------------
Other statistics
Working capital $ 366 $ 407 $ 464 $ 480 $ 495
Total assets 2,915 2,464 2,487 2,442 3,685
Long-term debt 1,116 755 904 896 1,555
Total debt 1,153 768 926 920 1,609
Common shareholders' equity 622 666 550 508 1,081
Annual cash dividends per common share 0.40 0.40 0.40 0.40 0.40
Capital additions for continuing operations 150 129 110 90 212
Depreciation and amortization from
continuing operations 122 112 111 113 120
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
43
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF DOLE FOOD COMPANY, INC.
There are no parents of the Registrant.
Registrant's consolidated subsidiaries are shown below together with the
percentage of voting securities owned and the state or jurisdiction of
organization of each subsidiary. The names have been omitted for subsidiaries
which, if considered in the aggregate as a single subsidiary, do not constitute
a significant subsidiary. Subsidiaries of subsidiaries are indented in the
following table:
<TABLE>
<CAPTION>
Percent of
Outstanding
Voting Securities
Owned as of
Subsidiaries of Registrant January 2, 1999
- -------------------------- ---------------
<S> <C>
Baltime Securities Corp. 100%
(Nevada)
Renaissance Capital Corporation 100%
(Nevada)
Dole Holdings, Inc. (fka Castle & Cooke Fresh Fruit Company) 100%
(Nevada)
Dole Citrus 100%
(California)
Dole Fresh Fruit Company 100%
(Nevada)
Standard Fruit Company 100%
(Delaware)
Cerveceria Hondurena, S.A. 82%
(Honduras)
1
<PAGE>
<CAPTION>
Percent of
Outstanding
Voting Securities
Owned as of
Subsidiaries of Registrant January 2, 1999
- -------------------------- ---------------
<S> <C>
Castle & Cooke Worldwide Limited 100%
(Hong Kong)
Standard Fruit Company (Bermuda) Ltd. 100%
(Bermuda)
Dole Fresh Fruit International, Limited 100%
(Liberia)
Solvest, Ltd. 100%
(Bermuda)
Singletree Corp. 100%
(Panama)
Floramerica Investments, Ltd. 100%
(Bermuda)
SABA Trading Holding AB 100%
(Sweden)
SABA Trading AB 60%
(Sweden)
Inversiones y Valores Montecristo, S.A. 74%
(Honduras)
Agricola Santa Ines, S.A. 98%
(Honduras)
Dole Europe BV 100%
(Netherlands)
Pascual Hermanos 91%
(Spain)
2
<PAGE>
<CAPTION>
Percent of
Outstanding
Voting Securities
Owned as of
Subsidiaries of Registrant January 2, 1999
- -------------------------- ---------------
<S> <C>
Castle & Cooke Worldwide Limited (cont'd.)
Dole Chile S.A. 100%
(Chile)
Sunburst Farms, Inc. 100%
(Delaware)
Dole Fresh Vegetables, Inc. 100%
(California)
Bud Antle, Inc. 100%
(California)
Dole Japan, Ltd. 100%
(Japan)
Dole Philippines, Inc. 99%
(Republic of the Philippines)
S & J Ranch, Inc. 100%
(California)
Dole Orland, Inc. 100%
(California)
Dole Dried Fruit and Nut Company, 10%
a California general partnership
M K Development, Inc. 100%
(Hawaii)
Dole Dried Fruit and Nut Company,
a California general partnership 90%
3
<PAGE>
<CAPTION>
Percent of
Outstanding
Voting Securities
Owned as of
Subsidiaries of Registrant January 2, 1999
- -------------------------- ---------------
<S> <C>
La Petite d'Agen, Inc. 100%
(Hawaii)
Cerulean, Inc. 61%
(Hawaii)
Blue Anthurium, Inc. 100%
(Hawaii)
Cerulean, Inc. 39%
(Hawaii)
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT OF PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports dated February 5, 1999 included (or incorporated by reference) in this
Form 10-K into Dole Food Company, Inc.'s previously filed Registration
Statements on Form S-3 Registration Nos. 33-41480, 33-64984, 333-07849, and
333-61689; Form S-8 Registration Nos. 2-87475, 33-594, 33-28782, 33-60643,
33-60641, 33-42152, 333-13739, and 333-06949; and Form N-2 Registration Nos.
333-325 and 811-7499.
/s/ ARTHUR ANDERSEN LLP
Los Angeles, California
February 5, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-02-1999<F1>
<PERIOD-START> JAN-04-1998<F1>
<PERIOD-END> JAN-02-1999<F1>
<CASH> 35,352
<SECURITIES> 0
<RECEIVABLES> 709,344
<ALLOWANCES> 92,765
<INVENTORY> 475,524
<CURRENT-ASSETS> 1,170,655
<PP&E> 1,821,219
<DEPRECIATION> 718,934
<TOTAL-ASSETS> 2,915,053
<CURRENT-LIABILITIES> 804,878
<BONDS> 1,116,422
0
0
<COMMON> 319,937
<OTHER-SE> 301,895
<TOTAL-LIABILITY-AND-EQUITY> 2,915,053
<SALES> 4,424,160
<TOTAL-REVENUES> 4,424,160
<CGS> 3,785,745
<TOTAL-COSTS> 3,785,745
<OTHER-EXPENSES> 552,193
<LOSS-PROVISION> 53,566
<INTEREST-EXPENSE> 68,943
<INCOME-PRETAX> 17,279
<INCOME-TAX> 5,200
<INCOME-CONTINUING> 12,079
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,079
<EPS-PRIMARY> 0.20<F2>
<EPS-DILUTED> 0.20<F3>
<FN>
<F1>THE COMPANY'S FISCAL YEAR ENDS ON THE SATURDAY CLOSEST TO DECEMBER 31.
FISCAL YEAR 1998 ENDED JANUARY 2, 1999 AND INCLUDED 52 WEEKS. ALL QUARTERS
INCLUDE 12 WEEKS, EXCEPT FOR THE THIRD QUARTER WHICH HAD 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>
