e10vk
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
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(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended December 31, 2005 |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period
from to |
Commission File Number 1-4455
Dole Food Company, Inc.
(Exact name of Registrant as specified in its charter)
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Delaware
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99-0035300 |
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(State or other jurisdiction of |
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(IRS Employer |
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incorporation or organization) |
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Identification No.) |
One Dole Drive, Westlake Village, California 91362
(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:
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Name of Each Exchange on Which Registered |
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Common Stock, $0.001 Par Value
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none |
Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15
(d) of the
Act. Yes þ No o
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes þ No o
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. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of “accelerated filer and large
accelerated filer” in
Rule 12b-2 of the
Exchange Act).
Large Accelerated
Filer o Accelerated
Filer o Non-accelerated
Filer þ
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2 of the
Act). Yes o No þ
The approximate aggregate market value of voting and non-voting
stock held by non-affiliates of the registrant was $0 as of the
last business day of the registrant’s most recently
completed second fiscal quarter.
The number of shares of Common Stock outstanding as of
April 13, 2006 was 1,000.
DOCUMENTS INCORPORATED BY REFERENCE
None
DOLE FOOD COMPANY, INC.
FORM 10-K
Fiscal Year Ended December 31, 2005
TABLE OF CONTENTS
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PART I
Dole Food Company, Inc. was founded in Hawaii in 1851 and was
incorporated under the laws of Hawaii in 1894. Dole
reincorporated as a Delaware corporation in July 2001. Unless
the context otherwise requires, Dole Food Company, Inc. and its
consolidated subsidiaries are referred to in this report as the
“Company,” “Dole” and “we.”
Dole’s principal executive offices are located at One Dole
Drive, Westlake Village, California 91362, telephone
(818) 879-6600. During fiscal year 2005, we had, on
average, approximately 45,000 full-time permanent employees
and 27,000 full-time seasonal or temporary employees,
worldwide. Dole is the world’s largest producer and
marketer of high-quality fresh fruit, fresh vegetables and
fresh-cut flowers. Dole markets a growing line of packaged and
frozen foods and is a produce industry leader in nutrition
education and research. Our website address is www.dole.com.
Since we have only one stockholder and since our debt securities
are not listed or traded on any exchange, we do not make
available free of charge, on or through our website,
electronically or through paper copies our annual report on
Form 10-K,
quarterly reports on
Form 10-Q, current
reports on
Form 8-K, or any
amendments to those reports.
Dole’s operations are described below. For detailed
financial information with respect to Dole’s business and
its operations, see Dole’s Consolidated Financial
Statements and the related Notes to Consolidated Financial
Statements, which are included in this report.
Overview
We are the world’s largest producer of fresh fruit, fresh
vegetables and fresh-cut flowers, and we market a growing line
of value-added products. We are one of the world’s largest
producers of bananas and pineapples, a leading marketer of
citrus and table grapes worldwide and an industry leader in
packaged fruit products,
ready-to-eat salads and
vegetables. Our most significant products hold the number 1
or number 2 positions in the respective markets in which we
compete. For the fiscal year ended December 31, 2005, we
generated revenues of $5.9 billion.
We provide wholesale, retail and institutional customers around
the world with high quality food products that bear the
DOLE®
trademarks. The DOLE brand was introduced in 1933 and we believe
it is one of the most recognized for fresh and packaged produce
in the United States, as evidenced by our 57% unaided consumer
brand awareness, twice that of our nearest competitor, according
to TNS-NFO, an international market research firm. We utilize
product quality, food safety, brand recognition, competitive
pricing, customer service and consumer marketing programs to
enhance our position within the food industry. Consumer and
institutional recognition of the DOLE trademarks and related
brands and the association of these brands with high quality
food products contribute significantly to our leading positions
in the markets that we serve.
We source or sell over 200 products in more than 90 countries.
Our fully-integrated operations include sourcing, growing,
processing, distributing and marketing our products. Our
products are produced both directly on Dole-owned or leased land
and through associated producer and independent grower
arrangements under which we provide varying degrees of farming,
harvesting, packing, storing, shipping, stevedoring and
marketing services.
Industry
The worldwide fresh produce industry is characterized by
consistent underlying demand and favorable growth dynamics. In
recent years, the market for fresh produce has grown at a rate
above population growth, supported by ongoing trends including
greater consumer demand for healthy, fresh and convenient foods,
increased retailer square footage devoted to produce, and
increased emphasis on fresh produce as a differentiating factor
in attracting customers. According to the Food and Agriculture
Organization, worldwide produce production grew 3.6% per
annum from 814 million metric tons in 1990 to an estimated
1.4 billion in 2005. Total wholesale fresh produce sales in
the United States surpassed $97 billion in 2005, up from
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approximately $35 billion in 1987, representing a 5.8%
compounded annual growth rate. In the U.S., wholesale fresh
produce sales are split roughly evenly between the retail and
foodservice channels.
Health conscious consumers are driving much of the growth in
demand for fresh produce. Over the past 20 years, the
benefits of natural, preservative free foods have become an
increasingly prominent element of the public dialogue on health
and nutrition. As a result, consumption of fresh fruit and
vegetables has increased markedly. According to the
U.S. Department of Agriculture, Americans consumed 45 more
pounds of fresh fruit and vegetables per capita in 2004 than
they did in 1987. Related to the focus on health and nutrition,
consumers are increasingly consuming organic foods.
Specifically, organic produce sales grew 12% to
$5.1 billion in 2005, according to the Organic Trade
Association. Organics now represent 5.5% of total retail produce
sales in the U.S.
Consumers are also demonstrating continued demand for
convenient,
ready-to-eat products.
Food manufacturers have responded with new product introductions
and packaging innovations in segments such as fresh-cut fruit
and vegetables and
ready-to-eat salads,
contributing to industry growth. For example, the
U.S. market for fresh-cut produce has increased from an
estimated $5 billion in 1994 to a projected
$15 billion in 2005, according to the International
Fresh-Cut Produce Association.
The North American packaged fruit industry is experiencing
steady growth, driven by consumer demand for healthy snacking
options. FRUIT
BOWLS®
in plastic cups, introduced by Dole in 1998, and other
innovative packaging items have steadily displaced the canned
alternative. These new products have driven overall growth in
the packaged fruit category, while the consumption of
traditional canned fruit has declined as consumers have opted
for fresh products and more innovative packaging.
Retail consolidation and the growing importance of food to mass
merchandisers are major factors affecting the food manufacturing
and fresh produce industries. As food retailers have grown and
expanded, they have sought to increase profitability through
value-added product offerings and in-store services. The fresh
produce category is also attractive to retailers due to its
higher margins. According to a Cornell University study, the
share of retailer profits due to produce sales increased from
18% in 1994 to 23% in 2004. On most packaged fruit products,
retailers generate a 12-36% trade margin. Some retailers are
reducing their dry goods sections of the store, in favor of
expanding fresh and chilled items, offering new product and
merchandising opportunities for packaged fruit. Fully integrated
produce companies, such as Dole, are well positioned to meet the
needs of large retailers through the delivery of consistent,
high quality produce, reliable service, competitive pricing and
innovative products. In addition, these companies have sought to
strengthen relationships with leading retailers through
value-added services such as banana ripening and distribution,
category management, branding initiatives and establishment of
long-term supply agreements.
Competitive Strengths
Our competitive strengths have contributed to our strong
historical operating performance and should enable us to
capitalize on future growth opportunities:
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Market Share Leader. Our most significant products hold
the number 1 or number 2 positions in the respective
markets in which we compete. We maintain number 1 market
share positions in North American bananas, North American
iceberg lettuce, celery, cauliflower,
ready-to-eat salads,
winter fruits exported from Chile, and packaged fruit products,
including our line of plastic fruit cups called FRUIT BOWLS and
FRUIT BOWLS in Gel. In addition, we believe that we are the only
fully integrated fresh-cut flower and bouquet supplier of our
size in North America. |
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Strong Global Brand. Consumer and institutional
recognition of the DOLE trademark and related brands and the
association of these brands with high quality food products
contribute significantly to our leading positions in the markets
that we serve. By implementing a global marketing program, we
have made the distinctive red “DOLE” letters and
sunburst a familiar symbol of freshness and quality recognized
around the world. We believe that opportunities exist to
leverage the DOLE brand through product extensions and new
product introductions. |
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Low-Cost Production Capabilities. We believe we are one
of the lowest cost producers of many of our major product lines,
including bananas, North American fresh vegetables and
ready-to-eat salads and
packaged fruit products. Over the last several years we have
undertaken various initiatives to achieve this low-cost
position, including leveraging our global logistics
infrastructure more efficiently. We intend to maintain these
low-cost positions through a continued focus on operating
efficiency. |
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State-of-the-Art
Infrastructure. We have made significant investments in our
production, processing, transportation and distribution
infrastructure with the goal of efficiently delivering the
highest quality and freshest product to our customers. We own or
lease over 60 processing, ripening and distribution centers, and
the largest dedicated refrigerated containerized shipping fleet
in the world, with 24 ships and approximately 13,700
refrigerated containers. The investments in our infrastructure
should allow for continued growth in the near term. In addition,
our market-leading logistics and distribution capabilities allow
us to act as a preferred fresh and packaged food provider to
leading global supermarkets and mass merchandisers. |
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Diversity of Sourcing Locations. We currently source our
fresh fruits, vegetables and fresh-cut flowers from 65 countries
and distribute products in more than 90 countries. We are not
dependent on any one country for the sourcing of any of our
products. The largest concentration of production is in Ecuador,
where we sourced approximately 38% of our Latin bananas in 2005.
The diversity of our production sources reduces our risk from
exposure to natural disasters and political disruptions in any
one particular country. |
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Experienced Management Team. Our management team has a
demonstrated history of delivering strong operating results
through disciplined execution. The current management team has
been instrumental in our continuing drive to transform Dole from
a production driven company into a sales and marketing driven
one. |
Business Strategy
Key elements of our strategy include:
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Leveraging our Strong Brand and Market Leadership
Position. Our most significant products hold number 1
or number 2 market positions in the respective markets in which
we compete. We intend to maintain those positions and continue
to expand our leadership both in new product areas and with new
customers. We have a history of leveraging our strong brand to
successfully enter, and in many cases become the leading player
in, value-added food categories. For example, we attained the
number 1 market share in the plastic fruit cups category
only 4 years after introducing FRUIT BOWLS and FRUIT BOWLS
in Gel. We intend to continue to evaluate and to strategically
introduce other branded products in the value-added sectors of
our business. |
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Focusing on Value-Added Products. Over the last
10 years, we have successfully shifted our product mix
toward value-added food categories and away from commodity
fruits and vegetables. For example, we have found major success
in our ready-to-eat
salad lines and, most recently, FRUIT BOWLS and FRUIT BOWLS in
Gel. These value-added food categories are growing at a faster
rate than our traditional commodity businesses and are
generating higher margins. Overall, we have significantly
increased our percentage of revenue from value-added products.
This shift has been most pronounced in our fresh vegetables and
packaged foods businesses, where value-added products now
account for approximately 53% and 51% of those businesses’
respective revenues. We plan to continue to address the growing
demand for convenient and innovative products by investing in
our higher margin, value-added food businesses. |
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Further Improving Operating Efficiency and Cash Flow. We
intend to continue to focus on profit improvement initiatives
and maximizing cash flow. We will continue to: |
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analyze our current customer base and focus on profitable
relationships with strategically important customers; |
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leverage our purchasing power to reduce our costs of raw
materials; |
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make focused capital investments to improve
productivity; and |
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sell unproductive assets. |
Business Segments
We have four business segments: fresh fruit, fresh vegetables,
packaged foods and fresh-cut flowers. The fresh fruit segment
contains several operating divisions that produce and market
fresh fruit to wholesale, retail and institutional customers
worldwide. The fresh vegetables segment contains two operating
divisions that produce and market commodity and fresh-cut
vegetables to wholesale, retail and institutional customers,
primarily in North America, Europe and Asia. The packaged foods
segment contains several operating divisions that produce and
market packaged foods including fruit, juices and snack foods.
Our fresh-cut flowers segment sources, imports and markets
fresh-cut flowers, grown mainly in Colombia, primarily to
wholesale florists and retail grocers in the United States. For
financial information on the four business segments, see
Item 7, Management’s Discussion and Analysis of
Financial Condition and Results of Operations and Item 8,
Financial Statements and Supplementary Data,
Note 13 — Business Segments, in this
Form 10-K.
Fresh Fruit
Our fresh fruit business segment has four primary operating
divisions: bananas, fresh pineapple, European
Ripening & Distribution and Dole Chile. We believe that
we are the industry leader in growing, sourcing, shipping and
distributing consistently high-quality fresh fruit. The fresh
fruit business segment represented approximately 64% of 2005
total revenues of the four segments.
We are one of the world’s largest producers of bananas,
growing and selling more than 136 million boxes of bananas
annually. We sell most of our bananas under the DOLE brand. We
primarily sell bananas to customers in North America, Europe and
Asia. We are the number 1 brand of bananas in both North
America (an approximate 36% market share) and Japan (an
approximate 29% market share) and the number 2 brand in Europe
(an approximate 15% market share). In Latin America, our bananas
are primarily sourced in Honduras, Costa Rica, Ecuador,
Colombia, Guatemala and Peru and grown on approximately
40,100 acres of company-owned farms and approximately
73,600 acres of independent producers’ farms. Bananas
produced by us in Latin America are shipped primarily to North
America and Europe on our refrigerated and containerized
shipping fleet. In Asia, we source our bananas primarily in the
Philippines. Bananas accounted for approximately 41% of our
fresh fruit business segment revenues in 2005.
Consistent with our strategy to focus on value-added products,
we have continued to expand our focus on higher margin, niche
bananas. While the traditional “green” bananas still
comprise the majority of our banana sales, we have successfully
introduced niche bananas (e.g., organic). We have also improved
the profitability of our banana business by focusing on
profitable customer relationships and markets.
While bananas are sold year round, there is a seasonal aspect to
the banana business. Banana prices and volumes are typically
higher in the first and second calendar quarters before there is
increased competition from summer fruits. Approximately 90% of
our total retail volume in North America is under contract. The
contracts are typically one year in duration and help to
insulate us from fluctuations in the banana spot market. Our
principal competitors in the international banana business are
Chiquita Brands International, Inc. and Fresh Del Monte Produce
Inc.
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European Ripening & Distribution |
Our European Ripening & Distribution business
distributes DOLE and non-DOLE branded fresh produce in Europe.
This business operates 49 sales and distribution centers in ten
countries, predominantly in Western Europe. This is a
value-added business for us since European retailers generally
do not self-distribute
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or self-ripen. This business assists us in firmly establishing
customer relationships in Europe. In December 2004, Saba Trading
AB in Sweden became wholly-owned by Dole, when we acquired the
40% of Saba that we did not already own. Saba is
Scandinavia’s leading importer and distributor of fruit,
vegetables and flowers, with imports from more than 40
countries. European Ripening & Distribution accounted
for approximately 38% of our fresh fruit business segment’s
revenues in 2005.
We are the number 2 global producer of fresh pineapples, growing
and selling more than 27 million boxes annually. We sell
our pineapples globally and source them from company operated
farms and independent growers in Latin America, Hawaii, the
Philippines and Thailand. We produce and sell two principal
types of pineapples: the Champaka (or green) pineapple and the
sweet yellow pineapple. The Champaka pineapple, which
traditionally had been the most widely available type of
pineapple, is primarily sold to the foodservice sector and is
also used in our packaged products. The sweet yellow pineapple
was introduced in 1999 under the DOLE PREMIUM
SELECT®
label. We now market a substantial portion of this fruit under
the DOLE TROPICAL
GOLD®
label. The sweet yellow pineapple sells for a higher price than
the Champaka, which translates into a higher margin for our
customers and us. Our sweet yellow pineapple has had excellent
market acceptance. Unit volume grew by 22% in 2005 as compared
with 2004. Our primary competitor in fresh pineapples is Fresh
Del Monte Produce Inc. Pineapples accounted for approximately 9%
of our fresh fruit business segment’s revenues in 2005.
We began our Chilean operations in 1982 and have grown to become
the largest exporter of Chilean fruit. We export grapes, apples,
pears, stone fruit (e.g., peaches and plums) and kiwifruit from
approximately 4,040 Company owned or Company leased acres and
15,000 contracted acres. The weather and geographic features of
Chile are similar to those of the Western United States, with
opposite seasons. Accordingly, Chile’s harvest is
counter-seasonal to that in the northern hemisphere, offsetting
the seasonality in our other fresh fruit. We primarily export
Chilean fruit to North America, Latin America and Europe. Our
Dole Chile business division accounted for approximately 7% of
our fresh fruit business segment’s revenues in 2005.
Fresh Vegetables
Our fresh vegetables business segment operates through two
divisions: commodity and value-added. We source our fresh
vegetables from company-owned and contracted farms. To satisfy
the increasing demand for our products, we have continued to
expand production and distribution capabilities of our fresh
vegetables segment. Our Yuma, Arizona production facility
transitioned from a five-month seasonal operation to a
year-round production operation in the fall of 2002 to
accommodate growth in this segment. We broke ground on the
construction of a fourth salad plant in Bessemer City, North
Carolina, in November 2005. The plant is expected to open in
December 2006. Under our arrangements with independent growers,
we purchase fresh produce at the time of harvest and are
generally responsible for harvesting, packing and shipping the
product to our central cooling and distribution facilities. We
have continued to focus on our value-added products, which now
account for more than 53% of revenues for this segment. The
fresh vegetables business segment accounted for approximately
19% of 2005 total revenues of the four segments.
We source, harvest, cool, distribute and market more than 20
different types of fresh vegetables, including iceberg lettuce,
red and green leaf lettuce, romaine lettuce, butter lettuce,
celery, cauliflower, broccoli, carrots, brussel sprouts, green
onions, asparagus, snow peas and artichokes. We sell our
commodity vegetable products primarily in North America, Asia
and, to a lesser extent, Western Europe. In North America, we
are the number one provider of lettuce, celery and cauliflower.
Our primary competitors in this category include:
Tanimura & Antle, Duda, Salyer American and Ocean Mist.
In October 2004, we acquired Coastal Berry Company, LLC,
subsequently renamed as Dole Berry Company, LLC, as a result of
which, Dole became the third largest producer of strawberries in
North America.
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Our value-added vegetable products include
ready-to-eat salads,
broccoli florets and cauliflower florets. Our unit market share
of the ready-to-eat
salads category reported by A.C. Nielsen was approximately 40.5%
for the 12-week period
ended December 31, 2005. The
ready-to-eat salad
category in the U.S. experienced a compound annual growth
rate of approximately 12% from 1995 through 2005, reflecting the
consumer’s increasing preference for convenience and
healthy eating, with higher growth rates in the earlier years.
As the percentage of households buying one or more
ready-to-eat salad per
year approaches maximum levels, annual growth is expected to be
approximately 3%. Our value-added products typically have more
stable margins than commodity vegetables, thereby helping to
reduce our exposure to commodity price fluctuations. New product
development continues to be a key driver in the growth of this
segment. Our primary competitor in this segment is Fresh
Express, owned by Chiquita Brands International, Inc.
Packaged Foods
Our packaged foods segment produces canned pineapple, canned
pineapple juice, fruit juice concentrate and fruit in plastic
cups, jars and pouches. Most of our significant packaged food
products hold the number 1 branded market position in North
America. We remain the market leader in the plastic fruit cup
category with five of the top ten items in category. Fruit for
our packaged food products is sourced primarily in the
Philippines, Thailand, the United States and China and packed
primarily in three Asian canneries, two in Thailand and one in
the Philippines. We have continued to focus on expanding our
product range beyond our traditional canned fruit and juice
products. Non-canned products accounted for approximately 51% of
the segment’s revenues.
Our FRUIT BOWLS products were introduced in 1998 and continue to
exceed our volume and share expectations. The trend towards
convenience and healthy snacking has been responsible for the
explosive growth in the plastic fruit cup category. The plastic
fruit cup category is now larger than the applesauce cup and
shelf-stable gelatin cup categories. In an effort to keep up
with this demand, we have made significant investments in our
Asian canneries. We have significantly increased our FRUIT BOWLS
capacity in the past four years. These investments should ensure
our position as an industry innovator and low cost producer. We
are now producing more plastic cups than traditional cans. In
2003, Dole introduced fruit in a 24.5 oz. plastic jar. This
growing business achieved a 42% market share for 2005.
In June 2004, Dole acquired Wood Holdings, Inc. and its
operating company, J.R. Wood, Inc. (subsequently renamed Dole
Packaged Frozen Foods, Inc.), a frozen fruit producer and
manufacturer, in order to further leverage the DOLE brand and
strengthen our existing product portfolio. We began shipping
DOLE branded frozen fruit products in February of 2005, and it
is now the number one branded frozen fruit product in the United
States. Effective as of January 1, 2006, Dole Packaged
Frozen Foods, Inc. was converted to a limited liability company,
the assets and liabilities of the Dole Packaged Foods division
were contributed to Dole Packaged Frozen Foods, Inc., and the
combined entity was renamed Dole Packaged Foods, LLC.
With a broader line of convenience-oriented products, we are
gaining expanded distribution in non-grocery channels. These
channels are growing faster than the grocery channel and the
cost of gaining new distribution in them is lower. We have
gained significant new distribution in these alternative
channels, particularly for our fruit cup business.
Our packaged foods segment accounted for approximately 15% of
2005 revenues of the four segments.
Fresh-Cut Flowers
We entered the fresh-cut flowers business in 1998 and are now
the largest producer of fresh-cut flowers in Latin America with
over 90% of our Latin American flowers shipped into North
America. Our products
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include over 800 varieties of fresh-cut flowers such as roses,
carnations and alstroemeria. The fresh-cut flowers business fits
our core competencies including:
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expertise in perishable products; |
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strong relationships with and knowledge of the grocery channel; |
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the ability to manage production in the southern
hemisphere; and |
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sophisticated logistics capabilities. |
We are the only flower importer with guaranteed daily deliveries
by air. Immediately after harvesting, our flowers are flown to
our Miami facility where temperatures are maintained within
one-half degree of required levels in all warehouse and
production operations. Maintaining the cold chain enables us to
deliver the freshest and healthiest flowers to the market.
Dole’s focus is on supply chain optimization to provide its
customers industry-leading service in the procurement of
flowers. Current management emphasis is on increasing customer
service, rationalizing operational costs, reducing SKUs and
automating processes. Our fresh-cut flowers segment accounted
for approximately 3% of 2005 revenues of the four segments.
Global Logistics
We have significant owned and operated food sourcing and related
operations in Chile, Colombia, Costa Rica, Ecuador, Guatemala,
Honduras, the Philippines, Thailand and the United States. We
also source food products in Algeria, Argentina, Australia,
Brazil, Cameroon, China, Greece, Italy, Ivory Coast, Mexico, New
Zealand, Peru, South Africa, South Korea, Spain, Syria, Tunisia
and Turkey. 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, China, Hong Kong, New Zealand, South Korea, and other
countries in Asia, Eastern Europe, Scandinavia, the Middle East
and Central and South America.
The produce that we distribute internationally is transported
primarily by 24 owned or leased ocean-going vessels. We ship our
tropical fruit in owned or chartered refrigerated vessels. All
of our tropical fruit shipments into the North American and core
European markets are delivered using pallets or containers. This
increases efficiency and minimizes damage to the product from
handling. Most of the vessels are equipped with controlled
atmosphere technology, which improves product quality.
“Backhauling” services, transporting third-party cargo
primarily from North America and Europe to Latin America, reduce
net transportation costs. We use vessels that are both owned or
operated under long-term leases, as well as vessels chartered
under contracts that typically last one year. Our fresh-cut
flowers are transported via chartered flights.
Customers
Our top 10 customers in 2005 accounted for approximately 32% of
total revenues. No one customer accounted for more than 7% of
total 2005 revenues. Our customer base is highly diversified,
both geographically and in terms of product mix. Each of our
segments’ largest customers accounted for less than 30% of
that segment’s revenues. Our largest customers are leading
global and regional mass merchandisers and supermarkets in North
America, Europe and Asia.
Sales and Marketing
We sell and distribute our fruit and vegetable products through
a network of fresh produce operations in North America, Europe,
Asia and Latin America. Some of these operations involve the
sourcing, distribution and marketing of fresh fruits and
vegetables while others involve only distribution and marketing.
We have regional sales organizations to service major retail and
wholesale customers. We also use the services of brokers in
certain regions, primarily for sales of packaged foods and
ready-to-eat salads.
Retail customers include large chain stores with which Dole
enters into product and service contracts, typically for a one
or two-year term. Wholesale customers include large distributors
in North America, Europe and Asia. We use
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consumer advertising and promotion support, together with trade
spending, to support awareness of new items to maintain and grow
our exceptional brand awareness, as well as to increase
nutrition and health awareness.
Competition
The global fresh and packaged produce markets are intensely
competitive, and generally have a small number of global
producers, filled out with independent growers, packers and
middlemen. Our large, international competitors are Chiquita,
Fresh Del Monte Produce and Del Monte Foods. In some product
lines, we compete with smaller national producers. In fresh
vegetables, a limited number of grower shippers in the United
States and Mexico supply a significant portion of the United
States market, with numerous smaller independent distributors
also competing. We also face competition from grower
cooperatives and foreign government sponsored producers.
Competition in the various markets in which we operate is based
on reliability of supply, product quality, brand recognition and
perception, price and the ability to satisfy changing customer
preferences through innovative product offerings.
Employees
During fiscal year 2005, we had on average approximately
45,000 full-time permanent employees and
27,000 full-time seasonal or temporary employees,
worldwide. This represents an increased work force from 2004 due
largely to acquisitions in North America and higher production
in Asia. Approximately 43% of our employees work under
collective bargaining agreements, some of which expire in 2006,
subject to automatic renewals unless a notice of non-extension
is given by the union or us. We have not received any notice yet
that a union intends not to extend a collective bargaining
agreement. We believe our relations with our employees are
generally good.
Research and Development
Our research and development programs concentrate on sustaining
the productivity of our agricultural lands, food safety, 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
sustaining and 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, post-harvesting, handling, packing and
shipping procedures), and includes onsite 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 developed for various phases of agricultural
production and packaging that reduces labor costs, improves
productivity and efficiency and increases product quality.
Agricultural research is conducted at field facilities primarily
in California, Hawaii, Latin America and Asia. We also sponsor
research related to environmental improvements and the
protection of worker and community health. The aggregate amounts
we spent on research and development in each of the last three
years have not been material in any of such years.
Trademark Licenses
We had an agreement, which expired in April 2006, with Ice Cream
Partners USA, LLC, pursuant to which we licensed to Nestle our
rights to market and manufacture processed products in key
segments of the frozen novelty business in the United States and
certain other countries, including FRUIT ’N
JUICE®
bars.
DOLEWHIP®,
a soft-serve, non-dairy dessert, is manufactured and marketed by
Precision Foods, Inc. under license from us. In connection with
the sale of the majority of our juice business to Tropicana
Products, Inc. in May of 1995, we received cash payments up
front and granted to Tropicana a license, requiring no
additional future royalty payments, to use certain DOLE
trademarks on certain beverage products. We continue to market
DOLE canned pineapple juice and pineapple juice blend beverages.
We have a number of additional license arrangements worldwide,
none of which is material to Dole and its subsidiaries, taken as
a whole.
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Environmental and Regulatory Matters
Our agricultural operations are subject to a broad range of
evolving environmental laws and regulations in each country in
which we operate. 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 that is not currently expected
to have a material effect on our capital expenditures, earnings
or competitive position. Environmental concerns are, however,
inherent in most major agricultural operations, including those
conducted by us, 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.
Our 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 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.
In the United States, portions of our 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. Worldwide,
the quantity and quality of water supplies varies depending on
weather conditions and government regulations. We believe that
under normal conditions these water supplies are adequate for
current production needs.
Legal Proceedings
See Item 3, Legal Proceedings, in this
Form 10-K.
Trade Issues
Our 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 our foreign operations could have a
material adverse effect on our operating results. We strive to
maintain good working relationships in each country where we
operate. Because our operations are a significant factor in the
economies of certain countries, our 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 public opinion in a particular country.
The European Union (“EU”) maintains banana regulations
that impose tariffs on bananas. On January 1, 2006, the EU
implemented a new “tariff only” import regime for
bananas. The 2001 EC/ US Understanding on Bananas required the
EU to implement a tariff only banana import system on or before
January 1, 2006, and the EU’s banana regime change was
therefore expected by that date.
Banana imports from Latin America are now subject to a tariff of
176 euro per metric ton for entry into the EU market. Under the
EU’s previous banana regime, banana imports from Latin
America were subject to a tariff of 75 euro per metric ton and
were also subject to import license requirements and volume
quotas. License requirements and volume quotas had the effect of
limiting access to the EU banana market.
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Although all Latin bananas are now subject to a tariff of 176
euro per metric ton, up to 775,000 metric tons of bananas from
African, Caribbean, and Pacific (“ACP”) countries may
be imported to the EU duty-free. This preferential treatment of
a zero tariff on up to 775,000 tons of ACP banana imports, as
well as the 176 euro per metric ton tariff applied to Latin
banana imports, is currently being challenged by Panama,
Honduras and Nicaragua at the World Trade Organization
(“WTO”). The current tariff applied to Latin banana
imports may be lowered and the ACP preference of a zero tariff
may be affected depending on the outcome of these WTO
proceedings, but the WTO proceedings are only in their initial
stage and may take several years to conclude.
Exports of our products to certain countries or regions,
particularly China, Japan, New Zealand, Russia, South Korea,
Taiwan and the Middle East, are subject to various restrictions
that may be increased or reduced in response to international
economic, currency and political factors, thus affecting our
ability to compete in these markets.
We distribute our products in more than 90 countries throughout
the world. Our 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.
Seasonality
Our sales volumes remain relatively stable throughout the year.
We experience seasonal earnings characteristics, predominantly
in the fresh fruit segment, because fresh fruit prices
traditionally are lower in the second half of the year, when
summer fruits are in the markets, than in the first half of the
year. Our fresh vegetables segment experiences some seasonality
as reflected by higher earnings in the first half of the year.
Our packaged foods and fresh-cut flowers segments experience
peak demand during certain well-known holidays and observances;
the impact is less than in the fresh fruit segment.
GOING-PRIVATE MERGER TRANSACTION
On March 28, 2003, following stockholder approval, Dole
completed the going-private merger transaction pursuant to which
David H. Murdock acquired the approximately 76% of Dole’s
common stock that he and his affiliates did not already own for
$33.50 per share in cash. Upon completion of the merger,
Dole became wholly owned by Mr. Murdock through DHM Holding
Company, Inc.
RISK FACTORS
In addition to the risk factors described elsewhere in this
Form 10-K, you
should consider the following risk factors. The risks and
uncertainties described below are not the only ones facing our
company. Additional risks and uncertainties not presently known
or that we currently believe to be less significant may also
adversely affect us.
Adverse weather conditions and crop disease can impose costs
on our business.
Fresh produce, including produce used in canning and other
packaged food operations, is vulnerable to adverse weather
conditions, including windstorms, floods, drought and
temperature extremes, which are quite common but difficult to
predict. Unfavorable growing conditions can reduce both crop
size and crop quality. In extreme cases, entire harvests may be
lost in some geographic areas. These factors can increase costs,
decrease revenues and lead to additional charges to earnings,
which may have a material adverse effect on our business,
results of operations and financial condition.
Fresh produce is also vulnerable to crop disease and to pests,
which may vary in severity and effect, depending on the stage of
production at the time of infection or infestation, the type of
treatment applied and
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climatic conditions. For example, black sigatoka is a fungal
disease that affects banana cultivation in most areas where they
are grown commercially. The costs to control this disease and
other infestations vary depending on the severity of the damage
and the extent of the plantings affected. These infestations can
increase costs, decrease revenues and lead to additional charges
to earnings, which may have a material adverse effect on our
business, results of operations and financial condition.
Our business is highly competitive and we cannot assure you
that we will maintain our current market share.
Many companies compete in our different businesses. However,
only a few well-established companies operate on both a national
and a regional basis with one or several branded product lines.
We face strong competition from these and other companies in all
our product lines.
Important factors with respect to our competitors include the
following:
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Some of our competitors may have greater operating flexibility
and, in certain cases, this may permit them to respond better to
changes in the industry or to introduce new products and
packaging more quickly and with greater marketing support. |
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Several of our packaged food product lines are sensitive to
competition from national or regional brands, and many of our
product lines compete with imports, private label products and
fresh alternatives. |
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We cannot predict the pricing or promotional actions of our
competitors or whether those actions will have a negative effect
on us. |
There can be no assurance that we will continue to compete
effectively with our present and future competitors, and our
ability to compete could be materially adversely affected by our
leveraged position. See “Business —
Competition.”
Our earnings are sensitive to fluctuations in market prices
and demand for our products.
Excess supplies often cause severe price competition in our
industry. Growing conditions in various parts of the world,
particularly weather conditions such as windstorms, floods,
droughts and freezes, as well as diseases and pests, are primary
factors affecting market prices because of their influence on
the supply and quality of product.
Fresh produce is highly perishable and generally must be brought
to market and sold soon after harvest. Some items, such as
lettuce, must be sold more quickly, while other items can be
held in cold storage for longer periods of time. The selling
price received for each type of produce depends on all of these
factors, including the availability and quality of the produce
item in the market, and the availability and quality of
competing types of produce.
In addition, general public perceptions regarding the quality,
safety or health risks associated with particular food products
could reduce demand and prices for some of our products. To the
extent that consumer preferences evolve away from products that
we produce for health or other reasons, and we are unable to
modify our products or to develop products that satisfy new
consumer preferences, there will be a decreased demand for our
products. However, even if market prices are unfavorable,
produce items which are ready to be, or have been, harvested
must be brought to market promptly. A decrease in the selling
price received for our products due to the factors described
above could have a material adverse effect on our business,
results of operations and financial condition.
Our earnings are subject to seasonal variability.
Our earnings may be affected by seasonal factors, including:
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the seasonality of our supplies and consumer demand; |
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the ability to process products during critical harvest
periods; and |
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the timing and effects of ripening and perishability. |
Although banana production tends to be relatively stable
throughout the year, banana pricing is seasonal because bananas
compete against other fresh fruit that generally comes to market
beginning in the summer. As a result, banana prices are
typically higher during the first half of the year. Our fresh
vegetables segment experiences some seasonality as reflected by
higher earnings in the first half of the year. Also, there is a
seasonal aspect to our fresh-cut flower business, with peak
demand generally around Valentine’s Day and Mother’s
Day.
Currency exchange fluctuations may impact the results of our
operations.
We distribute our products in more than 90 countries throughout
the world. Our international sales are usually transacted in
U.S. dollars, and European and Asian currencies. Our
results of operations are affected by fluctuations in currency
exchange rates in both sourcing and selling locations. Although
we enter into foreign currency exchange forward contracts from
time to time to reduce our risk related to currency exchange
fluctuation, our results of operations might still be impacted
by foreign currency exchange rates, primarily the
yen-to-U.S. dollar
and
euro-to-U.S. dollar
exchange rates. For instance, we currently estimate that a 10%
strengthening of the U.S. dollar relative to the Japanese
yen, euro and Swedish krona would lower operating income by
approximately $49 million excluding the impact of foreign
currency exchange hedges. Because we do not hedge against all of
our foreign currency exposure, our business will continue to be
susceptible to foreign currency fluctuations.
We face risks related to our former use of the pesticide
DBCP.
We formerly used dibromochloropropane, or DBCP, a nematocide
that was used on a variety of crops throughout the world. The
registration for DBCP with the U.S. government was
cancelled in 1979 based in part on an apparent link to male
sterility among chemical factory workers who produced DBCP.
There are a number of pending lawsuits in the United States and
other countries against the manufacturers of DBCP and the
growers, including us, who used it in the past. The cost to
defend or settle these lawsuits, and the costs to pay any
judgments or settlements resulting from these lawsuits, or other
lawsuits which might be brought, could have a material adverse
effect on our business, financial condition or results of
operations. See Item 3, Legal Proceedings, in this
Form 10-K.
Our substantial indebtedness could adversely affect our
operations, including our ability to perform our obligations
under the notes and our other debt obligations.
We have a substantial amount of indebtedness. As of
December 31, 2005, we had approximately $841 million
in senior secured indebtedness and other structurally senior
indebtedness, $1.105 billion in senior unsecured
indebtedness, including outstanding senior notes and debentures,
and approximately $81 million in capital leases. In April
2006, we completed amendments of our existing senior secured
credit facilities, which provide $1.425 billion of
borrowing capacity (consisting of $1.075 billion of term
loan and letter of credit facilities and $350 million of
revolving credit facilities). These funds have been used in part
to repay the outstanding term loans under our existing senior
secured credit facilities and to make a dividend to our
immediate parent, Dole Holding Company, LLC, with which the
latter repaid its $150 million credit facility. As of
April 13, 2006, we have approximately $1.076 billion
in senior secured indebtedness and other structurally senior
indebtedness, $1.105 billion in senior unsecured
indebtedness, including outstanding senior notes and debentures,
and approximately $80 million in capital leases.
Our substantial indebtedness could have important consequences.
For example, it could:
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make it more difficult for us to satisfy our obligations; |
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require us to dedicate a substantial portion of our cash flow
from operations to payments on our indebtedness, which would
reduce the availability of our cash flow to fund future working
capital, capital expenditures, acquisitions and other general
corporate purposes; |
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expose us to the risk of increased interest rates, as certain of
our borrowings are at variable rates of interest; |
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require us to sell assets to reduce indebtedness or influence
our decisions about whether to do so; |
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increase our vulnerability to general adverse economic and
industry conditions; |
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limit our flexibility in planning for, or reacting to, changes
in our business and the industry in which we operate; |
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restrict us from making strategic acquisitions or pursuing
business opportunities; |
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place us at a competitive disadvantage compared to our
competitors that have relatively less indebtedness; and |
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limit, along with the restrictive covenants in our credit
facilities and senior notes indentures, among other things, our
ability to borrow additional funds. Failing to comply with those
covenants could result in an event of default which, if not
cured or waived, could have a material adverse effect on our
business, financial condition and results of operations. |
The financing arrangements for the going-private merger
transactions may increase our exposure to tax liability.
A portion of our senior secured credit facility has been
incurred by our foreign subsidiaries and was used to fund the
going-private merger transactions. Although we believe, based in
part upon the advice of our tax advisors, that our intended tax
treatment of such transactions is appropriate, it is possible
that the Internal Revenue Service could seek to characterize the
going-private merger transactions in a manner that could result
in the immediate recognition of taxable income by us. Any such
immediate recognition of taxable income would result in a
material tax liability, which could have a material adverse
effect on our business, results of operations and financial
condition.
Restrictive covenants in our debt instruments restrict or
prohibit our ability to engage in or enter into a variety of
transactions, which could adversely affect us.
The indentures governing our senior notes due 2009, our senior
notes due 2010, our senior notes due 2011, our debentures due
2013 and our senior secured credit facilities contain various
restrictive covenants that limit our discretion in operating our
business. In particular, these agreements limit our ability to,
among other things:
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incur additional indebtedness; |
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make restricted payments (including paying dividends on,
redeeming or repurchasing our capital stock); |
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issue preferred stock of subsidiaries; |
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make certain investments or acquisitions; |
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create liens on our assets to secure debt; |
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engage in transactions with affiliates; |
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merge, consolidate or transfer substantially all of our
assets; and |
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transfer and sell assets. |
These covenants could have a material adverse effect on our
business by limiting our ability to take advantage of financing,
merger and acquisition or other corporate opportunities and to
fund our operations. Any future debt could also contain
financial and other covenants more restrictive than those
imposed under the indentures governing our senior notes due
2009, our senior notes due 2010, our senior notes due 2011, our
debentures due 2013 and our senior secured credit facilities.
13
A breach of a covenant or other provision in any debt instrument
governing our current or future indebtedness could result in a
default under that instrument and, due to cross-default and
cross-acceleration provisions, could result in a default under
our other debt instruments. Upon the occurrence of an event of
default under the senior secured credit facility or any other
debt instrument, the lenders could elect to declare all amounts
outstanding to be immediately due and payable and terminate all
commitments to extend further credit. If we 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 our current or future indebtedness accelerate the
payment of the indebtedness, we cannot assure you that our
assets or cash flow would be sufficient to repay in full our
outstanding indebtedness.
We face other risks in connection with our international
operations.
Our operations are heavily dependent upon products grown,
purchased and sold internationally. In addition, our operations
are a significant factor in the economies of many of the
countries in which we operate, increasing our visibility and
susceptibility to regulatory changes. These activities are
subject to risks that are inherent in operating in foreign
countries, including the following:
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foreign countries could change laws and regulations or impose
currency restrictions and other restraints; |
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in some countries, there is a risk that the government may
expropriate assets; |
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some countries impose burdensome tariffs and quotas; |
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political changes and economic crises may lead to changes in the
business environment in which we operate; |
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international conflict, including terrorist acts, could
significantly impact our business, financial condition and
results of operations; |
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in some countries, our operations are dependent on leases and
other agreements; and |
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economic downturns, political instability and war or civil
disturbances may disrupt production and distribution logistics
or limit sales in individual markets. |
The EU maintains banana regulations that impose tariffs on
bananas. On January 1, 2006, the EU implemented a new
“tariff only” import regime for bananas. The 2001 EC/
US Understanding on Bananas required the EU to implement a
tariff only banana import system on or before January 1,
2006, and the EU’s banana regime change was therefore
expected by that date.
Banana imports from Latin America are now subject to import
license requirements only and a tariff of 176 euro per metric
ton for entry into the EU market. Under the EU’s previous
banana regime, banana imports from Latin America were subject to
a tariff of 75 euro per metric ton and were also subject to both
import license requirements and volume quotas. These license
requirements and volume quotas had the effect of limiting access
to the EU banana market. The increase in the applicable tariff
and the elimination of the volume restrictions applicable to
Latin American bananas (which could lead to a
“flooding” of the market) could materially adversely
affect our business, results of operations or financial
condition.
Although all Latin bananas are now subject to a tariff of 176
euro per metric ton, up to 775,000 metric tons of bananas from
ACP countries may be imported to the EU duty-free. This
preferential treatment of a zero tariff on up to 775,000 tons of
ACP banana imports, as well as the 176 euro per metric ton
tariff applied to Latin banana imports, is currently being
challenged by Panama, Honduras and Nicaragua at the WTO. The
current tariff applied to Latin banana imports may be lowered
and the ACP preference of a zero tariff may be affected
depending on the outcome of these WTO proceedings, but the WTO
proceedings are only in their initial stage and may take several
years to conclude.
In 2005, the Company received a tax assessment from Honduras of
approximately $137 million relating to the disposition of
all of the Company’s interest in Cervecería
Hondureña, S.A in 2001. The Company believes the assessment
is without merit and filed an appeal with the Honduran tax
authorities, which was
14
denied. As a result of the denial in the administrative process,
in order to negate the tax assessment, on August 5, 2005,
the Company proceeded to the next stage of the appellate process
by filing a lawsuit against the Honduran government, in the
Honduran Administrative Tax Trial Court. The Honduran government
is seeking dismissal of the lawsuit and attachment of assets,
which the Company is challenging. No reserve has been provided
for this assessment.
Terrorism and the uncertainty of war may have a material
adverse effect on our operating results.
Terrorist attacks, such as the attacks that occurred in New York
and Washington, D.C. on September 11, 2001, the
subsequent response by the United States in Afghanistan, Iraq
and other locations, and other acts of violence or war in the
United States or abroad may affect the markets in which we
operate and our operations and profitability. From time to time
in the past, our operations or personnel have been the targets
of terrorist or criminal attacks, and the risk of such attacks
impacts our operations and results in increased security costs.
Further terrorist attacks against the United States or operators
of United States-owned businesses outside the United States may
occur, or hostilities could develop based on the current
international situation. The potential near-term and long-term
effect these attacks may have on our business operations, our
customers, the markets for our products, the United States
economy and the economies of other places we source or sell our
products is uncertain. The consequences of any terrorist
attacks, or any armed conflicts, are unpredictable, and we may
not be able to foresee events that could have an adverse effect
on our markets or our business.
Our worldwide operations and products are highly regulated in
the areas of food safety and protection of human health and the
environment.
Our worldwide operations are subject to a broad range of
foreign, federal, state and local environmental, health and
safety laws and regulations, including laws and regulations
governing the use and disposal of pesticides and other
chemicals. These regulations directly affect
day-to-day operations,
and violations of these laws and regulations can result in
substantial fines or penalties. There can be no assurance that
these fines or penalties would not have a material adverse
effect on our business, results of operations and financial
condition. To maintain compliance with all of the laws and
regulations that apply to our operations, we have been and may
be required in the future to modify our operations, purchase new
equipment or make capital improvements. Actions by regulators
may require operational modifications or capital improvements at
various locations. In addition, we have been and in the future
may become subject to private lawsuits alleging that our
operations caused personal injury or property damage.
We are subject to the risk of product liability claims.
The sale of food products for human consumption involves the
risk of injury to consumers. Such injuries may result from
tampering by unauthorized third parties, product contamination
or spoilage, including the presence of foreign objects,
substances, chemicals, other agents, or residues introduced
during the growing, storage, handling or transportation phases.
We have from time to time been involved in product liability
lawsuits, none of which were material to our business. While we
are subject to governmental inspection and regulations and
believe our facilities comply in all material respects with all
applicable laws and regulations, we cannot be sure that
consumption of our products will not cause a health-related
illness in the future or that we will not be subject to claims
or lawsuits relating to such matters. Even if a product
liability claim is unsuccessful or is not fully pursued, the
negative publicity surrounding any assertion that our products
caused illness or injury could adversely affect our reputation
with existing and potential customers and our corporate and
brand image. Moreover, claims or liabilities of this sort might
not be covered by our insurance or by any rights of indemnity or
contribution that we may have against others. We maintain
product liability insurance in an amount that we believe is
adequate. However, we cannot be sure that we will not incur
claims or liabilities for which we are not insured or that
exceed the amount of our insurance coverage.
We are subject to transportation risks.
An extended interruption in our ability to ship our products
could have a material adverse effect on our business, financial
condition and results of operations. Similarly, any extended
disruption in the distribution of
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our products could have a material adverse effect on our
business, financial condition and results of operations. While
we believe we are adequately insured and would attempt to
transport our products by alternative means if we were to
experience an interruption due to strike, natural disaster or
otherwise, we cannot be sure that we would be able to do so or
be successful in doing so in a timely and cost-effective manner.
The use of herbicides and other hazardous substances in our
operations may lead to environmental damage and result in
increased costs to us.
We use herbicides and other hazardous substances in the
operation of our business. We may have to pay for the costs or
damages associated with the improper application, accidental
release or the use or misuse of such substances. Our insurance
may not be adequate to cover such costs or damages or may not
continue to be available at a price or under terms that are
satisfactory to us. In such cases, payment of such costs or
damages could have a material adverse effect on our business,
results of operations and financial condition.
Events or rumors relating to the DOLE brand could
significantly impact our business.
Consumer and institutional recognition of the DOLE trademarks
and related brands and the association of these brands with high
quality and safe food products are an integral part of our
business. The occurrence of any events or rumors that cause
consumers and/or institutions to no longer associate these
brands with high quality and safe food products may materially
adversely affect the value of the DOLE brand name and demand for
our products. We have licensed the DOLE brand name to several
affiliated and unaffiliated companies for use in the United
States and abroad. Acts or omissions by these companies over
which we have no control may also have such adverse effects.
A portion of our workforce is unionized and labor disruptions
could decrease our profitability.
As of December 31, 2005, approximately 43% of our employees
worked under various collective bargaining agreements. Some of
our collective bargaining agreements will expire in fiscal 2006,
although each agreement is subject to automatic renewal unless
we or the union party to the agreement provides notice
otherwise. Our other collective bargaining agreements will
expire in later years. While we believe that our relations with
our employees are good, we cannot assure you that we will be
able to negotiate these or other collective bargaining
agreements on the same or more favorable terms as the current
agreements, or at all, and without production interruptions,
including labor stoppages. A prolonged labor dispute, which
could include a work stoppage, could have a material adverse
effect on the portion of our business affected by the dispute,
which could impact our business, results of operations and
financial condition.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
(Cautionary Statements Under the Private Securities Litigation
Reform Act of 1995)
Some of the information included in this
Form 10-K and
other materials filed or to be filed by us with the Commission
contains or may contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of
1934, as amended. These statements can be identified by the fact
that they do not relate strictly to historical or current facts
and may include the words “may,” “will,”
“could,” “should,” “would,”
“believe,” “expect,” “anticipate,”
“estimate,” “intend,” “plan” or
other words or expressions of similar meaning. We have based
these forward-looking statements on our current expectations
about future events. The forward-looking statements include
statements that reflect management’s beliefs, plans,
objectives, goals, expectations, anticipations and intentions
with respect to our financial condition, results of operations,
future performance and business, including statements relating
to our business strategy and our current and future development
plans.
The potential risks and uncertainties that could cause our
actual financial condition, results of operations and future
performance to differ materially from those expressed or implied
in this Form 10-K
include those set forth under the heading “Risk
Factors” in Item 1A.
16
We urge you to review carefully this
Form 10-K,
particularly the section “Risk Factors,” for a more
complete discussion of the risks to our business.
