<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
(MARK ONE)
<TABLE>
<C> <S>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE QUARTERLY PERIOD ENDED JUNE 17, 2000
OR
<TABLE>
<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 1-4455
------------------------
DOLE FOOD COMPANY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
HAWAII 99-0035300
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
ONE DOLE DRIVE
WESTLAKE VILLAGE, CALIFORNIA 91362
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (818) 879-6600
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
CLASS SHARES OUTSTANDING AT JULY 31, 2000
----- -----------------------------------
<S> <C>
Common Stock, No Par Value 55,844,853
</TABLE>
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<PAGE>
DOLE FOOD COMPANY, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements of Income--quarters and half years
ended June 17, 2000 and June 19, 1999..................... 3
Consolidated Balance Sheets--June 17, 2000 and January 1,
2000...................................................... 5
Consolidated Statements of Cash Flows--half years ended
June 17, 2000 and June 19, 1999........................... 6
Notes to Consolidated Financial Statements.................. 7
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 10
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders......... 15
ITEM 6. Exhibits and Reports on Form 8-K............................ 15
Signatures.................................................. 16
</TABLE>
2
<PAGE>
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DOLE FOOD COMPANY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------
JUNE 17, JUNE 19,
2000 1999
---------- ----------
<S> <C> <C>
Revenue..................................................... $1,300,970 $1,316,556
Cost of products sold....................................... 1,089,404 1,137,437
---------- ----------
Gross margin.............................................. 211,566 179,119
Selling, marketing and administrative expenses.............. 130,862 114,125
Hurricane Mitch net insurance proceeds...................... -- (14,839)
---------- ----------
Operating income.......................................... 80,704 79,833
Interest income............................................. 1,958 2,751
Other expense--net.......................................... (700) (662)
---------- ----------
Earnings before interest and taxes........................ 81,962 81,922
Interest expense............................................ 23,577 21,259
---------- ----------
Income before income taxes................................ 58,385 60,663
---------- ----------
Income taxes................................................ 13,300 13,300
---------- ----------
Net income................................................ 45,085 47,363
========== ==========
Net income per common share
Basic..................................................... $ 0.81 $ 0.83
Diluted................................................... 0.81 0.83
========== ==========
Diluted average number of common shares outstanding......... 55,998 57,223
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
DOLE FOOD COMPANY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
<TABLE>
<CAPTION>
HALF YEAR ENDED
-----------------------
JUNE 17, JUNE 19,
2000 1999
---------- ----------
<S> <C> <C>
Revenue..................................................... $2,457,195 $2,504,991
Cost of products sold....................................... 2,055,821 2,161,084
---------- ----------
Gross margin.............................................. 401,374 343,907
Selling, marketing and administrative expenses.............. 252,653 222,759
Hurricane Mitch net insurance proceeds...................... -- (26,515)
---------- ----------
Operating income.......................................... 148,721 147,663
Interest income............................................. 4,057 5,296
Other expense--net.......................................... (158) (1,051)
---------- ----------
Earnings before interest and taxes........................ 152,620 151,908
Interest expense............................................ 46,797 42,834
---------- ----------
Income before income taxes................................ 105,823 109,074
Income taxes................................................ 24,300 24,000
---------- ----------
Net income................................................ 81,523 85,074
========== ==========
Net income per common share
Basic..................................................... $ 1.46 $ 1.48
Diluted................................................... 1.46 1.48
========== ==========
Diluted average number of common shares outstanding......... 55,942 57,537
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
DOLE FOOD COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 17, JANUARY 1,
2000 2000
----------- ----------
(UNAUDITED) (AUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents................................. $ 28,133 $ 42,427
Receivables............................................... 641,351 600,671
Inventories
Finished products....................................... 209,424 175,574
Raw materials and work in progress...................... 148,461 181,690
Crop growing costs...................................... 46,610 55,221
Operating supplies and other............................ 111,797 112,090
---------- ----------
Total inventories....................................... 516,292 524,575
Prepaid expenses.......................................... 60,146 45,244
---------- ----------
Total current assets.................................... 1,245,922 1,212,917
Investments................................................. 81,684 78,899
