-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EazHxJs6AGp1SOSNVsOkW6okZWJD+jdBr/j1GyUEmIIMH4bzqZQk/66SjvncTdQN EAXJTVXRfg6rvX/zJVplmA== 0001047469-99-013425.txt : 19990405 0001047469-99-013425.hdr.sgml : 19990405 ACCESSION NUMBER: 0001047469-99-013425 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19990102 FILED AS OF DATE: 19990402 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DOLE FOOD COMPANY INC CENTRAL INDEX KEY: 0000018169 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE PRODUCTION - CROPS [0100] IRS NUMBER: 990035300 STATE OF INCORPORATION: HI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-04455 FILM NUMBER: 99586530 BUSINESS ADDRESS: STREET 1: 31365 OAK CREST DRIVE CITY: WESTLAKE VILLAGE STATE: CA ZIP: 91361 BUSINESS PHONE: 8188796600 MAIL ADDRESS: STREET 1: 31365 OAK CREST DR CITY: WESTLAKE VILLAGE STATE: CA ZIP: 91361 FORMER COMPANY: FORMER CONFORMED NAME: CASTLE & COOKE INC DATE OF NAME CHANGE: 19910731 10-K 1 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K (MARK ONE) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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 ------------------------ DOLE FOOD COMPANY, INC. (Exact Name of Registrant as specified in its charter) 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)
Registrant's telephone number, including area code: (818) 879-6600 Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED - --------------------------------------------------------- --------------------------------------------------------- Common Stock, No Par Value New York Stock Exchange Pacific Exchange
Securities registered pursuant to Section 12(g) of the Act: None -------------------------- 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. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DOLE FOOD COMPANY, INC. FORM 10-K FISCAL YEAR ENDED JANUARY 2, 1999 TABLE OF CONTENTS
ITEM NUMBER IN FORM 10-K PAGE - ----------------- --------- 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
Signatures........................................................................ 19 Financial Statements and Financial Statement Schedules............................ F-1-F-2
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 3 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. 4 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 5 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 6 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 7 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 8 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 9 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 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 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.
POSITIONS WITH THE COMPANY AND SUBSIDIARIES NAME AND AGE AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------------ --------- ----------------------------------------------------------------------- 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.
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POSITIONS WITH THE COMPANY AND SUBSIDIARIES NAME AND AGE AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------------ --------- ----------------------------------------------------------------------- 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.
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 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
EXPECTED MATURITY DATE ------------------------------------------------------------------------------------------ TOTAL / WEIGHTED- FAIR IN MILLIONS 1999 2000 2001 2002 2003 THEREAFTER AVERAGE VALUE - -------------------------- --------- --------- --------- --------- --------- ----------- ----------- --------- 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%
14 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
EXPECTED MATURITY DATE ------------------------------------------------------------------------------------------ TOTAL / WEIGHTED- FAIR IN MILLIONS 1999 2000 2001 2002 2003 THEREAFTER AVERAGE VALUE - -------------------------- --------- --------- --------- --------- --------- ----------- ----------- --------- 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
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 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:
ANNUAL REPORT PAGES ------------- 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:
The following financial statement schedules are included herein:
FORM 10-K PAGES ----------------- Independent Public Accountants' Report on Financial Statement Schedule......... F-1 Valuation and Qualifying Accounts.............................................. F-2
16 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 3. Exhibits:
EXHIBIT NO. - ----------- 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.
17
EXHIBIT NO. - ----------- 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.
(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 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. March 31, 1999 DOLE FOOD COMPANY, INC. REGISTRANT By: /s/ DAVID H. MURDOCK ----------------------------------------- David H. Murdock CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
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. /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
19 EXHIBIT INDEX
EXHIBITS PAGE - ----------- --------- 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................................................
20
EXHIBITS PAGE - ----------- --------- 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........................................................................