From time to time, oral or written forward-looking statements
are also included in our reports on
Forms 10-K, 10-Q
and 8-K, press
releases and other materials released to the public. Although we
believe that at the time made, the expectations reflected in all
of these forward-looking statements are and will be reasonable,
any or all of the forward-looking statements in this
Form 10-K, our
reports on
Forms 10-K, 10-Q
and 8-K and any
other public statements that are made by us may prove to be
incorrect. This may occur as a result of inaccurate assumptions
or as a consequence of known or unknown risks and uncertainties.
Many factors discussed in this
Form 10-K, certain
of which are beyond our control, will be important in
determining our future performance. Consequently, actual results
may differ materially from those that might be anticipated from
forward-looking statements. In light of these and other
uncertainties, you should not regard the inclusion of a
forward-looking statement in this
Form 10-K, or
other public communications that we might make, as a
representation by us that our plans and objectives will be
achieved, and you should not place undue reliance on such
forward-looking statements.
|
|
| Item 1B. |
Unresolved Staff Comments |
None.
We own our executive office facility in Westlake Village,
California. We also maintain divisional offices in Salinas,
California and Miami, Florida, which are owned by us. We own our
Latin American regional headquarters building in San Jose,
Costa Rica, as well as offices in Bogota/ Santa Marta, Colombia
and La Ceiba, Honduras. We also maintain offices in Chile,
Costa Rica and Ecuador, which are leased from third parties. We
maintain our European headquarters in Paris, France and regional
offices in Antwerp, Belgium, Athens, Greece, Hamburg, Germany,
Milan, Italy, Stockholm, Sweden and Cape Town, South Africa,
which are leased from third parties. We own our offices in
Madrid, Spain, Rungis, France and Lübeck, Germany. We
maintain offices in Japan, China, the Philippines, Thailand,
Hong Kong and South Korea, which are leased from third parties.
The inability to renew any of the above office leases by us
would not have a material adverse effect on our operating
results. We believe that our property and equipment are
generally well maintained, in good operating condition and
adequate for our present needs.
The following is a description of our significant properties.
Our Hawaii pineapple operations for the fresh produce market are
located on the island of Oahu and total approximately
3,100 acres, which we own.
We own approximately 1,200 acres of farmland in California,
and lease approximately 13,200 acres of farmland in
California and another 3,700 acres in Arizona in connection
with our vegetable and berry operations. The majority of this
acreage is farmed under joint growing arrangements with
independent growers, while we farm the remainder. We own
cooling, packing and shipping facilities in Yuma, Arizona and
the following California cities: Marina, Gonzales and Huron.
Additionally, we have partnership interests in facilities in
Yuma, Arizona and Salinas, California, and leases in facilities
in the following California cities: Coachella, Oceanside, Oxnard
and Watsonville. We own and operate
state-of-the-art,
ready-to-eat salad and
vegetable plants in Yuma, Arizona, Soledad, California,
Springfield, Ohio and have an additional
ready-to-eat salad
plant under construction in Bessemer City, North Carolina.
We produce almonds from approximately 300 acres, pistachios
from approximately 2,000 acres, olives from approximately
900 acres and citrus from approximately 2,800 acres on
orchards in the San Joaquin Valley through agricultural
partnerships in which we have an interest. We produce grapes on
approximately 570 acres of owned property in the
San Joaquin Valley.
17
Our Florida based fresh-cut flowers distribution operates from a
328,000 square foot building completed in 2001, which we
own. Approximately 200,000 square feet of this facility is
refrigerated. Our fresh-cut flowers business also operates
another cooling and distribution facility in the Miami area,
which we own. We also operate a leased facility in Los Angeles,
California and have sales offices in Bentonville, Arkansas.
We own approximately 2,700 acres of peach orchards in
California, which we farm. We own and operate a plant in
Atwater, California that produces individually quick frozen
fruit.
We produce bananas directly from owned plantations in Costa
Rica, Colombia, Ecuador and Honduras as well as through
associated producers or independent growing arrangements in
those countries and others, including Guatemala. We own
approximately 2,300 acres in Colombia, 34,600 acres in
Costa Rica, 3,800 acres in Ecuador and 17,900 acres in
Honduras, all related to banana production, although some of the
acreage is not presently under production.
We own approximately 6,200 acres of land in Honduras,
7,300 acres of land in Costa Rica and 3,000 acres of
land in Ecuador, all related to pineapple production, although
some of the acreage is not presently under production. Pineapple
is grown primarily for the fresh produce market. We own a juice
concentrate plant in Honduras for pineapple and citrus. Coconuts
are produced on approximately 800 acres of owned land in
Honduras.
We grow grapes, stone fruit, kiwi and pears on approximately
4,040 acres owned or leased by us in Chile. We own and
operate 11 packing and cold storage facilities, a corrugated box
plant and a wooden box plant in Chile. We also operate a
fresh-cut salad plant and a small local fruit distribution
company in Chile.
We also own and operate corrugated box plants in Colombia, Costa
Rica, Ecuador and Honduras. We also operate a value-added
vegetable plant in Costa Rica.
We formally accepted a new Ecuadorian port (Bananapuerto) on
September 6, 2002. We indirectly own 35% of Bananapuerto
and operate the port pursuant to a port services agreement, the
term of which is up to 30 years.
Dole Latin America operates a fleet of seven refrigerated
container ships, of which four are owned, two are under
long-term capital leases and one is long-term chartered. In
addition, Dole Latin America operates a fleet of 17 breakbulk
refrigerated ships, of which nine are owned, six are long-term
chartered and two are chartered for one year. We also cover part
of our requirements under contracts with existing liner services
and occasionally charter vessels for short periods on a time or
voyage basis as and when required. We own or lease approximately
12,800 refrigerated containers, 2,500 dry containers, 5,000
chassis and 3,700 generator sets.
We produce flowers on approximately 1,500 acres in Colombia
and Ecuador. We own and operate packing and cooling facilities
at each of our flower farms and lease a facility in Bogota,
Colombia for bouquet construction.
We operate a pineapple plantation of approximately 35,900 leased
acres in the Philippines. Approximately 19,500 acres of the
plantation are leased to us by a cooperative of our employees
that acquired the land pursuant to agrarian reform law. The
remaining 16,400 acres are leased from individual land
owners. A multi-fruit cannery, blast freezer, cold storage,
juice concentrate plant, a box forming plant, a can and drum
manufacturing plant, warehouses, wharf and a fresh fruit packing
plant, each owned by us, are located at or near the pineapple
plantation.
We own and operate a multi-fruit cannery, can manufacturing
plant and juice concentrate plant located in central Thailand
and a second multi-fruit cannery in southern Thailand. Dole also
grows pineapple in Thailand on approximately 3,700 acres of
leased land, not all of which are currently under cultivation.
18
We produce bananas and asparagus from leased lands in the
Philippines and also source these products through associated
producers or independent growing arrangements in the
Philippines. A plastic extruding plant and a box forming plant,
both owned by us, are located near the banana plantations. We
also operate banana ripening and distribution centers in Hong
Kong, South Korea, China and the Philippines.
Additionally, we source products from over 1,200 Japanese
farmers through independent growing arrangements.
We operate 12 banana ripening, produce and flower distribution
centers in Sweden, nine in France, six in Spain, four in Italy,
one in Belgium, one in Austria and three in Germany; with the
exception of three owned facilities in Sweden, three owned
facilities in France, two owned facilities in Spain, two owned
facilities in Germany and one owned facility in Italy, these
facilities are leased. We have a minority interest in a French
company that owns a majority interest in banana and pineapple
plantations in Cameroon and the Ivory Coast. We own a minority
interest in a banana ripening and fruit distribution company
with three facilities in the United Kingdom. We are the majority
owner in a company operating a port terminal and distribution
facility in Livorno, Italy. We own a banana ripening and fruit
distribution facility near Istanbul, Turkey.
We wholly own Saba Fresh Cuts AB, which owns and operates a
state-of-the-art,
ready-to-eat salad and
vegetable plant in Helsingborg, Sweden.
|
|
| Item 3. |
Legal Proceedings |
Dole is involved from time to time in claims and legal actions
incidental to its operations, both as plaintiff and defendant.
The Company has established what management currently believes
to be adequate reserves for pending legal matters. These
reserves are established as part of an ongoing worldwide
assessment of claims and legal actions that takes into
consideration such items as changes in the pending case load
(including resolved and new matters), opinions of legal counsel,
individual developments in court proceedings, changes in the
law, changes in business focus, changes in the litigation
environment, changes in opponent strategy and tactics, new
developments as a result of ongoing discovery, and past
experience in defending and settling similar claims. In the
opinion of management, after consultation with outside counsel,
the claims or actions to which the Company is a party are not
expected to have a material adverse effect, individually or in
the aggregate, on the Company’s financial condition or
results of operations.
A significant portion of the Company’s legal exposure
relates to lawsuits pending in the United States and in several
foreign countries, alleging injury as a result of exposure to
the agricultural chemical DBCP
(1,2-dibromo-3-chloropropane).
DBCP was manufactured by several chemical companies including
Dow and Shell and registered by the U.S. government for use
on food crops. The Company and other growers applied DBCP on
banana farms in Latin America and the Philippines and on
pineapple farms in Hawaii. Specific periods of use varied among
the different locations. The Company halted all purchases of
DBCP, including for use in foreign countries, when the
U.S. EPA cancelled the registration of DBCP for use in the
United States in 1979. That cancellation was based in part on a
1977 study by a manufacturer which indicated an apparent link
between male sterility and exposure to DBCP among factory
workers producing the product, as well as early product testing
done by the manufacturers showing testicular effects on animals
exposed to DBCP. To date, there is no reliable evidence
demonstrating that field application of DBCP led to sterility
among farm workers, although that claim is made in the pending
lawsuits. Nor is there any reliable scientific evidence that
DBCP causes any other injuries in humans, although plaintiffs in
the various actions assert claims based on cancer, birth defects
and other general illnesses.
Currently there are 554 lawsuits, in various stages of
proceedings, alleging injury as a result of exposure to DBCP or
seeking enforcement of Nicaraguan judgments. Seventeen of these
lawsuits are currently pending in various jurisdictions in the
United States. One case pending in Los Angeles Superior Court
with 13 Nicaraguan plaintiffs has a trial date of
July 17, 2006. The remaining cases are pending in Latin
America and the Philippines, including 347 labor cases
pending in Costa Rica under that country’s national
insurance program. Claimed damages in DBCP cases worldwide total
approximately $35.2 billion, with the lawsuits in Nicaragua
19
representing approximately 85% of this amount. In almost all of
the non-labor cases, the Company is a joint defendant with the
major DBCP manufacturers and, typically, other banana growers.
Except as described below, none of these lawsuits has resulted
in a verdict or judgment against the Company.
In Nicaragua, 168 cases are currently filed in various
courts throughout the country, with all but one of the lawsuits
brought pursuant to Law 364, an October 2000 Nicaraguan
statute that contains substantive and procedural provisions that
Nicaragua’s Attorney General formally opined are
unconstitutional. In October 2003, the Supreme Court of
Nicaragua issued an advisory opinion, not connected with any
litigation, that Law 364 is constitutional.
Seventeen cases have resulted in judgments in Nicaragua:
$489.4 million (nine cases consolidated with
468 claimants) on December 11, 2002;
$82.9 million (one case with 58 claimants) on
February 25, 2004; $15.7 million (one case with
20 claimants) on May 25, 2004; $4 million (one
case with four claimants) on May 25, 2004;
$56.5 million (one case with 72 claimants) on
June 14, 2004; $64.8 million (one case with
86 claimants) on June 15, 2004; $27.7 million
(one case with 39 claimants) on March 17, 2005.;
$98.5 million (150 claimants) on August 8, 2005;
and $46.4 million (one case with 62 claimants) on
August 20, 2005.
Thirty-two new cases have recently been filed in civil courts in
Managua (8) and Chinandega (24). In addition, there
are 20 active cases currently pending in civil courts in
Managua (10), Chinandega (8) and Puerto
Cabezas (2), all of which have been brought under
Law 364 except for one of the cases pending in Chinandega.
Six of the active cases pending before the court in Chinandega
have been consolidated for trial, which seeks $3.4 billion
on behalf of 1,708 claimants. Trial in this consolidated
case commenced November 25, 2005. In the 19 active cases
under Law 364, except for one case in Chinandega and one in
Managua, the Company has sought to have the cases returned to
the United States pursuant to Law 364. Notwithstanding, the
Chinandega court denied the Company’s request in the six
consolidated cases pending there; the Managua court denied the
Company’s request with respect to one of the cases pending
there; and the court in Puerto Cabezas denied the Company’s
request with respect to the two cases there. The Company’s
requests as to eight of the cases in Managua are still pending;
and the Company expects to make similar requests in the
remaining two cases at the appropriate time. The Company has
appealed the two decisions of the court in Puerto Cabezas, the
decision of the court in Managua and the six decisions of the
court in Chinandega.
The claimants’ attempted enforcement of the
December 11, 2002 judgment for $489.4 million in the
United States resulted in a dismissal with prejudice of that
action by the United States District Court for the Central
District of California on October 20, 2003. The claimants
have voluntarily dismissed their appeal of that decision which
was pending before the United States Court of Appeals for the
Ninth Circuit. Defendants’ motion for sanctions against
Plaintiffs’ counsel is still pending before the Court of
Appeals in that case.
Claimants have also indicated their intent to seek enforcement
of the Nicaraguan judgments in Colombia, Ecuador, Venezuela and
other countries in Latin America and elsewhere, including the
United States. In Venezuela, the claimants are attempting to
enforce five of the Nicaraguan judgments in that country’s
Supreme Court: $489.4 million (December 11, 2002);
$82.9 million (February 25, 2004); $15.7 million
(May 25, 2004); $56.5 million (June 14, 2004);
and $64.8 million (June 15, 2004). An action recently
filed to enforce the $27.7 million Nicaraguan judgment
(March 17, 2005) in the Colombian Supreme Court was
dismissed. In Ecuador, the claimants attempted to enforce the
five Nicaraguan judgments issued between February 25, 2004
through June 15, 2004 in the Ecuador Supreme Court. The
First, Second and Third Chambers of the Ecuador Supreme Court
issued rulings refusing to consider those enforcement actions on
the ground that the Supreme Court was not a court of competent
jurisdiction for enforcement of a foreign judgment. The
plaintiffs subsequently refiled those five enforcement actions
in the civil court in Guayaquil, Ecuador. Two of these
subsequently filed enforcement actions have been dismissed by
the 3rd Civil Court — $15.7 million
(May 25, 2004) — and the 12th Civil
Court — $56.5 million (June 14,
2004) — in Guayaquil; plaintiffs have sought
reconsideration of those dismissals. The remaining three
enforcement actions are still pending.
The Company believes that none of the Nicaraguan civil trial
courts’ judgments will be enforceable against any Dole
entity in the U.S. or in any other country, because
Nicaragua’s Law 364 is unconstitutional and violates
international principles of due process. Among other things, Law
364 is an improper “special law”
20
directed at particular parties; it requires defendants to pay
large, non-refundable deposits in order to even participate in
the litigation; it provides a severely truncated procedural
process; it establishes an irrebuttable presumption of causation
that is contrary to the evidence and scientific data; and it
sets unreasonable minimum damages that must be awarded in every
case.
As to all the DBCP matters, the Company has denied liability and
asserted substantial defenses. The Company has also engaged in
efforts to resolve pending litigation and claims in the U.S. and
Latin America. Although no assurance can be given concerning the
outcome of these cases, in the opinion of management, after
consultation with legal counsel and based on past experience
defending and settling DBCP claims, the pending lawsuits are not
expected to have a material adverse effect on the Company’s
financial condition or results of operations.
European Union Antitrust Inquiry and
U.S. Class Action Lawsuits: The European
Commission (“EC”) is investigating alleged violations
of European Union competition (antitrust) laws by banana
and pineapple importers and distributors operating within the
European Economic Area (“EEA”). On June 2 and 3,
2005, the EC conducted a search of certain of the Company’s
offices in Europe. During this same period, the EC also
conducted similar unannounced searches of other companies’
offices located in the European Union. The Company is
cooperating with the EC and has responded to the EC’s
information requests. Although no assurances can be given
concerning the course or outcome of that EC investigation, the
Company believes that it has not violated the European Union
competition laws.
Following the public announcement of the EC searches, a number
of class action lawsuits were filed against the Company and
three competitors in the U.S. District Court for the
Southern District of Florida. The lawsuits were filed on behalf
of entities that directly or indirectly purchased bananas from
the defendants and have now been consolidated into two separate
class action lawsuits: one by direct purchasers (customers); and
another by indirect purchasers (those who purchased bananas from
customers). Both consolidated class action lawsuits allege that
the defendants conspired to artificially raise or maintain
prices and control or restrict output of bananas. The Company
believes these lawsuits are without merit.
Honduran Tax Case: In 2005, the Company received a tax
assessment from Honduras of approximately $137 million
relating to the disposition of all of the Company’s
interest in Cervecería Hondureña, S.A in 2001. The
Company believes the assessment is without merit and filed an
appeal with the Honduran tax authorities, which was denied. As a
result of the denial in the administrative process, in order to
negate the tax assessment, on August 5, 2005, the Company
proceeded to the next stage of the appellate process by filing a
lawsuit against the Honduran government, in the Honduran
Administrative Tax Trial Court. The Honduran government is
seeking dismissal of the lawsuit and attachment of assets, which
the Company is challenging. No reserve has been provided for
this assessment.
|
|
| Item 4. |
Submission of Matters to a Vote of Security Holders |
There were no matters submitted to a vote of security holders
during the fiscal quarter ended December 31, 2005.
21
PART II
|
|
| Item 5. |
Market for Registrant’s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities |
All 1,000 authorized shares of Dole’s common stock are held
by one stockholder, Dole Holding Company, LLC, which itself is a
direct, wholly-owned subsidiary of DHM Holding Company, Inc., of
which David H. Murdock is the 100% beneficial owner. There are
no other Dole equity securities. There is no market for
Dole’s equity securities. In connection with the
March 28, 2003 going-private merger transaction, Dole ended
all of its equity compensation plans.
Dole paid a regular quarterly dividend of $0.10 per share
of its common stock from 1991 until December 2001. Dole
increased its quarterly dividend rate to $0.15 per share
for the quarter ending in March 2002 and subsequent quarters.
The last such dividend was for the fiscal quarter ended
March 23, 2003. The going-private merger transaction
occurred on March 28, 2003.
Additional information required by Item 5 is contained in
Note 12 — Shareholders’ Equity, to
Dole’s Consolidated Financial Statements in this
Form 10-K.
22
|
|
| Item 6. |
Selected Financial Data |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year | |
|
Year | |
|
Three Quarters | |
|
Quarter | |
|
|
|
|
| |
|
Ended | |
|
Ended | |
|
Ended | |
|
Ended | |
|
|
|
|
| |
|
December 31, | |
|
January 1, | |
|
January 3, | |
|
March 22, | |
|
|
|
|
| |
|
2005 | |
|
2005 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
|
Successor | |
|
Predecessor | |
|
Predecessor | |
|
Predecessor | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
|
(In millions) | |
|
Summary of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, net
|
|
$ |
5,870 |
|
|
$ |
5,316 |
|
|
$ |
3,700 |
|
|
$ |
1,073 |
|
|
$ |
4,392 |
|
|
$ |
4,314 |
|
|
Cost of products sold
|
|
|
5,182 |
|
|
|
4,574 |
|
|
|
3,213 |
|
|
|
895 |
|
|
|
3,697 |
|
|
|
3,884 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Gross margin
|
|
|
688 |
|
|
|
742 |
|
|
|
487 |
|
|
|
178 |
|
|
|
695 |
|
|
|
430 |
|
|
Selling, marketing and general and administrative expenses
|
|
|
463 |
|
|
|
425 |
|
|
|
322 |
|
|
|
89 |
|
|
|
421 |
|
|
|
383 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Operating income
|
|
|
225 |
|
|
|
317 |
|
|
|
165 |
|
|
|
89 |
|
|
|
274 |
|
|
|
47 |
|
|
Interest expense — net
|
|
|
137 |
|
|
|
148 |
|
|
|
120 |
|
|
|
17 |
|
|
|
69 |
|
|
|
65 |
|
|
Other income (expense) — net
|
|
|
(5 |
) |
|
|
(9 |
) |
|
|
(18 |
) |
|
|
— |
|
|
|
2 |
|
|
|
9 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Income (loss) from continuing operations before income tax
expense, minority interest expense and equity earnings
|
|
|
83 |
|
|
|
160 |
|
|
|
27 |
|
|
|
72 |
|
|
|
207 |
|
|
|
(9 |
) |
|
Income tax expense
|
|
|
45 |
|
|
|
26 |
|
|
|
7 |
|
|
|
13 |
|
|
|
54 |
|
|
|
29 |
|
|
Minority interest expense, net of income tax expense
|
|
|
3 |
|
|
|
10 |
|
|
|
3 |
|
|
|
1 |
|
|
|
6 |
|
|
|
2 |
|
|
Equity in earnings of unconsolidated subsidiaries, net of income
tax expense
|
|
|
(7 |
) |
|
|
(10 |
) |
|
|
(6 |
) |
|
|
(3 |
) |
|
|
(9 |
) |
|
|
(3 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations, net of income tax
expense
|
|
|
42 |
|
|
|
134 |
|
|
|
23 |
|
|
|
61 |
|
|
|
156 |
|
|
|
(37 |
) |
|
Income from discontinued operations, net of income tax expense
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
19 |
|
|
Gain on disposal of discontinued operations, net of income tax
expense
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
168 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Income before cumulative effect of a change in accounting
principle
|
|
|
44 |
|
|
|
134 |
|
|
|
23 |
|
|
|
61 |
|
|
|
156 |
|
|
|
150 |
|
|
Cumulative effect of a change in accounting principle
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
120 |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net income
|
|
$ |
44 |
|
|
$ |
134 |
|
|
$ |
23 |
|
|
$ |
61 |
|
|
$ |
36 |
|
|
$ |
150 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet and Other Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Working capital
|
|
$ |
535 |
|
|
$ |
423 |
|
|
$ |
279 |
|
|
|
— |
|
|
$ |
715 |
|
|
$ |
586 |
|
| |
Total assets
|
|
|
4,410 |
|
|
|
4,322 |
|
|
|
3,988 |
|
|
|
— |
|
|
|
3,037 |
|
|
|
2,768 |
|
| |
Long-term debt
|
|
|
2,001 |
|
|
|
1,837 |
|
|
|
1,804 |
|
|
|
— |
|
|
|
882 |
|
|
|
816 |
|
| |
Total debt
|
|
|
2,027 |
|
|
|
1,869 |
|
|
|
1,851 |
|
|
|
— |
|
|
|
1,125 |
|
|
|
843 |
|
| |
Total shareholders’ equity
|
|
|
617 |
|
|
|
678 |
|
|
|
456 |
|
|
|
— |
|
|
|
745 |
|
|
|
736 |
|
| |
Cash dividends
|
|
|
77 |
|
|
|
20 |
|
|
|
— |
|
|
$ |
8 |
|
|
|
34 |
|
|
|
22 |
|
| |
Capital additions
|
|
|
146 |
|
|
|
102 |
|
|
|
102 |
|
|
|
4 |
|
|
|
234 |
|
|
|
120 |
|
| |
Depreciation and amortization
|
|
|
150 |
|
|
|
145 |
|
|
|
107 |
|
|
|
25 |
|
|
|
107 |
|
|
|
117 |
|
Note: As a result of the going-private merger transaction, the
Company’s Consolidated Financial Statements present the
results of operations, financial position and cash flows prior
to the date of the merger transaction as the
“Predecessor.” The merger transaction and the
Company’s results of operations, financial position and
cash flows thereafter are presented as the
“Successor.” Predecessor results have not been
aggregated with those of the Successor in accordance with
accounting principles generally accepted in the U.S. and
accordingly the Company’s Consolidated Financial Statements
do not show the results of operations or cash flows for the year
ended January 3, 2004.
Discontinued operations for the periods presented relate to the
disposition of the Company’s interest in Cerveceria
Hondureña, S.A. in 2001.
23
|
|
| Item 7. |
Management’s Discussion and Analysis of Financial
Condition and Results of Operations |
2005 Overview
For the year ended December 31, 2005, Dole Food Company,
Inc. and its consolidated subsidiaries (“Dole” or the
“Company”) achieved record revenues of
$5.9 billion, reflecting growth of 10% compared to the
prior year. Higher revenues were generated by all four of the
Company’s operating segments. The Company earned operating
income of $225 million in 2005, compared to
$317 million earned in 2004. The Company’s net income
in 2005 was $44 million, compared to $134 million in
2004. The Company also generated operating cash flows of
$73 million during 2005, compared to $217 million in
2004.
Revenues were largely driven by strong banana volumes in North
America, higher sales and price increases in Dole’s
Packaged Foods business, and full year operations from Wood
Holdings, Inc. (renamed Dole Packaged Frozen Foods, Inc.), a
frozen fruit producer and manufacturer, and Coastal Berry
Company, LLC (renamed Dole Berry Company, LLC), a leading
California producer of fresh berries, which were acquired in
2004. Operating income decreased primarily due to higher
production, shipping and distribution costs across Dole’s
significant businesses.
Higher commodity costs, including significantly higher fuel
prices, impacted 2005 operations. In 2005, the Company
experienced significant cost increases in many of the
commodities it uses in production, including containerboard,
tinplate, resin and agricultural chemicals. In addition,
significantly higher average fuel prices resulted in higher
shipping and distribution costs. Overall, higher commodity costs
impacted operating income by approximately $45 million. The
Company entered into several fuel hedging contracts and
renegotiated certain commodity supply contracts to partly
mitigate its exposure to further commodity cost increases.
Going-Private Merger Transaction
In March 2003, the Company completed a going-private merger
transaction. The privatization resulted from the acquisition by
David H. Murdock, the Company’s Chairman and Chief
Executive Officer, of the approximately 76% of the Company that
he and his affiliates did not already own for $33.50 per
share in cash. As a result of the transaction, the Company
became wholly owned by Mr. Murdock through DHM Holding
Company, Inc. (“HoldCo”).
The purchase price of all of the outstanding common stock of the
Company not already owned by Mr. Murdock, plus transaction
costs, was approximately $1.55 billion. The funds necessary
to purchase these shares of the Company consisted of a
$125 million capital contribution by HoldCo, funds borrowed
under $1.125 billion of new senior secured credit
facilities (consisting of $825 million of term loan
facilities and $300 million of revolving credit facilities)
and the issuance of $475 million principal amount of
8.875% Senior Notes due 2011. The going-private merger
transaction was accounted for as a purchase at the HoldCo level
with the related purchase accounting pushed down to the Company
as of the date of the transaction.
Results of Operations
As a result of the going-private merger transaction, the
Company’s Consolidated Financial Statements present the
results of operations, financial position and cash flows prior
to the date of the merger transaction as the
“Predecessor.” The merger transaction and the
Company’s results of operations, financial position and
cash flows thereafter are presented as the
“Successor.” Predecessor results have not been
aggregated with those of the Successor in accordance with
accounting principles generally accepted in the U.S. and
accordingly the Company’s Consolidated Financial Statements
do not show results of operations or cash flows for the year
ended January 3, 2004. However, in order to facilitate an
understanding of the Company’s results in comparison with
the years ended December 31, 2005 and January 1, 2005,
the results of operations of the Predecessor for the quarter
ended March 22, 2003 and the Successor for the three
quarters ended January 3, 2004, are presented combined
(“Combined”).
24
Selected results of operations for the years ended
December 31, 2005, January 1, 2005 and January 3,
2004 were as follows (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Three Quarters | |
|
|
|
|
| |
|
Year Ended | |
|
Year Ended | |
|
Ended | |
|
Quarter Ended | |
|
Year Ended | |
| |
|
December 31, | |
|
January 1, | |
|
January 3, | |
|
March 22, | |
|
January 3, | |
| |
|
2005 | |
|
2005 | |
|
2004 | |
|
2003 | |
|
2004 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
|
Successor | |
|
Predecessor | |
|
Combined | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Revenues, net
|
|
$ |
5,870,611 |
|
|
$ |
5,316,202 |
|
|
$ |
3,699,971 |
|
|
$ |
1,073,170 |
|
|
$ |
4,773,141 |
|
|
Operating income
|
|
|
225,210 |
|
|
|
317,012 |
|
|
|
165,429 |
|
|
|
88,790 |
|
|
|
254,219 |
|
|
Interest income and other income (expense), net
|
|
|
696 |
|
|
|
(4,530 |
) |
|
|
(14,165 |
) |
|
|
2,897 |
|
|
|
(11,268 |
) |
|
Interest expense
|
|
|
142,716 |
|
|
|
152,704 |
|
|
|
124,491 |
|
|
|
19,647 |
|
|
|
144,138 |
|
|
Income tax expense
|
|
|
44,520 |
|
|
|
25,491 |
|
|
|
6,512 |
|
|
|
13,100 |
|
|
|
19,612 |
|
|
Minority interest expense and equity in earnings of
unconsolidated subsidiaries, net of income tax expense
|
|
|
(3,382 |
) |
|
|
(131 |
) |
|
|
(2,856 |
) |
|
|
(1,848 |
) |
|
|
(4,704 |
) |
|
Income from discontinued operations, net of income tax expense
|
|
|
2,044 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Net income
|
|
|
44,096 |
|
|
|
134,418 |
|
|
|
23,117 |
|
|
|
60,788 |
|
|
|
83,905 |
|
For the year ended December 31, 2005, revenues increased
10% to $5.9 billion from $5.3 billion in the prior
year. The most significant revenue drivers were the acquisitions
of Dole Berry Company during the fourth quarter of 2004 and Dole
Packaged Frozen Foods during the second quarter of 2004. These
acquisitions increased 2005 revenues by approximately
$130 million and $76 million, respectively, over
revenues reported in 2004. Revenues also benefited from higher
worldwide sales of fresh fruit, primarily for bananas and
pineapples. Sales of fresh fruit also increased due to higher
revenues in the Company’s European ripening and
distribution operations. In addition, revenues benefited from
higher sales of packaged salads and packaged foods products,
primarily for FRUIT BOWLS, canned pineapple and fruit in plastic
jars. These increases were partially offset by lower deciduous
sales in North America and Asia and lower citrus sales in Asia.
Changes in foreign currency exchange rates versus the
U.S. dollar did not have a significant impact on
consolidated revenues in 2005.
For the year ended January 1, 2005, revenues increased 11%
to $5.3 billion from $4.8 billion in 2003. The
increase was due to favorable U.S. dollar foreign currency
exchange rates primarily versus the euro, Swedish krona and
Japanese yen, and the acquisition of Dole Packaged Frozen Foods.
These factors benefited 2004 revenues by approximately
$190 million and $78 million, respectively. Revenues
also benefited from higher worldwide sales of fresh fruit,
particularly pineapples and deciduous fruit and expanded
European ripening and distribution and commercial cargo
activity. In addition, there were higher sales of packaged
salads and packaged foods products. The increase in revenues was
partially offset by one less week in 2004 as a result of a
52-week year in 2004
compared to a 53-week
year in 2003. The impact on revenues of this additional week was
approximately $73 million in 2003. Revenues were also
impacted by lower banana pricing in North America, lower
commodity vegetable sales and the 2003 disposal of Fabrica, a
Honduran palm oil business. Fabrica’s revenues were
$18 million during 2003.
For the year ended December 31, 2005, operating income was
$225.2 million compared with $317 million in 2004. The
decrease was primarily due to higher production costs, higher
shipping and distribution costs and an increase in selling and
marketing expenses. Higher production costs were driven by
significantly higher commodity costs, particularly for fuel and
containerboard. These factors were partially offset by higher
25
European banana earnings and higher sales volumes and pricing in
the packaged foods business. Operating income in 2005 also
increased due to an employee-related restructuring charge of
$8.8 million in Ecuador recorded in 2004. In addition,
unfavorable foreign currency exchange movements contributed to
lower operating results. If foreign currency exchange rates in
the Company’s significant foreign operations during 2005
remained unchanged from those experienced in 2004, the Company
estimates that its operating income would have been higher by
approximately $15 million. Operating income in 2005
included realized foreign currency exchange losses of
$4 million, partially offset by the impact of hedges of
$2 million, and $5 million related to foreign currency
hedging incentives from the Colombian government.
For the year ended January 1, 2005, operating income
increased to $317 million from $254.2 million in 2003.
The increase was primarily attributable to the absence of
privatization-related purchase accounting adjustments to
inventory of $59.3 million and nonrecurring privatization
expenses of $9.1 million, which were incurred in 2003.
Operating income also benefited from additional commercial cargo
activity and higher pineapple earnings. Pistachio earnings also
grew as a result of the seasonality and timing of the harvest.
These increases were partially offset by lower banana earnings,
lower earnings from fresh vegetables, packaged foods and
fresh-cut flowers, and the $8.8 million employee-related
restructuring charge in Ecuador. In addition, favorable foreign
currency exchange movements contributed to higher operating
results. If foreign currency exchange rates in the
Company’s significant foreign operations during 2004
remained unchanged from those experienced in 2003, the Company
estimates that its operating income would have been lower by
approximately $33 million. Operating income in 2004
included realized foreign currency exchange losses of
$2 million and hedge losses of $12 million.
|
|
|
Interest Income and Other Income (Expense), Net |
For the year ended December 31, 2005, interest income
increased to $6 million from $4.2 million in 2004.
Higher interest income was primarily generated from the interest
earned on an account receivable balance settled in 2005. Higher
interest rates associated with outstanding grower loans also
contributed to the increase.
Other income (expense), net improved to an expense of
$5.4 million in 2005 from an expense of $8.7 million
in 2004. The improvement was primarily due to the change in
unrealized foreign currency exchange gains of
$43.5 million. In 2005, the Company’s Japanese yen
denominated term loan and British pound sterling denominated
vessel capital lease obligation generated foreign currency
exchange gains of $27.1 million and $9.5 million,
respectively, compared to a foreign currency exchange loss on
the vessel obligations of $6.9 million in 2004. These
improvements were partially offset by $41.1 million of
additional expenses related to the early extinguishment of debt.
For the year ended January 1, 2005, interest income
decreased to $4.2 million from $7.1 million in 2003.
The decrease was related to interest income generated in the
first quarter of 2003 when the Company had a significant cash
balance. Most of this cash was used in the financing of the
going-private merger transaction in March 2003.
Other income (expense), net improved to an expense of
$8.7 million in 2004 from an expense of $18.3 million
in 2003. The improvement was primarily due to $9.9 million
of lower expenses related to the early extinguishment of debt
resulting from accelerated debt repayments.
Interest expense for the year ended December 31, 2005 was
$142.7 million compared to $152.7 million in 2004. The
decrease was primarily related to lower overall effective
borrowing rates that resulted from the Company’s
refinancing and bond tender transactions during the second
quarter of 2005.
Interest expense for the year ended January 1, 2005 was
$152.7 million compared to $144.1 million in 2003. The
increase was primarily due to the issuance of additional debt in
the second quarter of 2003 to finance the going-private merger
transaction, as well as additional interest expense on vessel
lease obligations capitalized due to the adoption of Financial
Accounting Standards Board (“FASB”) Interpretation
No. 46, Consolidation of Variable Interest Entities,
in the fourth quarter of 2003.
26
Income tax expense for the year ended December 31, 2005
increased to $44.5 million from $25.5 million in 2004.
Excluding the impact of the repatriation of foreign earnings
under Section 965 of the Internal Revenue Code of
$37.8 million, income tax expense for the year ended
December 31, 2005 was $6.7 million, which reflects the
Company’s effective tax rate of 8.1% for the 2005 fiscal
year. The reduction in the effective income tax rate in 2005 of
8.1% from the 2004 rate of 16% is primarily due to a change in
the mix of taxable earnings, resulting in part from lower
domestic earnings. For all periods presented, the effective
income tax rate differs from the U.S. federal statutory
rate primarily due to earnings from operations being taxed in
foreign jurisdictions at lower net effective rates than the
U.S. rate.
During October 2004, the American Jobs Creation Act of 2004 was
signed into law, adding Section 965 to the Internal Revenue
Code. Section 965 provides a special one-time deduction of
85% of certain foreign earnings that are repatriated under a
domestic reinvestment plan, as defined therein. The effective
federal tax rate on any qualified foreign earnings repatriated
under Section 965 equals 5.25%. Taxpayers could elect to
apply this provision to a qualified earnings repatriation made
during calendar year 2005.
During the second quarter of 2005, the Company repatriated
$570 million of earnings from its foreign subsidiaries, of
which approximately $489 million qualifies for the 85%
dividends received deduction under Section 965. A tax
provision of approximately $37.8 million for the
repatriation of certain foreign earnings has been recorded as
income tax expense for year ended December 31, 2005.
For 2005, 2004 and 2003, other than the taxes provided on the
$570 million of repatriated foreign earnings, no
U.S. taxes were provided on unremitted foreign earnings
from operations because such earnings are intended to be
indefinitely invested outside the U.S.
Income tax expense for the year ended January 1, 2005
increased to $25.5 million from $19.6 million in 2003.
The Company’s effective tax rate fell to 16% in 2004 from
19.8% in 2003. The reduction in the effective income tax rate in
2004 was primarily due to a change in the mix of taxable
earnings, resulting in part from lower domestic earnings and
higher earnings in Europe and Asia.
|
|
|
Minority Interest and Equity in Earnings of Unconsolidated
Subsidiaries |
Minority interest expense for the year ended December 31,
2005 decreased to $3.2 million from $10.2 million in
2004. The decrease was primarily due to the Company’s
purchase of the 40% minority interest in Saba Trading AB
(“Saba”) in December 2004.
Equity in earnings of unconsolidated subsidiaries for the year
ended December 31, 2005 decreased to $6.6 million from
$10.3 million in 2004. The decrease was primarily related
to the sale of the Company’s investment in a Guatemalan
joint venture during 2005.
Minority interest expense for the year ended January 1,
2005 increased to $10.2 million from $3.9 million in
2003. The increase was primarily related to 2004 seasonal
pistachio earnings generated by several majority-owned
partnerships.
Equity in earnings of unconsolidated subsidiaries for the year
ended January 1, 2005 increased to $10.3 million from
$8.6 million in 2003. The increase was primarily related to
higher earnings generated by several of the Company’s
European investments.
Segment Results of Operations
The Company has four primary reportable operating segments:
fresh fruit, fresh vegetables, packaged foods and fresh-cut
flowers. These reportable segments are managed separately due to
differences in their products, production processes,
distribution channels and customer bases.
The Company’s management evaluates and monitors segment
performance primarily through earnings before interest expense
and income taxes (“EBIT”). EBIT is calculated by
adding interest expense and income tax expense to net income. In
2005, EBIT is calculated by adding income from discontinued
27
operations, net of income tax expense, interest expense and
income tax expense to net income. Management believes that
segment EBIT provides useful information for analyzing the
underlying business results as well as allowing investors a
means to evaluate the financial results of each segment in
relation to the Company as a whole. EBIT is not defined under
accounting principles generally accepted in the United States of
America (“GAAP”) and should not be considered in
isolation or as a substitute for net income measures prepared in
accordance with GAAP or as a measure of the Company’s
profitability. Additionally, the Company’s computation of
EBIT may not be comparable to other similarly titled measures
computed by other companies, because not all companies calculate
EBIT in the same fashion.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2005 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
|
Combined | |
| |
|
| |
|
| |
|
| |
|
Revenues from external customers
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Fresh fruit
|
|
$ |
3,717,020 |
|
|
$ |
3,535,666 |
|
|
$ |
3,134,144 |
|
| |
Fresh vegetables
|
|
|
1,083,227 |
|
|
|
887,409 |
|
|
|
850,584 |
|
| |
Packaged foods
|
|
|
854,230 |
|
|
|
691,780 |
|
|
|
587,226 |
|
| |
Fresh-cut flowers
|
|
|
171,259 |
|
|
|
169,845 |
|
|
|
168,086 |
|
| |
Other operating segments
|
|
|
44,875 |
|
|
|
31,502 |
|
|
|
33,101 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
$ |
5,870,611 |
|
|
$ |
5,316,202 |
|
|
$ |
4,773,141 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2005 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
|
Combined | |
| |
|
| |
|
| |
|
| |
|
EBIT
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Fresh fruit
|
|
$ |
205,191 |
|
|
$ |
257,880 |
|
|
$ |
235,181 |
|
| |
Fresh vegetables
|
|
|
11,375 |
|
|
|
58,645 |
|
|
|
63,452 |
|
| |
Packaged foods
|
|
|
87,495 |
|
|
|
64,191 |
|
|
|
35,112 |
|
| |
Fresh-cut flowers
|
|
|
(5,094 |
) |
|
|
1,853 |
|
|
|
792 |
|
| |
Other operating segments
|
|
|
619 |
|
|
|
306 |
|
|
|
354 |
|
| |
|
|
|
|
|
|
|
|
|
| |
Total operating segments
|
|
|
299,586 |
|
|
|
382,875 |
|
|
|
334,891 |
|
| |
Corporate
|
|
|
(70,298 |
) |
|
|
(70,262 |
) |
|
|
(87,236 |
) |
| |
Interest expense
|
|
|
142,716 |
|
|
|
152,704 |
|
|
|
144,138 |
|
| |
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
$ |
86,572 |
|
|
$ |
159,909 |
|
|
$ |
103,517 |
|
| |
|
|
|
|
|
|
|
|
|
Fresh Fruit: Fresh fruit revenues increased 5% to
$3.7 billion in 2005 from $3.5 billion in 2004. The
increase in fresh fruit revenues was primarily due to higher
worldwide sales of bananas and pineapples and higher sales in
the European ripening and distribution operations. Higher
worldwide banana sales resulted from improved volumes in North
America and Asia, and higher pricing in Europe and North
America. Stronger pineapple sales reflected improved volumes
sold in North America, Europe and Asia and higher local pricing
in Asia. These benefits were partially offset by lower sales
volume of citrus in Asia and lower sales of deciduous fruit in
North America and Asia.
Fresh fruit EBIT decreased 20% to $205.2 million in 2005
from $257.9 million in 2004. EBIT decreased primarily as a
result of higher product costs that impacted bananas and fresh
pineapple operations worldwide, and deciduous fruit. EBIT was
also impacted by higher fuel costs which increased shipping and
distribution costs worldwide and by higher selling, marketing
and general and administrative costs. These factors were
partially offset by improved banana pricing in Europe and the
absence of an $8.8 million restructuring charge in Ecuador
recorded during 2004. If foreign currency exchanges rates in the
Company’s significant fresh fruit foreign operations during
2005 had remained unchanged from those experienced in 2004, the
Company estimates that fresh fruit EBIT would have been higher
by approximately $7 million. Fresh fruit EBIT in 2005
28
included realized foreign currency exchange losses of
$6 million and $9 million of unrealized foreign
currency exchange gains related to the British pound sterling
denominated vessel capital lease obligation.
Fresh Vegetables: Fresh vegetables revenues for 2005
increased 22% to $1.1 billion from $887.4 million in
2004. The increase was primarily due to the October 2004
acquisition of Dole Berry Company as well as higher sales
volumes in commodity vegetables and packaged salads. Dole Berry
Company generated revenues of approximately $131 million in
2005. These benefits were partially offset by lower pricing of
commodity vegetables mainly for mixed vegetables, celery,
broccoli and lettuce.
Fresh vegetables EBIT for 2005 decreased to $11.4 million
from $58.6 million in 2004. The decrease in EBIT was
primarily related to lower commodity vegetable earnings and
lower packaged salad earnings. Commodity vegetable earnings were
lower as a result of higher growing costs, higher fuel costs,
and higher harvest and packing costs. EBIT was also affected by
lower packaged salads earnings as a result of higher product,
labor, manufacturing and freight costs. Dole Berry
Company’s EBIT was a loss of $2.7 million during 2005.
Packaged Foods: Packaged foods revenues for 2005
increased 23% to $854.2 million from $691.8 million in
2004. The increase in revenues was a result of higher North
American sales of FRUIT BOWLS, canned solid pineapple and juice,
and fruit in plastic jars due in part to higher pricing.
Revenues grew in Asia due to higher sales of concentrate and
tropical fruit mix. Revenues also benefited from the June 2004
acquisition of Dole Packaged Frozen Foods, which increased sales
by $76 million compared to prior year.
Packaged foods EBIT in 2005 increased 36% to $87.5 million
from $64.2 million in 2004. The increase in EBIT was
primarily due to a more favorable product mix and higher
revenues in North America, partially offset by higher shipping
and distribution costs and higher selling, general and
administrative expenses.
Fresh-cut Flowers: Fresh-cut flowers revenues in 2005
increased to $171.3 million from $169.8 million in
2004. The increase was primarily due to increased sales to the
retail market partially offset by decreased sales volumes to the
wholesale market. Management is continuing to focus on shifting
volume into the retail market since average pricing in the
retail market is significantly higher than in the wholesale
market.
EBIT in the fresh-cut flowers segment in 2005 decreased to a
loss of $5.1 million from earnings of $1.9 million in
2004. EBIT decreased primarily as a result of higher product
costs due to the weakening of the U.S. dollar against the
Colombian peso. If the Colombian peso exchange rate during 2005
had remained unchanged from that experienced in 2004, the
Company estimates that its fresh-cut flowers EBIT would have
been higher by approximately $9 million. EBIT was also
impacted by additional third party flower purchases and higher
shipping costs, partially offset by lower general and
administrative expenses. In addition, 2005 EBIT included
approximately $5 million of foreign currency exchange
hedging incentives offered by the Colombian government. The
Colombian government offered these incentives to banana and
flower growers in the exporting sector.
Corporate: Corporate EBIT includes general and
administrative costs not allocated to the operating segments.
Corporate EBIT in both 2005 and 2004 was a loss of
$70.3 million. Corporate EBIT for 2005 included
$43.8 million of expenses incurred in connection with the
early retirement of debt and related refinancing and
$27.1 million of unrealized foreign currency exchange gains
associated with the Japanese yen denominated term loan. EBIT did
not change significantly in 2005 compared to 2004, as lower
general and administrative costs were offset by the
$43.8 million refinancing charge and $27.1 million of
unrealized foreign currency exchange gains.
Fresh Fruit: Fresh fruit revenues increased 13% to
$3.5 billion in 2004 from $3.1 billion in 2003. The
increase in fresh fruit revenues was primarily due to favorable
currency exchange rates, higher worldwide sales of bananas,
pineapples, and deciduous fruit, expanded operations in the
Europe ripening and distribution businesses, higher commercial
cargo activity and revenues from pistachios, which are harvested
every other year. A weaker U.S. dollar versus the euro, the
Swedish krona and the Japanese yen benefited revenues by
$90 million, $44 million and $43 million,
respectively. In addition to the benefit of foreign currency
exchange
29
rates, higher worldwide banana revenues reflected higher
European and Asian sales due mainly to higher local pricing,
partially offset by lower North American sales due to lower
volumes and pricing. Higher pineapple revenues were driven by
higher sales in North America and Asia. Higher North American
sales resulted from higher volumes of DOLE TROPICAL GOLD
pineapple and lower pineapple pricing, while higher pineapple
sales in Asia reflected both higher volumes and higher local
pricing. These increases were partially offset by lower European
pineapple revenues, primarily due to lower pricing. Deciduous
revenues increased as a result of higher volumes in Latin
America, Europe, the Middle East and Japan.
Fresh fruit EBIT increased 10% to $257.9 million in 2004
from $235.2 million in 2003. EBIT increased primarily due
to higher sales and the absence of privatization-related
purchase accounting charges of $17.6 million incurred in
2003. These increases were partially offset by a restructuring
charge in Ecuador of $8.8 million, as well as higher
product costs, higher fuel prices, and higher selling, general
and administrative costs. Higher product costs were primarily
attributable to the impact of the weaker U.S. dollar
against many currencies in which the Company sources its
production and the impact of significantly higher commodity
costs. In addition, 2004 EBIT included realized foreign currency
exchange gains of $3 million, hedge losses of
$12 million and $6.9 million of unrealized foreign
currency exchange losses related to the British pound sterling
denominated vessel capital lease obligation.
Fresh Vegetables: Fresh vegetables revenues for 2004
increased 4% to $887.4 million from $850.6 million in
2003. The increase in revenues was driven by higher packaged
salads sales, partially offset by lower commodity vegetable
sales. Higher packaged salad sales resulted from higher volumes,
partially offset by lower pricing due to increased competition.
The decrease in commodity vegetable sales was driven by lower
pricing of iceberg lettuce and cauliflower, partially offset by
higher pricing of celery. Lower iceberg lettuce pricing
reflected a return to normal pricing levels following an
industry-wide lettuce shortage during 2003. The acquisition of
Dole Berry Company in October 2004 did not have a significant
impact to 2004 sales.
Fresh vegetables EBIT for 2004 decreased 8% to
$58.6 million from $63.5 million in 2003. The decrease
in EBIT for 2004 was attributable to lower commodity vegetable
earnings, partially offset by higher packaged salads earnings.
Lower commodity vegetable earnings resulted from lower sales,
higher transportation costs, lower Asia commodity earnings and a
loss from Dole Berry Company. These factors were partially
offset by lower iceberg lettuce growing costs and the absence of
privatization-related purchase accounting charges of
$1.4 million. Packaged salads earnings grew primarily due
to higher sales. These factors were partially offset by higher
product costs, due in part to a change in product mix, higher
selling and marketing costs, and higher distribution costs due
to higher freight rates.