Property, plant and equipment............................... 1,114,644 1,125,389
Goodwill.................................................... 291,163 297,147
Other assets................................................ 306,661 320,106
---------- ----------
TOTAL ASSETS............................................ 3,040,074 3,034,458
========== ==========
CURRENT LIABILITIES
Short-term borrowings..................................... $ 73,221 $ 30,098
Current portion of long-term debt......................... 8,499 9,546
Accounts payable and accrued liabilities.................. 759,963 792,578
---------- ----------
Total current liabilities............................... 841,683 832,222
Long-term debt.............................................. 1,213,638 1,285,716
Other long-term liabilities................................. 346,053 335,967
Minority interests.......................................... 47,522 48,628
Commitments and contingencies
Common shareholders' equity
Common stock.............................................. 316,488 316,478
Additional paid-in capital................................ 56,912 56,795
Retained earnings......................................... 343,664 273,309
Accumulated other comprehensive loss...................... (125,886) (114,657)
---------- ----------
Total common shareholders' equity....................... 591,178 531,925
---------- ----------
TOTAL LIABILITIES AND EQUITY............................ 3,040,074 3,034,458
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
DOLE FOOD COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
HALF YEAR ENDED
---------------------
JUNE 17, JUNE 19,
2000 1999
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 81,523 $ 85,074
Adjustments to net income
Depreciation and amortization........................... 63,614 58,236
Provision for deferred income taxes..................... 12,650 13,169
Cash portion of special charges not included in net
income................................................ (12,865) (3,838)
Hurricane Mitch insurance proceeds...................... -- (38,331)
Other adjustments to net income......................... (6,280) (2,080)
Change in operating assets and liabilities,
net of effects from acquisitions and non-cash transactions
Receivables............................................. (31,930) (70,677)
Inventories............................................. 2,826 (15,140)
Prepaid expenses and other assets....................... (19,442) (36,485)
Accounts payable and accrued liabilities................ (11,643) 66,704
Internal Revenue Service refund related to prior years'
audits................................................ -- 14,550
Other................................................... (1,812) 9,379
-------- --------
Cash flow provided by operating activities.................. 76,641 80,561
-------- --------
INVESTING ACTIVITIES
Proceeds from sales of assets............................... 5,886 3,613
Capital additions........................................... (56,152) (55,631)
Purchases of investments and acquisitions, net of cash
acquired.................................................. (921) (18,792)
Hurricane Mitch insurance proceeds.......................... -- 38,331
-------- --------
Cash flow used in investing activities...................... (51,187) (32,479)
-------- --------
FINANCING ACTIVITIES
Short-term repayments--net.................................. (8,122) (23,605)
Long-term (repayments) borrowings--net...................... (20,585) 83,552
Cash dividends paid......................................... (11,168) (11,455)
Issuance of common stock.................................... 127 717
Repurchase of common stock.................................. -- (67,590)
-------- --------
Cash flow used in financing activities...................... (39,748) (18,381)
-------- --------
Increase (decrease) in cash and cash equivalents............ (14,294) 29,701
Cash and cash equivalents at beginning of period............ 42,427 35,352
-------- --------
Cash and cash equivalents at end of period.................. 28,133 65,053
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
6
<PAGE>
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of management, the accompanying unaudited consolidated
financial statements of Dole Food Company, Inc. and its consolidated
subsidiaries (the "company") include all adjustments necessary to present
fairly the company's financial position as of June 17, 2000 and January 1,
2000 (audited), its results of operations for the quarters and half years
ended June 17, 2000 and June 19, 1999 and its cash flows for the half years
then ended. For additional information, including a summary of significant
accounting policies used in the preparation of these financial statements,
refer to the Notes to Consolidated Financial Statements in the company's
Annual Report on Form 10-K for the year ended January 1, 2000.
Interim results are subject to significant seasonal variations and are not
necessarily indicative of the results of operations for a full year. The
company's operations are sensitive to a number of factors including
weather-related phenomena and their effects on industry volumes, prices,
product quality and costs. Operations are also sensitive to fluctuations in
currency exchange rates in both sourcing and selling locations. The company
has historically, with certain minor exceptions, not attempted to hedge
fluctuations resulting from foreign currency denominated transactions.
Certain prior year amounts have been reclassified to conform with the 2000
presentation.
2. The company has four reportable segments: fresh fruit, fresh vegetables,
processed foods and fresh-cut flowers.