21 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 DOLE FOOD COMPANY, INC. VALUATION AND QUALIFYING ACCOUNTS YEAR ENDED JANUARY 2, 1999
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) 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
NOTE: (A) Write-off of uncollectible amounts. (B) Purchase accounting and transfers among allowance accounts. F-2 EX-3.1 2 EXHIBIT 3.1 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 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 (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 (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 (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 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 (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 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 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 EX-4.2 3 EXHIBIT 4.2 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 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 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 EX-4.3 4 EXHIBIT 4.3 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 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 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: 3 (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; 4 (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 5 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 6 (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 7 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 8 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 9 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 10 EX-4.7 5 EXHIBIT 4.7 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 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; 2 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. 3 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 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 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 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 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 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 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 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 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 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 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 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 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 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 EX-13 6 EXHIBIT 13 CONSOLIDATED STATEMENTS OF INCOME
------------------------------------------------------------------ (IN THOUSANDS, EXCEPT PER SHARE DATA) 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 25 CONSOLIDATED BALANCE SHEETS
------------------------------------------------ (IN THOUSANDS) 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 26 CONSOLIDATED STATEMENTS OF CASH FLOW
------------------------------------------------------------------- (IN THOUSANDS) 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 27 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 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:
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1998 1997 - ------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------
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 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:
1998 UTILIZED TO BE (IN THOUSANDS) CHARGE 1998 UTILIZED - ------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------
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:
1998 UTILIZED TO BE (IN THOUSANDS) CHARGE 1998 UTILIZED - ------------------------------------------------------------------------------- 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 - ------------------------------------------------------------------------------
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 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:
(IN THOUSANDS) 1998 1997 - ------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------
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:
(IN THOUSANDS) 1998 1997 - ------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------
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:
(IN THOUSANDS) 1998 1997 - ------------------------------------------------------------------------------ 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 - -------------------------------------------------------------------------
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 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:
U.S. PENSION PLANS INTERNATIONAL PENSION PLANS OTHER PLANS ------------------------- ----------------------------- ----------------------- (IN THOUSANDS) 1998 1997 1998 1997 1998 1997 - --------------------------------------------------------------------------------------------------------------------------------- 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) - ----------------------------------------------------------------------------------------------------------------------------------
32 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:
PENSION PLANS OTHER PLANS --------------------- ----------------------------------------------- (IN THOUSANDS) 1998 1997 1996 1998 1997 1996 - -------------------------------------------------------------------------------------------------------------------------------- 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 - --------------------------------------------------------------------------------------------------------------------------------
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 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:
WEIGHTED- SHARES AVERAGE PRICE - ----------------------------------------------------------------------------- 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 - -----------------------------------------------------------------------------
The following table summarizes information about stock options outstanding at January 2, 1999:
(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 - --------------------------------------------------------------------------------------- $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 - ---------------------------------------------------------------------------------------
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:
1998 1997 1996 - --------------------------------------------------------------------------- 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 - ---------------------------------------------------------------------------
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:
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1998 1997 1996 - ------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------
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 Comprehensive income and changes in shareholders' equity were as follows:
COMMON ADDITIONAL SHARES COMMON PAID-IN RETAINEDIVE (IN THOUSANDS, EXCEPT SHARE DATA) OUTSTANDING STOCK CAPITAL EARNINGS - ----------------------------------------------------------------------------------------- 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 - ----------------------------------------------------------------------------------------- ACCUMULATED OTHER TOTAL COMMON COMPREHENSIVE SHAREHOLDERS' COMPREHENSIVE (IN THOUSANDS, EXCEPT SHARE DATA) LOSS EQUITY INCOME - ------------------------------------------------------------------------------------------------- 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 - -----------------------------------------------------------------------------
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:
(IN THOUSANDS) 1998 1997 1996 - ------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------
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 The Company's reported income tax expense varied from the expense calculated using the U.S. federal statutory tax rate for the following reasons:
(IN THOUSANDS) 1998 1997 1996 - -------------------------------------------------------------------------------------------------- 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 - --------------------------------------------------------------------------------------------------
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:
(IN THOUSANDS) 1998 1997 1996 - -------------------------------------------------------------------------------------------------- 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 - --------------------------------------------------------------------------------------------------
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:
(IN THOUSANDS) 1998 1997 1996 - --------------------------------------------------------------------- Deferred tax assets $ 238,212 $ 226,028 $ 253,831 Deferred tax liabilities (125,097) (146,020) (165,632) - --------------------------------------------------------------------- $ 113,115 $ 80,008 $ 88,199 - ---------------------------------------------------------------------
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 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:
(IN THOUSANDS) 1998 1997 1996 - --------------------------------------------------------------- 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 - ---------------------------------------------------------------
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:
(IN THOUSANDS) 1998 1997 1996 - ----------------------------------------------------------------- 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 - -----------------------------------------------------------------
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 NOTE 16 -- QUARTERLY FINANCIAL INFORMATION (UNAUDITED) The following table presents summarized quarterly results:
FIRST SECOND THIRD FOURTH (IN THOUSANDS, EXCEPT PER SHARE DATA) QUARTER QUARTER QUARTER QUARTER YEAR - ------------------------------------------------------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------------------------------------------------------
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:
HIGH LOW - ------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------
38 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 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 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 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 RESULTS OF OPERATIONS AND SELECTED FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE DATA) 1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------------------------
43 EX-21 7 EXHIBIT 21 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:
Percent of Outstanding Voting Securities Owned as of Subsidiaries of Registrant January 2, 1999 - -------------------------- --------------- 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 Percent of Outstanding Voting Securities Owned as of Subsidiaries of Registrant January 2, 1999 - -------------------------- --------------- 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 Percent of Outstanding Voting Securities Owned as of Subsidiaries of Registrant January 2, 1999 - -------------------------- --------------- 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 Percent of Outstanding Voting Securities Owned as of Subsidiaries of Registrant January 2, 1999 - -------------------------- --------------- La Petite d'Agen, Inc. 100% (Hawaii) Cerulean, Inc. 61% (Hawaii) Blue Anthurium, Inc. 100% (Hawaii) Cerulean, Inc. 39% (Hawaii)
EX-23 8 EXHIBIT 23 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 EX-27 9 EXHIBIT 27
5 1,000 YEAR JAN-02-1999 JAN-04-1998 JAN-02-1999 35,352 0 709,344 92,765 475,524 1,170,655 1,821,219 718,934 2,915,053 804,878 1,116,422 0 0 319,937 301,895 2,915,053 4,424,160 4,424,160 3,785,745 3,785,745 552,193 53,566 68,943 17,279 5,200 12,079 0 0 0 12,079 0.20 0.20 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. IN ACCORDANCE WITH SFAS NO. 128, "EARNINGS PER SHARE", THIS ITEM REFLECTS BASIC EARNINGS PER SHARE. IN ACCORDANCE WITH SFAS NO. 128, "EARNINGS PER SHARE", THIS ITEM REFLECTS DILUTED EARNINGS PER SHARE.
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