Packaged Foods: Packaged foods revenues for 2004
increased 18% to $691.8 million from $587.2 million in
2003. The increase in revenues was primarily due to the June
2004 acquisition of Dole Packaged Frozen Foods, which generated
revenues of $78.4 million. In addition, revenues grew as a
result of higher volumes of fruit in plastic jars and FRUIT
BOWLS in North America, higher volumes of FRUIT BOWLS and higher
volumes and pricing of concentrate in Europe, and higher sales
of canned product in Asia. These increases were partially offset
by the sale of Fabrica in 2003 and higher trade spending in
North America. Fabrica contributed revenues of
$17.6 million during 2003.
Packaged Foods EBIT in 2004 increased 83% to $64.2 million
from $35.1 million in 2003. The increase in EBIT was
primarily due to the absence of $36.1 million of
privatization-related purchase accounting charges incurred in
2003. EBIT in 2004 was impacted by lower overall margins and
higher selling and marketing expenses in Europe and Asia. Lower
margins were attributable to unfavorable currency exchange rates
on product costs, as well as higher fruit costs and higher
shipping and distribution expenses. EBIT in 2004 was also
impacted by the absence of Fabrica earnings, which were
$1.3 million in 2003.
In 2004, Dole Packaged Frozen Foods EBIT reported a loss of
$0.1 million. The loss included a non-cash charge of
$4.2 million related to purchase accounting adjustments to
inventory associated with the purchase price allocation.
30
Fresh-cut Flowers: Fresh-cut flowers revenues in 2004
increased to $169.8 million from $168.1 million in
2003. The increase in revenues was primarily due to higher
overall pricing as a result of a favorable volume shift from the
wholesale to the retail market.
EBIT in the fresh-cut flowers segment in 2004 improved to
$1.9 million from $0.8 million in 2003. EBIT increased
primarily due to the absence of $5.2 million of
privatization-related purchase accounting charges incurred in
2003. EBIT also benefited from higher sales, income of
$2.3 million related to Andean Trade Preference Act duty
refunds and lower product purchases from third parties. These
benefits were partially offset by higher product costs due to
unfavorable currency exchange rates, higher labor and material
costs, and higher shipping and distribution costs. If the
Colombian peso exchange rate during 2004 had remained unchanged
from that experienced in 2003, the Company estimates that its
fresh-cut flowers EBIT would have been higher by approximately
$6.3 million.
Corporate: Corporate EBIT includes general and
administrative costs not allocated to the operating segments.
Corporate EBIT in 2004 was a loss of $70.3 million compared
to a loss of $87.2 million in 2003. The improvement in 2004
EBIT resulted from lower write-offs of debt issuance costs due
to lower accelerated debt repayments and the absence of a
$6.9 million legal settlement incurred in 2003. The Company
wrote off debt issuance costs of $2.7 million in 2004 as
compared to $12.6 million in 2003.
Liquidity and Capital Resources
CASH REQUIREMENTS:
The following tables summarize the Company’s contractual
obligations and commitments at December 31, 2005:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Payments Due by Period | |
| |
|
| |
| |
|
|
|
Less Than | |
|
|
|
After | |
| |
|
Total | |
|
1 Year | |
|
1-2 Years | |
|
3-4 Years | |
|
4 Years | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
|
(In thousands) | |
|
Contractual obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Fixed rate debt
|
|
$ |
1,110,755 |
|
|
$ |
2,162 |
|
|
$ |
1,875 |
|
|
$ |
751,842 |
|
|
$ |
354,876 |
|
| |
Variable rate debt
|
|
|
835,531 |
|
|
|
20,403 |
|
|
|
72,384 |
|
|
|
370,456 |
|
|
|
372,288 |
|
| |
Capital lease obligations
|
|
|
80,971 |
|
|
|
3,849 |
|
|
|
6,905 |
|
|
|
6,445 |
|
|
|
63,772 |
|
| |
Non-cancelable operating lease commitments
|
|
|
356,789 |
|
|
|
93,938 |
|
|
|
121,633 |
|
|
|
55,949 |
|
|
|
85,269 |
|
| |
Cancelable operating lease commitments
|
|
|
104,103 |
|
|
|
9,651 |
|
|
|
18,333 |
|
|
|
18,015 |
|
|
|
58,104 |
|
| |
Purchase obligations
|
|
|
2,164,989 |
|
|
|
594,947 |
|
|
|
751,450 |
|
|
|
443,008 |
|
|
|
375,584 |
|
| |
Minimum required pension funding
|
|
|
108,483 |
|
|
|
6,184 |
|
|
|
25,146 |
|
|
|
20,674 |
|
|
|
56,479 |
|
| |
Postretirement benefit payments
|
|
|
54,419 |
|
|
|
5,639 |
|
|
|
11,528 |
|
|
|
11,330 |
|
|
|
25,922 |
|
| |
Interest payments on fixed and variable rate debt
|
|
|
663,194 |
|
|
|
132,528 |
|
|
|
261,283 |
|
|
|
180,280 |
|
|
|
89,103 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual cash obligations
|
|
$ |
5,479,234 |
|
|
$ |
869,301 |
|
|
$ |
1,270,537 |
|
|
$ |
1,857,999 |
|
|
$ |
1,481,397 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Debt: Details of amounts included in long-term
debt can be found in Note 10 of the Consolidated Financial
Statements. The table assumes that long-term debt is held to
maturity.
The variable rate maturities include amounts that were payable
under the Company’s recently repaid senior secured credit
facilities.
31
Capital Lease Obligations: The Company’s capital
lease obligations include $78.6 million related to two
vessel leases. The obligations under these leases, which
continue through 2024, are denominated in British pound
sterling. The lease payment commitments are presented in
U.S. dollars at the exchange rate in effect on
December 31, 2005 and therefore will change as foreign
currency exchange rates fluctuate.
Operating Lease Commitments: The Company has obligations
under non-cancelable and cancelable operating leases, primarily
for land, as well as for certain equipment and office
facilities. The leased assets are used in the Company’s
operations where leasing offers advantages of operating
flexibility and is less expensive than alternate types of
funding. A significant portion of the Company’s operating
lease payments are fixed. Lease payments are charged to
operations, primarily through cost of products sold. Total
rental expense, including rent related to cancelable and
non-cancelable leases, was $130 million,
$101.4 million and $98.4 million (net of sublease
income of $15.9 million, $15.1 million and
$15.1 million) for 2005, 2004 and 2003, respectively.
Included in operating lease commitments is a residual value
guarantee obligation under an aircraft lease agreement. The
Company’s maximum potential undiscounted future payment
under this residual value guarantee amounts to approximately
$8.2 million. This payment would occur if the fair value of
the aircraft is less than $20 million at the termination of
the lease in 2010. The Company does not currently anticipate any
future payments related to this residual value guarantee.
Purchase Obligations: In order to secure sufficient
product to meet demand and to supplement the Company’s own
production, the Company enters into non-cancelable agreements
with independent growers, primarily in Latin America, to
purchase substantially all of their production subject to market
demand and product quality. Prices under these agreements are
generally fixed and contract terms range from one to ten years.
Total purchases under these agreements were $433.4 million,
$340.1 million and $298.6 million for 2005, 2004 and
2003, respectively.
In order to ensure a steady supply of packing supplies and to
maximize volume incentive rebates, the Company enters into
contracts with certain suppliers for the purchase of packing
supplies, as defined in the respective agreements, over periods
of up to five years. Purchases under these contracts for 2005,
2004 and 2003 were approximately $227.3 million,
$181.8 million and $151.9 million, respectively.
Interest payments on fixed and variable rate debt:
Commitments for interest expense on debt, including capital
lease obligations, were determined based on anticipated annual
average debt balances, after factoring in mandatory debt
repayments. Interest expense on variable-rate debt has been
based on the prevailing interest rates at December 31, 2005.
Other Obligations and Commitments: The Company has
obligations with respect to its pension and other postretirement
benefit (“OPRB”) plans (Note 11 to the
Consolidated Financial Statements). During 2005, the Company
contributed $12 million to its qualified U.S. pension
plan, which included voluntary contributions above the minimum
requirements for the plan. Under the Internal Revenue Service
funding requirements, no contribution will be required for 2006.
However, the Company may make contributions to its
U.S. qualified plan in 2006 at its election. The Company
also has non-qualified, unfunded pension and OPRB plans. The
Company expects to make payments related to these unfunded
pension and OPRB plans of $11.8 million in 2006.
The Company has numerous collective bargaining agreements with
various unions covering approximately 43% of the Company’s
hourly full time and seasonal employees. Of the unionized
employees, 43% are covered under a collective bargaining
agreement that will expire within one year and the remaining 57%
are covered under collective bargaining agreements expiring
beyond the upcoming year. These agreements are subject to
periodic negotiation and renewal. Failure to renew any of these
collective bargaining agreements may result in a strike or work
stoppage; however management does not expect that the outcome of
these negotiations and renewals will have a material adverse
impact to the Company’s financial condition or results of
operations.
32
SOURCES AND USES OF CASH:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Successor | |
|
Successor | |
|
Combined | |
| |
|
| |
|
| |
|
| |
| |
|
2005 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
| |
|
(In thousands) | |
|
Cash flow provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Operating activities
|
|
$ |
72,589 |
|
|
$ |
217,392 |
|
|
$ |
338,924 |
|
| |
Investing activities
|
|
|
(164,323 |
) |
|
|
(281,584 |
) |
|
|
(1,595,413 |
) |
| |
Financing activities
|
|
|
69,937 |
|
|
|
107,571 |
|
|
|
636,823 |
|
| |
Foreign currency impact
|
|
|
(8,608 |
) |
|
|
2,356 |
|
|
|
6,181 |
|
| |
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash
|
|
$ |
(30,405 |
) |
|
$ |
45,735 |
|
|
$ |
(613,485 |
) |
| |
|
|
|
|
|
|
|
|
|
Operating Activities: The primary drivers of the
Company’s operating cash flows are operating earnings,
adjusted for cash generated from or used in net working capital,
interest paid and taxes paid or refunded. The Company defines
net working capital as the sum of receivables, inventories,
prepaid expenses and other current assets less accounts payable
and accrued liabilities. Factors that impact the Company’s
operating earnings that do not impact cash flows include
depreciation and amortization, gains and losses on the sale of
assets and purchase accounting expenses.
Changes in working capital generally correspond to operating
activity. For example, as sales increase, a larger investment in
working capital is typically required. Management attempts to
keep the Company’s investment in net working capital to a
reasonable minimum by closely monitoring inventory levels and
matching production to expected market demand, keeping tight
control over collection of receivables and optimizing payment
terms on its trade and other payables. Debt levels and interest
rates impact interest payments, and tax payments are impacted by
tax rates, the tax jurisdiction of earnings and the availability
of tax operating losses.
Cash flows generated by operating activities were
$72.6 million in 2005 compared to $217.4 million in
2004. Cash flows decreased in 2005 due primarily to an increase
in net working capital of $122.7 million, driven primarily
by higher accounts receivable and a greater investment in
inventory, partially offset by higher accounts payable. The
increase in accounts receivable was driven mainly by higher
sales. The increase in inventory was primarily attributable to
higher anticipated sales of packaged foods products in 2006.
Higher accounts payable was primarily the result of higher
inventory related purchases and the timing of payments to
suppliers. In 2004, net working capital increased
$100.9 million principally due to higher accounts
receivable, inventory, and lower accrued liabilities, partially
offset by higher accounts payable. The increase in accounts
receivables was driven mainly by higher sales. The increase in
inventory was attributable to investments in Dole Packaged
Frozen Foods and Dole Berry Company inventories, as well as
higher overall balances to support higher sales. Lower accrued
liabilities were primarily due to the timing of payments to
growers. Higher accounts payable was primarily the result of
higher inventory related purchases and the timing of payments to
suppliers, partially offset by payments made on Dole Packaged
Frozen Foods and Dole Berry Company payables, which were overdue
when these companies were acquired in 2004.
Investing Activities: Cash flows used in investing
activities decreased to $164.3 million in 2005 from
$281.6 million in the prior year. The decrease in cash
outflow during 2005 was primarily due to less cash used for
acquisitions. In 2005, the Company acquired the 40% minority
interest in Saba for $47.1 million compared to the
acquisitions in 2004, primarily related to Dole Packaged Frozen
Foods and Dole Berry Company, for $189.7 million. This
decrease was partially offset by higher capital expenditures of
$29.8 million in 2005.
The purchase of Saba, 2005 capital expenditures and payments for
acquisitions were funded by operating cash flows and through
additional borrowings. The Company expects that 2006 capital
expenditures will be approximately $104.2 million.
Financing Activities: Cash flows from financing
activities decreased to $69.9 million in 2005 from
$107.6 million in 2004. The decrease in cash of
$37.7 million was primarily due to higher dividend payments
of $77.3 million in 2005 (a partial return of the
$100 million capital contribution made to the Company by its
33
immediate parent, Dole Holding Company, LLC during 2004) versus
$20 million in 2004 and the absence of a $100 million
capital contribution from Dole Holding Company, LLC in 2004.
These decreases to cash flow were partially offset by higher net
borrowings incurred in 2005 of $150 million versus
2004 net borrowings of $33.2 million, to fund current
year operations.
The majority of the cash from financing activities in 2004
resulted from additional term loan borrowings of
$175 million to fund the acquisition of Dole Packaged
Frozen Foods. The Company repaid approximately
$141.8 million of pre-existing short and long-term
borrowings. In addition, cash dividends of $20 million were
paid to Dole Holding Company, LLC and dividends of
$5.6 million were paid to minority shareholders (primarily
the Saba minority shareholders). Financing activities in 2004
also included a $100 million contribution from Dole Holding
Company, LLC. These funds were raised by Dole Holding Company,
LLC as part of a $150 million borrowing under a Second Lien
Senior Credit Agreement that now has been repaid as part of the
refinancing in April 2006.
At December 31, 2005, the Company had outstanding long-term
borrowings of $2.03 billion, consisting of
$1.1 billion of unsecured senior notes and debentures due
2009 through 2013 and $921 million of secured debt
(consisting of revolving credit and term loan facilities and
capital lease obligations). As a result of the April 2006
refinancing, principal payments on secured borrowings due in
2006 were reduced from $25 million to $13 million.
During April 2005, the Company executed an amendment and
restatement of its senior secured credit facility agreement (the
“Amended and Restated Credit Agreement”). In
conjunction with the execution of the Amended and Restated
Credit Agreement, the Company completed a tender offer to
purchase for cash $325 million aggregate principal amount
of the Company’s outstanding debt securities. The Company
repurchased $50 million of its $400 million 8.625%
unsecured Senior Notes due 2009 and $275 million of its
$475 million 8.875% unsecured Senior Notes due 2011.
Under the Amended and Restated Credit Agreement, which has now
been repaid in full, the Company obtained financing through term
loan borrowings (“Term Loan A” and “Term
Loan B”), $350 million relating to Term Loan A
(denominated in Japanese yen), $400 million relating to
Term Loan B and $300 million of revolving credit
facilities. Borrowings under Term Loan A and Term
Loan B were repayable in quarterly tranches through 2010
and 2012, respectively. As of December 31, 2005, the term
loan facilities consisted of $306.1 million of Term
Loan A and $392 million of Term Loan B.
In May 2005, the Company entered into an interest rate swap
agreement in order to hedge future changes in interest rates.
This agreement effectively converted borrowings under Term
Loan A, which is variable-rate debt, to a fixed-rate basis
through the term of the loan.
In June 2005, the Company executed a technical amendment to its
Amended and Restated Credit Agreement, which changed the
scheduled amortization payment dates of the term loans from the
last business day of the Company’s fiscal quarters to the
last business day of the calendar quarters.
In December 2005, the Company executed a second amendment (the
“Second Amendment”) to the Amended and Restated Credit
Agreement. The Second Amendment permitted the Company to
reinvest the proceeds from the sale of any of its principal
properties (defined as each of the Company’s
U.S. manufacturing plants and processing facilities that
have a net book value exceeding 1% of the Company’s net
tangible assets) in a new principal property and also allows DHM
Holding Company, Inc., to borrow under project financing
facilities the proceeds of which would be used for the
construction, start up and operational deficits of a hotel, spa
and wellbeing center, subject to certain restrictions. In
addition, the Second Amendment amended both the minimum
consolidated interest coverage ratio and the maximum leverage
ratio for certain time periods.
As of December 31, 2005, there were $137 million of
outstanding borrowings under the Company’s revolving credit
facilities. Funds available under the revolving credit
facilities could be used for borrowings to finance short-term
working capital needs of the Company or for the issuance of
letters of credit and bank guarantees. The Company had the
ability to issue up to $232.5 million of letters of credit
and bank guarantees under these facilities, which to the extent
utilized, reduced available borrowings under these facilities. At
34
December 31, 2005, after taking into account approximately
$94.4 million of outstanding letters of credit and bank
guarantees drawn against these facilities, the Company had
approximately $68.6 million available under these revolvers.
During January 2006, the Company increased its revolving credit
facilities from $300 million to $360 million.
In addition to amounts available under the revolving credit
facilities, the Company’s subsidiaries have uncommitted
lines of credit of approximately $85 million at various
local banks, of which $79.3 million was available at
December 31, 2005. These lines of credit lines are used
primarily for short-term borrowings, foreign currency exchange
settlement and the issuance of letters of credit or bank
guarantees. Several of the Company’s uncommitted lines of
credit expire in 2006 while others do not have a commitment
expiration date. These arrangements may be cancelled at any time
by the Company or the banks.
On April 12, 2006, the Company completed an amendment and
restatement of its senior secured credit facilities. The Company
obtained $975 million of term loan facilities and
$100 million in a pre-funded letter of credit facility. The
proceeds of the term loans were used to repay the outstanding
term loans under the Company’s existing senior secured
credit facilities. In addition, the Company paid a dividend of
approximately $160 million to its immediate parent, Dole
Holding Company, LLC, which proceeds were used to repay in full
its Second Lien Senior Credit Facility. The terms and covenants
under the new senior secured credit facilities are similar to
those under the Company’s existing senior secured credit
facilities except that the new facilities do not contain
financial maintenance or maximum capital expenditure covenants.
Additionally, the Company entered into a new asset based
revolving credit facility of $350 million. The facility
will be secured and will be subject to a borrowing base
consisting of up to 85% of eligible accounts receivable plus a
predetermined percentage of eligible inventory.
The purposes of the refinancing include increasing the combined
size of the Company’s revolving credit and letter of credit
facilities and eliminating certain financial maintenance
covenants, realizing currency gains arising out of the
Company’s existing senior secured credit facilities, and
refinancing of the higher-cost bank indebtedness of Dole Holding
Company, LLC, at the lower-cost Dole Food Company, Inc. level.
In connection with the refinancing, the Company obtained a
waiver, with respect to the first quarter ended March 25,
2006, for certain covenants contained in the prior senior
secured credit facilities.
Refer to Note 10 of the Consolidated Financial Statements
for additional details of the Company’s outstanding debt.
The Company believes that available borrowings under the
revolving credit facility and subsidiaries’ uncommitted
lines of credit, together with its existing cash balance of
$48.8 million at December 31, 2005, future cash flow
from operations and access to capital markets will enable it to
meet its working capital, capital expenditure, debt maturity and
other commitments and funding requirements. Factors impacting
the Company’s cash flow from operations include such items
as commodity prices, interest rates and foreign currency
exchange rates, among other things. These factors are set forth
under “Risk Factors” in Item 1A. of this
Form 10-K and
under “Quantitative and Qualitative Disclosures About
Market Risk “in Item 7A. and elsewhere in this
Form 10-K.
GUARANTEES, CONTINGENCIES AND DEBT COVENANTS:
The Company is a guarantor of indebtedness of some of its key
fruit suppliers and other entities integral to the
Company’s operations. At December 31, 2005, guarantees
of $2.6 million consisted primarily of amounts advanced
under third party bank agreements to independent growers that
supply the Company with product. The Company has not
historically experienced any significant losses associated with
these guarantees.
As part of its normal business activities, the Company and its
subsidiaries also provide guarantees to various regulatory
authorities, primarily in Europe, in order to comply with
foreign regulations when operating businesses overseas. These
guarantees relate to customs duties and the now-eliminated
banana import license fees that were granted to the European
Union member states’ agricultural authority. These
guarantees are
35
obtained from commercial banks in the form of letters of credit
or bank guarantees. In addition, the Company issues letters of
credit and bonds through major banking institutions and
insurance companies as required by certain vendor and other
operating agreements. As of December 31, 2005, total
letters of credit and bonds outstanding were $121.8 million.
The Company also provides various guarantees, mostly to foreign
banks, in the course of its normal business operations to
support the borrowings, leases and other obligations of its
subsidiaries. The Company guaranteed $127.7 million of its
subsidiaries’ obligations to their suppliers and other
third parties as of December 31, 2005.
The Company has change of control agreements with certain key
executives, under which severance payments and benefits would
become payable in the event of specified terminations of
employment following a change of control (as defined) of the
Company. The going-private merger transaction did not trigger
the change of control provisions as outlined in these
agreements. Refer to Item 11 of this
Form 10-K, under
the heading “Employment, Severance and Change of Control
Arrangements” for additional information concerning the
change of control agreements.
As disclosed in Note 16 to the Consolidated Financial
Statements, the Company is subject to legal actions, most
notably related to the Company’s prior use of the
agricultural chemical dibromochloropropane, or “DBCP”.
Although no assurance can be given concerning the outcome of
these cases, in the opinion of management, after consultation
with legal counsel and based on past experience defending and
settling DBCP claims, the pending lawsuits are not expected to
have a material adverse effect on the Company’s business,
financial condition or results of operations.
Provisions under the senior secured credit facilities and the
indentures to the senior notes and debentures require the
Company to comply with certain covenants. These covenants
include limitations on, among other things, indebtedness,
investments, loans to subsidiaries, employees and third parties,
the issuance of guarantees and the payment of dividends. The
Company could borrow approximately an additional
$75 million at December 31, 2005 and remain within its
covenants, under the conditions then existing. At
December 31, 2005, the Company was in compliance with all
applicable covenants contained in the indentures and prior
senior secured credit facilities.
Critical Accounting Policies and Estimates
The preparation of the Consolidated Financial Statements
requires management to make estimates and assumptions that
affect reported amounts. These estimates and assumptions are
evaluated on an ongoing basis and are based on historical
experience and on other factors that management believes are
reasonable. Estimates and assumptions include, but are not
limited to, the areas of customer and grower receivables,
inventories, impairment of assets, useful lives of property,
plant and equipment, intangible assets, marketing programs,
income taxes, self-insurance reserves, retirement benefits,
financial instruments and commitments and contingencies.
The Company believes that the following represent the areas
where more critical estimates and assumptions are used in the
preparation of the Consolidated Financial Statements. Refer to
Note 2 of the Consolidated Financial Statements for a
summary of the Company’s significant accounting policies.
Application of Purchase Accounting: The Company makes
strategic acquisitions of entities to enhance its product
portfolio and to leverage the DOLE brand. These acquisitions
require the application of purchase accounting in accordance
with Statement of Financial Accounting Standards No. 141,
Business Combinations. This results in tangible and
identifiable intangible assets and liabilities of the acquired
entity being recorded at fair value. The difference between the
purchase price and the fair value of net assets acquired is
recorded as goodwill. In addition to acquisitions, the
consummation of the going-private merger transaction in 2003
also resulted in the application of purchase accounting to the
Company’s consolidated balance sheet as of the transaction
date.
In determining the fair values of assets and liabilities
acquired in a business combination, the Company uses a variety
of valuation methods including present value, depreciated
replacement cost, market values
36
(where available) and selling prices less costs to dispose.
Valuations are performed by either independent valuation
specialists or by Company management, where appropriate.
Assumptions must often be made in determining fair values,
particularly where observable market values do not exist.
Assumptions may include discount rates, growth rates, cost of
capital, royalty rates, tax rates and remaining useful lives.
These assumptions can have a significant impact on the value of
identifiable assets and accordingly can impact the value of
goodwill recorded. Management believes that the assumptions used
in the application of purchase accounting for the Company’s
acquisitions and the privatization in 2003 are appropriate and
consistent with observable market comparables. Different
assumptions could have resulted in materially different values
being attributed to assets and liabilities. Since these values
impact the amount of annual depreciation and amortization
expense, different assumptions could also significantly impact
the Company’s statement of operations and could impact the
results of future impairment reviews.
Grower Advances: The Company makes advances to third
party growers primarily in Latin America and Asia for various
farming needs. Some of these advances are secured with property
or other collateral owned by the growers. The Company monitors
these receivables on a regular basis and records an allowance
for these grower receivables based on estimates of the
growers’ ability to repay advances and the fair value of
the collateral. These estimates require significant judgment
because of the inherent risks and uncertainties underlying the
growers’ ability to repay these advances. These factors
include weather-related phenomena, government-mandated fruit
prices, market responses to industry volume pressures, grower
competition, fluctuations in local interest rates, economic
crises, security risks in developing countries, political
instability, outbreak of plant disease, inconsistent or poor
farming practices of growers and foreign currency fluctuations.
The aggregate amounts of grower advances made during fiscal
years 2005, 2004 and 2003 were approximately $148 million,
$146.6 million and $133.3 million, respectively. Net
grower advances receivable were $44.3 million and
$39.2 million at December 31, 2005 and January 1,
2005, respectively.
Long-Lived Assets: The Company’s long-lived assets
consist of 1) property, plant and equipment and amortized
intangibles and 2) goodwill and unamortized intangible assets.
1) Property, Plant and Equipment and Amortized
Intangibles: The Company depreciates property, plant and
equipment and amortizes intangibles principally by the
straight-line method over the estimated useful lives of these
assets. Estimates of useful lives are based on the nature of the
underlying assets as well as the Company’s experience with
similar assets and intended use. Estimates of useful lives can
differ from actual useful lives due to the inherent uncertainty
in making these estimates. This is particularly true for the
Company’s significant long-lived assets such as land
improvements, buildings, farming machinery and equipment,
vessels and customer relationships. Factors such as the
conditions in which the assets are used, availability of capital
to replace assets, frequency of maintenance, changes in farming
techniques and changes to customer relationships can influence
the useful lives of these assets. Refer to Notes 8 and 9 of
the Consolidated Financial Statements for a summary of useful
lives by major asset category and for further details on the
Company’s intangible assets, respectively. The Company
incurred depreciation expense of approximately
$137.9 million, $133.3 million and $123.6 million
in 2005, 2004 and 2003, respectively, and amortization expense
of approximately $11.9 million, $11.6 million and
$8 million in fiscal 2005, 2004 and 2003, respectively.
The Company reviews property, plant and equipment and
amortizable intangibles to be held and used for impairment
whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. If an evaluation of
recoverability is required, the estimated total undiscounted
future cash flows directly associated with the asset is compared
to the asset’s carrying amount. If this comparison
indicates that there is an impairment, the amount of the
impairment is calculated by comparing the carrying value to the
discounted expected future cash flows expected to result from
the use of the asset and its eventual disposition or comparable
market values, depending on the nature of the asset. Changes in
commodity pricing, weather-related phenomena and other market
conditions are events that have historically caused the Company
to assess the carrying amount of its long-lived assets.
2) Goodwill and Unamortized Intangible Assets: The
Company’s unamortized intangible assets consist primarily
of trademark and trade names, which includes the DOLE brand with
a carrying value of
37
$694.5 million. In determining whether intangible assets
have indefinite lives, the Company considers the expected use of
the asset, legal or contractual provisions that may limit the
life of the asset, length of time the intangible has been in
existence, as well as competitive, industry and economic
factors. The determination as to whether an intangible asset is
indefinite-lived or amortizable could have a significant impact
on the Company’s statement of operations in the form of
amortization expense and potential future impairment charges.
Goodwill and unamortized intangible assets are tested for
impairment annually and whenever events or circumstances
indicate that an impairment may have occurred. Indefinite-lived
intangibles are tested for impairment by comparing the fair
value of the asset to the carrying value. The fair value of the
DOLE brand was determined using a discounted cash flow
methodology, which is most sensitive to the royalty rate
assumption of 3%; a 0.5 percentage point change to the
royalty rate would have impacted the original valuation by
approximately $110 million.
Goodwill is tested for impairment by comparing the fair value of
a reporting unit with its net book value including goodwill. The
fair value of reporting units is determined using a discounted
cash flow methodology, which requires making estimates and
assumptions including pricing and volumes, industry growth
rates, future business plans, profitability, tax rates and
discount rates. If the fair value of the reporting unit exceeds
its carrying amount, then goodwill of that reporting unit is not
considered to be impaired. If the carrying amount of the
reporting unit exceeds its fair value, then the implied fair
value of goodwill is determined in the same manner as the amount
of goodwill recognized in a business combination is determined.
An impairment loss is recognized if the implied fair value of
goodwill exceeds its carrying amount. Changes to assumptions and
estimates can significantly impact the fair values determined
for reporting units and the implied value of goodwill, and
consequently can impact whether or not an impairment charge is
recognized, and if recognized, the size thereof. Management
believes that the assumptions used in the Company’s annual
impairment review are appropriate.
Income Taxes: Deferred income taxes are recognized for
the income tax effect of temporary differences between financial
statement carrying amounts and the income tax bases of assets
and liabilities. The Company regularly reviews its deferred
income tax assets to determine whether future taxable income
will be sufficient to realize the benefits of these assets. A
valuation allowance is provided for deferred income tax assets
for which it is deemed more likely than not that future taxable
income will not be sufficient to realize the related income tax
benefits from these assets. The amount of the net deferred
income tax asset that is considered realizable could, however,
be adjusted if estimates of future taxable income are adjusted.
The Company believes its tax positions comply with the
applicable tax laws and that it is adequately provided for all
tax related matters. The Company is subject to examination by
taxing authorities in the various jurisdictions in which it
files tax returns. Specifically, the Company is routinely under
examination by the Internal Revenue Service. The current
examination includes the years 1995 through 2001. Matters raised
upon audit may involve substantial amounts and could result in
material cash payments if resolved unfavorably; however,
management does not believe that any material payments will be
made related to these matters within the next year. Management
considers it unlikely that the resolution of these matters will
have a material adverse effect on its results of operations.
Pension and Other Postretirement Benefits: The Company
has qualified and non-qualified defined benefit pension plans
covering some of its full-time employees. Benefits under these
plans are generally based on each employee’s eligible
compensation and years of service, except for hourly plans,
which are based on negotiated benefits. In addition to pension
plans, the Company has OPRB plans that provide 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. Pension
and OPRB costs and obligations are calculated based on actuarial
assumptions including discount rates, health care cost trend
rates, compensation increases, expected return on plan assets,
mortality rates and other factors.
Pension obligations and expenses are most sensitive to the
expected return on pension plan assets and discount rate
assumptions. OPRB obligations and expenses are most sensitive to
discount rate assumptions and health care cost trend rates. The
Company determines the expected return on pension plan assets
based on
38
an expectation of average annual returns over an extended period
of years. This expectation is based, in part, on the actual
returns achieved by the Company’s pension plans over the
prior ten-year period. The Company also considers the
weighted-average historical rates of return on securities with
similar characteristics to those in which the Company’s
pension assets are invested. In the absence of a change in the
Company’s asset allocation or investment philosophy, this
estimate is not expected to vary significantly from year to
year. The Company’s 2005 and 2004 pension expense was
determined using an expected rate of return on U.S. plan
assets of 8.50% and 8.75%, respectively. The Company’s 2006
pension expense will be determined using an expected rate of
return on U.S. plan assets of 8.25%. At December 31,
2005, the Company’s U.S. pension plan investment
portfolio was invested approximately 58% in equity securities,
39% in fixed income securities and 3% in alternative
investments. A 25 basis point change in the expected rate
of return on pension plan assets would impact annual pension
expense by $0.6 million.
The Company’s U.S. pension plan’s discount rate
of 5.75% in both 2005 and 2004 was determined based on a
hypothetical portfolio of high-quality, non-callable,
zero-coupon bond indices with maturities that approximate the
duration of the liabilities in the Company’s pension plans.
A 25 basis point decrease in the assumed discount rate
would increase the projected benefit obligation by
$7 million and increase the annual expense by
$0.2 million.
The Company’s foreign pension plans’ weighted average
discount rate was 9.08% and 8.70% for 2005 and 2004,
respectively. A 25 basis point decrease in the assumed
discount rate of the foreign plans would increase the projected
benefit obligation by $2.1 million and increase the annual
expense by $0.4 million.
While management believes that the assumptions used are
appropriate, actual results may differ materially from these
assumptions. These differences may impact the amount of pension
and other postretirement obligations and future expense. Refer
to Note 11 of the Consolidated Financial Statements for
additional details of the Company’s pension and other
postretirement benefits.
Litigation: The Company is involved from time to time in
claims and legal actions incidental to its operations, both as
plaintiff and defendant. The Company has established what
management currently believes to be adequate reserves for
pending legal matters. These reserves are established as part of
an ongoing worldwide assessment of claims and legal actions that
takes into consideration such items as changes in the pending
case load (including resolved and new matters), opinions of
legal counsel, individual developments in court proceedings,
changes in the law, changes in business focus, changes in the
litigation environment, changes in opponent strategy and
tactics, new developments as a result of ongoing discovery, and
past experience in defending and settling similar claims.
Changes in accruals, both up and down, are part of the ordinary,
recurring course of business, in which management, after
consultation with legal counsel, is required to make estimates
of various amounts for business and strategic planning purposes,
as well as for accounting and SEC reporting purposes. These
changes are reflected in the reported earnings of the Company
each quarter. The litigation accruals at any time reflect
updated assessments of the then existing pool of claims and
legal actions. Actual litigation settlements could differ
materially from these accruals.
Other Matters
European Union Banana Import Regime: On January 1,
2006, the European Union (“EU”) implemented a new
“tariff only” import regime for bananas. The
2001 EC/US Understanding on Bananas required the EU to
implement a tariff only banana import system on or before
January 1, 2006, and the EU’s banana regime change was
therefore expected by that date.
Banana imports from Latin America are now subject to import
license requirements only and a tariff of 176 euro per metric
ton for entry into the EU market. Under the EU’s previous
banana regime, banana imports from Latin America were subject to
a tariff of 75 euro per metric ton and were also subject to both
import license requirements and volume quotas. License
requirements and volume quotas had the effect of limiting access
to the EU banana market.
Although all Latin bananas are now subject to a tariff of
176 euro per metric ton, up to 775,000 metric tons of
bananas from African, Caribbean, and Pacific (“ACP”)
countries may be imported to the EU duty-
39
free. This preferential treatment of a zero tariff on up to
775,000 tons of ACP banana imports, as well as the
176 euro per metric ton tariff applied to Latin banana
imports, is currently being challenged by Panama, Honduras and
Nicaragua at the World Trade Organization (“WTO”). The
current tariff applied to Latin banana imports may be lowered
and the ACP preference of a zero tariff may be affected
depending on the outcome of these WTO proceedings, but the WTO
proceedings are only in their initial stage and may take several
years to conclude. The Company encourages efforts to lower the
tariff through negotiations with the EU and is working actively
to help achieve this result.
Medicare Modernization Act: The Medicare Prescription
Drug, Improvements and Modernization Act of 2003 (the
“Act”) was signed into law in December 2003. The Act
introduced a prescription drug benefit under Medicare
(“Medicare Part D”), as well as a federal subsidy
to sponsors of retiree health care benefit plans that provide a
prescription drug benefit that is at least actuarially
equivalent to Medicare Part D. In May 2004, the FASB issued
Staff Position
No. 106-2
(“FSP 106-2”),
Accounting and Disclosure Requirements Related to the
Medicare Prescription Drug, Improvement and Modernization Act of
2003.
FSP 106-2 became
effective for interim or annual periods beginning after
June 15, 2004. The Company determined that the benefits
provided by certain of its postretirement health care plans are
actuarially equivalent to Medicare Part D and thus qualify
for the subsidy under the Act. The expected subsidy was
recognized in the 2004 year-end measurement of obligations
and reduced the accumulated postretirement benefit obligation
(“APBO”) by $8.1 million. This amount was based
on the estimated impact of the Act, pending further guidance.
The estimate was remeasured in 2005 based on final regulations
and other information and accordingly, the Company recorded an
increase in the APBO of $2.5 million, for a net
$5.6 million decrease in the APBO as a result of the Act.
The increase in the APBO of $2.5 million was recognized as
an actuarial loss in 2005. The net periodic benefit cost for
2005 was reduced by approximately $0.5 million due to the
expected subsidy.
Impact of Hurricane Katrina: During the third quarter of
2005, the Company’s operations in the Gulf Coast area of
the United States were impacted by Hurricane Katrina. The
Company’s fresh fruit division utilizes the Gulfport,
Mississippi port facility to receive and store product from its
Latin American operations. The Gulfport facility, which is
leased from the Mississippi Port Authority, incurred significant
damage from Hurricane Katrina. As a result of the damage
sustained at the Gulfport terminal, the Company diverted
shipments to other Dole port facilities including Freeport,
Texas; Port Everglades, Florida; and Wilmington, Delaware. The
Company resumed discharging shipments of fruit and other cargo
in Gulfport at the beginning of the fourth quarter of 2005.
However, the facility has not yet been fully rebuilt. The
financial impact to the Company’s fresh fruit operations
includes the loss of cargo and equipment, property damage and
additional costs associated with re-routing product to other
ports in the region. Equipment that was destroyed or damaged
includes refrigerated and dry shipping containers, as well as
chassis and generator-sets used for land transportation of the
shipping containers.
During 2005, the Company recorded a total charge related to
Hurricane Katrina of $10.1 million. The charge included
write-offs of owned assets with a net book value of
$4.1 million, direct incremental expenses of
$4.1 million and leased assets of $1.9 million
representing amounts due to lessors. The Company maintains
customary insurance for its property, including shipping
containers, as well as for business interruption. In 2005, the
Company collected $6 million from insurance carriers
related to cargo and property damage and recorded a receivable
of $3.4 million at December 31, 2005 for insurance
recoveries. Of the $3.4 million receivable balance, the
Company collected $3.1 million from insurance carriers
subsequent to December 31, 2005. During March 2006, the
Company received an additional $2 million. The Company is
continuing to work with its insurers to evaluate the extent of
the costs incurred as a result of the hurricane damage and to
determine the extent of the insurance coverage for that damage.
Honduran Tax Case: In 2005, the Company received a tax
assessment from Honduras of approximately $137 million
relating to the disposition of all of the Company’s
interest in Cervecería Hondureña, S.A in 2001. The
Company believes the assessment is without merit and filed an
appeal with the Honduran tax authorities, which was denied. As a
result of the denial in the administrative process, in order to
negate the tax assessment, on August 5, 2005, the Company
proceeded to the next stage of the appellate process by filing a
lawsuit against the Honduran government, in the Honduran
Administrative Tax Trial Court. The Honduran
40
government is seeking dismissal of the lawsuit and attachment of
assets, which the Company is challenging. No reserve has been
provided for this assessment.
Business Restructuring: In the first quarter of 2006, the
commercial relationship substantially ended between Dole’s
wholly owned subsidiary, Saba, and Saba’s largest customer.
Saba is a leading importer and distributor of fruit, vegetables
and flowers in Scandinavia. Saba’s financial results are
included in Dole’s fresh fruit reporting segment. Other
than the expected charges described below, the loss of this
customer’s business is not expected to be material to
Dole’s ongoing earnings. In connection with this recent
event, Dole plans on restructuring certain lines of Saba’s
business and expects to incur related charges, both in the first
quarter of 2006 and in subsequent fiscal quarters. These charges
are currently estimated at approximately $18 million in the
aggregate. However, the timing and exact amount of the charges
are yet to be determined, as well as Dole’s potential
contractual claims against this customer.
Capital Contribution: On March 3, 2006,
DHM Holding Company, Inc. (“HoldCo”) executed a
$150 million senior secured term loan agreement. In March
2006, HoldCo drew $50 million and contributed
$28.4 million to Dole Holding Company, LLC, the
Company’s parent, which contributed such funds to the
Company. The Company intends to dividend this entire amount by
the end of 2006 back to Dole Holding Company, LLC for further
dividend to HoldCo.
Supplemental Financial Information
The following financial information has been presented, as
management believes that it is useful information to some
readers of the Company’s Consolidated Financial Statements
(in thousands):
| |
|
|
|
|
|
|
|
|
| |
|
December 31, | |
|
January 1, | |
| |
|
2005 | |
|
2005 | |
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
| |
|
| |
|
| |
| |
|
(In thousands) | |
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
Total working capital (current assets less current liabilities)
|
|
$ |
534,663 |
|
|
$ |
423,482 |
|
|
Total assets
|
|
$ |
4,409,727 |
|
|
$ |
4,321,630 |
|
|
Total debt
|
|
$ |
2,027,257 |
|
|
$ |
1,868,922 |
|
|
Total shareholders’ equity
|
|
$ |
616,543 |
|
|
$ |
677,873 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year | |
|
Year | |
|
Three Quarters | |
|
Quarter | |
|
Year | |
| |
|
Ended | |
|
Ended | |
|
Ended | |
|
Ended | |
|
Ended | |
| |
|
December 31, | |
|
January 1, | |
|
January 3, | |
|
March 22, | |
|
January 3, | |
| |
|
2005 | |
|
2005 | |
|
2004 | |
|
2003 | |
|
2004 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
|
Successor | |
|
Predecessor | |
|
Combined | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
|
(In thousands) | |
|
Other Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
44,096 |
|
|
$ |
134,418 |
|
|
$ |
23,117 |
|
|
$ |
60,788 |
|
|
$ |
83,905 |
|
|
Income from discontinued operations, net
|
|
|
(2,044 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Interest expense
|
|
|
142,716 |
|
|
|
152,704 |
|
|
|
124,491 |
|
|
|
19,647 |
|
|
|
144,138 |
|
|
Income tax expense
|
|
|
44,520 |
|
|
|
25,491 |
|
|
|
6,512 |
|
|
|
13,100 |
|
|
|
19,612 |
|
|
Depreciation and amortization
|
|
|
149,809 |
|
|
|
144,993 |
|
|
|
106,766 |
|
|
|
25,051 |
|
|
|
131,817 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$ |
379,097 |
|
|
$ |
457,606 |
|
|
$ |
260,886 |
|
|
$ |
118,586 |
|
|
$ |
379,472 |
|
|
EBITDA margin
|
|
|
6.5 |
% |
|
|
8.6 |
% |
|
|
7.1 |
% |
|
|
11.1 |
% |
|
|
8.0 |
% |
|
Capital expenditures
|
|
$ |
146,306 |
|
|
$ |
101,667 |
|
|
$ |
101,971 |
|
|
$ |
4,235 |
|
|
$ |
106,206 |
|
“EBITDA” is defined as earnings before interest
expense, income tax expense, and depreciation and amortization.
EBITDA is calculated by adding interest expense, income tax
expense and depreciation and amortization to net income. In
2005, EBITDA is calculated by adding income from discontinued
operations, net of income tax expense, interest expense, income
tax expense and depreciation and amortization to net
41
income. EBITDA margin is defined as the ratio of EBITDA, as
defined, relative to net revenues. EBITDA is reconciled to net
income in the Consolidated Financial Statements in the tables
above. EBITDA and EBITDA margin fluctuated primarily due to the
same factors that impacted the changes in operating income and
segment EBIT discussed earlier.
The Company presents EBITDA and EBITDA margin because management
believes, similar to EBIT, EBITDA is a useful performance
measure for the Company. In addition, EBITDA is presented
because management believes it is frequently used by securities
analysts, investors and others in the evaluation of companies,
and because certain covenants on the Company’s Senior Notes
are tied to EBITDA. EBITDA and EBITDA margin should not be
considered in isolation from or as a substitute for net income
and other consolidated income statement data prepared in
accordance with GAAP or as a measure of profitability.
Additionally, the Company’s computation of EBITDA and
EBITDA margin may not be comparable to other similarly titled
measures computed by other companies, because not all companies
calculate EBITDA and EBITDA margin in the same manner.
The pushdown of purchase accounting to the Company and
privatization related expenses had a significant impact on the
Company’s results of operations for 2004 in comparison to
the results for 2003. EBITDA, as presented, of
$379.5 million was negatively impacted by purchase
accounting related and non-recurring going-private merger and
refinancing expenses of $80.3 million for the year ended
January 3, 2004. These items also negatively impacted
EBITDA margin by 1.7 percentage points. The impact of these
items on EBITDA for the year ended January 3, 2004 was
approximately $59.3 million related to the
step-up of inventory,
$19.6 million of non-recurring going-private merger
transaction related expenses and a net $1.4 million of
other purchase accounting related items.
This Management’s Discussion and Analysis contains
forward-looking statements that involve a number of risks and
uncertainties. Forward-looking statements, which are based on
management’s assumptions and describe the Company’s
future plans, strategies and expectations, are generally
identifiable by the use of terms such as “anticipate”,
“will”, “expect”, “believe”,
“should” or similar expressions. The potential risks
and uncertainties that could cause the Company’s actual
results to differ materially from those expressed or implied
herein include weather-related phenomena; market responses to
industry volume pressures; product and raw materials supplies
and pricing; changes in interest and currency exchange rates;
economic crises in developing countries; quotas, tariffs and
other governmental actions and international conflict. Refer to
“Disclosure Regarding Forward-Looking Statements” in
Item 1 of this
Form 10-K for
additional information concerning these matters.
|
|
| Item 7A. |
Quantitative and Qualitative Disclosures About Market
Risk |
As a result of its global operating and financing activities,
the Company is exposed to market risks including changes in
commodity pricing, fluctuations in interest rates and
fluctuations in foreign currency exchange rates in both sourcing
and selling locations. Commodity pricing exposures include the
potential impacts of 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, however, significant commodity
price fluctuations, particularly for bananas, pineapples and
commodity vegetables, could have a material impact on the
Company’s results of operations. The Company uses foreign
currency exchange forward contracts and participating forward
contracts to reduce its risk related to anticipated dollar
equivalent foreign currency cash flows, specifically forecasted
revenue transactions and forecasted operating expenses. In
addition, the Company makes limited use of bunker fuel hedges to
hedge its exposure to fluctuating fuel prices. The Company has
not utilized derivatives for trading or other speculative
purposes.
Interest Rate Risk: As a result of its normal borrowing
and leasing activities, the Company’s operating results are
exposed to fluctuations in interest rates, which the Company
manages primarily through its regular financing activities. The
Company generally maintains limited investments in cash
equivalents and has occasionally invested in marketable
securities or debt instruments with original maturities greater
than 90 days.
42
The Company has short-term and long-term debt with both fixed
and variable interest rates. Short-term debt is primarily
comprised of the current portion of long-term debt maturing
twelve months from the balance sheet date. Short-term debt also
includes 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, as
well as amounts outstanding under the Company’s senior
secured credit facilities and secured notes payable to banks.
Generally, the Company’s short-term debt is at variable
interest rates, while its long-term debt, with the exception of
amounts outstanding under the Company’s senior secured
credit facilities and vessel lease obligations, is at fixed
interest rates.
As of December 31, 2005, the Company had
$1.111 billion of fixed-rate debt and $2.4 million of
fixed-rate capital lease obligations with a combined
weighted-average interest rate of 8.18% and a fair value of
$1.12 billion. As of January 1, 2005, the Company had
$1.431 billion of fixed-rate debt and $3.6 million of
fixed rate capital lease obligations with a combined
weighted-average interest rate of 8.34% and a fair value of
$1.536 billion. The Company currently estimates that a
100 basis point increase in prevailing market interest
rates would decrease the fair value of its fixed-rate debt by
approximately $38.8 million.
As of December 31, 2005, the Company had the following
variable-rate arrangements: $835.5 million of variable-rate
debt with a weighted-average interest rate of 4.42% and
$78.6 million of variable-rate capital lease obligations
with a weighted-average interest rate of 4%. As of
January 1, 2005, the Company had the following
variable-rate arrangements: $341.8 million of variable-rate
debt with a weighted-average interest rate of 4.71% and
$91.9 million of variable-rate capital lease obligations
with a weighted-average interest rate of 4.93%. Interest expense
under the majority of these arrangements is based on the London
Interbank Offered Rate (“LIBOR”). The Company
currently estimates that a 100 basis point increase in
LIBOR would lower pretax income by $8.4 million.
In April 2005, the Company replaced part of its existing
long-term debt with Term Loan A, Term Loan B and a new
revolving credit facility. Term Loan A was denominated in
Japanese yen that bears interest at certain percentages over
Japanese LIBOR. At December 31, 2005, $306.1 million
was outstanding under Term Loan A. The Company was also
exposed to interest rate risk for changes in the Japanese LIBOR
rate. In May 2005, the Company entered into an interest rate
swap agreement, which fixed the interest rate at 2.05%.
On April 12, 2006, the Company completed an amendment and
restatement of its senior secured credit facilities. The Company
obtained $975 million of term loan facilities and
$100 million in a pre-funded letter of credit facility. The
proceeds of the term loans were used to repay the outstanding
term loans under the Company’s existing senior secured
credit facilities. In addition, the Company paid a dividend of
approximately $160 million to its immediate parent, Dole
Holding Company, LLC, which proceeds were used to repay its
Second Lien term loan. The terms and covenants under the new
senior secured credit facilities are similar to those under the
Company’s existing senior secured credit facilities except
that the new facilities do not contain financial maintenance or
maximum capital expenditure covenants.
Additionally, the Company entered into a new asset based
revolving credit facility of $350 million. The facility
will be secured and will be subject to a borrowing base
consisting of up to 85% of eligible accounts receivable plus a
predetermined percentage of eligible inventory.