Management evaluates and monitors segment performance primarily through
earnings before interest and taxes ("EBIT"). Revenue and EBIT for the
reportable segments, other operating segments, and corporate and other were
as follows (in thousands):
<TABLE>
<CAPTION>
QUARTER ENDED HALF YEAR ENDED
----------------------- -----------------------
JUNE 17, JUNE 19, JUNE 17, JUNE 19,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue
Fresh fruit.......................... $ 785,844 $ 864,283 $1,486,765 $1,598,609
Fresh vegetables..................... 243,519 197,212 457,345 409,780
Processed foods...................... 206,387 193,623 388,846 374,435
Fresh-cut flowers.................... 53,508 55,373 107,324 109,762
Other operating segments............. 11,712 6,065 16,915 12,405
---------- ---------- ---------- ----------
1,300,970 1,316,556 2,457,195 2,504,991
========== ========== ========== ==========
EBIT
Fresh fruit.......................... $ 35,680 $ 28,281 $ 81,522 $ 59,168
Fresh vegetables..................... 28,320 18,580 43,779 30,632
Processed foods...................... 23,434 19,801 43,039 34,254
Fresh-cut flowers.................... 4,458 5,804 6,148 15,412
Other operating segments............. (313) (205) (636) (636)
---------- ---------- ---------- ----------
Total operating segments............. 91,579 72,261 173,852 138,830
Corporate and other.................. (9,617) (5,178) (21,232) (13,437)
Hurricane Mitch net insurance
proceeds........................... -- 14,839 -- 26,515
---------- ---------- ---------- ----------
81,962 81,922 152,620 151,908
========== ========== ========== ==========
</TABLE>
7
<PAGE>
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Corporate and other EBIT includes general and administrative costs not
allocated to operating segments. Corporate and other EBIT for the first half
of 2000 included the write-off of certain investments and capitalized
software costs. Corporate and other EBIT for the first half of 1999 included
lower expense levels related to bonuses and self-insurance.
3. The weighted-average number of common shares outstanding used to calculate
basic net income per share, which excludes the dilutive effect of stock
options, was 55.9 million and 57.1 million for the quarters ended, and
55.8 million and 57.4 million for the half years ended June 17, 2000 and
June 19, 1999, respectively.
4. The company recognized comprehensive income, which consisted of net income
and unrealized foreign currency translation net losses, as follows (in
thousands):
<TABLE>
<CAPTION>
QUARTER ENDED HALF YEAR ENDED
------------------- -------------------
JUNE 17, JUNE 19, JUNE 17, JUNE 19,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income.................................... $45,085 $ 47,363 $ 81,523 $ 85,074
Unrealized foreign currency translation net
loss........................................ (3,267) (11,242) (11,229) (16,905)
------- -------- -------- --------
Comprehensive income.......................... 41,818 36,121 70,294 68,169
======= ======== ======== ========
</TABLE>
The unrealized foreign currency translation net loss in the second quarter
of 2000 decreased as compared to the second quarter of 1999 due to a less
significant change in the euro spot rate against the dollar during the
second quarter of 2000 versus the comparable change during the second
quarter of 1999.
The change in operating assets and liabilities shown in the Consolidated
Statements of Cash Flows excludes the effects of foreign currency
translation. Such translation reduced assets and liabilities by $17 million
and $6 million, respectively, during the half year ended June 17, 2000 and
by $66 million and $49 million, respectively, during the half year ended
June 19, 1999.
5. In the fourth quarter of 1999, the company took a $48 million special charge
related to the planned downsizing of certain of its global operations. In
connection with its plan, the company has ceased operations in Nicaragua and
Venezuela and terminated certain ship charters. The company continues the
process of closing certain production sites and sales offices as well as
terminating certain grower contracts. Included in this charge were
$31 million of accrued costs primarily related to the termination of certain
grower contracts and ship charters as well as the severance of employees.
During the first half of 2000, the company paid $9 million, $2 million and
$2 million for contract terminations, severance and other costs,
respectively. These costs were accounted for as a utilization of the related
accrual recorded as of January 1, 2000. Also included in the $31 million of
accrued costs at the end of 1999 was $11 million related to the early
retirement of employees. In the second quarter of 2000, these employee
retirements became effective, and the related early retirement benefits were
transferred from accrued liabilities to non-current accrued pension cost. As
of June 17, 2000, accrued special charge costs totaling $7 million remained
to be utilized by the end of the current fiscal year.
6. During the first half of both 2000 and 1999, the company declared and paid
dividends of $11 million on its common stock representing its regular
quarterly dividends of 10 cents per share.
