Notes Payable and Long-Term Debt

9 Months Ended

Oct. 08, 2011

Notes payable and long-term debt [Abstract]

NOTES PAYABLE AND LONG-TERM DEBT

NOTE 9 — NOTES PAYABLE AND LONG-TERM DEBT

Notes payable and long-term debt consisted of the following:

	October 8, 2011			January 1, 2011
	(In thousands)
Unsecured debt:
8.75% debentures due 2013	$	155,000		$	155,000
Secured debt:
13.875% notes due 2014		174,904			227,437
8% notes due 2016		315,000			315,000
Revolving credit facility		—			—
Term loan facilities		897,750			829,829
Contracts and notes, at a weighted-average interest rate of 2.4% in 2011 (4.1% in 2010)		8,503			9,070
Capital lease obligations, at a weighted-average interest rate of 2.9% in 2011 (2.6% in 2010)		57,180			59,552
Notes payable, at a weighted-average interest rate of 3.1% in 2011 (3.5% in 2010)		28,040			31,922
Unamortized debt discount		(23,367	)		(24,215	)
		1,613,010			1,603,595
Current maturities, net of unamortized debt discounts		(37,451	)		(39,270	)
	$	1,575,559		$	1,564,325

Notes Payable

Dole borrows funds primarily on a short-term basis to finance current operations. The terms of these borrowings range from one month to three months. Dole’s notes payable at October 8, 2011 consist primarily of foreign borrowings in Asia and Latin America.

2011 Refinancing

Dole’s term loan and the asset-based lending senior secured revolving credit facility (“ABL revolver”) were amended and restated on July 8, 2011 (“2011 Refinancing”). The amendments reduced borrowing rates on the ABL revolver, with an opportunity to also reduce future borrowing rates on the term loan and eliminated the financial maintenance covenants of total leverage ratio and minimum interest coverage ratio (such covenants had been in the previous term loan facilities, but not the revolving credit facility). The amended credit facilities provided $900 million of term debt due 2018 and a $350 million revolving credit facility due 2016.

Partial Retirement of 13  ⁷/8% notes due 2014

During the third quarter of 2011, Dole repurchased and retired $52.5 million of the 13.875% notes due 2014. As a result of the repurchase, Dole recorded a charge of approximately $13.5 million to other income (expense) in the condensed consolidated statement of operations during the third quarter of 2011. This charge relates to premiums paid in connection with the early debt retirement as well as the write-off of deferred debt issuance costs and debt discounts.

Term Loans and Revolving Credit Facility

As of October 8, 2011, the term loan facilities consisted of $314.2 million of Term Loan B and $583.5 million of Term Loan C. The term loan facilities bear interest, at Dole’s option, at a rate per annum equal to either (i) the London Interbank Offer Rate (“LIBOR”) plus 3.75%, with a LIBOR floor of 1.25%; or (ii) a base rate plus 2.75%. Interest on the term loan facilities is payable quarterly in arrears or at maturity of LIBOR contracts. The weighted average variable interest rate at October 8, 2011 for Term Loan B and Term Loan C was 5.05%. The term loan facilities require quarterly principal payments, plus a balloon payment due in 2018. Dole had an interest rate swap to hedge future changes in interest rates on Term Loan C which matured June 2011. Refer to Note 14 — Derivative Financial Instruments for additional information related to this instrument.

As of October 8, 2011, the asset-based lending senior secured revolving credit facility borrowing base was $309.7 million. There were no borrowings under the ABL revolver at October 8, 2011. Amounts outstanding under the ABL revolver bear interest, at Dole’s option, at a rate per annum equal to either (i) LIBOR plus 1.75% to 2.25%, or (ii) a base rate plus 0.75% to 1.25%, in each case, based upon Dole’s historical borrowing availability under this facility. The ABL revolver matures in 2016. After taking into account approximately $82.1 million of outstanding letters of credit issued under the ABL revolver, Dole had approximately $227.6 million available for borrowings as of October 8, 2011.

Covenants

Provisions under the amended senior secured credit facilities and the indentures governing Dole’s senior notes and debentures require Dole to comply with certain covenants. These covenants include limitations on, among other things, indebtedness, investments, liens, loans to subsidiaries, employees and third parties, the issuance of guarantees and the payment of dividends. The ABL revolver also contains a “springing covenant,” which would not be effective unless the availability under the ABL revolver were to fall below the greater of (i) $35 million and (ii) 12.5% of the lesser of the Total Commitment (as defined) and the borrowing base. To date, the springing covenant has never been effective and Dole does not currently anticipate that the springing covenant will become effective. At October 8, 2011, Dole was in compliance with all applicable covenants.

A breach of a covenant or other provision in any debt instrument governing Dole’s current or future indebtedness could result in a default under that instrument and, due to customary cross-default and cross-acceleration provisions, could result in a default under Dole’s other debt instruments. Upon the occurrence of an event of default under the senior secured credit facilities or other debt instrument, the lenders or holders of such other debt instruments could elect to declare all amounts outstanding to be immediately due and payable and terminate all commitments to extend further credit. If Dole were unable to repay those amounts, the lenders could proceed against the collateral granted to them, if any, to secure the indebtedness. If the lenders under Dole’s indebtedness were to accelerate the payment of the indebtedness, Dole cannot give assurance that its assets would be sufficiently liquid to repay in full its outstanding indebtedness on an accelerated basis.

Debt Discounts and Debt Issuance Costs

Debt issuance costs are capitalized and amortized into interest expense over the term of the underlying debt. During the quarter and three quarters ended October 8, 2011, Dole amortized deferred debt issuance costs of $1.7 million and $4.5 million, respectively. During the quarter and three quarters ended October 9, 2010, Dole amortized deferred debt issuance costs of $1.9 million and $4.5 million, respectively.

Dole wrote off approximately $4.6 million of deferred debt issuance costs during the three quarters ended October 9, 2010 resulting from the amendments of the senior secured credit facilities as well as the refinancing of the term loan facilities in connection with the amendments. The refinancing of the term loans and a portion of the ABL revolver, as a result of the amendments, was accounted for as extinguishment of debt. The write-off related to these amendments was recorded in other income (expense) in the condensed consolidated statement of operations for the three quarters ended October 9, 2010.

Debt discounts are amortized into interest expense over the term of the underlying debt. During the quarter and three quarters ended October 8, 2011, Dole amortized debt discounts of $1.5 million and $3.8 million, respectively. During the quarter and three quarters ended October 9, 2010, Dole amortized debt discounts of $1.5 million and $3.5 million, respectively. Debt discounts on term loan facilities in connection with the 2011 Refinancing were $6.8 million.

As a result of the 2011 Refinancing, Dole recorded a charge of $12.7 million to other income (expense) in the condensed consolidated statement of operations during the third quarter of 2011. The charge relates to fees incurred in connection with the refinancing as well as the write-off of deferred debt issuance costs and debt discounts.

Fair Value of Debt

Dole estimates the fair value of its secured and unsecured notes and debentures based on current quoted market prices. The term loans are traded between institutional investors on the secondary loan market, and the fair values of the term loans are based on the last available trading price. The carrying values and estimated fair values of Dole’s debt are summarized below:

	October 8, 2011				January 1, 2011
	Carrying Values		Estimated Fair  Values		Carrying Values		Estimated Fair  Values
	(In thousands)
Secured and unsecured notes and debentures	$	633,142	$	680,778	$	680,674	$	774,873
Term loans		886,145		884,284		822,377		844,351

Carrying values are net of debt discounts.