The purposes of the refinancing include refinancing of the
higher-cost bank indebtedness of Dole Holding Company, LLC, at
the lower-cost Dole Food Company, Inc. level, realizing currency
gains arising out of the Company’s existing senior secured
credit facilities, increasing the combined size of the
Company’s revolving credit and letter of credit facilities
and eliminating certain financial maintenance covenants. In
connection with the refinancing, the Company obtained a waiver,
with respect to the first quarter ended March 25, 2006, for
certain covenants contained in the prior senior secured credit
facilities.
Foreign Currency Exchange Risk: The Company has
production, processing, distribution and marketing operations
worldwide in more than 90 countries. Its international sales are
usually transacted in U.S. dollars and major European and
Asian currencies. Some of the Company’s costs are incurred
in currencies different
43
from those received from the sale of products. Results of
operations may be affected by fluctuations in currency exchange
rates in both sourcing and selling locations.
The Company has significant sales denominated in Japanese yen as
well as European sales denominated primarily in euro and Swedish
krona. Product and shipping costs associated with a portion of
these sales are U.S. dollar-denominated. In 2005, the
Company had approximately $640 million of annual sales
denominated in Japanese yen, approximately $1.1 billion of
annual sales denominated in euro, and approximately
$440 million of annual sales denominated in Swedish krona.
If U.S. dollar exchange rates versus the Japanese yen, euro
and Swedish krona during 2005 had remained unchanged from 2004,
the Company’s revenues and operating income would have been
higher by approximately $16 million and $4 million,
respectively. In addition, the Company currently estimates that
a 10% strengthening of the U.S. dollar relative to the
Japanese yen, euro and Swedish krona would lower operating
income by approximately $49 million, excluding the impact
of foreign currency exchange hedges.
The Company sources the majority of its products in foreign
locations and accordingly is exposed to changes in exchange
rates between the U.S. dollar and currencies in these
sourcing locations. The Company’s exposure to exchange rate
fluctuations in these sourcing locations is partially mitigated
by entering into U.S. dollar denominated contracts for
third party purchased product and most other major supply
agreements, including shipping contracts. However, the Company
is still exposed to those costs that are denominated in local
currencies. The most significant production currencies to which
the Company has exchange rate risk are the Colombian peso,
Chilean peso, Thai baht, Philippine peso and South African rand.
If U.S. dollar exchange rates versus these currencies
during 2005 had remained unchanged from 2004, the Company’s
operating income would have been higher by approximately
$12 million.
The Company also has euro, Swedish krona and Japanese yen
denominated intercompany notes. At December 31, 2005, the
euro, Swedish krona and Japanese yen denominated intercompany
notes, in entities whose functional currency is different than
the currency of the respective intercompany note, amounted to
$3.4 million, $3.8 million and $8.5 million,
respectively. In 2005, changes in the exchange rate between the
U.S. dollar and the euro, Swedish krona and Japanese yen
resulted in gains on these notes of $1.9 million.
In addition, the Company has British pound sterling denominated
capital lease obligations; it formerly had a Japanese yen
denominated term loan obligation. In April 2006, the Japanese
yen denominated term loan was repaid in connection with the
refinancing transaction. The British pound sterling denominated
capital lease of $78.6 million is owed and the Japanese
term loan of $306.1 million was owed by foreign
subsidiaries whose functional currency is the U.S. dollar.
Fluctuations in the British pound sterling and Japanese yen to
U.S. dollar exchange rate resulted in gains and losses that
are recognized through results of operations. In 2005, the
Company recognized $9.4 million and $27.1 million in
unrealized foreign currency exchange gains related to the
British pound sterling and Japanese yen obligations,
respectively. The Company currently estimates that the weakening
of the value of the U.S. dollar against the British pound
sterling by 10% as it relates to the capital lease obligation
would lower pretax income by approximately $8 million.
The ultimate impact of future changes to these and other foreign
currency exchange rates on 2006 revenues, operating income, net
income, equity and comprehensive income is not determinable at
this time.
Some of the Company’s divisions operate in functional
currencies other than the U.S. dollar. The net assets of
these divisions are exposed to foreign currency translation
gains and losses, which are included as a component of
accumulated other comprehensive loss in shareholders’
equity. Such translation resulted in unrealized losses of
$31.3 million in 2005. The Company has historically not
attempted to hedge this equity risk.
Financial Instruments: The Company’s financial
instruments are primarily comprised of short-term trade and
grower receivables, trade payables, notes receivable and long
and short-term notes payable, as well as long-term grower
receivables, term loans 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 are estimated based upon
discounted future cash flows at prevailing market interest
rates. Based on these assumptions, with the exception of the
Company’s fixed rate long-term debt discussed under
44
Interest Rate Risk above, management believes the fair market
values of the Company’s financial instruments are not
materially different from their recorded amounts as of
December 31, 2005 and January 1, 2005.
The Company is exposed to foreign currency exchange rate
fluctuations, bunker fuel price fluctuations and interest rate
changes in the normal course of its business. As part of its
risk management strategy, the Company uses derivative
instruments to hedge certain foreign currency, bunker fuel and
interest rate exposures. The Company’s objective is to
offset gains and losses resulting from these exposures with
losses and gains on the derivative contracts used to hedge them,
thereby reducing volatility of earnings.
The Company’s derivative instruments consist of Japanese
yen, Colombian peso and Thai baht denominated foreign currency
exchange forward contracts, Chilean peso foreign currency
exchange participating forward contracts, bunker fuel hedges and
an interest rate swap. The foreign currency exchange forward
contracts, bunker fuel hedges and interest rate swap have all
been designated as effective hedges of cash flows as defined by
Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging
Activities, as amended. The fair value of all instruments
designated as effective hedges of December 31, 2005 has
been included as a component of accumulated other comprehensive
loss in shareholders’ equity.
The outstanding notional amount of the Company’s Japanese
yen, Colombian peso and Thai baht foreign currency exchange
forwards and the Chilean peso participating forwards totaled
$3.3 million, $29.1 million, $52 million and
$8.8 million, respectively, at December 31, 2005. The
fair value of all foreign currency exchange forwards and
participating forwards at December 31, 2005 was
$0.5 million. Settlements of these contracts will occur
during 2006.
The Company enters into bunker fuel hedges to reduce its risk
related to price fluctuations on anticipated bunker fuel
purchases. At December 31, 2005, bunker fuel hedges had an
aggregate outstanding notional amount of $5 million. The
fair value of the bunker fuel hedges at December 31, 2005
was $0.5 million. Settlement of the bunker fuel contracts
occurred during the first quarter of 2006.
In May 2005, the Company entered into an interest rate swap
agreement in order to hedge future changes in interest rates.
This agreement effectively converted borrowings under Term
Loan A, which was variable-rate debt, to a fixed-rate basis
through the term of the loan. The interest rate swap fixed the
interest rate at 2.05% for Term Loan A. The paying and
receiving rates under the interest rate swap were 0.55% and
0.07% as of December 31, 2005, with an outstanding notional
amount of approximately 36 million Japanese yen. The
critical terms of the interest rate swap were substantially the
same as those of Term Loan A, including quarterly principal
and interest settlements, and an expiration date of March 2010.
The fair value of the swap at December 31, 2005 was
$1.9 million.
The counterparties to the foreign currency exchange forward
contracts consist of a number of major international financial
institutions. The Company has established counterparty
guidelines and regularly monitors its positions and the
financial strength of these institutions. While counterparties
to hedging contracts expose the Company to credit-related losses
in the event of a counterparty’s non-performance, the risk
would be limited to the unrealized gains on such affected
contracts. The Company does not anticipate any such losses. The
Company does not hold or issue derivative financial instruments
for trading or speculative purposes.
Refer to Note 15 of the Consolidated Financial Statements
for a summary of the Company’s derivative financial
instruments.
Commodity Risk: The Company uses a number of commodities
in its operations including tinplate in its canned products,
plastic resins in its fruit bowls, containerboard in its
packaging containers and bunker fuel for its vessels. The
Company is most exposed to market fluctuations in prices of
containerboard and fuel. The Company currently estimates that a
10% increase in the price of containerboard would lower
operating income by approximately $11 million and a 10%
increase in the price of bunker fuel would lower operating
income by approximately $7 million.
45
|
|
| Item 8. |
Financial Statements and Supplementary Data |
|
|
| I. |
Index to Consolidated Financial Statements of Dole Food
Company, Inc. |
| |
|
|
|
|
|
| |
|
Form 10-K | |
| |
|
Page | |
| |
|
| |
| |
Audited Financial Statements for the Three Years Ended
December 31, 2005:
|
|
|
|
|
| |
|
|
|
47 |
|
| |
|
|
|
48 |
|
| |
|
|
|
49 |
|
| |
|
|
|
50 |
|
| |
|
|
|
52 |
|
| |
|
|
|
53 |
|
| |
|
II. Supplementary Data
|
|
|
|
|
| |
| |
|
|
|
102 |
|
46
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholder of Dole Food Company,
Inc.:
We have audited the accompanying consolidated balance sheets of
Dole Food Company, Inc. and subsidiaries (the
“Company”) as of December 31, 2005 (Successor)
and January 1, 2005 (Successor), and the related
consolidated statements of income, shareholders’ equity,
and cash flows for the year ended December 31, 2005
(Successor), the year ended January 1, 2005 (Successor),
the three quarters ended January 3, 2004 (Successor) and
the quarter ended March 22, 2003 (Predecessor). Our audits
also included the financial statement schedule listed in the
Index at Item 15. These consolidated financial statements
and the financial statement schedule are the responsibility of
the Company’s management. Our responsibility is to express
an opinion on the consolidated financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal
control over financial reporting. An audit includes
consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, 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, such consolidated financial statements present
fairly, in all material respects, the financial position of the
Company as of December 31, 2005 (Successor) and
January 1, 2005 (Successor), and the results of its
operations and its cash flows for the year ended
December 31, 2005 (Successor), the year ended
January 1, 2005 (Successor), the three quarters ended
January 3, 2004 (Successor) and the quarter ended
March 22, 2003 (Predecessor), in conformity with accounting
principles generally accepted in the United States of America.
Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material
respects the information set forth therein.
Deloitte & Touche
LLP
Los Angeles, California
April 14, 2006
47
DOLE FOOD COMPANY, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 2005 (Successor) and
January 1, 2005 (Successor),
Three Quarters Ended January 3, 2004 (Successor) and
Quarter Ended March 22, 2003 (Predecessor)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Three Quarters | |
|
Quarter | |
| |
|
|
|
|
|
Ended | |
|
Ended | |
| |
|
|
|
|
|
January 3, | |
|
March 22, | |
| |
|
2005 | |
|
2004 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
|
Successor | |
|
Predecessor | |
| |
|
| |
|
| |
|
| |
|
| |
| |
|
(In thousands) | |
|
Revenues, net
|
|
$ |
5,870,611 |
|
|
$ |
5,316,202 |
|
|
$ |
3,699,971 |
|
|
$ |
1,073,170 |
|
|
Cost of products sold
|
|
|
5,182,266 |
|
|
|
4,574,242 |
|
|
|
3,212,944 |
|
|
|
895,039 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Gross margin
|
|
|
688,345 |
|
|
|
741,960 |
|
|
|
487,027 |
|
|
|
178,131 |
|
|
Selling, marketing and general and administrative expenses
|
|
|
463,135 |
|
|
|
424,948 |
|
|
|
321,598 |
|
|
|
89,341 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Operating income
|
|
|
225,210 |
|
|
|
317,012 |
|
|
|
165,429 |
|
|
|
88,790 |
|
|
Other income (expense), net
|
|
|
(5,353 |
) |
|
|
(8,737 |
) |
|
|
(18,541 |
) |
|
|
197 |
|
|
Interest income
|
|
|
6,049 |
|
|
|
4,207 |
|
|
|
4,376 |
|
|
|
2,700 |
|
|
Interest expense
|
|
|
142,716 |
|
|
|
152,704 |
|
|
|
124,491 |
|
|
|
19,647 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income tax expense,
minority interest expense and equity earnings
|
|
|
83,190 |
|
|
|
159,778 |
|
|
|
26,773 |
|
|
|
72,040 |
|
|
Income tax expense
|
|
|
44,520 |
|
|
|
25,491 |
|
|
|
6,512 |
|
|
|
13,100 |
|
|
Minority interest expense, net of income tax expense
|
|
|
3,244 |
|
|
|
10,200 |
|
|
|
2,857 |
|
|
|
1,072 |
|
|
Equity in earnings of unconsolidated subsidiaries, net of income
tax expense
|
|
|
(6,626 |
) |
|
|
(10,331 |
) |
|
|
(5,713 |
) |
|
|
(2,920 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of income tax expense
|
|
|
42,052 |
|
|
|
134,418 |
|
|
|
23,117 |
|
|
|
60,788 |
|
|
Income from discontinued operations, net of income tax expense
|
|
|
2,044 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net income
|
|
$ |
44,096 |
|
|
$ |
134,418 |
|
|
$ |
23,117 |
|
|
$ |
60,788 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements
48
DOLE FOOD COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31, 2005 (Successor) and January 1,
2005 (Successor)
| |
|
|
|
|
|
|
|
|
|
|
| |
|
2005 | |
|
2004 | |
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
| |
|
| |
|
| |
| |
|
(In thousands, | |
| |
|
except share data) | |
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
48,812 |
|
|
$ |
79,217 |
|
|
Receivables, net of allowances of $58,585 and $65,533,
respectively
|
|
|
637,636 |
|
|
|
617,952 |
|
|
Inventories
|
|
|
623,497 |
|
|
|
508,891 |
|
|
Prepaid expenses
|
|
|
58,864 |
|
|
|
63,742 |
|
|
Deferred income tax assets
|
|
|
34,756 |
|
|
|
33,564 |
|
| |
|
|
|
|
|
|
| |
|
Total current assets
|
|
|
1,403,565 |
|
|
|
1,303,366 |
|
|
Investments
|
|
|
76,753 |
|
|
|
94,481 |
|
|
Property, plant and equipment, net of accumulated depreciation
of $705,115 and $586,800, respectively
|
|
|
1,508,597 |
|
|
|
1,516,355 |
|
|
Goodwill
|
|
|
540,280 |
|
|
|
536,865 |
|
|
Intangible assets, net
|
|
|
726,700 |
|
|
|
738,491 |
|
|
Other assets, net
|
|
|
153,832 |
|
|
|
132,072 |
|
| |
|
|
|
|
|
|
| |
|
Total assets
|
|
$ |
4,409,727 |
|
|
$ |
4,321,630 |
|
| |
|
|
|
|
|
|
| |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$ |
411,451 |
|
|
$ |
400,112 |
|
|
Accrued liabilities
|
|
|
431,037 |
|
|
|
447,870 |
|
|
Current portion of long-term debt
|
|
|
25,020 |
|
|
|
31,278 |
|
|
Notes payable
|
|
|
1,394 |
|
|
|
624 |
|
| |
|
|
|
|
|
|
| |
|
Total current liabilities
|
|
|
868,902 |
|
|
|
879,884 |
|
|
Long-term debt
|
|
|
2,000,843 |
|
|
|
1,837,020 |
|
|
Deferred income tax liabilities
|
|
|
355,647 |
|
|
|
386,635 |
|
|
Other long-term liabilities
|
|
|
546,305 |
|
|
|
519,994 |
|
|
Minority interests
|
|
|
21,487 |
|
|
|
20,224 |
|
|
Commitments and contingencies (Notes 14 and 16)
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity
|
|
|
|
|
|
|
|
|
| |
Common stock — $0.001 par value;
1,000 shares authorized, issued and outstanding
|
|
|
— |
|
|
|
— |
|
|
Additional paid-in capital
|
|
|
440,032 |
|
|
|
440,032 |
|
|
Retained earnings
|
|
|
192,991 |
|
|
|
226,145 |
|
|
Accumulated other comprehensive income (loss)
|
|
|
(16,480 |
) |
|
|
11,696 |
|
| |
|
|
|
|
|
|
| |
|
Total shareholders’ equity
|
|
|
616,543 |
|
|
|
677,873 |
|
| |
|
|
|
|
|
|
| |
|
Total liabilities and shareholders’ equity
|
|
$ |
4,409,727 |
|
|
$ |
4,321,630 |
|
| |
|
|
|
|
|
|
See Notes to Consolidated Financial Statements
49
DOLE FOOD COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2005 (Successor) and
January 1, 2005 (Successor),
Three Quarters Ended January 3, 2004 (Successor) and
Quarter Ended March 22, 2003 (Predecessor)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Three Quarters | |
|
Quarter | |
| |
|
|
|
|
|
Ended | |
|
Ended | |
| |
|
|
|
|
|
January 3, | |
|
March 22, | |
| |
|
2005 | |
|
2004 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
|
Predecessor | |
|
Predecessor | |
| |
|
| |
|
| |
|
| |
|
| |
| |
|
(In thousands) | |
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
44,096 |
|
|
$ |
134,418 |
|
|
$ |
23,117 |
|
|
$ |
60,788 |
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Depreciation and amortization
|
|
|
149,809 |
|
|
|
144,993 |
|
|
|
106,766 |
|
|
|
25,051 |
|
| |
Purchase accounting step-up of inventory
|
|
|
— |
|
|
|
4,181 |
|
|
|
59,285 |
|
|
|
— |
|
| |
Unrealized foreign currency exchange (gain) loss
|
|
|
(41,503 |
) |
|
|
9,567 |
|
|
|
5,911 |
|
|
|
— |
|
| |
Asset write-offs and net (gain) loss on sale of assets
|
|
|
(8,214 |
) |
|
|
(6,065 |
) |
|
|
557 |
|
|
|
1,884 |
|
| |
Minority interest and equity earnings, net
|
|
|
(3,382 |
) |
|
|
(131 |
) |
|
|
(2,856 |
) |
|
|
(1,848 |
) |
| |
Write-off and amortization of debt issuance costs
|
|
|
16,641 |
|
|
|
11,527 |
|
|
|
19,473 |
|
|
|
244 |
|
| |
Provision for deferred income taxes
|
|
|
(31,918 |
) |
|
|
(1,599 |
) |
|
|
257 |
|
|
|
2,201 |
|
| |
Pension expense
|
|
|
19,760 |
|
|
|
21,323 |
|
|
|
5,943 |
|
|
|
3,191 |
|
| |
Loss on early retirement of debt
|
|
|
33,047 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
Other
|
|
|
3,799 |
|
|
|
2,789 |
|
|
|
5,389 |
|
|
|
1,542 |
|
|
Changes in operating assets and liabilities, net of effects from
acquisitions and dispositions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Receivables
|
|
|
(41,837 |
) |
|
|
(27,067 |
) |
|
|
69,640 |
|
|
|
(78,749 |
) |
| |
Inventories
|
|
|
(120,342 |
) |
|
|
(50,136 |
) |
|
|
29,274 |
|
|
|
(6,195 |
) |
| |
Prepaid expenses and other assets
|
|
|
(18,400 |
) |
|
|
(1,100 |
) |
|
|
(17,037 |
) |
|
|
(5,254 |
) |
| |
Accounts payable
|
|
|
76,218 |
|
|
|
26,770 |
|
|
|
171 |
|
|
|
29,049 |
|
| |
Accrued liabilities
|
|
|
(18,342 |
) |
|
|
(49,394 |
) |
|
|
44,774 |
|
|
|
(23,796 |
) |
| |
Other long-term liabilities
|
|
|
13,157 |
|
|
|
(2,684 |
) |
|
|
(13,553 |
) |
|
|
(6,295 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow provided by operating activities
|
|
|
72,589 |
|
|
|
217,392 |
|
|
|
337,111 |
|
|
|
1,813 |
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of assets
|
|
|
11,729 |
|
|
|
11,435 |
|
|
|
51,387 |
|
|
|
1,743 |
|
|
Proceeds from sales of investments and businesses, net of cash
disposed
|
|
|
7,402 |
|
|
|
— |
|
|
|
7,837 |
|
|
|
— |
|
|
Investments and acquisitions
|
|
|
(51,460 |
) |
|
|
(189,691 |
) |
|
|
(12,507 |
) |
|
|
— |
|
|
Capital additions
|
|
|
(131,495 |
) |
|
|
(101,667 |
) |
|
|
(101,971 |
) |
|
|
(4,235 |
) |
|
Repurchase of common stock and settlement of stock options in
going-private merger transaction
|
|
|
(499 |
) |
|
|
(1,300 |
) |
|
|
(1,468,070 |
) |
|
|
— |
|
|
Transaction costs paid in going-private merger transaction
|
|
|
— |
|
|
|
(361 |
) |
|
|
(69,597 |
) |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow used in investing activities
|
|
|
(164,323 |
) |
|
|
(281,584 |
) |
|
|
(1,592,921 |
) |
|
|
(2,492 |
) |
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt borrowings
|
|
|
18,183 |
|
|
|
57,201 |
|
|
|
1,028 |
|
|
|
7,936 |
|
|
Short-term debt repayments
|
|
|
(26,616 |
) |
|
|
(35,261 |
) |
|
|
(12,211 |
) |
|
|
(6,834 |
) |
|
Long-term debt borrowings, net of debt issuance costs
|
|
|
1,575,869 |
|
|
|
606,070 |
|
|
|
2,130,288 |
|
|
|
5,034 |
|
|
Long-term debt repayments
|
|
|
(1,417,413 |
) |
|
|
(594,838 |
) |
|
|
(1,595,418 |
) |
|
|
(6,777 |
) |
|
Capital contributions
|
|
|
— |
|
|
|
100,000 |
|
|
|
125,000 |
|
|
|
— |
|
|
Dividends paid to minority shareholders
|
|
|
(2,836 |
) |
|
|
(5,601 |
) |
|
|
(5,551 |
) |
|
|
— |
|
|
Dividends paid
|
|
|
(77,250 |
) |
|
|
(20,000 |
) |
|
|
— |
|
|
|
(8,440 |
) |
|
Proceeds from issuance of common stock (Predecessor)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,768 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow provided by (used in) financing activities
|
|
|
69,937 |
|
|
|
107,571 |
|
|
|
643,136 |
|
|
|
(6,313 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency exchange rate changes on cash
|
|
|
(8,608 |
) |
|
|
2,356 |
|
|
|
5,156 |
|
|
|
1,025 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
(30,405 |
) |
|
|
45,735 |
|
|
|
(607,518 |
) |
|
|
(5,967 |
) |
|
Cash and cash equivalents at beginning of period
|
|
|
79,217 |
|
|
|
33,482 |
|
|
|
641,000 |
|
|
|
646,967 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$ |
48,812 |
|
|
$ |
79,217 |
|
|
$ |
33,482 |
|
|
$ |
641,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
50
DOLE FOOD COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS —
Continued
For the Years Ended December 31, 2005 (Successor) and
January 1, 2005 (Successor),
Three Quarters Ended January 3, 2004 (Successor) and
Quarter Ended March 22, 2003 (Predecessor)
Supplemental cash flow information
At December 31, 2005, accounts payable included
approximately $14.8 million of capital expenditures.
The consolidated statement of cash flows for the year ended
January 1, 2005 excludes a $6.3 million non-cash
dividend of land to Dole Holding Company, LLC. Refer to
Note 12 for additional details.
The consolidated statement of cash flows for the three quarters
ended January 3, 2004 excludes non-cash increases to
property, plant, and equipment, deferred tax assets and
long-term debt of approximately $128.5 million,
$4.7 million and $139.8 million, respectively,
recorded in connection with the Company’s adoption of
Financial Accounting Standards Board Interpretation No. 46,
Consolidation of Variable Interest Entities, effective
March 23, 2003. During the three quarters ended
January 3, 2004, the Company purchased containers that were
previously held under capital lease for $45.5 million.
Income tax payments, net of refunds, for the years ended
December 31, 2005 and January 1, 2005, three quarters
ended January 3, 2004 and quarter ended March 22, 2003
were $42.2 million, $(0.3) million,
$(6.2) million, $(12.2) million, respectively.
Interest payments on borrowings totaled $142.8 million,
$141.2 million, $117.7 million and $8.2 million
during the years ended December 31, 2005 and
January 1, 2005, three quarters ended January 3, 2004
and quarter ended March 22, 2003, respectively.
See Notes to Consolidated Financial Statements
51
DOLE FOOD COMPANY, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
For the Years Ended December 31, 2005 (Successor) and
January 1, 2005 (Successor),
Three Quarters Ended January 3, 2004 (Successor) and
Quarter Ended March 22, 2003 (Predecessor)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Accumulated Other | |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Comprehensive Income (Loss) | |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
| |
|
Common | |
|
|
|
Additional | |
|
|
|
Minimum | |
|
Cumulative | |
|
Unrealized | |
|
Total | |
|
|
| |
|
Shares | |
|
Common | |
|
Paid-In | |
|
Retained | |
|
Pension | |
|
Translation | |
|
Gains (Losses) | |
|
Shareholders’ | |
|
Comprehensive | |
| |
|
Outstanding | |
|
Stock | |
|
Capital | |
|
Earnings | |
|
Liability | |
|
Adjustment | |
|
on Hedges | |
|
Equity | |
|
Income | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
|
(In thousands, except per share data) | |
|
Balance December 28, 2002 (Predecessor)
|
|
|
56,210 |
|
|
$ |
316,853 |
|
|
$ |
66,319 |
|
|
$ |
449,334 |
|
|
$ |
(38,134 |
) |
|
$ |
(48,391 |
) |
|
$ |
(870 |
) |
|
$ |
745,111 |
|
|
$ |
33,277 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net income (December 29, 2002 to March 22, 2003)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
60,788 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
60,788 |
|
|
$ |
60,788 |
|
| |
Cash dividends ($0.15 per share)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8,440 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8,440 |
) |
|
|
— |
|
| |
Unrealized foreign currency translation and hedging gains
(losses)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(195 |
) |
|
|
3,606 |
|
|
|
3,411 |
|
|
|
3,411 |
|
| |
Reclassification of realized losses to net income
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
586 |
|
|
|
586 |
|
|
|
586 |
|
| |
Income tax benefit on the exercise of certain stock options
|
|
|
— |
|
|
|
— |
|
|
|
458 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
458 |
|
|
|
— |
|
| |
Stock options exercised
|
|
|
119 |
|
|
|
119 |
|
|
|
2,667 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,786 |
|
|
|
— |
|
| |
Issuance of common stock
|
|
|
1 |
|
|
|
1 |
|
|
|
30 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
31 |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 22, 2003 (Predecessor)
|
|
|
56,330 |
|
|
$ |
316,973 |
|
|
$ |
69,474 |
|
|
$ |
501,682 |
|
|
$ |
(38,134 |
) |
|
$ |
(48,586 |
) |
|
$ |
3,322 |
|
|
$ |
804,731 |
|
|
$ |
64,785 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Purchase accounting adjustments
|
|
|
(56,329 |
) |
|
|
(316,973 |
) |
|
|
145,558 |
|
|
|
(406,766 |
) |
|
|
25,659 |
|
|
|
37,229 |
|
|
|
(2,546 |
) |
|
|
(517,839 |
) |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 23, 2003 (Successor)
|
|
|
1 |
|
|
$ |
— |
|
|
$ |
215,032 |
|
|
$ |
94,916 |
|
|
$ |
(12,475 |
) |
|
$ |
(11,357 |
) |
|
$ |
776 |
|
|
$ |
286,892 |
|
|
|
|
|
| |
Capital contribution by DHM Holding Company, Inc.
|
|
|
— |
|
|
|
— |
|
|
|
125,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
125,000 |
|
|
|
|
|
| |
Net income (March 23, 2003 to January 3, 2004)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
23,117 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
23,117 |
|
|
$ |
23,117 |
|
| |
Unrealized foreign currency translation and hedging gains
(losses)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
27,553 |
|
|
|
(27,293 |
) |
|
|
260 |
|
|
|
260 |
|
| |
Reclassification of realized losses to net income
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,413 |
|
|
|
10,116 |
|
|
|
12,529 |
|
|
|
12,529 |
|
| |
Additional minimum pension liability
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
8,630 |
|
|
|
— |
|
|
|
— |
|
|
|
8,630 |
|
|
|
8,630 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 3, 2004 (Successor)
|
|
|
1 |
|
|
$ |
— |
|
|
$ |
340,032 |
|
|
$ |
118,033 |
|
|
$ |
(3,845 |
) |
|
$ |
18,609 |
|
|
$ |
(16,401 |
) |
|
$ |
456,428 |
|
|
$ |
44,536 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Capital contribution by Dole Holding Company, LLC
|
|
|
— |
|
|
|
— |
|
|
|
100,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
100,000 |
|
|
|
|
|
| |
Net income
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
134,418 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
134,418 |
|
|
$ |
134,418 |
|
| |
Cash dividends
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(20,000 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(20,000 |
) |
|
|
— |
|
| |
Non-cash dividends
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(6,306 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(6,306 |
) |
|
|
— |
|
| |
Unrealized foreign currency translation and hedging gains
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
16,354 |
|
|
|
5,018 |
|
|
|
21,372 |
|
|
|
21,372 |
|
| |
Reclassification of realized losses to net income
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
11,582 |
|
|
|
11,582 |
|
|
|
11,582 |
|
| |
Additional minimum pension liability
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(19,621 |
) |
|
|
— |
|
|
|
— |
|
|
|
(19,621 |
) |
|
|
(19,621 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2005 (Successor)
|
|
|
1 |
|
|
$ |
— |
|
|
$ |
440,032 |
|
|
$ |
226,145 |
|
|
$ |
(23,466 |
) |
|
$ |
34,963 |
|
|
$ |
199 |
|
|
$ |
677,873 |
|
|
$ |
147,751 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net income
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
44,096 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
44,096 |
|
|
$ |
44,096 |
|
| |
Cash dividends
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(77,250 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(77,250 |
) |
|
|
— |
|
|
Unrealized foreign currency translation and hedging gains
(losses)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(31,530 |
) |
|
|
5,465 |
|
|
|
(26,065 |
) |
|
|
(26,065 |
) |
|
Reclassification of realized gains to net income
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,842 |
) |
|
|
(2,842 |
) |
|
|
(2,842 |
) |
|
Additional minimum pension liability
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
731 |
|
|
|
— |
|
|
|
— |
|
|
|
731 |
|
|
|
731 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2005 (Successor)
|
|
|
1 |
|
|
$ |
— |
|
|
$ |
440,032 |
|
|
$ |
192,991 |
|
|
$ |
(22,735 |
) |
|
$ |
3,433 |
|
|
$ |
2,822 |
|
|
$ |
616,543 |
|
|
$ |
15,920 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements
52
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED STATEMENTS
Note 1 — Nature of Operations
Dole Food Company, Inc. was incorporated under the laws of
Hawaii in 1894 and was reincorporated under the laws of Delaware
in July 2001.
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 fruit and vegetables, as well as
packaged foods. Additionally, the Company markets a full-line of
premium fresh-cut flowers.
Operations are conducted throughout North America, Latin
America, Europe (including eastern European countries), Asia
(primarily in Japan, Korea, the Philippines and Thailand), the
Middle East and Africa (primarily in South Africa). As a result
of its global operating and financing activities, the Company is
exposed to certain risks including changes in commodity pricing,
fluctuations in interest rates, fluctuations in foreign currency
exchange rates, as well as other environmental and business
risks in both sourcing and selling locations.
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 wholesale, retail and institutional
customers and other food product companies.
Note 2 — Basis of Presentation and Summary of
Significant Accounting Policies
Going-Private Merger Transaction: On March 28, 2003,
the Company completed the going-private merger transaction with
DHM Holding Company, Inc. (“HoldCo”) described in
Note 3. As a result of this transaction, the Company’s
results of operations, financial position and cash flows prior
to the date of the going-private merger transaction are
presented as the “predecessor.” The going-private
merger transaction and the Company’s results of operations,
financial position and cash flows thereafter are presented as
the “successor.” The going-private merger transaction
was accounted for as a purchase at the HoldCo level with the
related purchase accounting pushed-down to the Company.
Basis of Consolidation: The Company’s consolidated
financial statements include the accounts of Dole Food Company,
Inc. and its controlled subsidiaries. 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. The
successor’s fiscal years 2005, 2004 and 2003 ended on
December 31, 2005, January 1, 2005 and January 3,
2004, respectively. Fiscal year 2003, which includes the
predecessor’s quarter ended March 22, 2003 and the
successor’s three-quarter period ended January 3,
2004, consisted of 53 weeks. The impact of the additional
week in fiscal year 2003 was not material to the Company’s
consolidated financial condition or results of operations.
Revenue Recognition: Revenue is recognized at the point
title and risk of loss is transferred to the customer,
collection is reasonably assured, persuasive evidence of an
arrangement exists and the price is fixed or determinable.
Revenue is recorded net of expected returns, sales discounts and
volume rebates. Estimated sales discounts and expected returns
are recorded in the period in which the related sale is
recognized. Volume rebates are recognized as earned by the
customer, based upon the contractual terms of the arrangement
with the customer and, where applicable, the Company’s
estimate of sales volume over the term of the arrangement.
Adjustments to estimates are made periodically as new
information becomes available and actual sales volumes become
known. Adjustments to these estimates have historically not been
significant to the Company.
53
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
Agricultural Costs: Recurring agricultural costs include
costs relating to irrigation, fertilizing, disease and insect
control and other ongoing crop and land maintenance activities.
Recurring agricultural costs are charged to operations as
incurred or are recognized when the crops are harvested and
sold, depending on the product. Non-recurring agricultural
costs, primarily comprising of soil and farm improvements and
other long-term crop growing costs that benefit multiple
harvests, are deferred and amortized over the estimated
production period, currently from two to seven years.
Shipping and Handling Costs: Amounts billed to third
party customers for shipping and handling are included as a
component of revenue. Shipping and handling costs incurred are
included as a component of cost of products sold and represent
costs incurred by the Company to ship product from the sourcing
locations to the end consumer markets.
Marketing and Advertising Costs: Marketing and
advertising costs, which include media, production and other
promotional costs, are generally expensed in the period in which
the marketing or advertising first takes place. In limited
circumstances, the Company capitalizes payments related to the
right to stock products in customer outlets or to provide
funding for various merchandising programs over a specified
contractual period. In such cases, the Company amortizes the
costs over the life of the underlying contract. The amortization
of these costs, as well as the cost of other marketing and
advertising arrangements with customers, are classified as a
reduction in revenue. Advertising and marketing costs, included
in selling, marketing and general and administrative expenses,
amounted to $71.3 million, $62.1 million,
$48.2 million and $16.0 million during the years ended
December 31, 2005 and January 1, 2005, three quarters
ended January 3, 2004 and quarter ended March 22, 2003.
Research and Development Costs: Research and development
costs are expensed as incurred. Research and development costs
were not material for the years ended December 31, 2005 and
January 1, 2005, three quarters ended January 3, 2004
and quarter ended March 22, 2003.
Income Taxes: Deferred income taxes are recognized for
the income tax effect of temporary differences between financial
statement carrying amounts and the income tax bases of assets
and liabilities. Income taxes, which would be due upon the
repatriation of foreign subsidiary earnings, have not been
provided where the undistributed earnings are considered
indefinitely invested. A valuation allowance is provided for
deferred income tax assets for which it is deemed more likely
than not that future taxable income will not be sufficient to
realize the related income tax benefits from these assets.
Cash and Cash Equivalents: Cash and cash equivalents
consist of cash on hand and highly liquid investments, primarily
money market funds and time deposits, with original maturities
of three months or less.
Grower Advances: The Company makes advances to third
party growers primarily in Latin America and Asia for various
farming needs. Some of these advances are secured with property
or other collateral owned by the growers. The Company monitors
these receivables on a regular basis and records an allowance
for these grower receivables based on estimates of the
growers’ ability to repay advances and the fair value of
the collateral. Grower advances are stated at the gross advance
amount less allowances for potentially uncollectible balances.
Inventories: Inventories are valued at the lower of cost
or market. Cost is determined principally on a
first-in, first-out
basis and includes materials, labor and overhead. Specific
identification and average cost methods are also used primarily
for certain packing materials and operating supplies.
Investments: Investments in affiliates and joint ventures
with ownership of 20% to 50% are recorded on the equity method,
provided the Company has the ability to exercise significant
influence. All other non-consolidated investments are accounted
for using the cost method. At December 31, 2005 and
January 1, 2005, substantially all of the Company’s
investments have been accounted for under the equity method.
54
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
Property, Plant and Equipment: Property, plant and
equipment is stated at cost plus the fair value of asset
retirement obligations, if any, less accumulated depreciation.
Depreciation is computed principally by the straight-line method
over the estimated useful lives of these assets. The Company
reviews long-lived assets to be held and used for impairment
whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. If an evaluation of
recoverability is required, the estimated undiscounted future
cash flows directly associated with the asset are compared to
the asset’s carrying amount. If this comparison indicates
that there is an impairment, the amount of the impairment is
calculated by comparing the carrying value to discounted
expected future cash flows or comparable market values,
depending on the nature of the asset. All long-lived assets, for
which management has committed itself to a plan of disposal by
sale, are reported at the lower of carrying amount or fair value
less cost to sell. Long-lived assets to be disposed of other
than by sale are classified as held and used until the date of
disposal.
Goodwill and Intangibles: Goodwill represents the excess
cost of a business acquisition over the fair value of the net
identifiable assets acquired. Goodwill and unamortized
intangible assets are reviewed for impairment annually, or more
frequently if certain impairment indicators arise. Goodwill is
allocated to various reporting units, which are either the
operating segment or one reporting level below the operating
segment. Fair values for goodwill and unamortized intangible
assets are determined based on discounted cash flows, market
multiples or appraised values, as appropriate.
The Company’s unamortized intangible assets, consisting
primarily of the DOLE brand, are considered to have indefinite
lives because they are expected to generate cash flows
indefinitely and as such are not amortized. Amortizable
intangible assets are amortized on a straight-line basis over
the weighted-average estimated useful lives of the underlying
assets as follows:
| |
|
|
|
Customer relationships
|
|
11 years |
|
Other
|
|
3 years |
|
Total weighted-average amortization period
|
|
7 years |
Financial Instruments/Concentration of Credit Risk:
Financial instruments that potentially subject the Company to a
concentration of credit risk principally consist of cash
equivalents, foreign currency exchange contracts, grower
advances and trade receivables. The Company maintains its
temporary cash investments with high quality financial
institutions, which are invested primarily in short-term
U.S. government instruments and certificates of deposit.
The counter parties to the Company’s foreign currency
exchange contracts are major financial institutions. Grower
advances are principally with farming enterprises located
throughout Latin America and Asia and are secured by the
underlying crop harvests. Credit risk related to trade
receivables is mitigated due to the large number of customers
dispersed worldwide. To reduce credit risk, the Company performs
periodic credit evaluations of its customers but does not
generally require advance payments or collateral. Additionally,
the Company maintains allowances for credit losses. No
individual customer accounted for greater than 10% of the
Company’s revenues during the years ended December 31,
2005 and January 1, 2005, three quarters ended
January 3, 2004 and quarter ended March 22, 2003. No
individual customer accounted for greater than 10% of accounts
receivable as of December 31, 2005 or January 1, 2005.
The Company’s financial instruments are primarily composed
of short-term trade and grower receivables, trade payables,
notes receivable and long and short-term notes payable, as well
as long-term grower receivables, term loans, revolving credit
facilities, notes, debentures and derivatives. For short-term
instruments, the carrying amount is a reasonable estimate of
fair value. Fair values for long-term financial instruments not
readily marketable are estimated based upon discounted future
cash flows at prevailing market interest rates. Based on these
assumptions, with the exception of the Company’s fixed rate
long-term debt, management believes the fair market values of
the Company’s financial instruments are not materially
55
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
different from their recorded amounts as of December 31,
2005 and January 1, 2005. The Company’s derivative
financial instruments are recorded at fair value (Refer to
Note 15 for additional information).
The Company estimates the fair value of its fixed-interest-rate
long-term unsecured debt based on current quoted market prices.
The estimated fair value of unsecured notes (face value of
$1,105 million in 2005 and $1,430 million in 2004) was
approximately $1,111 million and $1,531 million as of
December 31, 2005 and January 1, 2005, respectively.
Based upon borrowing rates currently available to the Company
and market quotes, the fair value of the Company’s
long-term secured debt approximates the carrying value.
Foreign Currency Exchange: For subsidiaries with
transactions that are denominated in a currency other than the
functional currency, the net foreign currency exchange
transaction gains or losses resulting from the translation of
monetary assets and liabilities to the functional currency are
included in determining net income. Net foreign currency
exchange gains or losses resulting from the translation of
assets and liabilities of foreign subsidiaries whose functional
currency is not the U.S. dollar are recorded as a part of
cumulative translation adjustment in shareholders’ equity.
Unrealized currency gains and losses on certain intercompany
transactions that are of a long-term-investment nature (i.e.,
settlement is not planned or anticipated in the foreseeable
future) are also recorded in cumulative translation adjustment
in shareholders’ equity.
Stock-Based Compensation: Effective as of the beginning
of the 2003 fiscal year, the Company adopted the fair value
recognition provisions of Statement of Financial Accounting
Standards No. 123 (“FAS 123”), Accounting
for Stock-Based Compensation, as amended by Statement of
Financial Accounting Standards No. 148, Accounting for
Stock-Based Compensation — Transition and
Disclosure, for stock-based employee compensation. Under the
prospective method of adoption selected by the Company, the fair
value recognition provisions of FAS 123 apply to all new
employee awards granted after December 28, 2002. In
connection with the going-private merger transaction, all
outstanding stock options were settled or cancelled. No new
stock options have been issued subsequent to the going-private
merger transaction.
Leases: The Company leases fixed assets for use in
operations where leasing offers advantages of operating
flexibility and is less expensive than alternative types of
funding. The Company also leases land in countries where land
ownership by foreign entities is restricted. The Company’s
leases are evaluated at inception or at any subsequent
modification and, depending on the lease terms, are classified
as either capital leases or operating leases, as appropriate
under Statement of Financial Accounting Standards No. 13,
Accounting for Leases. The majority of the Company’s
leases are classified as operating leases. The Company’s
principal operating leases are for land and machinery and
equipment. The Company’s capitalized leases primarily
consist of two vessel leases. The Company’s decision to
exercise renewal options is primarily dependent on the level of
business conducted at the location and the profitability
thereof. The Company’s leasehold improvements were not
significant at December 31, 2005 and January 1, 2005.
Guarantees: The Company makes guarantees as part of its
normal business activities. These guarantees include guarantees
of the indebtedness of some of its key fruit suppliers and other
entities integral to the Company’s operations, as well as
minimum price guarantees and guarantees of minimum volume
purchases.
The Company adopted FASB Interpretation No. 45
(“FIN 45”), Guarantor’s Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, on a prospective basis
for all guarantees issued or modified after December 31,
2002. Following the adoption of FIN 45, at the inception of
any new guarantee, the Company recognizes a liability equal to
the fair value of the guarantee. The fair value of the guarantee
is generally determined by calculating a probability-weighted
present value of expected cash flows. The liability is generally
reduced ratably over the term of the guarantee. Depending on the
nature of the underlying arrangement the offsetting entry is
either expensed or deferred and amortized. The Company has not
historically experienced any significant losses associated with
these guarantees. Liabilities relating to guarantees were not
material at December 31, 2005 and January 1, 2005.
56
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
Use of Estimates: The preparation of financial statements
in conformity with accounting principles generally accepted in
the United States of America requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities as well as the disclosures of contingent
assets and liabilities as of the date of these financial
statements. Management’s use of estimates also affects 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 with the 2005 presentation. These
reclassifications had no impact on previously reported net
income or shareholders’ equity.
Note 3 — Going-Private Merger and Refinancing
Transactions
In March 2003 the Company completed a going-private merger
transaction. The privatization resulted from the acquisition by
David H. Murdock, the Company’s Chairman and Chief
Executive Officer, of the approximately 76% of the Company that
he and his affiliates did not already own for $33.50 per
share in cash. As a result of the transaction, the Company
became wholly owned by Mr. Murdock through HoldCo.
The purchase price of all of the outstanding common stock of the
Company not already owned by Mr. Murdock, plus transaction
costs, was approximately $1.55 billion. The funds necessary
to purchase these shares of the Company consisted of a
$125 million capital contribution by HoldCo, funds borrowed
under $1.125 billion of new senior secured credit
facilities (consisting of $825 million of term loan
facilities and $300 million of revolving credit facilities)
and the issuance of $475 million principal amount of
8.875% Senior Notes due 2011. The going-private merger
transaction was accounted for as a purchase at the HoldCo level
with the related purchase accounting pushed down to the Company
as of the date of the transaction.
The following unaudited pro forma financial information was
prepared as if the going-private merger transaction, which was
effective as of March 23, 2003, had occurred at the
beginning of the period presented (in thousands):
| |
|
|
|
|
| |
|
Year Ended | |
| |
|
January 3, | |
| |
|
2004 | |
| |
|
| |
|
Revenues, net
|
|
$ |
4,773,141 |
|
|
Income from continuing operations
|
|
$ |
65,132 |
|
These unaudited pro forma results have been prepared for
comparative purposes only and primarily include adjustments for
depreciation and amortization arising from the
step-up of assets in
the merger transaction, interest expense on debt issued in
connection with the merger transaction and related income tax
adjustments. These adjustments were tax effected using the
Company’s effective tax rate for the year ended
January 3, 2004. Included in net income for the year ended
January 3, 2004 is approximately $10.6 million of
pretax expense related to the write-off of debt issuance costs
due to the early repayment of debt in the refinancing
transaction as well as $6.9 million of pretax expense
related to a litigation settlement.
The pro forma information is not necessarily indicative of the
results that would have occurred had the going-private merger
and refinancing transactions occurred at the beginning of the
periods presented.
Note 4 — Business Dispositions
During the third quarter ended October 4, 2003, the Company
sold its 81% interest in Fabrica, a Honduran palm oil business
for $7.6 million and recorded a loss of $2.4 million.
The loss was included in selling, marketing and general and
administrative expenses in the Consolidated Statement of Income.
The financial results of Fabrica have been included in the
packaged foods reporting segment through the effective date of
disposal. Revenues related to Fabrica for the three quarters
ended January 3, 2004 and quarter ended
57
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
March 22, 2003 were $11.9 million and
$5.7 million, respectively. Operating income related to
Fabrica for the three quarters ended January 3, 2004 and
quarter ended March 22, 2003 was approximately
$0.8 million and $0.5 million, respectively. During
the fourth quarter of 2005, the Company resolved a contingency
related to the sale of Fabrica and, as a result, the Company
recorded income of $2 million. This amount is included in
selling, marketing and general and administrative expenses in
the Consolidated Statement of Income and is included in the
packaged foods reporting segment.
On November 28, 2001, the Company disposed of its 97%
interest in the capital stock of Cervecería Hondureña,
S.A. (“CHSA”), a Honduran corporation principally
engaged in the beverage business in Honduras. The Company
received $561 million as consideration for the disposition,
comprising $537 million in cash and $24 million of
intercompany forgiveness between CHSA and a subsidiary of the
Company. The Company realized a gain of approximately
$168.6 million on the disposal, net of income taxes of
$128 million. During the fourth quarter of 2005, the
Company resolved a contingency related to the sale of CHSA and,
as a result, realized income of $2 million, net of income
taxes of $1.4 million. The income has been recorded as
income from discontinued operations in the Company’s
Consolidated Statement of Income. In addition, the Company
recorded $4.8 million in income from continuing operations
related to the collection of a fully reserved receivable balance
and interest income.
Note 5 — Business Acquisitions
In June 2004, the Company acquired all of the outstanding
capital stock of Wood Holdings, Inc. (renamed Dole Packaged
Frozen Foods, Inc.), a privately held frozen fruit producer and
manufacturer. The acquisition of Dole Packaged Frozen Foods,
Inc. allows the Company to expand its packaged foods product
line and extends the Dole brand into the frozen fruit section of
the produce industry. The total purchase price, including
transaction expenses, was $174.3 million in cash. The
acquisition resulted in goodwill of $47.8 million, which
has been included in the Company’s packaged foods segment
and is fully deductible for tax purposes over a
15-year period.
Expected synergies of the combined operations and the ability to
leverage the DOLE brand in the frozen fruit business were the
primary factors that contributed to a purchase price that
resulted in the recognition of goodwill. The results of
operations for Dole Packaged Frozen Foods, Inc. have been
included in the Company’s consolidated results of
operations from June 8, 2004, the effective date of
acquisition.
The following table represents the final values attributed to
the assets acquired and liabilities assumed as of the date of
the acquisition (in thousands):
| |
|
|
|
|
|
Current assets
|
|
$ |
61,125 |
|
|
Property, plant and equipment
|
|
|
76,384 |
|
|
Intangible assets
|
|
|
10,150 |
|
|
Goodwill
|
|
|
47,834 |
|
|
Other assets
|
|
|
105 |
|
| |
|
|
|
|
Total assets acquired
|
|
|
195,598 |
|
|
Current liabilities
|
|
|
21,239 |
|
|
Other long-term liabilities
|
|
|
87 |
|
| |
|
|
|
|
Total liabilities assumed
|
|
|
21,326 |
|
| |
|
|
|
|
Net assets acquired
|
|
$ |
174,272 |
|
| |
|
|
|
58
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
The $10.1 million allocated to intangible assets is a
valuation of customer relationships with finite lives. These
customer relationships will be amortized over approximately
12 years.