7. The company paid interest of $45 million during the first half of 2000 and
$42 million for the same period of 1999. The company paid income taxes of
$10 million during the first half of 2000 and net
8
<PAGE>
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
income taxes of $1 million during the first half of 1999, which was
comprised of $16 million of payments offset by $15 million of refunds
related to the partial settlement of disputed items from prior years'
Internal Revenue Service audits.
8. Subsequent to June 17, 2000, the following occurred:
In July 2000, the company entered into a $250 million, 364-day revolving
credit facility (the "364-day Facility"). At the company's option,
borrowings under the 364-day Facility will bear interest at a certain
percentage over the London Interbank Offered Rate, the agent's prime rate
or the Federal Funds rate. Proceeds from the 364-day Facility will be
used to meet the company's short-term financing needs and for other
general corporate purposes.
In July 2000, the company repaid its $225 million, 6.75% notes which
matured on July 15, 2000. As of January 1, 2000, these notes had been
classified as long-term debt due to the company's ability and intent as
of that date to refinance the maturity using a long-term instrument. The
company has financed $40 million of this maturity under its 364-day
Facility. The remaining $185 million was financed under the company's
existing 5-year revolving credit facility. As such, $40 million of these
obligations have been classified as short term borrowings at June 17,
2000. The remainder of short-term borrowings at June 17, 2000 and the
balance of short-term borrowings at January 1, 2000 is primarily notes
payable to banks.
In late June and July 2000, the company received additional proceeds of
$51 million in final settlement of the majority of its insurance claims
related to losses sustained from Hurricane Mitch, which occurred at the
end of 1998. These proceeds, net of claims preparation expenses of
$2 million, will be recognized on a separate line as a component of
operating income during the third quarter of 2000.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DOLE FOOD COMPANY, INC.
RESULTS OF OPERATIONS
FRESH FRUIT
Fresh fruit revenues for the first half of 2000 decreased 7% to $1.5 billion
from $1.6 billion for the first half of 1999. Revenues for the second quarter of
2000 decreased 9% to $786 million from $864 million for the second quarter of
1999. These decreases were primarily due to lower revenues in the European
banana business, as banana volumes shipped to secondary markets in Eastern
Europe were reduced through the company's efforts to downsize its banana
business. In addition, the euro's decline against the dollar since the
comparable period of 1999 negatively impacted dollar-equivalent revenues from
fresh fruit products in the European market. In the company's Chilean fruit
business, revenues decreased due to lower export volumes from that region
combined with slightly lower pricing in the North American and European markets.
This overall decrease in fresh fruit revenues was partially offset by higher
revenues in the North American banana business as a result of increased volumes
sold in that market.
Earnings before interest and taxes ("EBIT") in the fresh fruit segment for
the first half of 2000 increased 38% to $82 million from $59 million for the
first half of 1999. EBIT for the second quarter of 2000 increased 26% to
$36 million from $28 million in the second quarter of 1999. Fresh fruit EBIT
increased primarily due to significant cost-cutting activities in the company's
Latin American-sourced banana business, which resulted in lower production and
logistics costs and lower volumes shipped to secondary (unprofitable) markets in
Europe. In addition, the recovery of the company's California citrus business
from a crop freeze at the end of 1998 further improved fresh fruit EBIT. These
increases were partially offset by the negative impact of the euro's decline
against the dollar since the same period of 1999.
FRESH VEGETABLES
Fresh vegetables revenues for the first half of 2000 increased 12% to
$457 million from $410 million for the first half of 1999. Revenues for the
second quarter of 2000 increased 23% to $244 million from $197 million for the
second quarter of 1999. Revenues increased in the company's North American
fresh-cut salads business due to continued category and market share growth
during the first half of 2000. In addition, revenues increased in the company's
North American commodity vegetables business due to overall strong pricing,
primarily in the second quarter, as a result of lower market supply.
EBIT in the fresh vegetables segment for the first half of 2000 increased
43% to $44 million from $31 million for the first half of 1999. EBIT for the
second quarter of 2000 increased 52% to $28 million from $19 million in the
second quarter of 1999. These increases were primarily due to strong pricing in
the North American commodity vegetables business. Increased EBIT resulting from
continued sales growth in the company's fresh-cut salads business was somewhat
offset by higher marketing expenses.