In October 2004, the Company acquired Coastal Berry Company, LLC
and two affiliated companies (renamed Dole Berry Company, LLC)
for $7 million in cash. In connection with the acquisition,
the Company also repaid approximately $10 million of Dole
Berry Company’s debt and capital lease obligations. This
acquisition resulted in approximately $8.5 million of
goodwill, which has been included in the Company’s fresh
vegetables segment and is fully deductible for tax purposes over
a 15-year period. Dole
Berry Company is a leading California producer of fresh berries
(including strawberries, raspberries and blackberries).
On December 30, 2004, the Company acquired the remaining
40% of Saba Trading AB (“Saba”), for
$47.1 million, which was paid in cash during the first
fiscal quarter of 2005. The Company acquired its 60% majority
ownership in Saba in 1998. The acquisition of Saba’s
remaining shares resulted in the allocation of
$33.5 million to goodwill, which has been included in the
Company’s fresh fruit segment. Saba is the leading importer
and distributor of fruit, vegetables and flowers in Scandinavia.
Pro forma financial information for the above acquisitions is
not presented, as it is not material.
Note 6 — Income Taxes
Income tax expense (benefit) was as follows (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Three | |
|
|
| |
|
|
|
|
|
Quarters | |
|
Quarter | |
| |
|
|
|
|
|
Ended | |
|
Ended | |
| |
|
|
|
|
|
January 3, | |
|
March 22, | |
| |
|
2005 | |
|
2004 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
|
Successor | |
|
Predecessor | |
| |
|
| |
|
| |
|
| |
|
| |
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Federal, state and local
|
|
$ |
52,020 |
|
|
$ |
13,373 |
|
|
$ |
(8,890 |
) |
|
$ |
7,484 |
|
| |
Foreign
|
|
|
25,838 |
|
|
|
13,717 |
|
|
|
15,145 |
|
|
|
3,415 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
77,858 |
|
|
|
27,090 |
|
|
|
6,255 |
|
|
|
10,899 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Federal, state and local
|
|
|
(17,342 |
) |
|
|
(948 |
) |
|
|
3,982 |
|
|
|
2,467 |
|
| |
Foreign
|
|
|
(15,996 |
) |
|
|
(651 |
) |
|
|
(3,725 |
) |
|
|
(266 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
(33,338 |
) |
|
|
(1,599 |
) |
|
|
257 |
|
|
|
2,201 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
44,520 |
|
|
$ |
25,491 |
|
|
$ |
6,512 |
|
|
$ |
13,100 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
As a result of the consummation of the going-private merger
transaction described in Note 3, income tax expense for the
quarter ended March 22, 2003 was based on earnings for the
period from December 29, 2002 through March 22, 2003,
to reflect the final separate financial reporting period for the
Company in its predecessor form. After the consummation of the
going-private transaction, income taxes are attributable to the
new successor company.
Pretax earnings attributable to foreign operations were
$199.2 million, $203.1 million, $89.2 million and
$61.4 million for the years ended December 31, 2005
and January 1, 2005, three quarters ended January 3,
2004 and quarter ended March 22, 2003, respectively.
Undistributed earnings of foreign subsidiaries, which
59
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
are intended to be indefinitely invested, aggregated
$1.5 billion at December 31, 2005. Other than the
repatriation discussed below, it is currently not practicable to
estimate the tax liability that might be payable if these
foreign earnings were repatriated.
During October 2004, The American Jobs Creation Act of 2004 was
signed into law, adding Section 965 to the Internal Revenue
Code. Section 965 provides a special one-time deduction of
85% of certain foreign earnings that are repatriated under a
domestic reinvestment plan, as defined therein. The effective
federal tax rate on any qualified repatriated foreign earnings
under Section 965 equals 5.25%. Taxpayers could elect to
apply this provision to a qualified earnings repatriation made
during calendar year 2005.
During the second quarter of 2005, the Company repatriated
$570 million of earnings from its foreign subsidiaries, of
which approximately $489 million qualifies for the 85%
dividends received deduction under Section 965. A tax
provision of approximately $37.8 million for the
repatriation of certain foreign earnings has been recorded as
income tax expense for year ended December 31, 2005.
Excluding the $37.8 million impact of the repatriation,
income tax expense for the year ended December 31, 2005 was
$6.7 million, which reflects the Company’s effective
income tax rate of 8.1% for the 2005 fiscal year.
The Company’s reported income tax expense on continuing
operations differed from the expense calculated using the
U.S. federal statutory tax rate for the following reasons
(in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Three | |
|
|
| |
|
|
|
Year | |
|
Quarters | |
|
Quarter | |
| |
|
Year Ended | |
|
Ended | |
|
Ended | |
|
Ended | |
| |
|
December 31, | |
|
January 1, | |
|
January 3, | |
|
March 22, | |
| |
|
2005 | |
|
2005 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
|
Successor | |
|
Predecessor | |
| |
|
| |
|
| |
|
| |
|
| |
| |
|
(In thousands) | |
|
Expense computed at U.S. federal statutory income tax rate
of 35%
|
|
$ |
29,117 |
|
|
$ |
55,922 |
|
|
$ |
9,371 |
|
|
$ |
25,214 |
|
|
Repatriation of certain foreign earnings
|
|
|
37,772 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Foreign income taxed at different rates
|
|
|
(39,766 |
) |
|
|
(38,289 |
) |
|
|
(1,342 |
) |
|
|
(9,876 |
) |
|
State and local income tax, net of federal income tax expense
(benefit)
|
|
|
(2,007 |
) |
|
|
951 |
|
|
|
(2,851 |
) |
|
|
1,167 |
|
|
Valuation allowances
|
|
|
19,522 |
|
|
|
7,557 |
|
|
|
2,324 |
|
|
|
(1,269 |
) |
|
Refund of prior years’ taxes
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,209 |
) |
|
Permanent items and other
|
|
|
(118 |
) |
|
|
(650 |
) |
|
|
(990 |
) |
|
|
73 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported income tax expense
|
|
$ |
44,520 |
|
|
$ |
25,491 |
|
|
$ |
6,512 |
|
|
$ |
13,100 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
60
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
Deferred tax assets (liabilities) comprised the following
(in thousands):
| |
|
|
|
|
|
|
|
|
| |
|
December 31, | |
|
January 1, | |
| |
|
2005 | |
|
2005 | |
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
| |
|
| |
|
| |
|
Intangibles
|
|
$ |
(273,641 |
) |
|
$ |
(271,530 |
) |
|
Property, plant and equipment
|
|
|
(179,784 |
) |
|
|
(191,270 |
) |
|
Inventory valuation methods
|
|
|
3,926 |
|
|
|
1,396 |
|
|
Postretirement benefits
|
|
|
46,079 |
|
|
|
52,593 |
|
|
Operating accruals
|
|
|
96,576 |
|
|
|
50,444 |
|
|
Tax credit carryforwards
|
|
|
18,913 |
|
|
|
18,388 |
|
|
Net operating loss carryforwards
|
|
|
136,944 |
|
|
|
133,049 |
|
|
Valuation allowances
|
|
|
(165,051 |
) |
|
|
(145,617 |
) |
|
Other, net
|
|
|
(4,853 |
) |
|
|
(524 |
) |
| |
|
|
|
|
|
|
| |
|
$ |
(320,891 |
) |
|
$ |
(353,071 |
) |
| |
|
|
|
|
|
|
The Company has gross federal, state and foreign net operating
loss carryforwards of $112.3 million, $1.1 billion and
$153.6 million, respectively, at December 31, 2005.
The Company has recorded deferred tax assets of
$39.3 million for federal net operating loss carryforwards,
which, if unused, will expire between 2023 and 2025. The Company
has recorded deferred tax assets of $51.2 million for state
net operating loss carryforwards, which, if unused, will start
to expire in 2006. The Company has recorded deferred tax assets
of $46.5 million for foreign net operating loss
carryforwards, which, if unused will expire between 2006 and
2020. The foreign tax credit carryforward amount of
$18.4 million will expire in 2011.
A valuation allowance has been established to offset foreign tax
credit carryforwards, state net operating loss carryforwards,
certain foreign net operating loss carryforwards, and certain
other deferred tax assets in foreign jurisdictions. The Company
has deemed it more likely than not that future taxable income in
the relevant taxing jurisdictions will be insufficient to
realize the related income tax benefits for these assets.
61
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
Total deferred tax assets and deferred tax liabilities were as
follows (in thousands):
| |
|
|
|
|
|
|
|
|
|
| |
|
December 31, | |
|
January 1, | |
| |
|
2005 | |
|
2005 | |
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
| |
|
| |
|
| |
|
Deferred tax assets
|
|
$ |
525,223 |
|
|
$ |
460,075 |
|
|
Deferred tax asset valuation allowance
|
|
|
(165,051 |
) |
|
|
(145,617 |
) |
| |
|
|
|
|
|
|
| |
|
|
360,172 |
|
|
|
314,458 |
|
| |
Deferred tax liabilities
|
|
|
(681,063 |
) |
|
|
(667,529 |
) |
| |
|
|
|
|
|
|
| |
Net deferred tax liabilities
|
|
$ |
(320,891 |
) |
|
$ |
(353,071 |
) |
| |
|
|
|
|
|
|
|
Current deferred tax assets consist of:
|
|
|
|
|
|
|
|
|
| |
Deferred tax assets, net of valuation allowance
|
|
$ |
48,541 |
|
|
$ |
47,207 |
|
| |
Deferred tax liabilities
|
|
|
(13,785 |
) |
|
|
(13,643 |
) |
| |
|
|
|
|
|
|
| |
Net current deferred tax assets
|
|
|
34,756 |
|
|
|
33,564 |
|
|
Non-current deferred tax liabilities consist of:
|
|
|
|
|
|
|
|
|
| |
Deferred tax assets, net of valuation allowance
|
|
|
311,631 |
|
|
|
267,251 |
|
| |
Deferred tax liabilities
|
|
|
(667,278 |
) |
|
|
(653,886 |
) |
| |
|
|
|
|
|
|
| |
Net non-current deferred tax liabilities
|
|
|
(355,647 |
) |
|
|
(386,635 |
) |
| |
|
|
|
|
|
|
| |
Net deferred tax liabilities
|
|
$ |
(320,891 |
) |
|
$ |
(353,071 |
) |
| |
|
|
|
|
|
|
Income Tax Audits: The Company believes its tax positions
comply with the applicable tax laws and that it is adequately
provided for all tax related matters. The Company is subject to
examination by taxing authorities in the various jurisdictions
in which it files tax returns. Specifically, the Company is
routinely under examination by the Internal Revenue Service. The
current examination includes the years 1995 through 2001.
Matters raised upon audit may involve substantial amounts and
could result in material cash payments if resolved unfavorably;
however, management does not believe that any material payments
will be made related to these matters within the next year.
Management considers it unlikely that the resolution of these
matters will have a material adverse effect on the
Company’s results of operations.
Honduran Tax Case: In 2005, the Company received a tax
assessment from Honduras of approximately $137 million
relating to the disposition of all of the Company’s
interest in Cervecería Hondureña, S.A in 2001. The
Company believes the assessment is without merit and filed an
appeal with the Honduran tax authorities, which was denied. As a
result of the denial in the administrative process, in order to
negate the tax assessment, on August 5, 2005, the Company
proceeded to the next stage of the appellate process by filing a
lawsuit against the Honduran government, in the Honduran
Administrative Tax Trial Court. The Honduran government is
seeking dismissal of the lawsuit and attachment of assets, which
the Company is challenging. No reserve has been provided for
this assessment.
62
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
Note 7 — Details of Certain Assets and
Liabilities
Details of receivables and inventories were as follows (in
thousands):
| |
|
|
|
|
|
|
|
|
|
| |
|
December 31, | |
|
January 1, | |
| |
|
2005 | |
|
2005 | |
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
| |
|
| |
|
| |
|
Receivables
|
|
|
|
|
|
|
|
|
| |
Trade
|
|
$ |
562,232 |
|
|
$ |
559,106 |
|
| |
Notes and other
|
|
|
96,293 |
|
|
|
87,221 |
|
| |
Grower advances
|
|
|
32,150 |
|
|
|
28,365 |
|
| |
Income tax refund
|
|
|
— |
|
|
|
524 |
|
| |
Other
|
|
|
5,546 |
|
|
|
8,269 |
|
| |
|
|
|
|
|
|
| |
|
|
696,221 |
|
|
|
683,485 |
|
| |
Allowance for doubtful accounts
|
|
|
(58,585 |
) |
|
|
(65,533 |
) |
| |
|
|
|
|
|
|
| |
|
$ |
637,636 |
|
|
$ |
617,952 |
|
| |
|
|
|
|
|
|
|
Inventories
|
|
|
|
|
|
|
|
|
| |
Finished products
|
|
$ |
290,593 |
|
|
$ |
232,193 |
|
| |
Raw materials and work in progress
|
|
|
145,146 |
|
|
|
119,645 |
|
| |
Crop-growing costs
|
|
|
139,271 |
|
|
|
116,295 |
|
| |
Operating supplies and other
|
|
|
48,487 |
|
|
|
40,758 |
|
| |
|
|
|
|
|
|
| |
|
$ |
623,497 |
|
|
$ |
508,891 |
|
| |
|
|
|
|
|
|
Accounts payable consists primarily of trade payables. In
addition, the accounts payable balance at January 1, 2005
included $47.1 million related to the purchase of the 40%
Saba minority shares (Note 5).
Accrued liabilities included the following (in thousands):
| |
|
|
|
|
|
|
|
|
| |
|
December 31, | |
|
January 1, | |
| |
|
2005 | |
|
2005 | |
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
| |
|
| |
|
| |
|
Employee-related costs and benefits
|
|
$ |
124,067 |
|
|
$ |
129,240 |
|
|
Amounts due to growers
|
|
|
91,370 |
|
|
|
79,379 |
|
|
Marketing and advertising
|
|
|
61,180 |
|
|
|
48,323 |
|
|
Materials and supplies
|
|
|
26,673 |
|
|
|
43,613 |
|
|
Other
|
|
|
127,747 |
|
|
|
147,315 |
|
| |
|
|
|
|
|
|
| |
|
$ |
431,037 |
|
|
$ |
447,870 |
|
| |
|
|
|
|
|
|
Remaining amounts included in other accrued liabilities shown
above comprise individually insignificant operating accruals.
63
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
Other long-term liabilities were as follows (in thousands):
| |
|
|
|
|
|
|
|
|
| |
|
December 31, | |
|
January 1, | |
| |
|
2005 | |
|
2005 | |
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
| |
|
| |
|
| |
|
Accrued postretirement and other employee benefits
|
|
$ |
233,736 |
|
|
$ |
243,285 |
|
|
Accrued income taxes
|
|
|
254,487 |
|
|
|
225,868 |
|
|
Other
|
|
|
58,082 |
|
|
|
50,841 |
|
| |
|
|
|
|
|
|
| |
|
$ |
546,305 |
|
|
$ |
519,994 |
|
| |
|
|
|
|
|
|
Note 8 — Property, Plant and Equipment
Major classes of property, plant and equipment were as follows
(in thousands):
| |
|
|
|
|
|
|
|
|
| |
|
December 31, | |
|
January 1, | |
| |
|
2005 | |
|
2005 | |
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
| |
|
| |
|
| |
|
Land and land improvements
|
|
$ |
750,913 |
|
|
$ |
722,169 |
|
|
Buildings and leasehold improvements
|
|
|
395,240 |
|
|
|
374,909 |
|
|
Machinery and equipment
|
|
|
637,224 |
|
|
|
591,974 |
|
|
Vessels and containers
|
|
|
233,413 |
|
|
|
234,283 |
|
|
Vessels and equipment under capital leases
|
|
|
94,045 |
|
|
|
94,998 |
|
|
Construction in progress
|
|
|
102,877 |
|
|
|
84,822 |
|
| |
|
|
|
|
|
|
| |
|
|
2,213,712 |
|
|
|
2,103,155 |
|
|
Accumulated depreciation
|
|
|
(705,115 |
) |
|
|
(586,800 |
) |
| |
|
|
|
|
|
|
| |
|
$ |
1,508,597 |
|
|
$ |
1,516,355 |
|
| |
|
|
|
|
|
|
Depreciation is computed principally by the straight-line method
over the estimated useful lives of the assets as follows:
| |
|
|
|
|
| |
|
Years | |
| |
|
| |
|
Land improvements
|
|
|
5 to 40 |
|
|
Buildings and leasehold improvements
|
|
|
3 to 50 |
|
|
Machinery and equipment
|
|
|
2 to 35 |
|
|
Vessels and containers
|
|
|
3 to 20 |
|
|
Vessels and equipment under capital leases
|
|
Shorter of useful life or life of lease |
Depreciation expense for property, plant and equipment totaled
$137.9 million, $133.3 million, $98.6 million and
$25 million for the years ended December 31, 2005 and
January 1, 2005, three quarters ended January 3, 2004
and quarter ended March 22, 2003, respectively.
64
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
Note 9 — Goodwill and Intangible Assets
Goodwill has been allocated to the Company’s reporting
segments as follows (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Fresh | |
|
Packaged | |
|
Fresh-cut |
|
|
|
|
| |
|
Fresh Fruit | |
|
Vegetables | |
|
Foods | |
|
Flowers |
|
Other |
|
Total | |
| |
|
| |
|
| |
|
| |
|
|
|
|
|
| |
|
Balance as of January 3, 2004 (Successor)
|
|
$ |
341,540 |
|
|
$ |
89,025 |
|
|
$ |
18,186 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
448,751 |
|
|
Additions
|
|
|
34,136 |
|
|
|
8,638 |
|
|
|
45,340 |
|
|
|
— |
|
|
|
— |
|
|
|
88,114 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2005 (Successor)
|
|
$ |
375,676 |
|
|
$ |
97,663 |
|
|
$ |
63,526 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
536,865 |
|
|
Additions
|
|
|
603 |
|
|
|
185 |
|
|
|
2,527 |
|
|
|
— |
|
|
|
— |
|
|
|
3,315 |
|
|
Tax-related adjustments
|
|
|
76 |
|
|
|
20 |
|
|
|
4 |
|
|
|
— |
|
|
|
— |
|
|
|
100 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2005 (Successor)
|
|
$ |
376,355 |
|
|
$ |
97,868 |
|
|
$ |
66,057 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
540,280 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The additions to goodwill during the year ended
December 31, 2005 relate primarily to a purchase price
adjustment associated with the 2004 acquisition of Dole Packaged
Frozen Foods. The purchase price adjustment is attributable to a
change in the expected reimbursement of certain tax liabilities
payable to the selling shareholders as a result of the
transaction. The 2004 additions to goodwill in the packaged
foods, fresh vegetables and fresh fruit segments primarily
relate to the acquisitions of Dole Packaged Frozen Foods, Dole
Berry Company and the remaining 40% share in Saba, respectively.
Refer to Note 5 for further details.
The tax-related adjustments result from changes to deductible
temporary differences, operating loss or tax credit
carryforwards and contingencies that existed at the time of the
going-private merger transaction.
Details of the Company’s intangible assets were as follows
(in thousands):
| |
|
|
|
|
|
|
|
|
|
| |
|
December 31, | |
|
January 1, | |
| |
|
2005 | |
|
2005 | |
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
| |
|
| |
|
| |
|
Amortized intangible assets:
|
|
|
|
|
|
|
|
|
| |
Customer relationships
|
|
$ |
38,501 |
|
|
$ |
38,501 |
|
| |
Licenses
|
|
|
20,688 |
|
|
|
20,688 |
|
| |
Other amortized intangible assets
|
|
|
9,064 |
|
|
|
9,132 |
|
| |
|
|
|
|
|
|
| |
|
|
68,253 |
|
|
|
68,321 |
|
|
Accumulated amortization — customer relationships
|
|
|
(9,219 |
) |
|
|
(5,542 |
) |
|
Accumulated amortization — licenses
|
|
|
(20,688 |
) |
|
|
(13,218 |
) |
|
Other accumulated amortization
|
|
|
(6,164 |
) |
|
|
(5,588 |
) |
| |
|
|
|
|
|
|
|
Accumulated amortization — intangible assets
|
|
|
(36,071 |
) |
|
|
(24,348 |
) |
| |
|
|
|
|
|
|
|
Intangible assets, net
|
|
|
32,182 |
|
|
|
43,973 |
|
|
Unamortized intangible assets:
|
|
|
|
|
|
|
|
|
| |
Trademark, trade names and other related intangibles
|
|
|
694,518 |
|
|
|
694,518 |
|
| |
|
|
|
|
|
|
|
Total identifiable intangible assets, net
|
|
$ |
726,700 |
|
|
$ |
738,491 |
|
| |
|
|
|
|
|
|
Amortization expense of identifiable intangibles totaled
$11.9 million, $11.6 million and $8.0 million for
the years ended December 31, 2005 and January 1, 2005
and for the three quarters ended January 3, 2004,
respectively. There was no amortization expense related to the
identifiable intangibles during the quarter
65
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
ended March 22, 2003. Estimated remaining amortization
expense associated with the Company’s identifiable
intangible assets in each of the next five fiscal years is as
follows (in thousands):
| |
|
|
|
|
| Fiscal Year |
|
Amount | |
| |
|
| |
|
2006
|
|
|
4,323 |
|
|
2007
|
|
|
3,677 |
|
|
2008
|
|
|
3,677 |
|
|
2009
|
|
|
3,677 |
|
|
2010
|
|
|
3,677 |
|
The Company performed its annual impairment review of goodwill
and indefinite-lived intangible assets pursuant to Statement of
Financial Accounting Standards No. 142, Goodwill and
Other Intangible Assets, during the second quarter of fiscal
2005. This review indicated no impairment to goodwill or any of
the Company’s indefinite-lived intangible assets.
Note 10 — Notes Payable and Long-Term
Debt
Notes payable and long-term debt consisted of the following
amounts (in thousands):
| |
|
|
|
|
|
|
|
|
|
| |
|
December 31, | |
|
January 1, | |
| |
|
2005 | |
|
2005 | |
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
| |
|
| |
|
| |
|
Unsecured debt:
|
|
|
|
|
|
|
|
|
| |
8.625% notes due 2009
|
|
$ |
350,000 |
|
|
$ |
400,000 |
|
| |
7.25% notes due 2010
|
|
|
400,000 |
|
|
|
400,000 |
|
| |
8.875% notes due 2011
|
|
|
200,000 |
|
|
|
475,000 |
|
| |
8.75% debentures due 2013
|
|
|
155,000 |
|
|
|
155,000 |
|
|
Secured debt:
|
|
|
|
|
|
|
|
|
| |
Revolving credit facilities
|
|
|
137,000 |
|
|
|
— |
|
| |
Term loan facilities
|
|
|
698,149 |
|
|
|
341,619 |
|
| |
Contracts and notes, at a weighted-average interest rate of
6.86% (7.84% in 2004) through 2010
|
|
|
5,952 |
|
|
|
2,801 |
|
|
Capital lease obligations
|
|
|
80,971 |
|
|
|
95,539 |
|
|
Unamortized debt discount
|
|
|
(1,209 |
) |
|
|
(1,661 |
) |
|
Notes payable
|
|
|
1,394 |
|
|
|
624 |
|
| |
|
|
|
|
|
|
| |
|
|
2,027,257 |
|
|
|
1,868,922 |
|
|
Current maturities
|
|
|
(26,414 |
) |
|
|
(31,902 |
) |
| |
|
|
|
|
|
|
| |
|
$ |
2,000,843 |
|
|
$ |
1,837,020 |
|
| |
|
|
|
|
|
|
In April 2002, the Company completed the sale and issuance of
$400 million aggregate principal amount of Senior Notes due
2009 (the “2009 Notes”). The 2009 Notes are
redeemable, at the discretion of the Company, at par plus a
make-whole amount, if any, and accrued and unpaid interest, any
time prior to maturity. The 2009 Notes were issued at 99.50% of
par.
In May 2003, the Company issued and sold $400 million
aggregate principal amount of 7.25% Senior Notes due 2010
(the “2010 Notes”). The Company may, at its option,
use the cash proceeds from an equity
66
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
offering to redeem up to 35% of the aggregate principal amount
of the 2010 Notes, at a redemption price of 107.25%, plus
accrued and unpaid interest prior to June 15, 2006; or at
specified premiums after June 15, 2007. The 2010 Notes were
issued at par.
In connection with the going-private merger transaction
described in Note 3, the Company issued $475 million
aggregate principal amount of 8.875% Senior Notes due 2011
(the “2011 Notes”). The 2011 Notes were issued at par.
At its option, the Company may use the cash proceeds from an
equity offering to redeem up to 35% of the aggregate principal
amount of the 2011 notes, at a redemption price of 108.875%,
plus accrued and unpaid interest, prior to March 15, 2006;
or at specified premiums after March 15, 2007.
In July 1993, the Company issued and sold debentures due 2013
(the “2013 Debentures”). The 2013 Debentures are not
redeemable prior to maturity and were issued at 99.37% of par.
In connection with the going-private merger transaction and
issuance of the 2011 Notes, both the 2013 Debentures and the
2009 Notes were modified to provide for substantially the same
interest rates, covenants and guarantees from certain of the
Company’s subsidiaries as are provided for by the 2011
Notes.
None of the Company’s notes or debentures are subject to
any sinking fund requirements. The notes and debentures are
guaranteed by the Company’s wholly-owned domestic
subsidiaries (Note 20).
|
|
|
Amendments to Credit Facilities |
In connection with the going-private merger transaction of 2003,
the Company obtained financing under a senior secured credit
facility (consisting of $825 million of term loans, and
$300 million of revolving credit facilities). In May 2003,
the Company issued the 2010 Notes and used the net proceeds to
prepay $400 million of the term loans. In November 2003,
the Company renegotiated its senior secured credit facilities
and, as a result, the Company received proceeds from Term
Loan C, of $315 million. These proceeds, together with
available cash of $14.5 million, were used to repay the
amounts outstanding under the existing term loans and the
Company’s headquarters lease. In May 2004, the Company
renegotiated its senior secured credit facilities which resulted
in the conversion of Term Loan C into Term Loan D and
borrowed an additional $175 million under a new term loan
facility, Term Loan E, to finance the acquisition of Dole
Packaged Frozen Foods.
In April 2005, the Company executed an amendment and restatement
of its senior secured credit agreement (the “Amended and
Restated Credit Agreement”) in which Term Loan D and
Term Loan E were repaid through new term loan borrowings
(“Term Loan A” and “Term Loan B”),
$350 million relating to Term Loan A (denominated in
Japanese yen), $400 million relating to Term Loan B
and $300 million of revolving credit facilities. The
purpose of the amendment and restatement was to lower the
Company’s overall effective interest rate and to more
effectively match the Company’s debt structure to its
foreign and domestic cash flows. In connection with the
refinancing of the term loan facilities, the Company wrote-off
deferred debt issuance costs of $1.5 million.
In conjunction with the execution of the Amended and Restated
Credit Agreement, the Company completed a tender offer to
purchase for cash $325 million aggregate principal amount
of the Company’s outstanding debt securities. The Company
repurchased $50 million of its 2009 Notes and
$275 million of its 2011 Notes. In connection with these
repurchases, the Company recorded a loss on early retirement of
debt of $42.3 million, which is included in other income
(expense), net in the consolidated statement of income for the
year ended December 31, 2005. The loss on early retirement
of debt included a write-off of deferred debt issuance costs of
$9.2 million as well as a bond premium expense of
$33.1 million.
In June 2005, the Company executed a technical amendment to its
Amended and Restated Credit Agreement, which changed the
scheduled amortization payment dates of the term loans from the
last business day of the Company’s fiscal quarters to the
last business day of the calendar quarters.
67
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
In December 2005, the Company executed a second amendment (the
“Second Amendment”) to the Amended and Restated Credit
Agreement. The Second Amendment permitted the Company to
reinvest the proceeds from the sale of any of its principal
properties (defined as each of the Company’s
U.S. manufacturing plants and processing facilities that
have a net book value exceeding 1% of the Company’s net
tangible assets) in a new principal property and also allowed
DHM Holding Company, Inc., to borrow under project financing
facilities the proceeds of which would be used for the
construction, start up and operational deficits of a hotel, spa
and wellbeing center, subject to certain restrictions. In
addition, the Second Amendment amended both the minimum
consolidated interest coverage ratio and the maximum leverage
ratio for certain time periods.
During January 2006, the Company increased its revolving credit
facilities from $300 million to $360 million.
On April 12, 2006, the Company completed an amendment and
restatement of its senior secured credit facilities. The Company
obtained $975 million of term loan facilities and
$100 million in a pre-funded letter of credit facility. The
proceeds of the term loans were used to repay the outstanding
term loans under the Company’s existing senior secured
credit facilities. In addition, the Company paid a dividend of
approximately $160 million to its immediate parent, Dole
Holding Company, LLC, which proceeds were used to repay in full
its Second Lien Senior Credit Facility. The terms and covenants
under the new senior secured credit facilities are similar to
those under the Company’s existing senior secured credit
facilities except that the new facilities do not contain
financial maintenance or maximum capital expenditure covenants.
Additionally, the Company entered into a new asset based
revolving credit facility of $350 million. The facility
will be secured and will be subject to a borrowing base
consisting of up to 85% of eligible accounts receivable plus a
predetermined percentage of eligible inventory.
The purposes of the refinancing include increasing the combined
size of the Company’s revolving credit and letter of credit
facilities and eliminating certain financial maintenance
covenants, realizing currency gains arising out of the
Company’s existing senior secured credit facilities, and
refinancing of the higher-cost bank indebtedness of Dole Holding
Company, LLC, at the lower-cost Dole Food Company, Inc. level.
In connection with the refinancing, the Company obtained a
waiver, with respect to the first quarter ended March 25,
2006, for certain covenants contained in the prior senior
secured credit facilities.
|
|
|
Revolving Credit Facilities and Term Loans |
As of December 31, 2005, there was $137 million in
outstanding borrowings under the Company’s
$300 million revolving credit facilities. The balance of
funds available under the revolving credit facilities could be
used for borrowings to finance short-term working capital needs
of the Company or for the issuance of letters of credit and bank
guarantees up to $232.5 million. At December 31, 2005,
after taking into account approximately $94.4 million of
outstanding letters of credit and bank guarantees drawn against
these facilities, the Company had approximately
$68.6 million available under these revolvers. Borrowings
under these facilities bore interest at certain percentages over
the bank’s prime rate or LIBOR plus a predetermined spread.
As of December 31, 2005, the weighted average variable
interest rate on the revolving credit facilities was 6.5%.
A commitment fee, which fluctuated between 0.25% and 0.375%, was
required based on the total unused portion of the revolver. The
Company paid a total of $0.7 million, $1.2 million and
$1.6 million in commitment fees for the years ended
December 31, 2005 and January 1, 2005 and for the
three quarters ended January 3, 2004, respectively. No
commitment fees were paid during the quarter ended
March 22, 2003. Under the Company’s new senior secured
credit facilities, the commitment fee is unchanged.
68
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
As of December 31, 2005, the term loan facilities consisted
of $306.1 million of Term Loan A and $392 million
of Term Loan B. The weighted average variable interest
rates at December 31, 2005 for Term Loan A and Term
loan B were 1.6% and 5.9%, respectively.
In May 2005, the Company entered into an interest rate swap
agreement in order to hedge future changes in interest rates.
This agreement effectively converted borrowings under Term
Loan A, which was variable-rate debt, to a fixed-rate basis
through the term of the loan. The fair value of the swap at
December 31, 2005 was $1.9 million. The interest rate
swap fixed the interest rate at 2.05%.
The revolving credit facilities and term loan facilities are
collateralized by substantially all of the Company’s
tangible and intangible assets, other than certain intercompany
debt, certain equity interests and each of the Company’s
U.S. manufacturing plants and processing facilities that
has a net book value exceeding 1% of the Company’s net
tangible assets.
|
|
|
Capital Lease Obligations |
At December 31, 2005, included in capital lease obligations
is $78.6 million of vessel financings related to two vessel
leases denominated in British pound sterling. The interest rates
on these leases are based on LIBOR plus a spread. The remaining
$2.4 million of capital lease obligations relate primarily
to machinery and equipment and interest rates under these leases
are fixed. The capital lease obligations are collateralized by
the underlying leased assets.
Provisions under the recently repaid senior secured credit
facilities and the indentures to the Company’s senior notes
and debentures required the Company to comply with certain
covenants. These covenants include financial performance
measures, as well as limitations on, among other things,
indebtedness, investments, loans to subsidiaries, employees and
third parties, the issuance of guarantees and the payment of
dividends. At December 31, 2005, the Company was in
compliance with all applicable covenants.
Expenses related to the issuance of long-term debt are
capitalized and amortized to interest expense over the term of
the underlying debt. During the years ended December 31,
2005 and January 1, 2005, three quarters ended
January 3, 2004 and quarter ended March 22, 2003, the
Company amortized deferred debt issuance costs of
$5.9 million, $8.9 million, $7.0 million and
$0.2 million, respectively.
The Company wrote off $10.7 million, $2.7 million and
$12.6 million of deferred debt issuance costs during the
years ended December 31, 2005 and January 1, 2005 and
the three quarters ended January 3, 2004, respectively. The
write off of debt issuance costs in 2005 resulted from the
prepayment of $325 million of unsecured senior notes and
$335 million of term loan facilities. In 2004, the write
off of debt issuance costs resulted from the prepayment of term
loan facilities of $106.5 million. The write-off of debt
issuance costs in 2003 resulted from the prepayment of term loan
facilities of $540 million, which included
$400 million in connection with the May 2003 refinancing
transaction.
69
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
|
|
|
Maturities of Notes Payable and Long-Term Debt |
Maturities with respect to notes payable and long-term debt as
of December 31, 2005 were as follows (in thousands):
| |
|
|
|
|
| Fiscal Year |
|
Amount | |
| |
|
| |
|
2006
|
|
$ |
26,414 |
|
|
2007
|
|
|
40,764 |
|
|
2008
|
|
|
40,400 |
|
|
2009
|
|
|
390,170 |
|
|
2010
|
|
|
738,573 |
|
|
Thereafter
|
|
|
790,936 |
|
| |
|
|
|
|
Total
|
|
$ |
2,027,257 |
|
| |
|
|
|
These maturities include amounts that were payable under the
Company’s recently repaid senior secured credit facilities.
In addition to amounts available under the revolving credit
facilities, the Company’s subsidiaries have uncommitted
lines of credit of approximately $85 million at various
local banks, of which $79.3 million was available at
December 31, 2005. These lines of credit lines are used
primarily for short-term borrowings, foreign currency exchange
settlement and the issuance of letters of credit or bank
guarantees. Several of the Company’s uncommitted lines of
credit expire in 2006 while others do not have a commitment
expiration date. These arrangements may be cancelled at any time
by the Company or the banks.
Note 11 — Employee Benefit Plans
The Company sponsors a number of defined benefit pension plans
covering certain employees worldwide. 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
pension plans, the Company has other postretirement benefit
(“OPRB”) 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. pension plans, the Company’s general policy
is to fund the normal cost plus a
15-year amortization of
the unfunded liability. Most of the Company’s international
pension plans and all of its OPRB plans are unfunded.
During 2001, two of the Company’s U.S. pension plans
and a portion of its international pension plans were frozen.
Effective January 1, 2002, no new salaried pension benefits
will accrue, with the exception of a transition benefit for
long-term employees. The assumption for the rate of compensation
increase of 2.5% on the U.S. plans represents the rate
associated with the remaining active U.S. participants
whose benefits are negotiated under collective bargaining
arrangements.
In the third quarter of 2004, the Company terminated certain
employees in Ecuador following a restructuring of one of the
Company’s business units. In connection with this
restructuring, the Company made severance payments and settled
all pension benefit obligations in cash. As a result of these
payments, the Company recognized expense of $8.8 million,
of which $6.1 million related to a settlement loss in
accordance with Statement of Financial Accounting Standards
No. 88, Employers’ Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for
Termination Benefits.
70
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
During 2005, the Company modified its existing postretirement
medical plan by offering to certain retirees a medical plan
under which Dole would be the secondary payer to Medicare,
rather than the primary payer for these benefits. In addition,
the Company’s prescription drug coverage will be provided
through a self-insured program rather than a fully insured
program. These changes resulted in a reduction of the projected
benefit obligation for OPRB plans of approximately
$6.7 million.
The Company uses a December 31 measurement date for the
majority of its plans.
71
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
The status of the Company’s defined benefit pension plans
was as follows (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
U.S. Pension Plans | |
|
International Pension Plans | |
|
OPRB Plans | |
| |
|
| |
|
| |
|
| |
| |
|
Year Ended | |
|
Year Ended | |
|
Year Ended | |
|
Year Ended | |
|
Year Ended | |
|
Year Ended | |
| |
|
December 31, | |
|
January 1, | |
|
December 31, | |
|
January 1, | |
|
December 31, | |
|
January 1, | |
| |
|
2005 | |
|
2005 | |
|
2005 | |
|
2005 | |
|
2005 | |
|
2005 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
|
Successor | |
|
Successor | |
|
Successor | |
|
Successor | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Change in projected benefit obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Benefit obligation at beginning of period
|
|
$ |
311,705 |
|
|
$ |
278,863 |
|
|
$ |
63,876 |
|
|
$ |
62,198 |
|
|
$ |
77,117 |
|
|
$ |
78,212 |
|
| |
Service cost
|
|
|
1,683 |
|
|
|
2,780 |
|
|
|
5,489 |
|
|
|
4,098 |
|
|
|
406 |
|
|
|
93 |
|
| |
Interest cost
|
|
|
17,548 |
|
|
|
16,635 |
|
|
|
7,700 |
|
|
|
5,007 |
|
|
|
4,186 |
|
|
|
5,058 |
|
| |
Participant contributions
|
|
|
— |
|
|
|
— |
|
|
|
39 |
|
|
|
27 |
|
|
|
— |
|
|
|
— |
|
| |
Foreign currency exchange rate changes
|
|
|
— |
|
|
|
— |
|
|
|
(1,377 |
) |
|
|
1,640 |
|
|
|
— |
|
|
|
— |
|
| |
Actuarial (gain) loss
|
|
|
(902 |
) |
|
|
37,433 |
|
|
|
2,498 |
|
|
|
(790 |
) |
|
|
1,924 |
|
|
|
(1,230 |
) |
| |
Curtailments, settlements and terminations, net
|
|
|
— |
|
|
|
— |
|
|
|
971 |
|
|
|
5,611 |
|
|
|
— |
|
|
|
— |
|
| |
Benefits paid
|
|
|
(24,680 |
) |
|
|
(24,006 |
) |
|
|
(7,108 |
) |
|
|
(14,622 |
) |
|
|
(4,947 |
) |
|
|
(5,016 |
) |
| |
Plan amendments
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(6,678 |
) |
|
|
— |
|
| |
Additional plans
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
707 |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Benefit obligation at end of period
|
|
$ |
305,354 |
|
|
$ |
311,705 |
|
|
$ |
72,088 |
|
|
$ |
63,876 |
|
|
$ |
72,008 |
|
|
$ |
77,117 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Fair value of plan assets at beginning of period
|
|
$ |
223,000 |
|
|
$ |
223,621 |
|
|
$ |
2,925 |
|
|
$ |
2,439 |
|
|
$ |
— |
|
|
$ |
— |
|
| |
Actual return on plan assets
|
|
|
17,961 |
|
|
|
19,581 |
|
|
|
158 |
|
|
|
533 |
|
|
|
— |
|
|
|
— |
|
| |
Company contributions
|
|
|
14,022 |
|
|
|
3,804 |
|
|
|
7,112 |
|
|
|
14,587 |
|
|
|
4,947 |
|
|
|
5,016 |
|
| |
Participant contributions
|
|
|
— |
|
|
|
— |
|
|
|
39 |
|
|
|
27 |
|
|
|
— |
|
|
|
— |
|
| |
Foreign currency exchange rate changes
|
|
|
— |
|
|
|
— |
|
|
|
138 |
|
|
|
(39 |
) |
|
|
— |
|
|
|
— |
|
| |
Benefits paid
|
|
|
(24,680 |
) |
|
|
(24,006 |
) |
|
|
(7,108 |
) |
|
|
(14,622 |
) |
|
|
(4,947 |
) |
|
|
(5,016 |
) |
| |
Curtailments, settlements and terminations, net
|
|
|
— |
|
|
|
— |
|
|
|
(32 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
Other
|
|
|
— |
|
|
|
— |
|
|
|
376 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Fair value of plan assets at end of period
|
|
$ |
230,303 |
|
|
$ |
223,000 |
|
|
$ |
3,608 |
|
|
$ |
2,925 |
|
|
$ |
— |
|
|
$ |
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Funded status
|
|
$ |
(75,051 |
) |
|
$ |
(88,705 |
) |
|
$ |
(68,480 |
) |
|
$ |
(60,951 |
) |
|
$ |
(72,008 |
) |
|
$ |
(77,117 |
) |
| |
Unrecognized net loss (gain)
|
|
|
35,449 |
|
|
|
37,098 |
|
|
|
6,159 |
|
|
|
3,697 |
|
|
|
1,021 |
|
|
|
(1,542 |
) |
| |
Unrecognized prior service cost (benefit)
|
|
|
2 |
|
|
|
4 |
|
|
|
444 |
|
|
|
485 |
|
|
|
(7,287 |
) |
|
|
(717 |
) |
| |
Unrecognized net transition obligation
|
|
|
— |
|
|
|
— |
|
|
|
216 |
|
|
|
275 |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net balance sheet liability
|
|
$ |
(39,600 |
) |
|
$ |
(51,603 |
) |
|
$ |
(61,661 |
) |
|
$ |
(56,494 |
) |
|
$ |
(78,274 |
) |
|
$ |
(79,376 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in the Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid benefit cost
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
143 |
|
|
$ |
62 |
|
|
$ |
— |
|
|
$ |
— |
|
| |
Accrued benefit liability
|
|
|
(74,506 |
) |
|
|
(88,022 |
) |
|
|
(65,396 |
) |
|
|
(59,996 |
) |
|
|
(78,274 |
) |
|
|
(79,376 |
) |
| |
Intangible assets
|
|
|
2 |
|
|
|
4 |
|
|
|
621 |
|
|
|
651 |
|
|
|
— |
|
|
|
— |
|
| |
Accumulated other comprehensive loss
|
|
|
34,904 |
|
|
|
36,415 |
|
|
|
2,971 |
|
|
|
2,789 |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net amount recognized
|
|
$ |
(39,600 |
) |
|
$ |
(51,603 |
) |
|
$ |
(61,661 |
) |
|
$ |
(56,494 |
) |
|
$ |
(78,274 |
) |
|
$ |
(79,376 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
The accumulated benefit obligation for all defined benefit
pension plans was $366.5 million and $367.6 million at
December 31, 2005 and January 1, 2005, respectively.
The majority of the Company’s pension plans were
underfunded at December 31, 2005, having accumulated
benefit obligations exceeding the fair value of plan assets. At
December 31, 2005, the additional minimum liability was
$37.9 million. This resulted in an after-tax adjustment of
$22.7 million that was recorded as a decrease of
shareholders’ equity through accumulated other
comprehensive loss in fiscal 2005. The aggregate projected
benefit obligation, accumulated benefit obligation and fair
value of plan assets for pension plans with accumulated benefit
obligations in excess of plan assets were as follows:
| |
|
|
|
|
|
|
|
|
| |
|
December 31, | |
|
January 1, | |
| |
|
2005 | |
|
2005 | |
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
| |
|
| |
|
| |
| |
|
(In thousands) | |
|
Projected benefit obligation
|
|
$ |
376,955 |
|
|
$ |
375,060 |
|
|
Accumulated benefit obligation
|
|
$ |
366,139 |
|
|
$ |
367,247 |
|
|
Fair value of plan assets
|
|
$ |
233,434 |
|
|
$ |
225,486 |
|
The components of net periodic benefit cost for the
Company’s U.S. and international pension plans and OPRB
plans were as follows (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
U.S. Pension Plans | |
|
International Pension Plans | |
| |
|
| |
|
| |
| |
|
|
|
Three | |
|
|
|
|
|
Three | |
|
|
| |
|
Year | |
|
Year | |
|
Quarters | |
|
Quarter | |
|
Year | |
|
Year | |
|
Quarters | |
|
Quarter | |
| |
|
Ended | |
|
Ended | |
|
Ended | |
|
Ended | |
|
Ended | |
|
Ended | |
|
Ended | |
|
Ended | |
| |
|
December 31, | |
|
January 1, | |
|
January 3, | |
|
March 22, | |
|
December 31, | |
|
January 1, | |
|
January 3, | |
|
March 22, | |
| |
|
2005 | |
|
2005 | |
|
2004 | |
|
2003 | |
|
2005 | |
|
2005 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
|
Successor | |
|
Predecessor | |
|
Successor | |
|
Successor | |
|
Successor | |
|
Predecessor | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Components of net periodic benefit cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Service cost
|
|
$ |
1,683 |
|
|
$ |
2,780 |
|
|
$ |
2,084 |
|
|
$ |
649 |
|
|
$ |
5,489 |
|
|
$ |
4,098 |
|
|
$ |
2,469 |
|
|
$ |
813 |
|
| |
Interest cost
|
|
|
17,548 |
|
|
|
16,635 |
|
|
|
12,820 |
|
|
|
4,400 |
|
|
|
7,700 |
|
|
|
5,007 |
|
|
|
3,504 |
|
|
|
1,152 |
|
| |
Expected return on plan assets
|
|
|
(18,075 |
) |
|
|
(18,795 |
) |
|
|
(18,616 |
) |
|
|
(6,205 |
) |
|
|
(356 |
) |
|
|
(247 |
) |
|
|
(195 |
) |
|
|
(61 |
) |
| |
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Unrecognized net loss (gain)
|
|
|
862 |
|
|
|
67 |
|
|
|
130 |
|
|
|
186 |
|
|
|
129 |
|
|
|
130 |
|
|
|
(15 |
) |
|
|
(26 |
) |
| |
|
Unrecognized prior service cost
|
|
|
2 |
|
|
|
3 |
|
|
|
2 |
|
|
|
3 |
|
|
|
65 |
|
|
|
65 |
|
|
|
51 |
|
|
|
73 |
|
| |
|
Unrecognized net transition (asset) obligation
|
|
|
— |
|
|
|
(1 |
) |
|
|
(8 |
) |
|
|
(12 |
) |
|
|
49 |
|
|
|
48 |
|
|
|
35 |
|
|
|
34 |
|
| |
|
Curtailments, settlements and terminations, net
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
819 |
|
|
|
6,492 |
|
|
|
79 |
|
|
|
— |
|
| |
|
Other
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,017 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
2,020 |
|
|
$ |
689 |
|
|
$ |
(3,588 |
) |
|
$ |
(979 |
) |
|
$ |
13,895 |
|
|
$ |
15,593 |
|
|
$ |
5,928 |
|
|
$ |
3,002 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
OPRB Plans | |
| |
|
| |
| |
|
|
|
Three | |
|
|
| |
|
Year | |
|
Year | |
|
Quarters | |
|
Quarter | |
| |
|
Ended | |
|
Ended | |
|
Ended | |
|
Ended | |
| |
|
December 31, | |
|
January 1, | |
|
January 3, | |
|
March 22, | |
| |
|
2005 | |
|
2005 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
|
Successor | |
|
Predecessor | |
| |
|
| |
|
| |
|
| |
|
| |
|
Components of net periodic benefit cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Service cost
|
|
$ |
406 |
|
|
$ |
93 |
|
|
$ |
65 |
|
|
$ |
21 |
|
| |
Interest cost
|
|
|
4,186 |
|
|
|
5,058 |
|
|
|
3,624 |
|
|
|
1,238 |
|
| |
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Unrecognized net loss
|
|
|
— |
|
|
|
28 |
|
|
|
17 |
|
|
|
56 |
|
| |
|
Unrecognized prior service benefit
|
|
|
(747 |
) |
|
|
(138 |
) |
|
|
(103 |
) |
|
|
(147 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
3,845 |
|
|
$ |
5,041 |
|
|
$ |
3,603 |
|
|
$ |
1,168 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average assumptions used to determine benefit
obligations at December 31, 2005 and January 1, 2005
are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
U.S. Pension | |
|
International | |
|
|
| |
|
Plans | |
|
Pension Plans | |
|
OPRB Plans | |
| |
|
| |
|
| |
|
| |
| |
|
2005 | |
|
2004 | |
|
2005 | |
|
2004 | |
|
2005 | |
|
2004 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Rate assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Discount rate
|
|
|
5.75 |
% |
|
|
5.75 |
% |
|
|
9.08 |
% |
|
|
8.70 |
% |
|
|
5.64 |
% |
|
|
5.75 |
% |
| |
Rate of compensation increase
|
|
|
2.50 |
% |
|
|
4.50 |
% |
|
|
7.08 |
% |
|
|
6.75 |
% |
|
|
4.76 |
% |
|
|
4.50 |
% |
Weighted-average assumptions used to determine net periodic
benefit cost for the 2005 and 2004 years are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
U.S. Pension | |
|
International | |
|
|
| |
|
Plans | |
|
Pension Plans | |
|
OPRB Plans | |
| |
|
| |
|
| |
|
| |
| |
|
2005 | |
|
2004 | |
|
2005 | |
|
2004 | |
|
2005 | |
|
2004 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Rate assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Discount rate
|
|
|
5.75 |
% |
|
|
6.25 |
% |
|
|
8.94 |
% |
|
|
8.93 |
% |
|
|
5.75 |
% |
|
|
6.25 |
% |
| |
Compensation increases
|
|
|
4.20 |
% |
|
|
4.50 |
% |
|
|
6.75 |
% |
|
|
6.98 |
% |
|
|
4.50 |
% |
|
|
4.50 |
% |
| |
Rate of return on plan assets
|
|
|
8.50 |
% |
|
|
8.75 |
% |
|
|
12.33 |
% |
|
|
11.11 |
% |
|
|
— |
|
|
|
— |
|
International plan discount rates, assumed rates of increase in
future compensation and expected long-term return on assets
differ from the assumptions used for U.S. plans due to
differences in the local economic conditions in the countries in
which the international plans are based.
74
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
The accumulated postretirement benefit obligation
(“APBO”) for the Company’s U.S. OPRB plan in
2005 and 2004 was determined using the following assumed annual
rate of increase in the per capita cost of covered health care
benefits:
| |
|
|
|
|
|
|
|
|
| |
|
Year Ended | |
|
Year Ended | |
| |
|
December 31, | |
|
January 1, | |
| Fiscal Year |
|
2005 | |
|
2005 | |
| |
|
| |
|
| |
|
2005
|
|
|
— |
|
|
|
10% |
|
|
2006
|
|
|
9 |
% |
|
|
9% |
|
|
2007
|
|
|
8 |
% |
|
|
8% |
|
|
2008
|
|
|
7 |
% |
|
|
7% |
|
|
2009
|
|
|
6 |
% |
|
|
6% |
|
|
2010
|
|
|
5.5 |
% |
|
|
5.5% |
|
|
2011 and thereafter
|
|
|
5.5 |
% |
|
|
5.5% |
|
A one-percentage-point change in assumed health care cost trend
rates would have the following impact on the Company’s OPRB
plans (in thousands):
| |
|
|
|
|
|
|
|
|
| |
|
One-Percentage-Point | |
|
One-Percentage-Point | |
| |
|
Increase | |
|
Decrease | |
| |
|
| |
|
| |
|
Increase (decrease) in service and interest cost
|
|
$ |
556 |
|
|
$ |
(49 |
) |
|
Increase (decrease) in APBO
|
|
$ |
5,480 |
|
|
$ |
(4,853 |
) |
The Company’s U.S. pension plan weighted-average asset
allocations at December 31, 2005 and January 1, 2005
by asset category, are as follows:
| |
|
|
|
|
|
|
|
|
|
| |
|
Plan Assets at | |
| |
|
| |
| |
|
December 31, | |
|
January 1, | |
| Asset Category |
|
2005 | |
|
2005 | |
| |
|
| |
|
| |
|
Fixed income securities
|
|
|
39.0 |
% |
|
|
38.2 |
% |
|
Equity securities
|
|
|
58.0 |
% |
|
|
58.0 |
% |
|
Alternative investments
|
|
|
3.0 |
% |
|
|
3.8 |
% |
| |
|
|
|
|
|
|
| |
Total
|
|
|
100 |
% |
|
|
100 |
% |
| |
|
|
|
|
|
|
The plan’s asset allocation includes a mix of fixed income
investments designed to reduce volatility and equity investments
designed to maintain funding ratios and long-term financial
health of the plan. The equity investments are diversified
across U.S. and international stocks as well as growth, value,
and small and large capitalizations.
Alternative investments such as private equity and distressed
debt are used to enhance long-term returns while improving
portfolio diversification. The Company employs a total return
investment approach whereby a mix of fixed income and equity
investments is used to maximize the long-term return of plan
assets with a prudent level of risk. The objectives of this
strategy are to achieve full funding of the accumulated benefit
obligation, and to achieve investment experience over time that
will minimize pension expense volatility and minimize the
Company’s contributions required to maintain full funding
status. Risk tolerance is established through careful
consideration of plan liabilities, plan funded status and
corporate financial condition. Investment risk is measured and
monitored on an ongoing basis through annual liability
measurements, periodic asset/liability studies and quarterly
investment portfolio reviews.
75
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
The following is the plan’s target asset mix, which
management believes provides the optimal tradeoff of
diversification and long-term asset growth:
| |
|
|
|
|
| |
|
Target | |
| Asset Class |
|
Allocation | |
| |
|
| |
|
Fixed income securities
|
|
|
40 |
% |
|
Equity securities
|
|
|
55 |
% |
|
Alternative investments
|
|
|
5 |
% |
The pension plan did not hold any of the Company’s common
stock at December 31, 2005 and January 1, 2005.
The Company determines the expected return on pension plan
assets based on an expectation of average annual returns over an
extended period of years. This expectation is based, in part, on
the actual returns achieved by the Company’s pension plans
over the prior ten-year period. The Company also considers the
weighted-average historical rate of returns on securities with
similar characteristics to those in which the Company’s
pension assets are invested.
The Company applies the “10% corridor” approach to
amortize unrecognized actuarial gains (losses) on both its U.S.
and international pension and OPRB plans. Under this approach,
only actuarial gains (losses) that exceed 10% of the greater of
the projected benefit obligation or the market-related value of
the plan assets are amortized. The amortization period is based
on the average remaining service period of active employees
expected to receive benefits under each plan. For the year ended
December 31, 2005, the average remaining service period
used to amortize unrecognized actuarial gains (losses) for its
domestic plans was approximately 10 years.
|
|
|
Plan Contributions and Estimated Future Benefit
Payments |
During 2005, the Company contributed $12 million to its
qualified U.S. pension plan, which included voluntary
contributions above the minimum requirements for the plan. Under
the Internal Revenue Service funding requirements, no
contribution will be required for 2006. However, the Company may
make contributions to its U.S. qualified plan in 2006 at
its election. The Company expects to make payments related to
its unfunded U.S. and foreign pension and OPRB plans of
$11.8 million in 2006. Future contributions to the
U.S. pension plan in excess of the minimum funding
requirements are voluntary and may change depending on the
Company’s operating performance or at management’s
discretion.
The following table presents estimated future benefit payments
(in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
International | |
|
|
| |
|
U.S. Pension | |
|
Pension | |
|
|
| Fiscal Year |
|
Plans | |
|
Plans | |
|
OPRB Plans | |
| |
|
| |
|
| |
|
| |
|
2006
|
|
$ |
23,658 |
|
|
$ |
4,454 |
|
|
$ |
5,639 |
|
|
2007
|
|
|
23,222 |
|
|
|
4,922 |
|
|
|
5,749 |
|
|
2008
|
|
|
22,902 |
|
|
|
5,529 |
|
|
|
5,778 |
|
|
2009
|
|
|
22,475 |
|
|
|
6,403 |
|
|
|
5,720 |
|
|
2010
|
|
|
22,163 |
|
|
|
6,986 |
|
|
|
5,611 |
|
|
2011-2015
|
|
|
105,801 |
|
|
|
47,451 |
|
|
|
25,922 |
|
| |
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
220,221 |
|
|
$ |
75,745 |
|
|
$ |
54,419 |
|
| |
|
|
|
|
|
|
|
|
|
76
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
|
|
|
Defined Contribution Plans |
The Company offers defined contribution plans to eligible
employees. Such employees may defer a percentage of their annual
compensation in accordance with plan guidelines. Some of these
plans provide for a Company match that is subject to a maximum
contribution as defined by the plan. Company contributions to
its defined contribution plans totaled $9.6 million,
$12.0 million, $5.6 million and $5.3 million in
the years ended December 31, 2005 and January 1, 2005,
three quarters ended January 3, 2004 and quarter ended
March 22, 2003, respectively.
The Company is also party to various industry-wide collective
bargaining agreements that provide pension benefits. Total
contributions to these plans for eligible participants were
approximately $3.6 million, $3.6 million,
$3.0 million and $0.9 million in the years ended
December 31, 2005 and January 1, 2005, three quarters
ended January 3, 2004 and quarter ended March 22,
2003, respectively.
|
|
|
Medicare Modernization Act |
The Medicare Prescription Drug, Improvements and Modernization
Act of 2003 (the “Act”) was signed into law in
December 2003. The Act introduced a prescription drug benefit
under Medicare (“Medicare Part D”), as well as a
federal subsidy to sponsors of retiree health care benefit plans
that provide a prescription drug benefit that is at least
actuarially equivalent to Medicare Part D. In May 2004, the
FASB issued Staff Position No. 106-2 (“FSP
106-2”), Accounting and Disclosure Requirements Related
to the Medicare Prescription Drug, Improvement and Modernization
Act of 2003. FSP 106-2 became effective for interim or
annual periods beginning after June 15, 2004. The Company
determined that the benefits provided by certain of its
postretirement health care plans are actuarially equivalent to
Medicare Part D and thus qualify for the subsidy under the
Act. The expected subsidy was recognized in the
2004 year-end measurement of obligations and reduced the
APBO by $8.1 million. This amount was based on the
estimated impact of the Act, pending further guidance. The
estimate was remeasured in 2005 based on final regulations and
other information and accordingly, the Company recorded an
increase in the APBO of $2.5 million, for a net
$5.6 million decrease in the APBO as a result of the Act.
The increase in the APBO of $2.5 million was recognized as
an actuarial loss in 2005. The net periodic benefit cost for
2005 was reduced by approximately $0.5 million due to the
expected subsidy.
Note 12 — Shareholders’ Equity
In connection with the going-private merger transaction
described in Note 3, shareholders’ equity was adjusted
to reflect Mr. Murdock’s continuing residual interest
in the Company at its original cost plus his share of the
Company’s earnings, losses, dividends and other equity
adjustments since the date of his original acquisition.
The Company’s authorized share capital as of
December 31, 2005 and January 1, 2005 consisted of
1,000 shares of $0.001 par value common stock of which
1,000 shares were issued and outstanding. All issued and
outstanding shares are owned by Dole Holding Company, LLC, a
Delaware limited liability company, and a direct, wholly-owned
subsidiary of HoldCo.
In July 2004, Dole Holding Company, LLC borrowed
$150 million under a Second Lien Senior Credit Agreement,
which has now been repaid. Amounts borrowed under this agreement
were available for distribution to HoldCo or contribution and/or
loan to the Company. During the third quarter of 2004,
$100 million of these borrowings were contributed to the
Company.
77
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
During the year ended December 31, 2005, the Company
declared and paid dividends of $77.3 million to Dole
Holding Company, LLC. As planned, the dividends are a partial
return of the $100 million capital contribution made to the
Company by Dole Holding Company, LLC during 2004.
During the year ended January 1, 2005, the Company paid
cash dividends of $20 million to Dole Holding Company, LLC.
In addition, the Company entered into a transaction with a
related party to exchange similarly valued land. The Company
subsequently leased the land to a subsidiary of HoldCo to be
used in the construction of a hotel, spa and wellbeing center by
such subsidiary. Due to its terms, the lease was treated for
accounting purposes as a distribution of land and reflected as a
non-cash dividend of $6.3 million to Dole Holding Company,
LLC in the consolidated financial statements. The non-cash
dividend represents the tax-adjusted value of land used in the
construction of the hotel, spa and wellbeing center.
No dividends were declared during the three quarters ended
January 3, 2004. Prior to the privatization, during the
quarter ended March 22, 2003, the Company declared and paid
dividends of approximately $8.4 million on its common
shares.
The Company’s ability to declare future dividends is
restricted under the terms of its senior secured credit
facilities and bond indentures.
Comprehensive income consists of changes to shareholders’
equity, other than contributions from or distributions to
shareholders, and net income. The Company’s other
comprehensive income principally consists of unrealized foreign
currency translation gains and losses, unrealized gains and
losses on cash flow hedging instruments and additional minimum
pension liability. The components of, and changes in,
accumulated other comprehensive income are presented in the
Company’s Consolidated Statements of Shareholders’
Equity.
Note 13 — Business Segments
The Company has four primary reportable operating segments:
fresh fruit, fresh vegetables, packaged foods, and fresh-cut
flowers. The fresh fruit segment contains several operating
segments that produce and market primarily fresh fruit to
wholesale, retail and institutional customers worldwide. The
fresh vegetables segment contains operating segments that
primarily produce and market commodity vegetables and
ready-to-eat packaged
salads to wholesale, retail and institutional customers mostly
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 packaged foods segment
contains several operating segments that produce and market
packaged foods, including fruit, juices and snack foods. The
Company’s fresh-cut flowers segment sources, imports and
markets fresh-cut flowers, grown mainly in Colombia, primarily
to wholesale florists and supermarkets in the United States.
These reportable segments are managed separately due to
differences in their products, production processes,
distribution channels and customer bases.
Management evaluates and monitors segment performance primarily
through earnings before interest expense and income taxes
(“EBIT”). EBIT is calculated by adding interest
expense and income tax expense to net income. In 2005, EBIT is
calculated by adding income from discontinued operations, net of
income tax expense, interest expense and income tax expense to
net income. Management believes that segment EBIT provides
useful information for analyzing the underlying business results
as well as allowing investors a means to evaluate the financial
results of each segment in relation to the Company as a whole.
EBIT is not defined under accounting principles generally
accepted in the United States of America (“GAAP”) and
should not be considered in isolation or as a substitute for net
income or cash flow measures prepared in accordance with GAAP or
as a measure of the Company’s profitability. Additionally,
the Company’s computation of EBIT may not be comparable to
other similarly titled measures computed by other companies,
because not all companies calculate EBIT in the same fashion.
78
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
Accounting policies for the primary reportable operating
segments, other operating segments, and corporate are the same
as those described in the summary of significant accounting
policies (Note 2). The results of operations and financial
position of the four primary reportable operating segments,
other operating segments and corporate were as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Three Quarters | |
|
Quarter | |
| |
|
|
|
|
|
Ended | |
|
Ended | |
| |
|
|
|
|
|
January 3, | |
|
March 22, | |
| |
|
2005 | |
|
2004 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
|
Successor | |
|
Predecessor | |
| |
|
| |
|
| |
|
| |
|
| |
| |
|
(In thousands) | |
|
Revenues from external customers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Fresh fruit
|
|
$ |
3,717,020 |
|
|
$ |
3,535,666 |
|
|
$ |
2,409,029 |
|
|
$ |
725,115 |
|
| |
Fresh vegetables
|
|
|
1,083,227 |
|
|
|
887,409 |
|
|
|
673,719 |
|
|
|
176,865 |
|
| |
Packaged foods
|
|
|
854,230 |
|
|
|
691,780 |
|
|
|
470,514 |
|
|
|
116,712 |
|
| |
Fresh-cut flowers
|
|
|
171,259 |
|
|
|
169,845 |
|
|
|
119,580 |
|
|
|
48,506 |
|
| |
Other operating segments
|
|
|
44,875 |
|
|
|
31,502 |
|
|
|
27,129 |
|
|
|
5,972 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
5,870,611 |
|
|
$ |
5,316,202 |
|
|
$ |
3,699,971 |
|
|
$ |
1,073,170 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
EBIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Fresh fruit
|
|
$ |
205,191 |
|
|
$ |
257,880 |
|
|
$ |
165,007 |
|
|
$ |
70,174 |
|
| |
Fresh vegetables
|
|
|
11,375 |
|
|
|
58,645 |
|
|
|
46,749 |
|
|
|
16,703 |
|
| |
Packaged foods
|
|
|
87,495 |
|
|
|
64,191 |
|
|
|
23,419 |
|
|
|
11,693 |
|
| |
Fresh-cut flowers
|
|
|
(5,094 |
) |
|
|
1,853 |
|
|
|
(5,602 |
) |
|
|
6,394 |
|
| |
Other operating segments
|
|
|
619 |
|
|
|
306 |
|
|
|
289 |
|
|
|
65 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total operating segments
|
|
|
299,586 |
|
|
|
382,875 |
|
|
|
229,862 |
|
|
|
105,029 |
|
| |
Corporate
|
|
|
(70,298 |
) |
|
|
(70,262 |
) |
|
|
(75,742 |
) |
|
|
(11,494 |
) |
|
Interest expense
|
|
|
142,716 |
|
|
|
152,704 |
|
|
|
124,491 |
|
|
|
19,647 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income tax expense
|
|
$ |
86,572 |
|
|
$ |
159,909 |
|
|
$ |
29,629 |
|
|
$ |
73,888 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
Corporate EBIT includes general and administrative costs not
allocated to operating segments.
Substantially all of the Company’s equity earnings in
unconsolidated subsidiaries, which have been included in EBIT in
the table above, relate to the fresh fruit operating segment.
79
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
| |
|
|
|
|
|
|
|
|
|
| |
|
December 31, | |
|
January 1, | |
| |
|
2005 | |
|
2005 | |
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
| |
|
| |
|
| |
| |
|
(In thousands) | |
|
Total assets
|
|
|
|
|
|
|
|
|
| |
Fresh fruit
|
|
$ |
2,301,090 |
|
|
$ |
2,285,228 |
|
| |
Fresh vegetables
|
|
|
451,490 |
|
|
|
429,556 |
|
| |
Packaged foods
|
|
|
639,999 |
|
|
|
563,297 |
|
| |
Fresh-cut flowers
|
|
|
153,565 |
|
|
|
144,137 |
|
| |
Other operating segments
|
|
|
12,478 |
|
|
|
11,886 |
|
| |
|
|
|
|
|
|
| |
Total operating segments
|
|
|
3,558,622 |
|
|
|
3,434,104 |
|
| |
Corporate
|
|
|
851,105 |
|
|
|
887,526 |
|
| |
|
|
|
|
|
|
| |
|
$ |
4,409,727 |
|
|
$ |
4,321,630 |
|
| |
|
|
|
|
|
|
Depreciation and amortization and capital additions by segment
were as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Three Quarters | |
|
Quarter | |
| |
|
|
|
|
|
Ended | |
|
Ended | |
| |
|
|
|
|
|
January 3, | |
|
March 22, | |
| |
|
2005 | |
|
2004 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
|
Successor | |
|
Predecessor | |
| |
|
| |
|
| |
|
| |
|
| |
| |
|
(In thousands) | |
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Fresh fruit
|
|
$ |
94,481 |
|
|
$ |
91,504 |
|
|
$ |
68,923 |
|
|
$ |
16,354 |
|
| |
Fresh vegetables
|
|
|
15,602 |
|
|
|
14,789 |
|
|
|
13,208 |
|
|
|
3,260 |
|
| |
Packaged foods
|
|
|
30,704 |
|
|
|
26,012 |
|
|
|
14,306 |
|
|
|
2,502 |
|
| |
Fresh-cut flowers
|
|
|
4,603 |
|
|
|
5,807 |
|
|
|
4,626 |
|
|
|
1,360 |
|
| |
Other operating segments
|
|
|
675 |
|
|
|
582 |
|
|
|
469 |
|
|
|
96 |
|
| |
Corporate
|
|
|
3,744 |
|
|
|
6,299 |
|
|
|
5,234 |
|
|
|
1,479 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
149,809 |
|
|
$ |
144,993 |
|
|
$ |
106,766 |
|
|
$ |
25,051 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital additions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Fresh fruit
|
|
$ |
100,358 |
|
|
$ |
59,471 |
|
|
$ |
77,054 |
|
|
$ |
1,630 |
|
| |
Fresh vegetables
|
|
|
17,691 |
|
|
|
12,219 |
|
|
|
12,407 |
|
|
|
35 |
|
| |
Packaged foods
|
|
|
21,845 |
|
|
|
18,382 |
|
|
|
7,901 |
|
|
|
1,898 |
|
| |
Fresh-cut flowers
|
|
|
2,324 |
|
|
|
5,220 |
|
|
|
1,136 |
|
|
|
29 |
|
| |
Other operating segments
|
|
|
2,555 |
|
|
|
852 |
|
|
|
1,279 |
|
|
|
— |
|
| |
Corporate
|
|
|
1,533 |
|
|
|
5,523 |
|
|
|
2,194 |
|
|
|
643 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
146,306 |
|
|
$ |
101,667 |
|
|
$ |
101,971 |
|
|
$ |
4,235 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
80
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
The Company’s revenues from external customers and tangible
long-lived assets by country/region were as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Three Quarters | |
|
Quarter | |
| |
|
|
|
|
|
Ended | |
|
Ended | |
| |
|
|
|
|
|
January 3, | |
|
March 22, | |
| |
|
2005 | |
|
2004 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
|
Successor | |
|
Predecessor | |
| |
|
| |
|
| |
|
| |
|
| |
| |
|
(In thousands) | |
|
Revenues from external customers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
United States
|
|
$ |
2,707,460 |
|
|
$ |
2,302,624 |
|
|
$ |
1,716,234 |
|
|
$ |
511,297 |
|
| |
Euro zone countries
|
|
|
1,077,639 |
|
|
|
1,036,441 |
|
|
|
691,988 |
|
|
|
204,206 |
|
| |
Japan
|
|
|
641,969 |
|
|
|
673,842 |
|
|
|
485,532 |
|
|
|
112,873 |
|
| |
Sweden
|
|
|
479,888 |
|
|
|
462,854 |
|
|
|
326,791 |
|
|
|
93,179 |
|
| |
Canada
|
|
|
141,642 |
|
|
|
99,484 |
|
|
|
57,311 |
|
|
|
17,235 |
|
| |
Other international
|
|
|
822,013 |
|
|
|
740,957 |
|
|
|
422,115 |
|
|
|
134,380 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
5,870,611 |
|
|
$ |
5,316,202 |
|
|
$ |
3,699,971 |
|
|
$ |
1,073,170 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
In the Other international category above, there are no
individual countries whose revenues from external customers are
considered material.
| |
|
|
|
|
|
|
|
|
|
| |
|
December 31, | |
|
January 1, | |
| |
|
2005 | |
|
2005 | |
| |
|
| |
|
| |
| |
|
Successor | |
|
Successor | |
| |
|
| |
|
| |
| |
|
(In thousands) | |
|
Tangible long-lived assets
|
|
|
|
|
|
|
|
|
| |
United States
|
|
$ |
707,690 |
|
|
$ |
731,033 |
|
| |
Oceangoing assets
|
|
|
219,703 |
|
|
|
244,970 |
|
| |
Philippines
|
|
|
142,273 |
|
|
|
119,942 |
|
| |
Costa Rica
|
|
|
130,421 |
|
|
|
114,763 |
|
| |
Honduras
|
|
|
85,184 |
|
|
|
87,255 |
|
| |
Chile
|
|
|
83,929 |
|
|
|
77,420 |
|
| |
Ecuador
|
|
|
81,323 |
|
|
|
77,435 |
|
| |
Other international
|
|
|
211,906 |
|
|
|
195,609 |
|
| |
|
|
|
|
|
|
| |
|
$ |
1,662,429 |
|
|
$ |
1,648,427 |
|
| |
|
|
|
|
|
|
Note 14 — Operating Leases and Other
Commitments
In addition to obligations recorded on the Company’s
Consolidated Balance Sheet as of December 31, 2005, the
Company has commitments under cancelable and non-cancelable
operating leases, primarily for land, equipment and office
warehouse facilities. A significant portion of the
Company’s lease payments are fixed. Total rental expense,
including rent related to cancelable and non-cancelable leases,
was $130 million, $101.4 million, $75.9 million,
and $22.5 million (net of sublease income of
$15.9 million, $15.1 million, $11.7 million and
$3.4 million) for the years ended December 31, 2005
and January 1, 2005, three quarters ended January 3,
2004 and quarter ended March 22, 2003, respectively.
The Company’s corporate aircraft lease agreement includes a
residual value guarantee. The maximum exposure, which would
occur if the fair value of the aircraft is less than
$20 million at the termination of the lease in 2010, is
approximately $8.2 million.
81
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
As of December 31, 2005, the Company’s aggregate
cancelable and non-cancelable minimum lease commitments,
including residual value guarantees, before sublease income,
were as follows (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Fiscal Year |
|
Cancelable | |
|
Non-Cancelable | |
|
Total | |
| |
|
| |
|
| |
|
| |
|
2006
|
|
$ |
9,651 |
|
|
$ |
93,938 |
|
|
$ |
103,589 |
|
|
2007
|
|
|
9,059 |
|
|
|
64,938 |
|
|
|
73,997 |
|
|
2008
|
|
|
9,274 |
|
|
|
56,695 |
|
|
|
65,969 |
|
|
2009
|
|
|
9,279 |
|
|
|
28,224 |
|
|
|
37,503 |
|
|
2010
|
|
|
8,736 |
|
|
|
27,725 |
|
|
|
36,461 |
|
|
Thereafter
|
|
|
58,104 |
|
|
|
85,269 |
|
|
|
143,373 |
|
| |
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
104,103 |
|
|
$ |
356,789 |
|
|
$ |
460,892 |
|
| |
|
|
|
|
|
|
|
|
|
Total expected future sublease income is $45.4 million.
The Company’s cancelable leases relate primarily to land
leases in the Philippines, where foreign land ownership is
prohibited under current law.
In order to secure sufficient product to meet demand and to
supplement the Company’s own production, the Company has
entered into non-cancelable agreements primarily with
independent growers primarily in Latin America to purchase
substantially all of their production subject to market demand
and product quality. Prices under these agreements are generally
fixed and contract terms range from one to ten years. Total
purchases under these agreements were $433.4 million,
$340.1 million, $242.3 million and $56.3 million
for the years ended December 31, 2005 and January 1,
2005, three quarters ended January 3, 2004 and quarter
ended March 22, 2003 respectively.
At December 31, 2005, aggregate future payments under such
purchase commitments (based on December 31, 2005 pricing
and volumes) are as follows (in thousands):
| |
|
|
|
|
| Fiscal Year |
|
Amount | |
| |
|
| |
|
2006
|
|
$ |
404,194 |
|
|
2007
|
|
|
300,773 |
|
|
2008
|
|
|
239,943 |
|
|
2009
|
|
|
208,598 |
|
|
2010
|
|
|
172,640 |
|
|
Thereafter
|
|
|
375,584 |
|
| |
|
|
|
| |
|
$ |
1,701,732 |
|
| |
|
|
|
In order to ensure a steady supply of packing supplies and to
maximize volume incentive rebates, the Company has entered into
contracts with certain suppliers for the purchase of packing
supplies, as defined in the respective agreements, over periods
of up to five years. Purchases under these contracts for the
years ended December 31, 2005 and January 1, 2005,
three quarters ended January 3, 2004 and quarter ended
March 22, 2003 were approximately $227.3 million,
$181.8 million, $117.8 million and $34.1 million,
respectively.
82
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
Under these contracts, the Company was committed at
December 31, 2005, to purchase packing supplies, assuming
current price levels, as follows (in thousands):
| |
|
|
|
|
| Fiscal Year |
|
Amount | |
| |
|
| |
|
2006
|
|
$ |
190,753 |
|
|
2007
|
|
|
106,007 |
|
|
2008
|
|
|
104,727 |
|
|
2009
|
|
|
30,885 |
|
|
2010
|
|
|
30,885 |
|
| |
|
|
|
| |
|
$ |
463,257 |
|
| |
|
|
|
The Company has numerous collective bargaining agreements with
various unions covering approximately 43% of the Company’s
hourly full time and seasonal employees. Of the unionized
employees, 43% are covered under a collective bargaining
agreement that will expire within one year and the remaining 57%
are covered under collective bargaining agreements expiring
beyond the upcoming year. These agreements are subject to
periodic negotiation and renewal. Failure to renew any of these
collective bargaining agreements may result in a strike or work
stoppage; however management does not expect that the outcome of
these negotiations and renewals will have a material adverse
impact on the Company’s financial condition or results of
operations.
Note 15 — Derivative Financial Instruments
The Company is exposed to foreign currency exchange rate
fluctuations, bunker fuel price fluctuations and interest rate
changes in the normal course of its business. As part of its
risk management strategy, the Company uses derivative
instruments to hedge certain foreign currency, bunker fuel and
interest rate exposures. The Company’s objective is to
offset gains and losses resulting from these exposures with
losses and gains on the derivative contracts used to hedge them,
thereby reducing volatility of earnings. The Company does not
hold or issue derivative financial instruments for trading or
speculative purposes.
Statement of Financial Accounting Standards No. 133
(“FAS 133”), Accounting for Derivative
Instruments and Hedging Activities, as amended, establishes
accounting and reporting standards requiring that every
derivative instrument be recorded in the balance sheet as either
an asset or liability and measured at fair value. FAS 133
also requires that changes in the derivative’s fair value
be recognized currently in earnings unless specific criteria are
met and that a company must formally document, designate and
assess the effectiveness of transactions that receive hedge
accounting. For those instruments that qualify for hedge
accounting as cash flow hedges, any unrealized gains or losses
are included in accumulated other comprehensive income, with the
corresponding asset or liability recorded on the balance sheet.
The Company’s hedges consist of cash flow hedges. Any
portion of a cash flow hedge that is deemed to be ineffective is
recognized into current period earnings. When the transaction
underlying the hedge is recognized into earnings, the related
other comprehensive income (loss) is reclassified to current
period earnings. Foreign currency exchange gains and losses
associated with hedges are recorded as a component of cost of
products sold in the consolidated statements of income. Gains
and losses related to the interest rate swap are recorded as a
component of interest expense in the consolidated statements of
income.
The Company estimates the fair values of its derivatives based
on quoted market prices or pricing models using current market
rates and records all derivatives on the balance sheet at fair
value.
83
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
Some of the Company’s divisions operate in functional
currencies other than the U.S. dollar. As a result, the
Company enters into cash flow derivative instruments to hedge
portions of anticipated revenue streams and operating expenses.
At December 31, 2005, the Company had forward contract
hedges for forecasted revenue transactions denominated in
Japanese yen and for forecasted operating expenses denominated
in Colombian pesos, Chilean pesos and Thai baht. The Company
uses foreign currency exchange forward contracts and
participating forward contracts to reduce its risk related to
anticipated dollar equivalent foreign currency cash flows. The
change in the fair value of these contracts relating to hedge
ineffectiveness was not significant.
In addition, the net assets of these divisions are exposed to
foreign currency translation gains and losses, which are
included as a component of accumulated other comprehensive
income in shareholders’ equity. The Company has
historically not attempted to hedge this equity risk.
The Company recorded a gain of $2 million, a loss of
$11.6 million and a loss of $8.6 million related to
the settlement of foreign currency exchange contracts for the
years ended December 31, 2005, January 1, 2005 and
January 3, 2004, respectively. At December 31, 2005,
certain Colombian peso hedges did not receive hedge accounting
treatment under FAS 133. The unrealized gain associated
with these hedges was $0.5 million.
At December 31, 2005, the gross notional and unrecognized
gains (losses) of the Company’s foreign currency hedges
were as follows (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Gross | |
|
Unrecognized | |
|
|
|
|
| |
|
Notional | |
|
Gains | |
|
Average Strike | |
|
Settlement | |
| |
|
Value | |
|
(Losses) | |
|
Price | |
|
Year | |
| |
|
| |
|
| |
|
| |
|
| |
|
Foreign Currency Hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Japanese yen
|
|
$ |
3,260 |
|
|
$ |
27 |
|
|
|
¥112.3 |
|
|
|
2006 |
|
|
Thai baht
|
|
|
51,999 |
|
|
|
353 |
|
|
|
THB 41.4 |
|
|
|
2006 |
|
|
Chilean peso
|
|
|
8,831 |
|
|
|
213 |
|
|
|
CLP 522.8 |
|
|
|
2006 |
|
|
Colombian peso
|
|
|
29,087 |
|
|
|
(134 |
) |
|
|
COP 2,288.1 |
|
|
|
2006 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$ |
459 |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
There were no outstanding foreign currency hedges at
January 1, 2005. The unrecognized gains and losses at
December 31, 2005 are expected to be recognized into
earnings during 2006.
The Company enters into bunker fuel hedges for its shipping
operations to reduce its risk related to price fluctuations on
anticipated bunker fuel purchases. At December 31, 2005,
the Company had Houston fuel oil forward contracts with a
notional value of $2.5 million that require conversion of
approximately 9,800 metric tons of fuel at a price of
$252 per metric ton. The Company also had Rotterdam fuel
oil forward contracts with a notional value of $2.5 million
that require conversion of approximately 9,900 metric tons of
fuel at a price of $253 per metric ton. Settlement of these
contracts occurred during the first quarter of 2006. The fair
values of the bunker fuel hedges were assets of
$0.5 million and $0.2 million at December 31,
2005 and January 1, 2005, respectively. The change in the
fair value of these contracts relating to hedge ineffectiveness
was not significant.
The Company recorded a gain of $3.3 million related to the
settlement of bunker fuel contracts for the year ended
December 31, 2005.
84
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
As discussed in Note 10, the Company entered into an
interest rate swap agreement to fix Term Loan A borrowings
under its recently repaid senior secured credit facilities,
which were denominated in Japanese yen, and bore interest at
certain percentages over Japanese LIBOR. The Company was exposed
to interest rate risk for changes in the Japanese LIBOR rate.
The interest rate swap agreement fixed the interest rate at
2.05%. The notional amount of the interest rate swap and the
termination date matched the principal amounts and maturity date
of Term Loan A. The fair value of the swap at
December 31, 2005 was an asset of $1.9 million. For
the year ended December 31, 2005, $1 million was
recognized as interest expense in the consolidated statement of
income related to the swap.
The counterparties to the foreign currency exchange forward
contracts, bunker fuel hedges and the interest rate swap consist
of a number of major international financial institutions. The
Company has established counterparty guidelines and regularly
monitors its positions and the financial strength of these
institutions. While counterparties to hedging contracts expose
the Company to credit-related losses in the event of a
counterparty’s non-performance, the risk would be limited
to the unrealized gains on such affected contracts. The Company
does not anticipate any such losses.
Note 16 — Contingencies
The Company is a guarantor of indebtedness of some of its key
fruit suppliers and other entities integral to the
Company’s operations. At December 31, 2005, guarantees
of $2.6 million consisted primarily of amounts advanced
under third party bank agreements to independent growers that
supply the Company with product. The Company has not
historically experienced any significant losses associated with
these guarantees.
As part of its normal business activities, the Company and its
subsidiaries also provide guarantees to various regulatory
authorities, primarily in Europe, in order to comply with
foreign regulations when operating businesses overseas. These
guarantees relate to customs duties and the now-eliminated
banana import license fees that were granted to the European
Union member states’ agricultural authority. These
guarantees are obtained from commercial banks in the form of
letters of credit or bank guarantees. In addition, the Company
issues letters of credit and bonds through major banking
institutions and insurance companies as required by certain
vendor and other operating agreements. As of December 31,
2005, total letters of credit and bonds outstanding were
$121.8 million.
The Company also provides various guarantees, mostly to foreign
banks, in the course of its normal business operations to
support the borrowings, leases and other obligations of its
subsidiaries. The Company guaranteed $127.7 million of its
subsidiaries’ obligations to their suppliers and other
third parties as of December 31, 2005.
The Company has change of control agreements with certain key
executives, under which severance payments and benefits would
become payable in the event of specified terminations of
employment following a change of control (as defined) of the
Company. The going-private merger transaction (Note 3) did
not trigger the change of control provisions as outlined in
these agreements. Refer to Item 11 of this
Form 10-K, under
the heading “Employment, Severance and Change of Control
Arrangements” for additional information concerning the
change of control agreements.
The Company is involved from time to time in claims and legal
actions incidental to its operations, both as plaintiff and
defendant. The Company has established what management currently
believes to be adequate reserves for pending legal matters.
These reserves are established as part of an ongoing worldwide
assessment of claims and legal actions that takes into
consideration such items as changes in the pending case load
(including resolved and new matters), opinions of legal counsel,
individual developments in court proceedings,
85
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
changes in the law, changes in business focus, changes in the
litigation environment, changes in opponent strategy and
tactics, new developments as a result of ongoing discovery, and
past experience in defending and settling similar claims. In the
opinion of management, after consultation with outside counsel,
the claims or actions to which the Company is a party are not
expected to have a material adverse effect, individually or in
the aggregate, on the Company’s financial condition or
results of operations.
A significant portion of the Company’s legal exposure
relates to lawsuits pending in the United States and in several
foreign countries, alleging injury as a result of exposure to
the agricultural chemical DBCP (1,2-dibromo-3-chloropropane).
DBCP was manufactured by several chemical companies including
Dow and Shell and registered by the U.S. government for use
on food crops. The Company and other growers applied DBCP on
banana farms in Latin America and the Philippines and on
pineapple farms in Hawaii. Specific periods of use varied among
the different locations. The Company halted all purchases of
DBCP, including for use in foreign countries, when the
U.S. EPA cancelled the registration of DBCP for use in the
United States in 1979. That cancellation was based in part on a
1977 study by a manufacturer which indicated an apparent link
between male sterility and exposure to DBCP among factory
workers producing the product, as well as early product testing
done by the manufacturers showing testicular effects on animals
exposed to DBCP. To date, there is no reliable evidence
demonstrating that field application of DBCP led to sterility
among farm workers, although that claim is made in the pending
lawsuits. Nor is there any reliable scientific evidence that
DBCP causes any other injuries in humans, although plaintiffs in
the various actions assert claims based on cancer, birth defects
and other general illnesses.
Currently there are 554 lawsuits, in various stages of
proceedings, alleging injury as a result of exposure to DBCP or
seeking enforcement of Nicaraguan judgments. Seventeen of these
lawsuits are currently pending in various jurisdictions in the
United States. One case pending in Los Angeles Superior Court
with 13 Nicaraguan plaintiffs has a trial date of
July 17, 2006. The remaining cases are pending in Latin
America and the Philippines, including 347 labor cases pending
in Costa Rica under that country’s national insurance
program. Claimed damages in DBCP cases worldwide total
approximately $35.2 billion, with the lawsuits in Nicaragua
representing approximately 85% of this amount. In almost all of
the non-labor cases, the Company is a joint defendant with the
major DBCP manufacturers and, typically, other banana growers.
Except as described below, none of these lawsuits has resulted
in a verdict or judgment against the Company.
In Nicaragua, 168 cases are currently filed in various courts
throughout the country, with all but one of the lawsuits brought
pursuant to Law 364, an October 2000 Nicaraguan statute that
contains substantive and procedural provisions that
Nicaragua’s Attorney General formally opined are
unconstitutional. In October 2003, the Supreme Court of
Nicaragua issued an advisory opinion, not connected with any
litigation, that Law 364 is constitutional.
Seventeen cases have resulted in judgments in Nicaragua:
$489.4 million (nine cases consolidated with 468 claimants)
on December 11, 2002; $82.9 million (one case with 58
claimants) on February 25, 2004; $15.7 million (one
case with 20 claimants) on May 25, 2004; $4 million
(one case with four claimants) on May 25, 2004;
$56.5 million (one case with 72 claimants) on June 14,
2004; $64.8 million (one case with 86 claimants) on
June 15, 2004; $27.7 million (one case with 39
claimants) on March 17, 2005.; $98.5 million (150
claimants) on August 8, 2005; and $46.4 million (one
case with 62 claimants) on August 20, 2005.
Thirty-two new cases have recently been filed in civil courts in
Managua (8) and Chinandega (24). In addition, there are 20
active cases currently pending in civil courts in Managua (10),
Chinandega (8) and Puerto Cabezas (2), all of which have
been brought under Law 364 except for one of the cases pending
in Chinandega. Six of the active cases pending before the court
in Chinandega have been consolidated for trial, which seeks
$3.4 billion on behalf of 1,708 claimants. Trial in this
consolidated case commenced November 25, 2005. In the 19
active cases under Law 364, except for one case in Chinandega
and one in Managua, the Company has sought to have the cases
returned to the United States pursuant to Law 364.
Notwithstanding, the Chinandega court denied the Company’s
request in the six consolidated cases pending there; the
86
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
Managua court denied the Company’s request with respect to
one of the cases pending there; and the court in Puerto Cabezas
denied the Company’s request with respect to the two cases
there. The Company’s requests as to eight of the cases in
Managua are still pending; and the Company expects to make
similar requests in the remaining two cases at the appropriate
time. The Company has appealed the two decisions of the court in
Puerto Cabezas, the decision of the court in Managua and the six
decisions of the court in Chinandega.
The claimants’ attempted enforcement of the
December 11, 2002 judgment for $489.4 million in the
United States resulted in a dismissal with prejudice of that
action by the United States District Court for the Central
District of California on October 20, 2003. The claimants
have voluntarily dismissed their appeal of that decision which
was pending before the United States Court of Appeals for the
Ninth Circuit. Defendants’ motion for sanctions against
Plaintiffs’ counsel is still pending before the Court of
Appeals in that case.
Claimants have also indicated their intent to seek enforcement
of the Nicaraguan judgments in Colombia, Ecuador, Venezuela and
other countries in Latin America and elsewhere, including the
United States. In Venezuela, the claimants are attempting to
enforce five of the Nicaraguan judgments in that country’s
Supreme Court: $489.4 million (December 11, 2002);
$82.9 million (February 25, 2004); $15.7 million
(May 25, 2004); $56.5 million (June 14, 2004);
and $64.8 million (June 15, 2004). An action recently
filed to enforce the $27.7 million Nicaraguan judgment
(March 17, 2005) in the Colombian Supreme Court was
dismissed. In Ecuador, the claimants attempted to enforce the
five Nicaraguan judgments issued between February 25, 2004
through June 15, 2004 in the Ecuador Supreme Court. The
First, Second and Third Chambers of the Ecuador Supreme Court
issued rulings refusing to consider those enforcement actions on
the ground that the Supreme Court was not a court of competent
jurisdiction for enforcement of a foreign judgment. The
plaintiffs subsequently refiled those five enforcement actions
in the civil court in Guayaquil, Ecuador. Two of these
subsequently filed enforcement actions have been dismissed by
the 3rd Civil Court — $15.7 million
(May 25, 2004) — and the 12th Civil
Court — $56.5 million (June 14,
2004) — in Guayaquil; plaintiffs have sought
reconsideration of those dismissals. The remaining three
enforcement actions are still pending.
The Company believes that none of the Nicaraguan civil trial
courts’ judgments will be enforceable against any Dole
entity in the U.S. or in any other country, because
Nicaragua’s Law 364 is unconstitutional and violates
international principles of due process. Among other things, Law
364 is an improper “special law” directed at
particular parties; it requires defendants to pay large,
non-refundable deposits in order to even participate in the
litigation; it provides a severely truncated procedural process;
it establishes an irrebuttable presumption of causation that is
contrary to the evidence and scientific data; and it sets
unreasonable minimum damages that must be awarded in every case.
As to all the DBCP matters, the Company has denied liability and
asserted substantial defenses. The Company has also engaged in
efforts to resolve pending litigation and claims in the U.S. and
Latin America. Although no assurance can be given concerning the
outcome of these cases, in the opinion of management, after
consultation with legal counsel and based on past experience
defending and settling DBCP claims, the pending lawsuits are not
expected to have a material adverse effect on the Company’s
financial condition or results of operations.
European Union Antitrust Inquiry and
U.S. Class Action Lawsuits: The European
Commission (“EC”) is investigating alleged violations
of European Union competition (antitrust) laws by banana
and pineapple importers and distributors operating within the
European Economic Area (“EEA”). On June 2 and 3,
2005, the EC conducted a search of certain of the Company’s
offices in Europe. During this same period, the EC also
conducted similar unannounced searches of other companies’
offices located in the European Union. The Company is
cooperating with the EC and has responded to the EC’s
information requests. Although no assurances can be given
concerning the course or outcome of that EC investigation, the
Company believes that it has not violated the European Union
competition laws.
87
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
Following the public announcement of the EC searches, a number
of class action lawsuits were filed against the Company and
three competitors in the U.S. District Court for the
Southern District of Florida. The lawsuits were filed on behalf
of entities that directly or indirectly purchased bananas from
the defendants and have now been consolidated into two separate
class action lawsuits: one by direct purchasers (customers); and
another by indirect purchasers (those who purchased bananas from
customers). Both consolidated class action lawsuits allege that
the defendants conspired to artificially raise or maintain
prices and control or restrict output of bananas. The Company
believes these lawsuits are without merit.
Honduran Tax Case: In 2005, the Company received a tax
assessment from Honduras of approximately $137 million
relating to the disposition of all of the Company’s
interest in Cervecería Hondureña, S.A in 2001. The
Company believes the assessment is without merit and filed an
appeal with the Honduran tax authorities, which was denied. As a
result of the denial in the administrative process, in order to
negate the tax assessment, on August 5, 2005, the Company
proceeded to the next stage of the appellate process by filing a
lawsuit against the Honduran government, in the Honduran
Administrative Tax Trial Court. The Honduran government is
seeking dismissal of the lawsuit and attachment of assets, which
the Company is challenging. No reserve has been provided for
this assessment.
Note 17 — Related Party Transactions
In September 1998, the Company acquired 60% of Saba. On
December 30, 2004, the Company acquired the remaining 40%
minority interest of Saba (Note 5). Prior to the
Company’s acquisition of the minority interest, the 40%
minority interest was held 25% by another Swedish company and
15% by a Swedish co-op. As part of its normal operations, Saba
routinely sells fresh fruit, vegetables and flowers to entities
in which these minority shareholders are principal owners.
Revenues from these entities were $349.6 million,
$251.3 million and $75.7 million during the year ended
January 1, 2005, three quarters ended January 3, 2004
and quarter ended March 22, 2003, respectively.
On March 28, 2003, the Company completed the going-private
merger transaction with DHM Holding Company, Inc. and became
wholly owned by David H. Murdock, the Company’s Chairman
and Chief Executive Officer, through DHM Holding Company, Inc.
(Note 3).
Mr. Murdock owns Castle & Cooke, Inc.
(“Castle”) as well as a transportation equipment
leasing company, a private dining club and a private country
club, which supply products and provide services to numerous
customers and patrons. During the years ended December 31,
2005 and January 1, 2005, three quarters ended
January 3, 2004 and quarter ended March 22, 2003, the
Company paid Mr. Murdock’s companies an aggregate of
approximately $7.2 million, $5.2 million,
$3.8 million and $1.2 million, respectively, primarily
for the rental of truck chassis, generator sets and warehousing
services. Castle purchased approximately $4 million,
$0.4 million, $0.3 million and $0.1 million of
products from the Company during the years ended
December 31, 2005 and January 1, 2005, three quarters
ended January 3, 2004 and quarter ended March 22,
2003, respectively. The Company had a number of other
transactions with Castle and other entities owned by
Mr. Murdock, generally on an arms-length basis, none of
which, individually or in the aggregate, were material.
The Company and Castle are responsible for 68% and 32%,
respectively, of all obligations under an aircraft lease
arrangement. The Company and Castle have agreed that each party
would be responsible for the direct costs associated with its
use of this aircraft, and that all other indirect costs would be
shared in proportion to each party’s lease obligation
percentage. During the years ended December 31, 2005 and
January 1, 2005, three quarters ended January 3, 2004
and quarter ended March 22, 2003, the Company’s
proportionate share of the direct and indirect costs for this
aircraft was $1.9 million, $2.3 million,
$1.5 million and $0.5 million, respectively.
88
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
In 2003, the Company and Castle began operating their risk
management departments on a joint basis. This arrangement
enables the Company and Castle to leverage their buying power to
optimize their position in the insurance market and take
advantage of the market relationships that both companies
developed over the years. The Company and Castle share insurance
procurement and premium costs based on the relative risk borne
by each company as determined under methodologies used by the
insurance underwriters. Administrative costs of the risk
management department are shared on a 50-50 basis. The
Company’s share of the risk management department’s
costs during each of the years ended December 31, 2005,
January 1, 2005 and January 3, 2004 were approximately
$0.2 million, $0.1 million and $0.1 million,
respectively.
The Company retains risk for commercial property losses
sustained by the Company and Castle totaling $4 million in
the aggregate and $4 million per occurrence, above which
the Company has coverage provided through third party insurance
carriers. The arrangement, entered into on April 1, 2005
and expiring March 31, 2006, provides for premiums to be
paid to the Company by Castle quarterly beginning March 31,
2005 in exchange for the Company’s retained risk. The
Company received approximately $0.7 million and
$1 million from Castle during the years ended
December 31, 2005 and January 1, 2005, respectively.
No amounts were paid by Castle under this arrangement during the
year ended January 3, 2004. The Company paid approximately
$0.2 million and $0.3 million to Castle for property
losses in 2005 and 2004, respectively.
During September 2004, the Company and Castle entered into a
tax-free real estate exchange agreement in which the Company
transferred unimproved and improved real properties located in
California and Hawaii, having an independently appraised
aggregate fair market value of approximately $17.3 million,
for Castle’s unimproved real property located in Westlake
Village, California having substantially the same, independently
appraised fair market value. Since the exchange of land was
between two entities under common control, no gain was
recognized on the exchange. Refer to Note 12 for further
information.
The Company had outstanding net accounts receivable of
$0.2 million from Castle at December 31, 2005 and
outstanding net accounts payable of $0.4 million to Castle
at January 1, 2005.
Note 18 — Impact of Hurricane Katrina
During the third quarter of 2005, the Company’s operations
in the Gulf Coast area of the United States were impacted by
Hurricane Katrina. The Company’s fresh fruit division
utilizes the Gulfport, Mississippi port facility to receive and
store product from its Latin American operations. The Gulfport
facility, which is leased from the Mississippi Port Authority,
incurred significant damage from Hurricane Katrina. As a result
of the damage sustained at the Gulfport terminal, the Company
diverted shipments to other Dole port facilities including
Freeport, Texas; Port Everglades, Florida; and Wilmington,
Delaware. The Company resumed discharging shipments of fruit and
other cargo in Gulfport at the beginning of the fourth quarter
of 2005. However, the facility has not yet been fully rebuilt.
The financial impact to the Company’s fresh fruit
operations includes the loss of cargo and equipment, property
damage and additional costs associated with re-routing product
to other ports in the region. Equipment that was destroyed or
damaged includes refrigerated and dry shipping containers, as
well as chassis and generator-sets used for land transportation
of the shipping containers.