PROCESSED FOODS
Processed foods revenues for the first half of 2000 increased 4% to
$389 million from $374 million for the first half of 1999. Revenues for the
second quarter of 2000 increased 7% to $206 million from $194 million for the
second quarter of 1999. Revenues in the company's processed pineapple business
increased, as the continued success of its new FRUIT BOWLS-Registered Trademark-
and FUN SHAPES-Registered Trademark- products in North America compensated for
lower pricing in traditional pineapple products in both North America and Asia.
In the company's European processed pineapple and dried foods businesses, the
euro's decline against the dollar since the comparable period of 1999 negatively
impacted dollar-equivalent revenues.
10
<PAGE>
EBIT in the processed foods segment for the first half of 2000 increased 26%
to $43 million from $34 million for the first half of 1999. EBIT for the second
quarter of 2000 increased 18% to $23 million from $20 million in the second
quarter of 1999. Processed foods EBIT increased largely due to higher earnings
in the company's North American processed pineapple business as a result of cost
reductions in sourcing locations combined with higher demand for new products in
the North American market. Increased EBIT from growth in new product sales was
partially offset by higher related marketing expenses. In the company's Honduran
beverage operation, earnings grew largely due to the recovery of the business
during the first quarter of 2000 from the impact of Hurricane Mitch on the
comparable quarter of 1999.
FRESH-CUT FLOWERS
Fresh-cut flowers revenues remained relatively unchanged at $107 million for
the first half of 2000 as compared to $110 million for the first half of 1999.
Similarly, revenues were $54 million for the second quarter of 2000 as compared
to $55 million for the second quarter of 1999. Revenues were flat in the
fresh-cut flowers segment as improved demand from supermarket customers was
offset by lower pricing and volumes to wholesale customers.
EBIT in the fresh-cut flowers segment for the first half of 2000 decreased
to $6 million from $15 million for the first half of 1999. EBIT for the second
quarter of 2000 decreased to $4 million from $6 million in the second quarter of
1999. EBIT was lower due to increased shipping and airfreight rates, primarily
driven by increased fuel prices, combined with higher logistics and distribution
costs. The company currently anticipates slightly improved full-year 2000
results.
In the first half of 1999, the company received a total of $38 million of
insurance proceeds and incurred $12 million of rehabilitation expenses related
to Hurricane Mitch, which devastated portions of Latin America in the fourth
quarter of 1998. Of this total, $18 million of proceeds were received and
$3 million of expenses were incurred in the second quarter. The net proceeds of
$15 million and $26 million for the second quarter and first half of 1999,
respectively, were reported on a separate line in the Consolidated Statements of
Income. The company did not receive additional Hurricane Mitch-related insurance
proceeds in the first half of 2000. Subsequent to the end of the second quarter,
the company received additional proceeds of $51 million in final settlement of
the majority of claims related to losses sustained from Hurricane Mitch. These
proceeds, net of claims-preparation expenses of $2 million, will be recognized
on a separate line as a component of operating income during the third quarter
of 2000. The company continues to pursue the final settlement of certain minor
claims. Any future insurance proceeds will continue to be reported on a separate
line in the company's Consolidated Statements of Income.
In the fourth quarter of 1999, the company took a $48 million special charge
related to the planned downsizing of certain of its global operations. In
connection with its plan, the company has ceased operations in Nicaragua and
Venezuela and terminated certain ship charters. The company continues the
process of closing certain production sites and sales offices as well as
terminating certain grower contracts. Included in this charge were $31 million
of accrued costs primarily related to the termination of certain grower
contracts and ship charters as well as the severance of employees. During the
first half of 2000, the company paid $9 million, $2 million and $2 million for
contract terminations, severance and other costs, respectively. These costs were
accounted for as a utilization of the related accrual recorded as of January 1,
2000. Also included in the $31 million of accrued costs at the end of 1999 was
$11 million related to the early retirement of employees. In the second quarter
of 2000, these employee retirements became effective, and the related early
retirement benefits were transferred from accrued liabilities to non-current
accrued pension cost. As of June 17, 2000, accrued special charge costs totaling
$7 million remained to be utilized by the end of the current fiscal year.
11
<PAGE>
In the latter part of 1999, the company initiated a review of its non-core
assets and under-performing businesses with the intention to sell or liquidate
those that fall outside of the company's strategic direction or that do not meet
internal economic return criteria. This initiative was expected to generate
approximately $100 million to $200 million of cash proceeds over a period of
18 months. To date, the company has sold its citrus business in Florida and
disposed of certain idle properties in California. The company has also received
letters of intent for its California citrus and almonds businesses. In total,
these sales are expected to generate gross proceeds of approximately
$65 million. The company is also considering the sale of portions of its
deciduous businesses located in North America. In addition, the company is
pursuing the sale of its Honduran beverage operations. Proceeds from these
activities will primarily be used to pay down debt.
Other expense--net consists primarily of minority interest expense and
certain non-operating items.
Interest expense for the first half of 2000 increased to $47 million from
$43 million for the first half of 1999. For the second quarter of 2000, interest
expense increased to $24 million from $21 million for the second quarter of
1999. Interest expense rose due to higher average debt levels during the first
half of 2000 as compared to the same period of 1999.
During the first half of 2000, the company's effective tax rate increased to
23% from 22% during the same period of 1999. The increase was primarily due to
changes in the company's earnings mix.
The European Union ("EU") banana regulations, which impose quotas and
tariffs on bananas, remained in effect during the first half of 2000. In 1999,
the EU changed the licensing system for the EU's Tariff Rate Quota banana regime
in response to adverse rulings by the World Trade Organization ("WTO"). However,
this new license system was also found to be discriminatory, and the United
States and Ecuador were authorized to impose retaliatory sanctions until the EU
complies with its WTO obligations. The EU has stated its intention to comply,
but has not made the necessary changes to bring its banana import regime into
compliance. Discussions are ongoing between the EU, the United States and
Ecuador. The net impact of these changes on the company's future results of
operations is not determinable until the details of any new system are known and
finalized.
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, with minor exceptions,
historically not hedged these exposures.
Since its introduction at the beginning of 1999, the euro and other European
currencies with fixed euro exchange rates have declined significantly against
the U.S. dollar. This decline has had a significant impact on dollar-equivalent
revenues generated in the European market. The impact of future changes to this
and other currency exchange rates on the company's fiscal year 2000 results of
operations and financial position is not determinable at this time.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting
for Derivative Instruments and Hedging Activities." In June 1999, the FASB
issued Statement of Financial Accounting Standards No. 137 ("SFAS 137"),
"Accounting for Derivative Instruments and Hedging Activities--Deferral of the
Effective Date of FASB Statement No. 133," which delayed the effective date of
SFAS 133 by one year. In June 2000, the FASB issued Statement of Financial
Accounting Standards No. 138 ("SFAS 138"), "Accounting for Certain Derivative
Instruments and Certain Hedging Activities," which amended portions of
SFAS 133. The company currently anticipates adopting SFAS 133, as amended by
SFAS 137 and SFAS 138, in the first quarter of 2001. Additionally, in
March 2000, the FASB issued Interpretation No. 44 ("FIN 44"), "Accounting for
Certain Transactions Involving Stock Compensation." The company adopted
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FIN 44 as of July 1, 2000. Such adoptions have not had and are currently not
expected to have a material impact on the company's financial condition or
results of operations.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow provided by operating activities decreased slightly to
$77 million for the first half of 2000 from $81 million for the same period of
1999. During the first half of 2000, cash used in accounts payable and accrued
liabilities included higher levels of payments to growers and suppliers. During
the first half of 1999, operating cash flow was impacted by high receivables
balances during that period related to the timing of cash receipts.
Additionally, during the first half of 1999, the company received $38 million of
Hurricane Mitch insurance proceeds and a refund from the Internal Revenue
Service of $15 million related to the partial settlement of certain disputed
items from prior years' audits.
Capital expenditures of $56 million for the first half of 2000 were for the
acquisition and improvement of productive assets, which included $9 million for
the replacement or capitalizable repair of assets destroyed or damaged by
Hurricane Mitch.
In the first half of 2000, investments and acquisitions of $1 million were
the result of the company's increased ownership of its Honduran beverage
business. In the first half of 1999, investments and acquisitions of
$19 million included the company's increased ownership in its Honduran beverage
business and the acquisition of banana production operations in South America.
At the end of 1999, the company's gross debt totaled $1.33 billion. During
the first quarter of 2000, that debt level rose approximately $70 million to
$1.40 billion due to uncustomarily higher seasonal working capital requirements.
During the second quarter of 2000, the company paid down approximately
$100 million of debt with cash generated from operations. As a result of lower
debt combined with higher retained earnings, the company's net debt to net debt
and equity percentage improved to 68% at the end of the second quarter of 2000
from 71% at the end of 1999. As of June 17, 2000, the company's debt totaled
$1.30 billion, which included $215 million outstanding under its $400 million,
5-year revolving credit facility (the "Facility") and $2 million outstanding
under uncommitted lines of credit. 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. As of June 17, 2000, the company was in compliance with
these covenants.