During 2005, the Company recorded a total charge related to
Hurricane Katrina of $10.1 million. The charge included
write-offs of owned assets with a net book value of
$4.1 million, direct incremental expenses of
$4.1 million and leased assets of $1.9 million
representing amounts due to lessors. The Company maintains
customary insurance for its property, including shipping
containers, as well as for business interruption. In 2005, the
Company collected $6 million from insurance carriers
related to cargo and property damage and recorded a receivable
of $3.4 million at December 31, 2005 for insurance
recoveries. Of the $3.4 million receivable balance the
Company collected an additional $3.1 million from insurance
carriers subsequent to December 31, 2005. During March
2006, the Company received an additional $2 million. The
Company is
89
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
continuing to work with its insurers to evaluate the extent of
the costs incurred as a result of the hurricane damage and to
determine the extent of the insurance coverage for that damage.
Note 19 — Subsequent Events
Dividends: In January 2006, the Company declared and paid
dividends of $3.4 million to its parent company, Dole
Holding Company, LLC. In April 2006, the Company declared and
paid a dividend of approximately $160 million to Dole
Holding Company, LLC, which the latter used to repay the
outstanding principal of its second lien senior credit facility,
together with accrued but unpaid interest and a prepayment
premium.
European Union Banana Import Regime: On January 1,
2006, the European Union (“EU”) implemented a new
“tariff only” import regime for bananas. The 2001 EC/
US Understanding on Bananas required the EU to implement a
tariff only banana import system on or before January 1,
2006, and the EU’s banana regime change was therefore
expected by that date.
Banana imports from Latin America are now subject to import
license requirements only and a tariff of 176 euro per metric
ton for entry into the EU market. Under the EU’s previous
banana regime, banana imports from Latin America were subject to
a tariff of 75 euro per metric ton and were also subject to both
import license requirements and volume quotas. License
requirements and volume quotas had the effect of limiting access
to the EU banana market.
Although all Latin bananas are now subject to a tariff of 176
euro per metric ton, up to 775,000 metric tons of bananas from
African, Caribbean, and Pacific (“ACP”) countries may
be imported to the EU duty-free. This preferential treatment of
a zero tariff on up to 775,000 tons of ACP banana imports, as
well as the 176 euro per metric ton tariff applied to Latin
banana imports, is currently being challenged by Panama,
Honduras and Nicaragua at the World Trade Organization
(“WTO”). The current tariff applied to Latin banana
imports may be lowered and the ACP preference of a zero tariff
may be affected depending on the outcome of these WTO
proceedings, but the WTO proceedings are only in their initial
stage and may take several years to conclude.
Business Restructuring: In the first quarter of 2006, the
commercial relationship substantially ended between Dole’s
wholly owned subsidiary, Saba, and Saba’s largest customer.
Saba is a leading importer and distributor of fruit, vegetables
and flowers in Scandinavia. Saba’s financial results are
included in Dole’s fresh fruit reporting segment. Other
than the expected charges described below, the loss of this
customer’s business is not expected to be material to
Dole’s ongoing earnings. In connection with this recent
event, Dole plans on restructuring certain lines of Saba’s
business and expects to incur related charges, both in the first
quarter of 2006 and in subsequent fiscal quarters. These charges
are currently estimated at approximately $18 million in the
aggregate. However, the timing and exact amount of the charges
are yet to be determined, as well as Dole’s potential
contractual claims against this customer.
Capital Contribution: On March 3, 2006, DHM Holding
Company, Inc. (“HoldCo”) executed a $150 million
senior secured term loan agreement. In March 2006, HoldCo drew
$50 million and contributed $28.4 million to Dole
Holding Company, LLC, the Company’s parent, which
contributed such funds to the Company. The Company intends to
dividend this entire amount by the end of 2006 back to Dole
Holding Company, LLC for further dividend to HoldCo.
Refinancing Transaction: On April 12, 2006, the
Company completed an amendment and restatement of its senior
secured credit facilities. The Company obtained
$975 million of term loan facilities and $100 million
in a pre-funded letter of credit facility. The proceeds of the
term loans were used to repay the outstanding term loans under
the Company’s existing senior secured credit facilities. In
addition, the Company paid a dividend of approximately
$160 million to its immediate parent, Dole Holding Company,
LLC, which proceeds were used to repay its Second Lien term
loan. The terms and covenants under the new senior secured
90
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
credit facilities are similar to those under the Company’s
existing senior secured credit facilities except that the new
facilities do not contain financial maintenance or maximum
capital expenditure covenants.
Additionally, the Company entered into a new asset based
revolving credit facility of $350 million. The facility
will be secured and will be subject to a borrowing base
consisting of up to 85% of eligible accounts receivable plus a
predetermined percentage of eligible inventory.
The purposes of the refinancing include increasing the combined
size of the Company’s revolving credit and letter of credit
facilities and eliminating certain financial maintenance
covenants, realizing currency gains arising out of the
Company’s existing senior secured credit facilities, and
refinancing of the higher-cost bank indebtedness of Dole Holding
Company, LLC, at the lower-cost Dole Food Company, Inc. level.
In connection with the refinancing, the Company obtained a
waiver, with respect to the first quarter ended March 25,
2006, for certain covenants contained in the prior senior
secured credit facilities.
Note 20 — Guarantor Financial Information
In connection with the issuance of the 2011 Notes in March 2003
and the 2010 Notes in May 2003, all of the Company’s
wholly-owned domestic subsidiaries (“Guarantors”) have
fully and unconditionally guaranteed, on a joint and several
basis, the Company’s obligations under the indentures
related to such Notes and to the Company’s 2009 Notes and
2013 Debentures (the “Guarantees”). Each Guarantee is
subordinated in right of payment to the Guarantors’
existing and future senior debt, including obligations under the
senior secured credit facility, and will rank pari passu with
all senior subordinated indebtedness of the applicable Guarantor.
The accompanying guarantor consolidating financial information
is presented on the equity method of accounting for all periods
presented. Under this method, investments in subsidiaries are
recorded at cost and adjusted for the Company’s share in
the subsidiaries’ cumulative results of operations, capital
contributions and distributions and other changes in equity.
Elimination entries relate primarily to the elimination of
investments in subsidiaries and associated intercompany balances
and transactions.
The following are consolidating statements of income of the
Company for the years ended December 31, 2005 and
January 1, 2005, three quarters ended January 3, 2004
and the quarter ended March 22, 2003; condensed
consolidating balance sheets as of December 31, 2005 and
January 1, 2005 and condensed consolidating statements of
cash flows for the years ended December 31, 2005 and
January 1, 2005, three quarters ended January 3, 2004
and quarter ended March 22, 2003.
91
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
CONSOLIDATING STATEMENT OF INCOME
SUCCESSOR
For the Year Ended December 31, 2005
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Dole Food | |
|
|
|
Non | |
|
|
|
|
| |
|
Company, Inc. | |
|
Guarantors | |
|
Guarantors | |
|
Eliminations | |
|
Total | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
|
(In thousands) | |
|
Revenues, net
|
|
$ |
570,215 |
|
|
$ |
2,328,866 |
|
|
$ |
4,160,366 |
|
|
$ |
(1,188,836 |
) |
|
$ |
5,870,611 |
|
|
Cost of products sold
|
|
|
432,539 |
|
|
|
2,157,163 |
|
|
|
3,761,446 |
|
|
|
(1,168,882 |
) |
|
|
5,182,266 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Gross margin
|
|
|
137,676 |
|
|
|
171,703 |
|
|
|
398,920 |
|
|
|
(19,954 |
) |
|
|
688,345 |
|
|
Selling, marketing and general and administrative expenses
|
|
|
130,927 |
|
|
|
123,650 |
|
|
|
228,512 |
|
|
|
(19,954 |
) |
|
|
463,135 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Operating income
|
|
|
6,749 |
|
|
|
48,053 |
|
|
|
170,408 |
|
|
|
— |
|
|
|
225,210 |
|
|
Equity in subsidiary income
|
|
|
156,484 |
|
|
|
172,347 |
|
|
|
— |
|
|
|
(328,831 |
) |
|
|
— |
|
|
Other income (expense), net
|
|
|
(43,701 |
) |
|
|
— |
|
|
|
38,348 |
|
|
|
— |
|
|
|
(5,353 |
) |
|
Interest income
|
|
|
460 |
|
|
|
1,118 |
|
|
|
4,471 |
|
|
|
— |
|
|
|
6,049 |
|
|
Interest expense
|
|
|
111,400 |
|
|
|
295 |
|
|
|
31,021 |
|
|
|
— |
|
|
|
142,716 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Income from continuing operations before income taxes, minority
interest expense and equity earnings
|
|
|
8,592 |
|
|
|
221,223 |
|
|
|
182,206 |
|
|
|
(328,831 |
) |
|
|
83,190 |
|
|
Income tax expense (benefit)
|
|
|
(34,921 |
) |
|
|
65,017 |
|
|
|
14,424 |
|
|
|
— |
|
|
|
44,520 |
|
| |
Minority interest expense, net of income tax expense
|
|
|
1,461 |
|
|
|
270 |
|
|
|
1,513 |
|
|
|
— |
|
|
|
3,244 |
|
|
Equity in earnings of unconsolidated subsidiaries, net of income
tax expense
|
|
|
— |
|
|
|
(145 |
) |
|
|
(6,481 |
) |
|
|
— |
|
|
|
(6,626 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Income from continuing operations, net of income tax expense
|
|
|
42,052 |
|
|
|
156,081 |
|
|
|
172,750 |
|
|
|
(328,831 |
) |
|
|
42,052 |
|
| |
Income from discontinued operations, net of income tax expense
|
|
|
2,044 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,044 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net income
|
|
$ |
44,096 |
|
|
$ |
156,081 |
|
|
$ |
172,750 |
|
|
$ |
(328,831 |
) |
|
$ |
44,096 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
92
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
CONSOLIDATING STATEMENT OF INCOME
SUCCESSOR
For the Year Ended January 1, 2005
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Dole Food | |
|
|
|
Non | |
|
|
|
|
| |
|
Company, Inc. | |
|
Guarantors | |
|
Guarantors | |
|
Eliminations | |
|
Total | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
|
(In thousands) | |
|
Revenues, net
|
|
$ |
501,209 |
|
|
$ |
1,969,079 |
|
|
$ |
3,926,186 |
|
|
$ |
(1,080,272 |
) |
|
$ |
5,316,202 |
|
|
Cost of products sold
|
|
|
390,000 |
|
|
|
1,753,620 |
|
|
|
3,494,536 |
|
|
|
(1,063,914 |
) |
|
|
4,574,242 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Gross margin
|
|
|
111,209 |
|
|
|
215,459 |
|
|
|
431,650 |
|
|
|
(16,358 |
) |
|
|
741,960 |
|
|
Selling, marketing and general and administrative expenses
|
|
|
123,134 |
|
|
|
112,519 |
|
|
|
205,653 |
|
|
|
(16,358 |
) |
|
|
424,948 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Operating income (loss)
|
|
|
(11,925 |
) |
|
|
102,940 |
|
|
|
225,997 |
|
|
|
— |
|
|
|
317,012 |
|
|
Equity in subsidiary income
|
|
|
233,197 |
|
|
|
190,756 |
|
|
|
— |
|
|
|
(423,953 |
) |
|
|
— |
|
|
Other income (expense), net
|
|
|
(50 |
) |
|
|
— |
|
|
|
(8,687 |
) |
|
|
— |
|
|
|
(8,737 |
) |
|
Interest income
|
|
|
246 |
|
|
|
265 |
|
|
|
3,696 |
|
|
|
— |
|
|
|
4,207 |
|
|
Interest expense
|
|
|
132,572 |
|
|
|
221 |
|
|
|
19,911 |
|
|
|
— |
|
|
|
152,704 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Income from continuing operations before income taxes, minority
interest expense and equity earnings
|
|
|
88,896 |
|
|
|
293,740 |
|
|
|
201,095 |
|
|
|
(423,953 |
) |
|
|
159,778 |
|
|
Income tax expense (benefit)
|
|
|
(47,219 |
) |
|
|
59,488 |
|
|
|
13,222 |
|
|
|
— |
|
|
|
25,491 |
|
|
Minority interest expense, net of income tax expense
|
|
|
1,697 |
|
|
|
2,536 |
|
|
|
5,967 |
|
|
|
— |
|
|
|
10,200 |
|
|
Equity in earnings of unconsolidated subsidiaries, net of income
tax expense
|
|
|
— |
|
|
|
(124 |
) |
|
|
(10,207 |
) |
|
|
— |
|
|
|
(10,331 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net income
|
|
$ |
134,418 |
|
|
$ |
231,840 |
|
|
$ |
192,113 |
|
|
$ |
(423,953 |
) |
|
$ |
134,418 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
CONSOLIDATING STATEMENT OF INCOME
SUCCESSOR
For the Three Quarters Ended January 3, 2004
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Dole Food | |
|
|
|
Non | |
|
|
|
|
| |
|
Company, Inc. | |
|
Guarantors | |
|
Guarantors | |
|
Eliminations | |
|
Total | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
|
(In thousands) | |
|
Revenues, net
|
|
$ |
380,573 |
|
|
$ |
1,407,740 |
|
|
$ |
2,702,360 |
|
|
$ |
(790,702 |
) |
|
$ |
3,699,971 |
|
|
Cost of products sold
|
|
|
317,376 |
|
|
|
1,261,579 |
|
|
|
2,424,691 |
|
|
|
(790,702 |
) |
|
|
3,212,944 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Gross margin
|
|
|
63,197 |
|
|
|
146,161 |
|
|
|
277,669 |
|
|
|
— |
|
|
|
487,027 |
|
|
Selling, marketing and general and administrative expenses
|
|
|
110,468 |
|
|
|
79,524 |
|
|
|
131,606 |
|
|
|
— |
|
|
|
321,598 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Operating income (loss)
|
|
|
(47,271 |
) |
|
|
66,637 |
|
|
|
146,063 |
|
|
|
— |
|
|
|
165,429 |
|
|
Equity in subsidiary income
|
|
|
185,447 |
|
|
|
136,898 |
|
|
|
— |
|
|
|
(322,345 |
) |
|
|
— |
|
|
Other income (expense), net
|
|
|
(3,944 |
) |
|
|
106 |
|
|
|
(14,703 |
) |
|
|
— |
|
|
|
(18,541 |
) |
|
Interest income
|
|
|
231 |
|
|
|
261 |
|
|
|
3,884 |
|
|
|
— |
|
|
|
4,376 |
|
|
Interest expense
|
|
|
104,750 |
|
|
|
607 |
|
|
|
19,134 |
|
|
|
— |
|
|
|
124,491 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Income from continuing operations before income taxes, minority
interest expense and equity earnings
|
|
|
29,713 |
|
|
|
203,295 |
|
|
|
116,110 |
|
|
|
(322,345 |
) |
|
|
26,773 |
|
|
Income tax expense (benefit)
|
|
|
6,491 |
|
|
|
17,920 |
|
|
|
(17,899 |
) |
|
|
— |
|
|
|
6,512 |
|
|
Minority interest expense, net of income tax expense
|
|
|
105 |
|
|
|
(876 |
) |
|
|
3,628 |
|
|
|
— |
|
|
|
2,857 |
|
|
Equity in earnings of unconsolidated subsidiaries, net of income
tax expense
|
|
|
— |
|
|
|
(77 |
) |
|
|
(5,636 |
) |
|
|
— |
|
|
|
(5,713 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net income
|
|
$ |
23,117 |
|
|
$ |
186,328 |
|
|
$ |
136,017 |
|
|
$ |
(322,345 |
) |
|
$ |
23,117 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
CONSOLIDATING STATEMENT OF INCOME
PREDECESSOR
For the Quarter Ended March 22, 2003
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Dole Food | |
|
|
|
Non | |
|
|
|
|
| |
|
Company, Inc. | |
|
Guarantors | |
|
Guarantors | |
|
Eliminations | |
|
Total | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
|
(In thousands) | |
|
Revenues, net
|
|
$ |
96,185 |
|
|
$ |
432,831 |
|
|
$ |
803,294 |
|
|
$ |
(259,140 |
) |
|
$ |
1,073,170 |
|
|
Cost of products sold
|
|
|
69,640 |
|
|
|
371,625 |
|
|
|
712,914 |
|
|
|
(259,140 |
) |
|
|
895,039 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Gross margin
|
|
|
26,545 |
|
|
|
61,206 |
|
|
|
90,380 |
|
|
|
— |
|
|
|
178,131 |
|
|
Selling, marketing and general and administrative expenses
|
|
|
28,887 |
|
|
|
23,285 |
|
|
|
37,169 |
|
|
|
— |
|
|
|
89,341 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Operating income (loss)
|
|
|
(2,342 |
) |
|
|
37,921 |
|
|
|
53,211 |
|
|
|
— |
|
|
|
88,790 |
|
|
Equity in subsidiary income
|
|
|
73,874 |
|
|
|
51,568 |
|
|
|
— |
|
|
|
(125,442 |
) |
|
|
— |
|
|
Other income (expense), net
|
|
|
51 |
|
|
|
— |
|
|
|
146 |
|
|
|
— |
|
|
|
197 |
|
|
Interest income
|
|
|
1,179 |
|
|
|
119 |
|
|
|
1,402 |
|
|
|
— |
|
|
|
2,700 |
|
|
Interest expense
|
|
|
17,831 |
|
|
|
28 |
|
|
|
1,788 |
|
|
|
— |
|
|
|
19,647 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Income from continuing operations before income taxes, minority
interest expense and equity earnings
|
|
|
54,931 |
|
|
|
89,580 |
|
|
|
52,971 |
|
|
|
(125,442 |
) |
|
|
72,040 |
|
|
Income tax expense (benefit)
|
|
|
(6,073 |
) |
|
|
16,024 |
|
|
|
3,149 |
|
|
|
— |
|
|
|
13,100 |
|
|
Minority interest expense, net of income tax expense
|
|
|
216 |
|
|
|
(119 |
) |
|
|
975 |
|
|
|
— |
|
|
|
1,072 |
|
|
Equity in earnings of unconsolidated subsidiaries, net of income
tax expense
|
|
|
— |
|
|
|
— |
|
|
|
(2,920 |
) |
|
|
— |
|
|
|
(2,920 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net income
|
|
$ |
60,788 |
|
|
$ |
73,675 |
|
|
$ |
51,767 |
|
|
$ |
(125,442 |
) |
|
$ |
60,788 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
CONDENSED CONSOLIDATING BALANCE SHEET
SUCCESSOR
As of December 31, 2005
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Dole Food | |
|
|
|
Non | |
|
|
|
|
| |
|
Company, Inc. | |
|
Guarantors | |
|
Guarantors | |
|
Eliminations | |
|
Total | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
|
(In thousands) | |
|
ASSETS |
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cash and cash equivalents
|
|
$ |
12,698 |
|
|
$ |
(5,453 |
) |
|
$ |
41,567 |
|
|
$ |
— |
|
|
$ |
48,812 |
|
| |
Receivables, net of allowances
|
|
|
121,316 |
|
|
|
116,226 |
|
|
|
400,094 |
|
|
|
— |
|
|
|
637,636 |
|
| |
Inventories
|
|
|
101,935 |
|
|
|
171,601 |
|
|
|
349,961 |
|
|
|
— |
|
|
|
623,497 |
|
| |
Prepaid expenses
|
|
|
5,663 |
|
|
|
10,071 |
|
|
|
43,130 |
|
|
|
— |
|
|
|
58,864 |
|
| |
Deferred income tax assets
|
|
|
15,946 |
|
|
|
15,282 |
|
|
|
3,528 |
|
|
|
— |
|
|
|
34,756 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total current assets
|
|
|
257,558 |
|
|
|
307,727 |
|
|
|
838,280 |
|
|
|
— |
|
|
|
1,403,565 |
|
| |
Investments
|
|
|
2,271,031 |
|
|
|
1,708,078 |
|
|
|
75,200 |
|
|
|
(3,977,556 |
) |
|
|
76,753 |
|
| |
Property, plant and equipment, net
|
|
|
299,100 |
|
|
|
360,886 |
|
|
|
848,611 |
|
|
|
— |
|
|
|
1,508,597 |
|
| |
Goodwill
|
|
|
18,224 |
|
|
|
145,702 |
|
|
|
376,354 |
|
|
|
— |
|
|
|
540,280 |
|
| |
Intangible assets, net
|
|
|
710,743 |
|
|
|
13,687 |
|
|
|
2,270 |
|
|
|
— |
|
|
|
726,700 |
|
| |
Other assets, net
|
|
|
34,679 |
|
|
|
9,643 |
|
|
|
109,510 |
|
|
|
— |
|
|
|
153,832 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total assets
|
|
$ |
3,591,335 |
|
|
$ |
2,545,723 |
|
|
$ |
2,250,225 |
|
|
$ |
(3,977,556 |
) |
|
$ |
4,409,727 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Accounts payable
|
|
$ |
(121,890 |
) |
|
$ |
249,560 |
|
|
$ |
283,781 |
|
|
$ |
— |
|
|
$ |
411,451 |
|
| |
Accrued liabilities
|
|
|
97,397 |
|
|
|
178,582 |
|
|
|
155,058 |
|
|
|
— |
|
|
|
431,037 |
|
| |
Current portion of long-term debt
|
|
|
(300 |
) |
|
|
885 |
|
|
|
24,435 |
|
|
|
— |
|
|
|
25,020 |
|
| |
Notes payable
|
|
|
— |
|
|
|
1,119 |
|
|
|
275 |
|
|
|
— |
|
|
|
1,394 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total current liabilities
|
|
|
(24,793 |
) |
|
|
430,146 |
|
|
|
463,549 |
|
|
|
— |
|
|
|
868,902 |
|
| |
Intercompany payables (receivables)
|
|
|
1,072,418 |
|
|
|
(229,126 |
) |
|
|
(843,292 |
) |
|
|
— |
|
|
|
— |
|
| |
Long-term debt
|
|
|
1,216,090 |
|
|
|
2,451 |
|
|
|
782,302 |
|
|
|
— |
|
|
|
2,000,843 |
|
| |
Deferred income tax liabilities
|
|
|
294,420 |
|
|
|
32,128 |
|
|
|
29,099 |
|
|
|
— |
|
|
|
355,647 |
|
| |
Other long-term liabilities
|
|
|
416,657 |
|
|
|
39,684 |
|
|
|
89,964 |
|
|
|
— |
|
|
|
546,305 |
|
| |
Minority interests
|
|
|
— |
|
|
|
6,325 |
|
|
|
15,162 |
|
|
|
— |
|
|
|
21,487 |
|
| |
Total shareholders’ equity
|
|
|
616,543 |
|
|
|
2,264,115 |
|
|
|
1,713,441 |
|
|
|
(3,977,556 |
) |
|
|
616,543 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total liabilities and shareholders’ equity
|
|
$ |
3,591,335 |
|
|
$ |
2,545,723 |
|
|
$ |
2,250,225 |
|
|
$ |
(3,977,556 |
) |
|
$ |
4,409,727 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
CONDENSED CONSOLIDATING BALANCE SHEET
SUCCESSOR
As of January 1, 2005
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Dole Food | |
|
|
|
Non | |
|
|
|
|
| |
|
Company, Inc. | |
|
Guarantors | |
|
Guarantors | |
|
Eliminations | |
|
Total | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
|
(In thousands) | |
|
ASSETS |
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cash and cash equivalents
|
|
$ |
9,236 |
|
|
$ |
3,279 |
|
|
$ |
66,702 |
|
|
$ |
— |
|
|
$ |
79,217 |
|
| |
Receivables, net of allowances
|
|
|
194,538 |
|
|
|
25,750 |
|
|
|
397,664 |
|
|
|
— |
|
|
|
617,952 |
|
| |
Inventories
|
|
|
65,340 |
|
|
|
163,799 |
|
|
|
279,752 |
|
|
|
— |
|
|
|
508,891 |
|
| |
Prepaid expenses
|
|
|
7,239 |
|
|
|
11,861 |
|
|
|
44,642 |
|
|
|
— |
|
|
|
63,742 |
|
| |
Deferred income tax assets
|
|
|
14,875 |
|
|
|
13,427 |
|
|
|
5,262 |
|
|
|
— |
|
|
|
33,564 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total current assets
|
|
|
291,228 |
|
|
|
218,116 |
|
|
|
794,022 |
|
|
|
— |
|
|
|
1,303,366 |
|
| |
Investments
|
|
|
2,406,115 |
|
|
|
1,926,079 |
|
|
|
92,928 |
|
|
|
(4,330,641 |
) |
|
|
94,481 |
|
| |
Property, plant and equipment, net
|
|
|
303,129 |
|
|
|
366,142 |
|
|
|
847,084 |
|
|
|
— |
|
|
|
1,516,355 |
|
| |
Goodwill
|
|
|
18,219 |
|
|
|
143,794 |
|
|
|
374,852 |
|
|
|
— |
|
|
|
536,865 |
|
| |
Intangible assets, net
|
|
|
713,613 |
|
|
|
14,534 |
|
|
|
10,344 |
|
|
|
— |
|
|
|
738,491 |
|
| |
Other assets, net
|
|
|
49,705 |
|
|
|
8,836 |
|
|
|
73,531 |
|
|
|
— |
|
|
|
132,072 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total assets
|
|
$ |
3,782,009 |
|
|
$ |
2,677,501 |
|
|
$ |
2,192,761 |
|
|
$ |
(4,330,641 |
) |
|
$ |
4,321,630 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Accounts payable
|
|
$ |
6,370 |
|
|
$ |
103,613 |
|
|
$ |
290,129 |
|
|
$ |
— |
|
|
$ |
400,112 |
|
| |
Accrued liabilities
|
|
|
113,035 |
|
|
|
182,202 |
|
|
|
152,633 |
|
|
|
— |
|
|
|
447,870 |
|
| |
Current portion of long-term debt
|
|
|
(335 |
) |
|
|
701 |
|
|
|
30,912 |
|
|
|
— |
|
|
|
31,278 |
|
| |
Notes payable
|
|
|
— |
|
|
|
624 |
|
|
|
— |
|
|
|
— |
|
|
|
624 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total current liabilities
|
|
|
119,070 |
|
|
|
287,140 |
|
|
|
473,674 |
|
|
|
— |
|
|
|
879,884 |
|
| |
Intercompany payables (receivables)
|
|
|
682,783 |
|
|
|
(92,030 |
) |
|
|
(590,753 |
) |
|
|
— |
|
|
|
— |
|
| |
Long-term debt
|
|
|
1,598,674 |
|
|
|
1,565 |
|
|
|
236,781 |
|
|
|
— |
|
|
|
1,837,020 |
|
| |
Deferred income tax liabilities
|
|
|
304,605 |
|
|
|
35,848 |
|
|
|
46,182 |
|
|
|
— |
|
|
|
386,635 |
|
| |
Other long-term liabilities
|
|
|
399,004 |
|
|
|
38,581 |
|
|
|
82,409 |
|
|
|
— |
|
|
|
519,994 |
|
| |
Minority interests
|
|
|
— |
|
|
|
7,600 |
|
|
|
12,624 |
|
|
|
— |
|
|
|
20,224 |
|
| |
Total shareholders’ equity
|
|
|
677,873 |
|
|
|
2,398,797 |
|
|
|
1,931,844 |
|
|
|
(4,330,641 |
) |
|
|
677,873 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total liabilities and shareholders’ equity
|
|
$ |
3,782,009 |
|
|
$ |
2,677,501 |
|
|
$ |
2,192,761 |
|
|
$ |
(4,330,641 |
) |
|
$ |
4,321,630 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
97
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SUCCESSOR
For the Year Ended December 31, 2005
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Dole Food | |
|
|
|
Non | |
|
|
|
|
| |
|
Company, Inc. | |
|
Guarantors | |
|
Guarantors | |
|
Eliminations | |
|
Total | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
|
(In thousands) | |
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Intercompany dividend income
|
|
$ |
570,000 |
|
|
$ |
566,713 |
|
|
$ |
— |
|
|
$ |
(1,136,713 |
) |
|
$ |
— |
|
| |
Operating activities
|
|
|
(73,474 |
) |
|
|
29,202 |
|
|
|
116,861 |
|
|
|
— |
|
|
|
72,589 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cash flow provided by operating activities
|
|
|
496,526 |
|
|
|
595,915 |
|
|
|
116,861 |
|
|
|
(1,136,713 |
) |
|
|
72,589 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Proceeds from sales of assets
|
|
|
3,016 |
|
|
|
1,255 |
|
|
|
7,458 |
|
|
|
— |
|
|
|
11,729 |
|
| |
Proceeds from sales of investments and businesses, net of cash
disposed
|
|
|
— |
|
|
|
— |
|
|
|
7,402 |
|
|
|
— |
|
|
|
7,402 |
|
| |
Investments and acquisitions
|
|
|
— |
|
|
|
— |
|
|
|
(51,460 |
) |
|
|
— |
|
|
|
(51,460 |
) |
| |
Capital additions
|
|
|
(2,284 |
) |
|
|
(30,001 |
) |
|
|
(99,210 |
) |
|
|
— |
|
|
|
(131,495 |
) |
| |
Repurchase of common stock and settlement of stock options in
going- private merger transaction
|
|
|
(499 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(499 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Cash flow provided by (used in) investing activities
|
|
|
233 |
|
|
|
(28,746 |
) |
|
|
(135,810 |
) |
|
|
— |
|
|
|
(164,323 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Short-term debt borrowings
|
|
|
— |
|
|
|
1,591 |
|
|
|
16,592 |
|
|
|
— |
|
|
|
18,183 |
|
| |
Short-term debt repayments
|
|
|
— |
|
|
|
(10,299 |
) |
|
|
(16,317 |
) |
|
|
— |
|
|
|
(26,616 |
) |
| |
Long-term debt borrowings, net of debt issuance costs
|
|
|
604,000 |
|
|
|
2,055 |
|
|
|
969,814 |
|
|
|
— |
|
|
|
1,575,869 |
|
| |
Long-term debt repayments
|
|
|
(1,020,047 |
) |
|
|
(989 |
) |
|
|
(396,377 |
) |
|
|
— |
|
|
|
(1,417,413 |
) |
| |
Dividends paid to minority shareholders
|
|
|
— |
|
|
|
(1,546 |
) |
|
|
(1,290 |
) |
|
|
— |
|
|
|
(2,836 |
) |
| |
Intercompany dividends
|
|
|
— |
|
|
|
(566,713 |
) |
|
|
(570,000 |
) |
|
|
1,136,713 |
|
|
|
— |
|
| |
Dividends paid
|
|
|
(77,250 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(77,250 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Cash flow provided by (used in) financing activities
|
|
|
(493,297 |
) |
|
|
(575,901 |
) |
|
|
2,422 |
|
|
|
1,136,713 |
|
|
|
69,937 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Effect of foreign currency exchange rate changes on cash
|
|
|
— |
|
|
|
— |
|
|
|
(8,608 |
) |
|
|
— |
|
|
|
(8,608 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Increase (decrease) in cash and cash equivalents
|
|
|
3,462 |
|
|
|
(8,732 |
) |
|
|
(25,135 |
) |
|
|
— |
|
|
|
(30,405 |
) |
| |
Cash and cash equivalents at beginning of period
|
|
|
9,236 |
|
|
|
3,279 |
|
|
|
66,702 |
|
|
|
— |
|
|
|
79,217 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cash and cash equivalents at end of period
|
|
$ |
12,698 |
|
|
$ |
(5,453 |
) |
|
$ |
41,567 |
|
|
$ |
— |
|
|
$ |
48,812 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
98
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SUCCESSOR
For the Year Ended January 1, 2005
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Dole Food | |
|
|
|
Non | |
|
|
|
|
| |
|
Company, Inc. | |
|
Guarantors | |
|
Guarantors | |
|
Eliminations |
|
Total | |
| |
|
| |
|
| |
|
| |
|
|
|
| |
| |
|
(In thousands) | |
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Cash flow provided by (used in) operating activities
|
|
$ |
(54,868 |
) |
|
$ |
37,027 |
|
|
$ |
235,233 |
|
|
$ |
— |
|
|
$ |
217,392 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Proceeds from sales of assets
|
|
|
3,854 |
|
|
|
379 |
|
|
|
7,202 |
|
|
|
— |
|
|
|
11,435 |
|
| |
Investments and acquisitions
|
|
|
(169,629 |
) |
|
|
(16,906 |
) |
|
|
(3,156 |
) |
|
|
— |
|
|
|
(189,691 |
) |
| |
Capital additions
|
|
|
(5,940 |
) |
|
|
(19,677 |
) |
|
|
(76,050 |
) |
|
|
— |
|
|
|
(101,667 |
) |
| |
Repurchase of common stock and settlement of stock options in
going-private merger transaction
|
|
|
(1,300 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,300 |
) |
| |
Transaction costs paid in going- private merger transaction
|
|
|
(361 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(361 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Cash flow used in investing activities
|
|
|
(173,376 |
) |
|
|
(36,204 |
) |
|
|
(72,004 |
) |
|
|
— |
|
|
|
(281,584 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Short-term debt borrowings
|
|
|
56 |
|
|
|
24,617 |
|
|
|
32,528 |
|
|
|
— |
|
|
|
57,201 |
|
| |
Short-term debt repayments
|
|
|
— |
|
|
|
(1,631 |
) |
|
|
(33,630 |
) |
|
|
— |
|
|
|
(35,261 |
) |
| |
Long-term debt borrowings, net of debt issuance costs
|
|
|
585,150 |
|
|
|
837 |
|
|
|
20,083 |
|
|
|
— |
|
|
|
606,070 |
|
| |
Long-term debt repayments
|
|
|
(435,150 |
) |
|
|
(851 |
) |
|
|
(158,837 |
) |
|
|
— |
|
|
|
(594,838 |
) |
| |
Dividends paid to minority shareholders
|
|
|
— |
|
|
|
(18 |
) |
|
|
(5,583 |
) |
|
|
— |
|
|
|
(5,601 |
) |
| |
Dividends paid
|
|
|
(20,000 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(20,000 |
) |
| |
Capital contributions
|
|
|
100,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
100,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Cash flow provided by (used in) financing activities
|
|
|
230,056 |
|
|
|
22,954 |
|
|
|
(145,439 |
) |
|
|
— |
|
|
|
107,571 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Effect of foreign currency exchange rate changes on cash
|
|
|
— |
|
|
|
— |
|
|
|
2,356 |
|
|
|
— |
|
|
|
2,356 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Increase in cash and cash equivalents
|
|
|
1,812 |
|
|
|
23,777 |
|
|
|
20,146 |
|
|
|
— |
|
|
|
45,735 |
|
| |
Cash and cash equivalents at beginning of period
|
|
|
7,424 |
|
|
|
(20,498 |
) |
|
|
46,556 |
|
|
|
— |
|
|
|
33,482 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cash and cash equivalents at end of period
|
|
$ |
9,236 |
|
|
$ |
3,279 |
|
|
$ |
66,702 |
|
|
$ |
— |
|
|
$ |
79,217 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SUCCESSOR
For the Three Quarters Ended January 3, 2004
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Dole Food | |
|
|
|
Non | |
|
|
|
|
| |
|
Company, Inc. | |
|
Guarantors | |
|
Guarantors | |
|
Eliminations |
|
Total | |
| |
|
| |
|
| |
|
| |
|
|
|
| |
| |
|
(In thousands) | |
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Cash flow provided by (used in) operating activities
|
|
$ |
32,919 |
|
|
$ |
(3,675 |
) |
|
$ |
307,867 |
|
|
$ |
— |
|
|
$ |
337,111 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Proceeds from sales of assets
|
|
|
43,425 |
|
|
|
3,186 |
|
|
|
4,776 |
|
|
|
— |
|
|
|
51,387 |
|
| |
Proceeds from sales of businesses, net of cash disposed
|
|
|
— |
|
|
|
— |
|
|
|
7,837 |
|
|
|
— |
|
|
|
7,837 |
|
| |
Investments and acquisitions
|
|
|
(1,032 |
) |
|
|
(1,293 |
) |
|
|
(10,182 |
) |
|
|
— |
|
|
|
(12,507 |
) |
| |
Capital additions
|
|
|
(4,404 |
) |
|
|
(18,043 |
) |
|
|
(79,524 |
) |
|
|
— |
|
|
|
(101,971 |
) |
| |
Repurchase of common stock and settlement of stock options in
going-private merger transaction
|
|
|
(943,070 |
) |
|
|
— |
|
|
|
(525,000 |
) |
|
|
— |
|
|
|
(1,468,070 |
) |
| |
Transaction costs paid in going-private merger transaction
|
|
|
(69,597 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(69,597 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Cash flow used in investing activities
|
|
|
(974,678 |
) |
|
|
(16,150 |
) |
|
|
(602,093 |
) |
|
|
— |
|
|
|
(1,592,921 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Short-term debt borrowings
|
|
|
— |
|
|
|
1,028 |
|
|
|
— |
|
|
|
— |
|
|
|
1,028 |
|
| |
Short-term debt repayments
|
|
|
— |
|
|
|
(875 |
) |
|
|
(11,336 |
) |
|
|
— |
|
|
|
(12,211 |
) |
| |
Long-term debt borrowings, net of debt issuance costs
|
|
|
1,207,275 |
|
|
|
1,266 |
|
|
|
921,747 |
|
|
|
— |
|
|
|
2,130,288 |
|
| |
Long-term debt repayments
|
|
|
(914,683 |
) |
|
|
(700 |
) |
|
|
(680,035 |
) |
|
|
— |
|
|
|
(1,595,418 |
) |
| |
Dividends paid to minority shareholders
|
|
|
— |
|
|
|
(755 |
) |
|
|
(4,796 |
) |
|
|
— |
|
|
|
(5,551 |
) |
| |
Capital contributions
|
|
|
125,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
125,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Cash flow provided by (used in) financing activities
|
|
|
417,592 |
|
|
|
(36 |
) |
|
|
225,580 |
|
|
|
— |
|
|
|
643,136 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Effect of foreign currency exchange rate changes on cash
|
|
|
— |
|
|
|
— |
|
|
|
5,156 |
|
|
|
— |
|
|
|
5,156 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Decrease in cash and cash equivalents
|
|
|
(524,167 |
) |
|
|
(19,861 |
) |
|
|
(63,490 |
) |
|
|
— |
|
|
|
(607,518 |
) |
| |
Cash and cash equivalents at beginning of period
|
|
|
531,591 |
|
|
|
(637 |
) |
|
|
110,046 |
|
|
|
— |
|
|
|
641,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cash and cash equivalents at end of period
|
|
$ |
7,424 |
|
|
$ |
(20,498 |
) |
|
$ |
46,556 |
|
|
$ |
— |
|
|
$ |
33,482 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
DOLE FOOD COMPANY, INC.
NOTES TO CONSOLIDATED
STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
PREDECESSOR
For the Quarter Ended March 22, 2003
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Dole Food | |
|
|
|
Non | |
|
|
|
|
| |
|
Company, Inc. | |
|
Guarantors | |
|
Guarantors | |
|
Eliminations |
|
Total | |
| |
|
| |
|
| |
|
| |
|
|
|
| |
| |
|
(In thousands) | |
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Cash flow provided by (used in) operating activities
|
|
$ |
146,297 |
|
|
$ |
2,259 |
|
|
$ |
(146,743 |
) |
|
$ |
— |
|
|
$ |
1,813 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Proceeds from sales of assets
|
|
|
834 |
|
|
|
33 |
|
|
|
876 |
|
|
|
— |
|
|
|
1,743 |
|
| |
Capital additions
|
|
|
(621 |
) |
|
|
— |
|
|
|
(3,614 |
) |
|
|
— |
|
|
|
(4,235 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Cash flow provided by (used in) investing activities
|
|
|
213 |
|
|
|
33 |
|
|
|
(2,738 |
) |
|
|
— |
|
|
|
(2,492 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Short-term debt borrowings
|
|
|
— |
|
|
|
1,786 |
|
|
|
6,150 |
|
|
|
— |
|
|
|
7,936 |
|
| |
Short-term debt repayments
|
|
|
(4,353 |
) |
|
|
(1,730 |
) |
|
|
(751 |
) |
|
|
— |
|
|
|
(6,834 |
) |
| |
Long-term debt borrowings
|
|
|
— |
|
|
|
15 |
|
|
|
5,019 |
|
|
|
— |
|
|
|
5,034 |
|
| |
Long-term debt repayments
|
|
|
— |
|
|
|
(143 |
) |
|
|
(6,634 |
) |
|
|
— |
|
|
|
(6,777 |
) |
| |
Proceeds from issuance of common stock
|
|
|
2,768 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,768 |
|
| |
Dividends paid
|
|
|
(8,440 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8,440 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Cash flow provided by (used in) financing activities
|
|
|
(10,025 |
) |
|
|
(72 |
) |
|
|
3,784 |
|
|
|
— |
|
|
|
(6,313 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Effect of foreign currency exchange rate changes on cash
|
|
|
— |
|
|
|
— |
|
|
|
1,025 |
|
|
|
— |
|
|
|
1,025 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Increase (decrease) in cash and cash equivalents
|
|
|
136,485 |
|
|
|
2,220 |
|
|
|
(144,672 |
) |
|
|
— |
|
|
|
(5,967 |
) |
| |
Cash and cash equivalents at beginning of period
|
|
|
395,106 |
|
|
|
(2,857 |
) |
|
|
254,718 |
|
|
|
— |
|
|
|
646,967 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cash and cash equivalents at end of period
|
|
$ |
531,591 |
|
|
$ |
(637 |
) |
|
$ |
110,046 |
|
|
$ |
— |
|
|
$ |
641,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101
Quarterly Financial Information (Unaudited)
The following table presents summarized quarterly results (in
thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Quarter Ended | |
| |
|
| |
| |
|
March 26, 2005 | |
|
June 18, 2005 | |
|
October 8, 2005 | |
|
December 31, 2005 | |
| 2005 |
|
Successor | |
|
Successor | |
|
Successor | |
|
Successor | |
| |
|
| |
|
| |
|
| |
|
| |
|
Revenues, net
|
|
$ |
1,442,133 |
|
|
$ |
1,526,351 |
|
|
$ |
1,645,009 |
|
|
$ |
1,257,118 |
|
|
Gross margin
|
|
|
215,947 |
|
|
|
220,792 |
|
|
|
163,365 |
|
|
|
88,241 |
|
|
Net income (loss)
|
|
|
17,154 |
|
|
|
32,328 |
|
|
|
17,604 |
|
|
|
(22,990 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Quarter Ended | |
| |
|
| |
| |
|
March 27, 2004 | |
|
June 19, 2004 | |
|
October 9, 2004 | |
|
January 1, 2005 | |
| 2004 |
|
Successor | |
|
Successor | |
|
Successor | |
|
Successor | |
| |
|
| |
|
| |
|
| |
|
| |
|
Revenues, net
|
|
$ |
1,254,584 |
|
|
$ |
1,315,959 |
|
|
$ |
1,521,504 |
|
|
$ |
1,224,155 |
|
|
Gross margin
|
|
|
204,070 |
|
|
|
218,560 |
|
|
|
166,973 |
|
|
|
152,357 |
|
|
Net income
|
|
|
60,834 |
|
|
|
67,943 |
|
|
|
4,933 |
|
|
|
708 |
|
During the fourth quarter of 2005, the Company resolved a
contingency related to the 2001 disposition of the
Company’s interest in Cervecería Hondureña, S.A.
As a result, the Company realized income of $2 million, net
of income taxes, which has been recorded as income from
discontinued operations. In addition, the Company recorded
$4.8 million in income from continuing operations related
to the collection of a fully reserved receivable balance and
interest income.
102
|
|
| Item 9. |
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure |
None.
|
|
| Item 9A. |
Controls and Procedures |
An evaluation was carried out as of December 31, 2005 under
the supervision and with the participation of Dole’s
management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of our disclosure
controls and procedures, as defined in Rule 15d-15(e) under
the Securities Exchange Act. Based upon this evaluation,
Dole’s Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures were
effective as of December 31, 2005. No change in our
internal control over financial reporting identified in
connection with this evaluation that occurred during our fourth
quarter of 2005 has materially affected, or is reasonably likely
to materially affect, Dole’s internal control over
financial reporting.
We have concluded that a “material weakness” (defined
below) in internal control with respect to certain aspects of
accounting for income taxes existed as of December 31,
2005. The matter principally concerns controls and procedures
related to the identification and recording of deferred taxes on
the US GAAP vs. income tax basis difference of Dole’s
foreign equity-method investments. Under applicable accounting
pronouncements, deferred income taxes must be provided on the
undistributed earnings of a foreign subsidiary, unless such
earnings are considered to be permanently reinvested outside the
United States. However, in the case of certain equity
investments, due to the lack of control over the equity
investment, it is not possible to establish that earnings are
permanently reinvested outside the United States. In those
cases, tax must be provided on the difference between the book
and tax basis in the investment. In the case of a foreign equity
investment held by another foreign company, US taxes could apply
to undistributed earnings under Subpart F of the Internal
Revenue Code. In addition, foreign taxes, such as withholding
taxes, could apply if these undistributed earnings are ever
distributed in the future. Dole did not evaluate the need for
deferred taxes on this type of equity investment. The error was
discovered by our independent auditors during the course of the
audit of the 2005 accounts. This error occurred as the result of
human error, in that Dole personnel responsible for the area of
accounting for income taxes did not recognize the need to record
these deferred taxes. In correcting this matter in the 2005
financial statements included in this Form 10-K, Dole
recorded a deferred tax liability in the amount of
$3.8 million; approximately $2 million of this entry
reduced net income and there was a $1.8 million adjustment
to the balance sheet. These amounts were not material to our
financial statements. We also have revised our procedures for
accounting for income taxes to include a step to evaluate the
need for deferred taxes on equity investments. In addition, Dole
is considering other process and control improvements in the
area of accounting for income taxes.
Although the presence of a material weakness in a company’s
internal control over financial reporting (defined below) could
well mean that such company’s disclosure controls and
procedures (defined below) are ineffective, we have concluded,
after a careful review of the facts and circumstances, and
viewing our disclosure controls and procedures as a whole, that
Dole’s disclosure controls and procedures were effective as
of December 31, 2005.
We reach this conclusion for the following principal reasons.
First, the matter involved is a specific, technical area of tax
accounting (described above) that does not have broader
implications or significant effects for Dole or its financial
statements. Second, the matter resulted from a human error, in
that the specific tax accounting issue was simply missed and was
not caught during our extensive internal review process. The
immaterial financial statement adjustments described above
resulted from the application of this specific tax accounting
requirement to one foreign company in which we (as one of only
two stockholders) have a minority interest but account for the
investment on the equity method. We have only a small number of
such investments, and any associated deferred income tax
liability related to book to tax basis differences for such
remaining investments is believed to be insignificant to
Dole’s financial statements. The specific tax accounting
issue has now been raised to a level of high focus within Dole.
As a result, this error will not recur and we believe that the
control deficiency concerning the error has been remedied.
Third, our controls and procedures already included the
provision of extensive training to our tax accounting personnel,
using both outside consultants and frequent tax accounting
seminars. We will now provide additional training to our tax
103
accounting personnel to help ensure that similar errors do not
occur. Had we provided more complete training, the specific tax
accounting issue might well have been spotted. Fourth, the
matter did not, in fact, have a material effect on our financial
statements. Fifth, the matter involved a non-cash deferred tax
amount, and the timing of a potential future cash impact on
Dole, if any, would be largely unpredictable. Sixth, when the
matter came to the attention of Dole personnel, the senior
officers who make our disclosure decisions were immediately and
fully informed of the matter and its ramifications.
Notwithstanding our conclusion that we had a material weakness,
as of December 31, 2005, in internal control with respect
to certain aspects of accounting for income taxes, we have
concluded that our disclosure controls and procedures were
effective as of December 31, 2006.
With respect to internal control over financial reporting, a
“material weakness” is a control deficiency, or
combination thereof, that results in more than a remote
likelihood that a material misstatement of our financial
statements would not be prevented or detected, while a
“significant deficiency” is a control deficiency, or
combination thereof, that results in more than a remote
likelihood that a more-than-inconsequential misstatement of our
financial statements would not be prevented or detected.
“Disclosure controls and procedures” means controls
and other procedures designed to ensure that information
required to be disclosed by us in our SEC filings is timely
recorded, processed, summarized and reported. Disclosure
controls and procedures include controls and procedures designed
to ensure that information required to be disclosed in our SEC
reports is accumulated and communicated to our senior management
to allow timely decisions regarding required disclosures.
Disclosure controls go beyond financial statements, and involve
all forms of disclosure a company is required to make; the
purpose of disclosure controls and procedures is to bring issues
to light that need to be disclosed. “Internal control over
financial reporting” is a process to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements in accordance with GAAP,
including those policies and procedures that: pertain to the
maintenance of reasonably detailed records that accurately and
fairly reflect our transactions and asset dispositions; provide
reasonable assurance that transactions are recorded to permit
preparation of GAAP financial statements, and that receipts and
expenditures are being made only in accordance with
authorizations of management and directors; and provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that
could have a material effect on our financial statements.
|
|
| Item 9B. |
Other Information |
None.
PART III
|
|
| Item 10. |
Directors and Executive Officers of the Registrant |
Below is a list of the names and ages of all directors and
executive officers of Dole as of March 15, 2006, indicating
their positions with Dole and their principal occupations during
the past five years. The current terms of the executive officers
will expire at the next organizational meeting of Dole’s
Board of Directors or at such time as their successors are
elected.