In July 2000, the company entered into a $250 million, 364-day revolving
credit facility (the "364-day Facility"). At the company's option, borrowings
under the 364-day Facility will bear interest at a certain percentage over the
London Interbank Offered Rate, the agent's prime rate or the Federal Funds rate.
Proceeds from the 364-day Facility will be used to meet short-term financing
needs and for other general corporate purposes.
In July 2000, the company repaid its $225 million, 6.75% notes which matured
on July 15, 2000. As of January 1, 2000, these notes had been classified as
long-term debt due to the company's ability and intent as of that date to
refinance the maturity using a long-term instrument. The company has financed
$40 million of this maturity under its 364-day Facility. The remaining
$185 million was financed under the company's Facility. As such, $40 million of
these obligations have been classified as short-term borrowings at June 17,
2000.
During January and February 1999, the company repurchased approximately
2.3 million of its common shares for $68 million. These share repurchases were
funded by debt. No shares were repurchased during the first half of 2000.
Approximately 3.3 million shares remain authorized for repurchase under the
company's stock repurchase program.
Subsequent to the end of the second quarter of 2000, the company received
additional proceeds of $51 million in final settlement of the majority of its
insurance claims related to losses sustained from Hurricane Mitch. These
proceeds, net of claims preparation expenses of $2 million, will be recognized
on a
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separate line as a component of operating income during the third quarter of
2000. Additionally, on June 20, 2000, the company received a $9 million tax
refund from the Internal Revenue Service to settle disputed items from prior
years' audits. These combined proceeds were used to pay down debt.
The company believes its cash flow from operations, as well as its existing
cash balances, revolving credit facilities and access to capital markets, will
enable it to meet its working capital, capital expenditure, debt service,
dividend payment and other funding requirements.
This filing contains forward-looking statements that involve a number of
risks and uncertainties. Forward looking statements, which are based on
management's assumptions and describe the company's future plans, strategies and
expectations, are generally identifiable by the use of terms such as
"anticipate," "expect," "intend," "will," or similar expressions. 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; product and raw
materials supplies and pricing; changes in interest and currency exchange rates;
economic crises in developing countries; and quotas, tariffs and other
governmental actions.
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PART II.
OTHER INFORMATION
DOLE FOOD COMPANY, INC.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Dole Food Company, Inc. held its Annual Meeting of Stockholders (the
"Meeting") on May 11, 2000, at which the company's stockholders: (1) elected the
nominated slate of seven directors, each to serve until the next meeting and
until his or her successor has been duly elected and qualified: Elaine L. Chao,
Mike Curb, David A. DeLorenzo, Richard M. Ferry, James F. Gary, Zoltan Merszei,
and David H. Murdock, and (2) elected Arthur Andersen LLP as the company's
independent public accountants and auditors for the 2000 fiscal year.
Holders of record of the company's common stock as of March 30, 2000 were
entitled to vote at the Meeting. On March 30, 2000, there were 55,844,798 shares
of common stock outstanding and entitled to vote and 50,497,827 of such shares
were represented at the Meeting. Each of the directors received at least 98.7%
of the shares cast in favor of his or her election. The shares cast for each
director are as follows: Elaine L. Chao: 49,873,317 for and 624,510 withheld;
Mike Curb: 49,872,463 for and 625,364 withheld; David A. DeLorenzo: 49,873,230
for and 624,597 withheld; Richard M. Ferry: 49,873,581 for and 624,246 withheld;
James F. Gary 49,870,393 for and 627,434 withheld; Zoltan Merszei: 49,869,339
for and 628,488 withheld; and David H. Murdock: 49,850,588 for and 647,239
withheld. With respect to the election of Arthur Andersen LLP, the shares cast
were 49,819,137 for, 64,257 shares against and 614,432 shares in abstention.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
4 $250,000,000 Credit Agreement dated as of July 11, 2000.
27 Financial data schedule
</TABLE>
(B) No reports on Form 8-K were filed during the quarter ended June 17,
2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
<TABLE>
<S> <C> <C>
DOLE FOOD COMPANY, INC.
Registrant
August 1, 2000 By: /s/ GIL BOROK
-----------------------------------------
Gil Borok
CONTROLLER AND CHIEF ACCOUNTING OFFICER
</TABLE>
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