David H. Murdock, Chairman of the Board and Chief Executive
Officer. Mr. Murdock, 82, joined Dole as Chairman of the
Board and Chief Executive Officer in July 1985. He has been
Chairman of the Board, Chief Executive Officer and Director of
Castle & Cooke, Inc., a Hawaii corporation, since
October 1995 (Mr. Murdock has beneficially owned all of the
capital stock of Castle & Cooke, Inc. since September
2000). Since June 1982, he has been Chairman of the Board and
Chief Executive Officer of Flexi-Van Leasing, Inc., a Delaware
corporation wholly owned by Mr. Murdock. Mr. Murdock
also is the sole owner and developer of the Sherwood Country
Club in Ventura County, California, and numerous other real
estate developments. Mr. Murdock also is the sole
stockholder of numerous corporations engaged in a variety of
business ventures and in the manufacture of industrial and
building products. Mr. Murdock is Chairman of the Executive
Committee and of the Corporate Compensation and Benefits
Committee of Dole’s Board of Directors.
104
C. Michael Carter, Executive Vice President, General
Counsel and Corporate Secretary, and Director.
Mr. Carter, 62, became Dole’s Senior Vice President,
General Counsel and Corporate Secretary in July 2003, Executive
Vice President, General Counsel and Corporate Secretary in July
2004, and a director of Dole in April 2003. Mr. Carter
joined Dole in October 2000 as Vice President, General Counsel
and Corporate Secretary. Prior to his employment by Dole,
Mr. Carter had served as Executive Vice President, General
Counsel and Corporate Secretary of Pinkerton’s Inc. Prior
to Pinkerton’s, Inc., Mr. Carter held positions at
Concurrent Computer Corporation, Nabisco Group Holdings, The
Singer Company and the law firm of Winthrop, Stimson, Putnam and
Roberts.
Andrew J. Conrad, Ph.D., Director. Dr. Conrad,
42, became a director in July 2003. Dr. Conrad was a
co-founder of the National Genetics Institute and has been its
chief scientific officer since 1992. The National Genetics
Institute is now a subsidiary of Laboratory Corporation of
America.
Richard J. Dahl, President, Chief Operating Officer and
Director. Mr. Dahl, 54, became Dole’s Senior Vice
President and Chief Financial Officer in July 2003, Dole’s
President and Chief Operating Officer in July 2004, and a
director of Dole in April 2003. Mr. Dahl joined Dole as
Vice President and Chief Financial Officer in June 2002, after
serving as President and Chief Operating Officer of Pacific
Century Financial Corporation and Bank of Hawaii. Prior to
Pacific Century, Mr. Dahl held various positions at
Ernst & Young. Mr. Dahl is also a director of
IHOP, Inc. Mr. Dahl is Chairman of the Finance Committee of
Dole’s Board of Directors.
David A. DeLorenzo, Director. Mr. DeLorenzo, 59,
joined Dole in 1970. He was President of Dole Fresh Fruit
Company from September 1986 to June 1992, President of Dole Food
Company from July 1990 to March 1996, President of Dole Food
Company-International from September 1993 to March 1996,
President and Chief Operating Officer of Dole from March 1996 to
February 2001, and Vice Chairman of Dole from February 2001
through December 2001, at which time Mr. DeLorenzo became a
consultant for Dole under contract for the period from January
2002 through January 2007. He has been a director of Dole for
more than five years.
Richard M. Ferry, Director. Mr. Ferry, 68, rejoined
Dole’s Board of Directors in July 2003. Mr. Ferry was
serving as a director of Dole at the time of the March 28,
2003 going-private merger transaction; Mr. Ferry had, at
that time, been a director of Dole for more than five years.
Mr. Ferry is Founder Chairman of Korn/ Ferry International,
an international executive search firm. From May 1977 through
July 2001, Mr. Ferry served as Chairman of the Board of
Korn/ Ferry. Mr. Ferry also serves on the Board of
Directors of Avery Dennison Corporation, Pacific Life Insurance
Company and Mrs. Fields’ Famous Brands, Inc., as well
as a number of privately held and not-for-profit corporations.
Mr. Ferry is the Chairman of the Audit Committee of
Dole’s Board of Directors.
Scott A. Griswold, Executive Vice President, Corporate
Development, and Director. Mr. Griswold, 52, became
Dole’s Vice President, Acquisitions and Investments in July
2003, Executive Vice President, Corporate Development in July
2004, and a director in April 2003. Mr. Griswold has been
Executive Vice President of Finance of Castle & Cooke,
Inc., which is wholly owned by David H. Murdock, since 2000, and
previously, from 1993, Vice President and Chief Financial
Officer of Pacific Holding Company, a sole proprietorship of
David H. Murdock. Since 1987, he has served as an officer and/or
director of various other companies held by Mr. Murdock.
Justin M. Murdock, Vice President, New Products and Corporate
Development, and Director. Mr. Murdock, 33, became
Dole’s Vice President, New Products and Corporate
Development in November 2004, and a director in April 2003.
Mr. Murdock has been Vice President of Investments of
Castle & Cooke, Inc., which is wholly owned by David H.
Murdock, since 2001, and previously, from 1999, Vice President
of Mergers and Acquisitions of Pacific Holding Company, a sole
proprietorship of David H. Murdock.
Edward C. Roohan, Director. Mr. Roohan, 42, became a
director of Dole in April 2003. Mr. Roohan has been
President and Chief Operating Officer of Castle &
Cooke, Inc., which is wholly owed by David H. Murdock, since
December 2000. He was Vice President and Chief Financial Officer
of Castle & Cooke, Inc.
105
from April 1996 to December 2000. He has served as an officer
and/or director of various companies held by Mr. Murdock
for more than five years.
Joseph S. Tesoriero, Vice President and Chief Financial
Officer. Mr. Tesoriero, 52, became Dole’s Vice
President and Chief Financial Officer in July 2004, after
joining Dole as Vice President of Taxes in October 2002. Prior
to his employment by Dole, Mr. Tesoriero was Senior Vice
President of Tax at Global Crossing. Mr. Tesoriero also
held tax positions at Coleman Camping Equipment, Revlon
Cosmetics, and International Business Machines.
Roberta Wieman, Executive Vice President, Chief of Staff, and
Director. Ms. Wieman, 60, joined Dole in 1991 as
Executive Assistant to the Chairman of the Board and Chief
Executive Officer. She became a Vice President of Dole in 1995,
Executive Vice President and Chief of Staff in July 2004, and a
director in April 2003. Ms. Wieman has been Executive Vice
President of Castle & Cooke, Inc. since August 2001;
Vice President and Corporate Secretary of Castle &
Cooke, Inc. from April 1996 to August 2001; Corporate Secretary
of Castle & Cooke, Inc. from April 1996; and a Director
of Flexi-Van Leasing, Inc., which is wholly owned by
Mr. Murdock, since August 1996, and Assistant Secretary
thereof for more then five years.
All directors serve a term from the date of their election until
the next annual meeting.
Justin M. Murdock is a son of David H. Murdock. Otherwise, there
is no family relationship between any other officer or director
of Dole.
Dole’s Board of Directors has determined that Dole has at
least one audit committee financial expert serving on its Audit
Committee, Richard M. Ferry, who is independent. The other
members of the Audit Committee are Scott A. Griswold, David A.
DeLorenzo, Justin M. Murdock and Edward C. Roohan.
Dole has adopted a code of ethics applicable to our principal
executive officer, principal financial officer and principal
accounting officer. A copy of the code of ethics, which we call
our Code of Conduct, and which applies to all employees of Dole,
is available on Dole’s web site at www.dole.com. We intend
to post on our web site any amendments to, or waivers (with
respect to our principal executive officer, principal financial
officer and principal accounting officer) from, this code of
ethics within four business days of any such amendment or waiver.
|
|
| Item 11. |
Executive Compensation |
REMUNERATION OF DIRECTORS
Directors who are not employees of Dole are compensated for
their services as follows:
|
|
|
| |
• |
An annual retainer fee of $38,000, payable in equal quarterly
installments. |
| |
| |
• |
A fee of $2,000 for each meeting of the Board of Directors
attended, and a fee of $1,000 for each telephonic meeting of the
Board of Directors in which the director participates. |
| |
| |
• |
A fee of $1,000 for each committee meeting attended, a fee of
$1,000 for each telephonic committee meeting in which the
director participates and a fee of $4,000 per year for
service as chairman of a committee. |
The reasonable expenses incurred by each director in connection
with his duties as a director are also reimbursed by Dole. A
Board member who is also an employee of Dole does not receive
compensation for service as a director.
In connection with Mr. DeLorenzo’s December 29,
2001 retirement as an employee of Dole, Mr. DeLorenzo,
among other things, entered into a contract with Dole under
which he became a consultant to Dole. Mr. DeLorenzo’s
consulting agreement with Dole is Exhibit 10.6 to
Dole’s Annual Report on
Form 10-K for the
fiscal year ended January 3, 2004. The final payment due
under Mr. DeLorenzo’s consulting agreement was paid in
January 2006. Mr. DeLorenzo’s agreement concludes
January 4, 2007.
106
COMPENSATION OF EXECUTIVE OFFICERS
Except as noted, the following table sets forth for Dole’s
fiscal years ended December 31, 2005, January 1, 2005,
and January 3, 2004, in prescribed format, the compensation
for services in all capacities to Dole and its subsidiaries of
those persons who were the Chief Executive Officer and the next
most highly compensated persons who were “executive
officers” of Dole Food Company, Inc. at December 31,
2005 (the “Named Executive Officers”).
SUMMARY COMPENSATION TABLE
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Awards | |
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Other | |
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Securities | |
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| Name and |
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|
|
Annual | |
|
Underlying | |
|
LTIP | |
|
All Other | |
| Principal Position |
|
Year | |
|
Salary($)(1) | |
|
Bonus($)(2)(3) | |
|
Comp.($)(4) | |
|
Options(#) | |
|
Payouts(5) | |
|
Comp. | |
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|
| |
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| |
|
David H. Murdock(6)
|
|
|
2005 |
|
|
$ |
950,000 |
|
|
$ |
285,000 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
1,585,775 |
|
|
$ |
0 |
(7) |
| |
Chairman & CEO
|
|
|
2004 |
|
|
$ |
950,000 |
|
|
$ |
1,087,750 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
1,585,775 |
|
|
$ |
22,716 |
(8) |
| |
Dole Food Company, Inc.
|
|
|
2003 |
|
|
$ |
968,269 |
|
|
$ |
1,368,000 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
2,051,854 |
|
|
$ |
3,283,712 |
(9) |
|
Richard J. Dahl(10)
|
|
|
2005 |
|
|
$ |
750,000 |
|
|
$ |
225,000 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
42,958 |
|
|
$ |
96,525 |
(7) |
| |
President & COO
|
|
|
2004 |
|
|
$ |
605,769 |
|
|
$ |
858,750 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
42,958 |
|
|
$ |
74,949 |
(8) |
| |
Dole Food Company, Inc.
|
|
|
2003 |
|
|
$ |
509,615 |
|
|
$ |
468,000 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
42,958 |
|
|
$ |
596,599 |
(9) |
|
C. Michael Carter(11)
|
|
|
2005 |
|
|
$ |
535,000 |
|
|
$ |
200,000 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
310,459 |
|
|
$ |
55,990 |
(7) |
| |
Executive Vice President, General
|
|
|
2004 |
|
|
$ |
514,807 |
|
|
$ |
398,174 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
310,549 |
|
|
$ |
68,600 |
(8) |
| |
Counsel & Corporate Secretary
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|
|
2003 |
|
|
$ |
509,615 |
|
|
$ |
468,000 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
310,549 |
|
|
$ |
2,078,280 |
(9) |
| |
Dole Food Company, Inc.
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|
|
|
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|
|
|
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|
|
|
|
|
|
|
Joseph S. Tesoriero(12)
|
|
|
2005 |
|
|
$ |
378,846 |
|
|
$ |
75,000 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
8,928 |
|
|
$ |
29,154 |
(7) |
| |
Vice President & CFO
|
|
|
2004 |
|
|
$ |
330,577 |
|
|
$ |
214,688 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
8,928 |
|
|
$ |
30,997 |
(8) |
| |
Dole Food Company, Inc.
|
|
|
2003 |
|
|
$ |
285,269 |
|
|
$ |
156,600 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
8,928 |
|
|
$ |
110,668 |
(9) |
|
|
| (1) |
2003 salaries reflect that Dole’s 2003 fiscal year
contained 53 Dole’s 2004 and 2005 fiscal years
contained 52 weeks. |
| |
| (2) |
Bonus amounts shown reflect cash payments made in 2006 with
respect to performance for 2005 under Dole’s Management
One-Year Incentive Plan and payments made in 2005 for 2004 and
in 2004 for 2003. |
| |
| (3) |
The 2003 executive incentive plan was structured to provide two
payments: an initial payout of 65% of the total bonus award,
which was paid in January 2004 for 2003 performance; and a
delayed payout of 35% of the total award to foster executive
retention, paid in January 2006. The 2003 amounts in the table
reflect the initial payouts for Mr. Carter, Mr. Dahl
and Mr. Tesoriero. The amount for Mr. Murdock reflects
a 100% payout of his total bonus award, since he is the
beneficial owner of all of Dole’s common stock. To be
eligible to receive the delayed payout, the executive’s
employment with Dole was required through the January 2006
payment date. |
| |
| (4) |
Does not include perquisites that total the lesser of $50,000 or
10% of the reported annual salary and bonus for any year. |
| |
| (5) |
These amounts represent sums earned and payable under the terms
of Dole’s 1998 Combined Annual and Long-Term Incentive Plan
for Executive Officers (the “1998 Plan”) through
fiscal 2003. Awards for the cycle ending in 2002 were paid in
cash and are included in the column “LTIP Payouts” in
this table. As a result of the going-private merger transaction,
the 1998 Plan was terminated on March 28, 2003 and the cash
awards payable for the long-term incentive cycles remaining
under the 1998 Plan were determined as of that date and approved
for payment in three equal installments: the first installment
was paid in April 2003; the second installment was paid in
January 2004; and the third installment was paid in January
2005. Participants under the 1998 Plan were not entitled to
receive the installment payment if they were not a Dole employee
on the day before the completion of the going-private merger
transaction (March 28, 2003) and on the applicable payment
dates as a result of their prior termination by Dole for cause
or their prior voluntary resignation. The amounts of the all
three payments are included in the column “LTIP
Payouts” in this table. |
107
|
|
| (6) |
Mr. Murdock also holds positions with certain business
entities he owns that are not controlled directly or indirectly
by Dole, which other entities pay compensation and may provide
fringe benefits to Mr. Murdock for his services. |
| |
| (7) |
The amounts shown in this column include the following:
(1) Dole’s contributions (in the form of Company
(i) match paid during the year and (ii) profit sharing
earned during the year) to the 401(k) and Excess Savings Plans
of Dole Food Company, Inc. (see “Pension Plans”) on
behalf of Mr. Murdock $0, Mr. Carter $55,990,
Mr. Dahl $96,525 and Mr. Tesoriero $29,154. |
| |
| (8) |
The amounts shown include the following: (1) Dole’s
contributions (in the form of Company (i) match paid during
the year and (ii) profit sharing earned during the year) to
the 401(k) and Excess Savings Plans of Dole Food Company, Inc.
(see “Pension Plans”) on behalf of Mr. Murdock
$22,716, Mr. Carter $68,600, Mr. Dahl $74,949 and
Mr. Tesoriero $30,997. |
| |
| (9) |
The amounts shown including the following: (1) the
stock-option cash-out payments in connection with the
going-private merger transaction for Mr. Murdock $0,
Mr. Carter $1,110,000, Mr. Dahl $180,000 and
Mr. Tesoriero $25,000; (2) Dole’s contributions
(in the form of Company (i) match paid during the year and
(ii) profit sharing earned during the year) to the 401(k)
and Excess Savings Plans of Dole Food Company, Inc. (“see
Pension Plans”) on behalf of Mr. Murdock $112,163,
Mr. Carter $93,183, Mr. Dahl $76,683 and
Mr. Tesoriero $15,612; (3) (A) the installments paid in
January 2004 under the 1998 Plan for Mr. Murdock
$1,585,775, Mr. Carter $310,549, Mr. Dahl $42,958 and
Mr. Tesoriero $8,928; and (B) the installments paid in
January 2005 under the 1998 Plan for Mr. Murdock
$1,585,775, Mr. Carter $310,549, Mr. Dahl $42,958 and
Mr. Tesoriero $8,928; and (4) the delayed payout of
35% under the 2003 executive incentive plan paid in January 2006
for Mr. Murdock $0, Mr. Carter $252,000, Mr. Dahl
$252,000 and Mr. Tesoriero $52,200. |
|
|
| (10) |
Mr. Dahl became President and Chief Operating Officer in
July 2004. |
| |
| (11) |
Mr. Carter became Executive Vice President, General
Counsel & Corporate Secretary in July 2004. |
| |
| (12) |
Mr. Tesoriero became Vice President & Chief
Financial Officer in July 2004. |
EMPLOYMENT, SEVERANCE AND CHANGE OF CONTROL ARRANGEMENTS
On March 22, 2001, the Board of Directors approved
amendments to Dole’s incentive and retirement plans. These
amendments, among other things, put in place a uniform
definition of Change of Control, and revised arbitration
provisions so as to provide that an employee may only be awarded
attorneys fees if the employee is the prevailing party (under
the pre-amendment provisions, an employee was entitled to
recover his or her attorneys fees so long as the arbitrator
determined that the employee’s claim was made in good
faith, even if the employee was not the prevailing party in the
arbitration). The amendments were set forth in
Exhibit 10.10 to Dole’s Annual Report on
Form 10-K for the
fiscal year ended December 30, 2000. The definitions are
summarized below under “Employment, Severance and Change of
Control Arrangements — Change of Control
Agreements — Definitions.”
Change of Control Agreements
In line with the practice at numerous public companies, Dole
recognizes that the possibility of a change of control of Dole
may result in the departure or distraction of management to the
detriment of Dole. On March 22, 2001, Dole put in place a
program to offer Change of Control Agreements to each of the
Named Executive Officers of Dole and certain other officers and
employees of Dole (each person accepting a Change of Control
Agreement is an “Employee”). Dole has no reason to
believe that any officer or employee will refuse to accept a
Change of Control Agreement. The following summarizes the
material provisions of the Change of Control Agreements. At the
time the program was put in place, Dole was advised by its
executive compensation consultants that the benefits provided
under the Change of Control Agreements were within the range of
customary practices of other public companies. In addition, the
Compensation Committee retained its own legal counsel to advise
it in its deliberations with respect to the Change of Control
Agreements.
108
|
|
|
Benefits Following Change of Control and Termination of
Employment: |
If, during the period beginning on the Change of Control Date
and ending on the second anniversary of the date on which the
Change of Control becomes effective (the “Protected
Period”), the Employee’s employment is terminated, the
Employee will receive the amounts and benefits stated under
“Amount of Severance Pay and Benefits Following Qualified
Termination,” unless employment is (a) terminated by
Dole for Cause or (b) terminated by the Employee other than
for Good Reason (a termination other than under clause (a)
or (b) during a Protected Period is a “Qualified
Termination”). If employment is terminated under
clause (a) or (b), the Employee will only be entitled to
receive the sum of (1) the Employee’s annual base
salary through the date of termination to the extent not
theretofore paid and (2) any compensation previously
deferred by the Employee (together with any accrued interest or
earnings thereon) pursuant to outstanding elections and/or any
accrued vacation pay or paid time off, in each case to the
extent not theretofore paid (“Accrued Obligations”).
No benefits are payable under the Change of Control Agreements
unless a Change of Control actually occurs and a Qualified
Termination occurs. If a Change of Control via a Fundamental
Transaction or an Asset Sale is consummated, there is a
look-back period (a “Look-Back Period”) to protect the
Employee against the possibility that he or she was actually or
constructively terminated without Cause in anticipation of the
Change of Control. If, prior to the first Change of Control
Date, employment with Dole terminates other than during a
Look-Back Period, then all of the Employee’s rights under
the Change of Control Agreement terminate, and the Change of
Control Agreement will be deemed to have been terminated on the
date of termination. After the first Change of Control Date, the
Change of Control Agreement may only be modified or terminated
by a writing signed by both Dole and the Employee. Before the
first Change of Control Date, however, Dole can unilaterally
modify or terminate the Change of Control Agreement, but such
unilateral modification or termination will not be effective
until the second anniversary of the date on which Dole first
gives the Employee express written notice of the unilateral
modification or termination (the “Modification Effective
Date”). The unilateral modification or termination shall
never become effective, however, if (1) a Change of Control
Date occurs before the Modification Effective Date and
(2) employment is terminated during the Protected Period in
respect of such Change of Control Date. Dole’s obligation
to make any payment provided for in the Change of Control
Agreements will be subject to and conditioned upon the
Employee’s execution of a standard release form.
|
|
|
Amount of Severance Pay and Benefits Following Qualified
Termination |
The Employees will be placed into one of three categories, each
providing a different level of severance pay and benefits if a
Qualified Termination occurs.
Category 1
|
|
|
| |
• |
An amount in cash equal to three times the Employee’s
annual base salary; |
| |
| |
• |
An amount in cash equal to three times the Employee’s
target bonus; |
| |
| |
• |
An amount in cash equal to three times $10,000, in lieu of any
other health and welfare benefits (including medical, life,
disability, accident and other insurance, car allowance or other
health and welfare plans, programs, policies or practices or
understandings) and other taxable perquisites and fringe
benefits to which the Employee or the Employee’s family may
have been entitled. |
| |
| |
• |
An amount in cash equal to the pro rata portion of the greater
of (i) the Employee’s target benefits under
Dole’s Long Term Incentive Plan (the “LTIP”) and
(ii) the Employee’s actual benefits under the LTIP; |
| |
| |
• |
If, at the time of Qualified Termination, the Employee would
have been eligible for a benefit under either (i) the Dole
Food Company Supplementary Executive Retirement Plan
(“SERP”) or (ii) a Defined Benefit Plan (as
defined in the SERP) were it not for the requirement of at least
five (5) years of service with Dole, an amount in cash will
be payable to the Employee equal to the actuarial equivalent of
such retirement benefit. If for any reason, a benefit is payable
under the Defined |
109
|
|
|
| |
|
Benefit Plan, the payments made to the Employee under this
clause shall be reduced by the actuarial equivalent of such
benefits payable under the Defined Benefit Plan. |
| |
| |
• |
An amount in cash equal to the aggregate amount of the Accrued
Obligations; |
| |
| |
• |
An amount in cash equal to the pro rata portion of the
Employee’s target bonus for the fiscal year in which the
date of termination occurs; and |
| |
| |
• |
An amount in cash equal to any reimbursement for outstanding
reimbursable expenses. |
| |
| |
• |
If it is determined that any payment or distribution by Dole to
the Employee or for the Employee’s benefit (whether paid or
payable or distributed or distributable under the Change of
Control Agreement or otherwise, but determined without regard to
any additional payments required under this clause (a
“Payment”) would be subject to the excise tax imposed
by Section 4999 of the United States Internal Revenue Code
or any interest or penalties are incurred by the Employee with
respect to such excise tax (such excise tax, together with any
such interest and penalties, are collectively the “Excise
Tax”), then the Employee will be entitled to receive from
Dole an additional payment (a “Gross-Up Payment”). The
Gross-Up Payment will equal an amount such that after payment by
the Employee of all taxes (including any interest or penalties
imposed with respect to such taxes), the Employee will retain an
amount of the Gross-Up Payment equal to the Excise Tax imposed
upon the Payments. |
Category 2
|
|
|
| |
• |
An amount in cash equal to two times the Employee’s annual
base salary; |
| |
| |
• |
An amount in cash equal to two times the Employee’s target
bonus; |
| |
| |
• |
An amount in cash equal to two times $10,000, in lieu of any
other health and welfare benefits (including medical, life,
disability, accident and other insurance or other health and
welfare plans, programs, policies or practices or
understandings) and other taxable perquisites and fringe
benefits to which the Employee or the Employee’s family may
have been entitled. |
| |
| |
• |
An amount in cash equal to the pro rata portion of the greater
of (i) the Employee’s target benefits under the LTIP
and (ii) the Employee’s actual benefits under the LTIP; |
| |
| |
• |
An amount in cash equal to the aggregate amount of the Accrued
Obligations; |
| |
| |
• |
An amount in cash equal to the pro rata portion of the
Employee’s target bonus for the fiscal year in which the
date of termination occurs; and |
| |
| |
• |
An amount in cash equal to any reimbursement for outstanding
reimbursable expenses. |
| |
| |
• |
If any payments or benefits under the Change of Control
Agreement, after taking into account all other payments or
benefits to which the Employee is entitled from Dole, or any
affiliate thereof, are more likely than not to result in a loss
of a deduction to Dole by reason of Section 280G of the
United States Internal Revenue Code or any successor provision
to that section, such payments and benefits will be reduced to
the extent required to avoid such loss of deduction. |
Category 3
|
|
|
| |
• |
An amount in cash equal to two times the Employee’s annual
base salary; |
| |
| |
• |
An amount in cash equal to two times the Employee’s target
bonus; |
| |
| |
• |
An amount in cash equal to two times $10,000, in lieu of any
other health and welfare benefits (including medical, life,
disability, accident and other insurance or other health and
welfare plans, programs, policies or practices or
understandings) and other taxable perquisites and fringe
benefits to which the Employee or the Employee’s family may
have been entitled. |
| |
| |
• |
An amount in cash equal to the aggregate amount of the Accrued
Obligations; |
110
|
|
|
| |
• |
An amount in cash equal to the pro rata portion of the
Employee’s target bonus for the fiscal year in which the
date of termination occurs; and |
| |
| |
• |
An amount in cash equal to any reimbursement for outstanding
reimbursable expenses. |
| |
| |
• |
If any payments or benefits under the Change of Control
Agreement, after taking into account all other payments or
benefits to which the Employee is entitled from Dole, or any
affiliate thereof, are more likely than not to result in a loss
of a deduction to Dole by reason of Section 280G of the
United States Internal Revenue Code or any successor provision
to that section, such payments and benefits will be reduced to
the extent required to avoid such loss of deduction. |
The Company does not currently have an existing equity plan,
however, all of the three categories will have the following
benefits relating to accelerated vesting of options and option
exercise periods should an equity plan be adopted by the Company:
|
|
| |
All of the Employee’s unvested options granted pursuant to
such plans or agreements (whenever granted) shall be deemed to
vest immediately prior to the first time that one or both of the
following conditions are satisfied: (a) a Change of Control
occurs; or (b) the shares of common stock of Dole are not
listed on either the New York Stock Exchange or the National
Market System of the Nasdaq Stock Market, and neither the Board
of Directors of Dole nor any committee thereof nor any other
person shall have any discretion, right or power whatsoever to
block, delay or impose any condition upon such vesting. If a
Qualified Termination occurs during a Look-Back Period, all of
the Employee’s unvested options shall vest immediately
prior to the effectiveness or consummation of the Fundamental
Transaction or the Asset Sale but not at any earlier time. |
In any circumstance where the Employee has undergone a Qualified
Termination and, under Dole’s Certificate of Incorporation
or By-Laws or applicable law, Dole has the power to indemnify or
advance expenses to the Employee in respect of any judgments,
fines, settlements, losses, costs or expenses (including
attorneys’ fees) of any nature relating to or arising out
of the Employee’s activities as an agent, employee, officer
or director of Dole or in any other capacity on behalf of or at
the request of Dole, Dole will promptly, on written request,
indemnify and advance expenses to the Employee to the fullest
extent permitted by applicable law, including but not limited to
making such findings and determinations and taking any and all
such actions as Dole may, under applicable law, be permitted to
have the discretion to take so as to effectuate such
indemnification or advancement.
Any officers who are presently covered by directors and officers
insurance shall be furnished for six years following Qualified
Termination with directors and officers insurance with policy
limits aggregating not less than those in place at the present
time and otherwise to contain substantially the same terms,
conditions and exceptions as the liability insurance policies
provided for directors and officers of Dole in force from time
to time, provided that such terms, conditions and exceptions
will not be, in the aggregate, materially less favorable to the
Employee than those in effect on the date of the Change of
Control Agreement and provided that such insurance can be
obtained on commercially reasonable terms.
In the event that the Employee has an employment contract or any
other agreement with Dole or participates in any other plan or
program that entitles the Employee to severance payments upon
the termination of employment with Dole, the amount of any such
severance payments will be deducted from the payments to be made
to the Employee under the Change of Control Agreement. All
benefits under the Change of Control Agreement also will be
reduced by the amount paid to the Employee under any law, rule
or regulation that requires a formal notice period, pay in lieu
of notice, termination, indemnity, severance payments or similar
payments or entitlements related to service, other than
unemployment or social security benefits provided in the United
States.
The Change of Control Agreements use a number of defined terms.
The terms “Cause,” “Good Reason” and
“Change of Control” are given definitions that Dole
has been advised by its executive compensation consultants are
within the range of customary practices of other public
companies. In addition, the
111
Compensation Committee retained its own legal counsel to advise
it with respect to the Change of Control Agreements. A
“Change of Control” is deemed to occur if any one or
more of the following conditions are satisfied:
|
|
| |
(1) any person, other than (a) David H. Murdock or
(b) following the death of David H. Murdock, the trustee or
trustees of a trust created by David H. Murdock, becomes the
“Beneficial Owner” (as defined in
Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the
Corporation representing 20% or more of the combined voting
power of the Corporation’s then outstanding securities; |
| |
| |
(2) individuals who, as of March 23, 2001, constitute
the Board of Directors of the Corporation (the “Incumbent
Board”) cease for any reason to constitute at least a
majority of the Board. Any individual who becomes a director
subsequent to March 23, 2001 whose election, or nomination
for election by the Corporation’s shareholders, was
approved by a vote of at least two-thirds of the directors then
comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, unless the
individual’s initial assumption of office occurs as a
result of either an actual or threatened election contest or
other actual or threatened tender offer, solicitation of proxies
or consents by or on behalf of a person other than the Board; |
| |
| |
(3) a reorganization, merger, consolidation,
recapitalization, tender offer, exchange offer or other
extraordinary transaction involving Dole (a “Fundamental
Transaction”) becomes effective or is consummated, unless:
(a) more than 50% of the outstanding voting securities of
the surviving or resulting entity (including, without
limitation, an entity (“parent”) which as a result of
such transaction owns the Corporation or all or substantially
all of the Corporation’s assets either directly or through
one or more subsidiaries) (“Resulting Entity”) are, or
are to be, Beneficially Owned, directly or indirectly, by all or
substantially all of the persons who were the Beneficial Owners
of the outstanding voting securities of the Corporation
immediately prior to such Fundamental Transaction in
substantially the same proportions as their Beneficial
Ownership, immediately prior to such Fundamental Transaction, of
the outstanding voting securities of the Corporation and
(b) more than half of the members of the board of directors
or similar body of the Resulting Entity (or its parent) were
members of the Incumbent Board at the time of the execution of
the initial agreement providing for such Fundamental Transaction. |
| |
| |
(4) A sale, transfer or any other disposition (including,
without limitation, by way of spin-off, distribution, complete
liquidation or dissolution) of all or substantially all of the
Corporation’s business and/or assets (an “Asset
Sale”) is consummated, unless, immediately following such
consummation, all of the requirements of clauses (3)(a) and
(3)(b) of this definition of Change of Control are satisfied,
both with respect to the Corporation and with respect to the
entity to which such business and/or assets have been sold,
transferred or otherwise disposed of or its parent (a
“Transferee Entity”). |
The consummation or effectiveness of a Fundamental Transaction
or an Asset Sale shall be deemed not to constitute a Change of
Control if more than 50% of the outstanding voting securities of
the Resulting Entity or the Transferee Entity, as appropriate,
are, or are to be, Beneficially Owned by David H. Murdock.
“Corporation” means Dole Food Company, Inc., a
Delaware corporation, and its successors. For purposes of this
definition of Corporation, after the consummation of a
Fundamental Transaction or an Asset Sale, the term
“successor” shall include, without limitation, the
Resulting Entity or Transferee Entity, respectively.
“Dole” means the Corporation and/or its subsidiaries.
112
Long Term Incentive Plan Awards in the Last Fiscal Year
The following table provides information regarding each
Contingent Award made to a Named Executive Officer in fiscal
2005 under Dole’s Sustained Profit Growth Plan.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Incentive Period 2005-2007(1) | |
| |
|
| |
| |
|
|
|
Contingent Award | |
| |
|
Incentive | |
|
| |
| Name |
|
Period | |
|
Minimum(2) | |
|
Target(3) | |
|
Maximum(3) | |
| |
|
| |
|
| |
|
| |
|
| |
|
David H. Murdock
|
|
|
2005-2007 |
|
|
$ |
0 |
|
|
$ |
950,000 |
|
|
$ |
2,850,000 |
|
|
Richard J. Dahl
|
|
|
2005-2007 |
|
|
$ |
0 |
|
|
$ |
750,000 |
|
|
$ |
2,250,000 |
|
|
C. Michael Carter
|
|
|
2005-2007 |
|
|
$ |
0 |
|
|
$ |
454,750 |
|
|
$ |
1,364,250 |
|
|
Joseph S. Tesoriero
|
|
|
2005-2007 |
|
|
$ |
0 |
|
|
$ |
140,625 |
|
|
$ |
421,875 |
|
|
|
| (1) |
The performance matrix established for the Incentive Period
2005-2007 consists of a combination of revenue and return on
shareholder investment as the driver of the financial
performance factors used in determining the Contingent Awards
for the Named Executive Officers. The performance matrix has
been established for the 2006-2008 Incentive Period. Final
Awards are paid in a lump-sum within 90 days following the
end of the Incentive Period. A Final Award may become payable in
the event of the Named Executive Officer’s death,
disability or retirement, or involuntary termination without
cause, and are subject to customary adjustments for certain
changes in capitalization. |
| |
| (2) |
If the minimum combination of revenue and return on shareholder
investment in the performance matrix is not achieved as of the
end of the Incentive Period, no amount will be earned by the
Named Executive Officers for the Incentive Period. |
| |
| (3) |
Contingent Award amounts for target and maximum are based on
annual salary at the beginning of the Incentive Period. |
The performance matrix and the financial performance factors
with respect to future Contingent Awards may vary as determined
by the Corporate Compensation and Benefits Committee of
Dole’s Board of Directors.
Pension Plans
Dole maintains a non-contributory pension plan that provides
benefits, following retirement at age 65 or older with one
or more years of credited service (or age 55 with five or
more years of credited service), primarily to salaried,
non-union employees of Dole on U.S. payrolls, including
executive officers of Dole. The plan provides a monthly pension
to supplement personal savings and Social Security benefits.
Starting January 1, 2002, no new pension benefits will
accrue, with the exception of a transition benefit for long-term
employees which will be completed at the end of 2006.
Each year’s accrued benefit under the plan is 1.1% of final
average compensation multiplied by years of service, plus .33%
of final average compensation multiplied by years of service in
excess of 15 years. Benefits accrued as of March 31,
1992 under the prior benefit formula serve as minimum
entitlements.
The credited years of service and ages as of December 31,
2005 for the Named Executive Officers are as follows:
Mr. Murdock (age 82) — 7 years;
Mr. Carter (age 62) — 1 year;
Mr. Dahl (age 54) — 0 years; and
Mr. Tesoriero (age 52) — 0 years.
Assuming these individuals remain employed by Dole until
age 65 (or later), their annual retirement benefits will
approximate: Mr. Carter — $5,748;
Mr. Dahl — $0; and Mr. Tesoriero $0. As
required by the Internal Revenue Code, Mr. Murdock, who is
presently over the age of
701/2
, is receiving his current annual retirement benefit
under the pension plan of $208,604.
Generally, the Internal Revenue Code places an annual maximum
limit of $170,000 (at December 31, 2005) on the benefits
available to an individual under Dole’s pension plans.
Furthermore, the Internal Revenue Code places an annual maximum
of $210,000 (at December 31, 2005) on compensation which
may be considered in determining a participant’s benefit
under qualified retirement programs. If an individual’s
113
benefit under a plan exceeds the maximum annual benefit or the
maximum compensation limit, the excess will be paid by Dole from
an unfunded excess and supplemental benefit plan.
Notwithstanding anything to the contrary set forth in any of
Dole’s filings under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended,
that might incorporate future filings, including this
Form 10-K, in
whole or in part, the following Corporate
Compensation & Benefits Committee Report shall not be
incorporated by reference into any such filings or any future
filings, except to the extent Dole expressly incorporates such
report by reference therein. The report shall not be deemed
soliciting material or otherwise deemed filed under either of
such Acts.
Compensation Committee Interlocks and Insider
Participation
The members of the Corporate Compensation and Benefits Committee
of Dole’s Board of Directors (the “Compensation
Committee”) are David H. Murdock, Chairman, Andrew J.
Conrad, David A. DeLorenzo and Roberta Wieman. Mr. Murdock
and Ms. Wieman are officers of Dole. Mr. DeLorenzo was
Vice Chairman of Dole during part of 2001 and was President and
Chief Operating Officer prior thereto.
CORPORATE COMPENSATION AND BENEFITS COMMITTEE REPORT
COMPENSATION PHILOSOPHY
Dole’s compensation philosophy is to relate the
compensation of Dole’s executive officers (all of whom are
Named Executive Officers) to measures of Dole performance that
contribute to increased value for Dole.
GOALS
Dole’s compensation philosophy for Named Executive Officers
takes into account the following goals:
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|
| |
• |
Compensation must reflect a competitive and performance-oriented
environment that motivates executive officers to set and achieve
aggressive goals in their respective areas of responsibility. |
| |
| |
• |
Incentive-based compensation must be contingent upon the
performance of each executive officer against financial and
strategic performance goals. |
| |
| |
• |
Dole’s compensation policies must enable Dole to attract
and retain top quality management. |
The Compensation Committee periodically reviews the components
of compensation for the Named Executive Officers on the basis of
its philosophy and goals. Further, as the situation warrants,
the Compensation Committee also retains the services of a
qualified compensation consulting firm to provide
recommendations to enhance the linkage of executive officer
compensation to the above goals and to obtain information as to
how Dole’s compensation of executive officers compares with
peer companies.
EXECUTIVE COMPENSATION COMPONENTS
Dole evaluates the competitiveness of its executive compensation
program relative to comparable companies.
A group of industry peers (or “peer group”) is used to
evaluate the compensation for the Named Executive Officers. The
peer group was identified by the Compensation Committee’s
executive compensation consulting firm through a comparability
screening process that considered such variables as revenue
size, product line diversity, and geographic scope of operation.
The peer group is reviewed periodically and changes may be made
based on the comparability screening process.
Broader published surveys of food processing companies, as well
as industry in general, are used to evaluate the competitiveness
of total compensation for other Dole executives.
Generally speaking, above median pay levels can only be achieved
if Dole’s aggressive goals associated with its incentive
compensation plans are attained. Pay levels for each Named
Executive Officer, other than
114
the CEO, largely reflect the recommendation of the CEO based on
individual experience and breadth of knowledge, internal equity
considerations, and other subjective factors. The compensation
opportunity for the CEO for 2005 was based on deliberations of
the Compensation Committee, as described below under “CEO
Compensation.”
Each component of the total executive compensation package
emphasizes a different aspect of Dole’s compensation
philosophy:
|
|
|
| |
(1) |
Base Salary. Base salaries for Named Executive Officers
(other than the CEO whose salary is discussed below) are
initially set upon hiring by management (subject to periodic
review by the Compensation Committee) based on recruiting
requirements (e.g., market demand), competitive pay practices,
individual experience and breadth of knowledge, internal equity
considerations and other subjective factors. |
|
|
|
| |
|
Increases to base salary are determined primarily on the basis
of market movements, individual performance and contribution to
Dole, and involve the application of both quantifiable and
subjective criteria. |
|
|
|
| |
(2) |
Annual Incentives. Dole relies to a large degree on
annual incentive compensation to attract and retain executives
of outstanding abilities and to motivate them to perform to the
full extent of these abilities. |
|
|
|
| |
|
Under Dole’s Management One-Year Incentive Plan, target
bonuses for the Named Executive Officers, as a percentage of
base salary, ranged from 50% to 100%, depending on Dole’s
performance relative to financial performance targets set
earlier in the year. Bonuses generally are payable only if the
specified minimum level of financial performance is realized and
may be increased to maximum levels only if substantially higher
performance levels are attained. Incentive opportunities for
each individual are determined on the basis of competitive
incentive levels (as a percent of salary), degree of
responsibility and other subjective factors, including the Named
Executive Officer’s individual performance over the course
of the plan year. |
| |
| |
|
Generally speaking, each Named Executive Officer’s maximum
annual cash bonus equals 300% of his target percentage. The
maximum bonus is payable only if exceptional Dole performance
levels against predetermined goals are achieved. |
| |
| |
|
In 2005, the bonus opportunity for the Named Executive Officers
was based upon a cash return measure, reflecting the results of
EBITDA and the shareholder’s investment. For 2005, Dole did
not meet the targeted cash return performance. |
|
|
|
| |
(3) |
Long-Term Incentives. Under Dole’s Sustained Profit
Growth Plan (“the Growth Plan”), the performance
matrix established for the 2005-2007 Incentive Period consists
of a combination of revenue and return on shareholder investment
as the driver of the financial performance factors used in
determining Contingent Awards for the Named Executive Officers.
This performance matrix was designed to further align executive
compensation with shareholder’s return on a long-term
basis. The Growth Plan contemplates annual grants each with
three-year Incentive Periods. A participant’s Final Award
in connection with each grant is determined as of the end of the
Incentive Period for that grant, and is paid in a lump-sum
within 90 days following the end of the Incentive Period.
The Compensation Committee has authorized all of the Named
Executive Officers to participate in the Growth Plan. |
115
CEO COMPENSATION
The Compensation Committee periodically reviews
Mr. Murdock’s compensation relative to the
compensation (base salary, annual and long-term incentives) of
the peer group. It is the Compensation Committee’s intent
to target aggregate compensation for Mr. Murdock at
approximately the median of the peer group. In establishing
Mr. Murdock’s compensation, the Compensation Committee
considered his responsibilities with other companies and
determined that Mr. Murdock devotes to Dole the time that
is necessary for the effective performance of his duties.
Under the terms of the annual incentive plan, Mr. Murdock
was eligible for an annual bonus ranging from 0% to 300% of
target percentage (100% of base salary), depending on
Dole’s performance in 2005. Mr. Murdock’s total
2005 bonus opportunity was based on the Company’s cash
return. Dole did not meet the targeted cash return performance.
The Committee approved an award of $285,000 to Mr. Murdock.
Mr. Murdock participates in Dole’s Sustained Profit
Growth Plan, described above under Long-Term Incentives.
Mr. Murdock recused himself from the Committee’s
voting on, and all of its discussion of, his own compensation.
|
|
| |
The Corporate Compensation
And
|
| |
Benefits Committee
|
| |
| |
David H. Murdock, Chairman |
| |
Andrew J. Conrad |
| |
David A. DeLorenzo |
| |
Roberta Wieman |
116
|
|
| Item 12. |
Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters |
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|
|
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|
|
|
|
|
|
| |
|
|
|
Amount and | |
|
|
| |
|
|
|
Nature of | |
|
Percent | |
| |
|
|
|
Beneficial | |
|
of | |
| Title of Class |
|
Name and Address of Beneficial Owner |
|
Ownership(1) | |
|
Class | |
| |
|
|
|
| |
|
| |
|
Common Stock, $0.001 par value
|
|
David H. Murdock |
|
|
1,000 shares |
|
|
|
100% |
|
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Dole Food Company, Inc.
One Dole
Drive
Westlake Village, CA 91362 |
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| (1) |
Mr. Murdock beneficially owns these shares through one or
more affiliates, and has effective sole voting and dispositive
power with respect to the shares. Beneficial ownership is
determined in accordance with
Rule 13d-3 under
the Securities Exchange Act of 1934, as amended.
Mr. Murdock is Dole’s Chairman of the Board and Chief
Executive Officer. |
Dole has no equity compensation plans. All of the outstanding
shares of common stock of Dole have been pledged pursuant to
Dole’s Credit Agreement and ancillary documents thereto.
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| Item 13. |
Certain Relationships and Related Transactions |
In September 1998, the Company acquired 60% of Saba. On
December 30, 2004, the Company acquired the remaining 40%
minority interest of Saba (See Note 5 to the Consolidated
Financial Statements). Prior to the Company’s acquisition
of the minority interest, the 40% minority interest was held 25%
by another Swedish company and 15% by a Swedish co-op. As part
of its normal operations, Saba routinely sells fresh fruit,
vegetables and flowers to entities in which these minority
shareholders are principal owners. Revenues from these entities
were $349.6 million, $251.3 million and
$75.7 million during the year ended January 1, 2005,
three quarters ended January 3, 2004 and quarter ended
March 22, 2003, respectively.
On March 28, 2003, the Company completed the going-private
merger transaction with DHM Holding Company, Inc. and
became wholly owned by David H. Murdock, the Company’s
Chairman and Chief Executive Officer, through DHM Holding
Company, Inc. (See Note 3 to the Consolidated Financial
Statements).
Mr. Murdock owns Castle & Cooke, Inc.
(“Castle”) as well as a transportation equipment
leasing company, a private dining club and a private country
club, which supply products and provide services to numerous
customers and patrons. During the years ended December 31,
2005 and January 1, 2005, three quarters ended
January 3, 2004 and quarter ended March 22, 2003, the
Company paid Mr. Murdock’s companies an aggregate of
approximately $7.2 million, $5.2 million,
$3.8 million and $1.2 million, respectively, primarily
for the rental of truck chassis, generator sets and warehousing
services. Castle purchased approximately $4 million,
$0.4 million, $0.3 million and $0.1 million of
products from the Company during the years ended
December 31, 2005 and January 1, 2005, three quarters
ended January 3, 2004 and quarter ended March 22,
2003, respectively. The Company had a number of other
transactions with Castle and other entities owned by
Mr. Murdock, generally on an arms-length basis, none of
which, individually or in the aggregate, were material.
The Company and Castle are responsible for 68% and 32%,
respectively, of all obligations under an aircraft lease
arrangement. The Company and Castle have agreed that each party
would be responsible for the direct costs associated with its
use of this aircraft, and that all other indirect costs would be
shared in proportion to each party’s lease obligation
percentage. During the years ended December 31, 2005 and
January 1, 2005, three quarters ended January 3, 2004
and quarter ended March 22, 2003, the Company’s
proportionate share of the direct and indirect costs for this
aircraft was $1.9 million, $2.3 million,
$1.5 million and $0.5 million, respectively.
In 2003, the Company and Castle began operating their risk
management departments on a joint basis. This arrangement
enables the Company and Castle to leverage their buying power to
optimize their position in
117
the insurance market and take advantage of the market
relationships that both companies developed over the years. The
Company and Castle share insurance procurement and premium costs
based on the relative risk borne by each company as determined
under methodologies used by the insurance underwriters.
Administrative costs of the risk management department are
shared on a 50-50 basis. The Company’s share of the risk
management department’s costs during each of the years
ended December 31, 2005, January 1, 2005 and
January 3, 2004 were approximately $0.2 million,
$0.1 million and $0.1 million, respectively.
The Company retains risk for commercial property losses
sustained by the Company and Castle totaling $4 million in
the aggregate and $4 million per occurrence, above which
the Company has coverage provided through third party insurance
carriers. The arrangement, entered into on April 1, 2005
and expiring March 31, 2006, provides for premiums to be
paid to the Company by Castle quarterly beginning March 31,
2005 in exchange for the Company’s retained risk. The
Company received approximately $0.7 million and
$1 million from Castle during the years ended
December 31, 2005 and January 1, 2005, respectively.
No amounts were paid by Castle under this arrangement during the
year ended January 3, 2004. The Company paid approximately
$0.2 million and $0.3 million to Castle for property
losses in 2005 and 2004, respectively.
During September 2004, the Company and Castle entered into a
tax-free real estate exchange agreement in which the Company
transferred unimproved and improved real properties located in
California and Hawaii, having an independently appraised
aggregate fair market value of approximately $17.3 million,
for Castle’s unimproved real property located in Westlake
Village, California having substantially the same, independently
appraised fair market value. Since the exchange of land was
between two entities under common control, no gain was
recognized on the exchange (See Note 12 to the Consolidated
Financial Statements).
The Company had outstanding net accounts receivable of
$0.2 million from Castle at December 31, 2005 and
outstanding net accounts payable of $0.4 million to Castle
at January 1, 2005.
Mr. Murdock is a director and executive officer of Dole and
also serves as a director and executive officer of privately
held entities that he owns or controls. Mr. Scott Griswold,
Ms. Roberta Wieman and Mr. Justin Murdock also serve
as directors and officers of privately held entities controlled
by Mr. Murdock. Mr. Edward C. Roohan is a director of
Dole and a director and executive officer of Castle. Any
compensation paid by those companies is within the discretion of
their respective boards of directors.
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| Item 14. |
Principal Accountant Fees and Services |
Principal Accountant Fees and Services
The following table summarizes the aggregate fees billed to the
Company by its independent auditor Deloitte & Touche
LLP, the member firms of Deloitte Touche Tohmatsu, and their
respective affiliates (collectively, the “Deloitte
Entities”):
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Fiscal Year Ended | |
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December 31, | |
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January 1, | |
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2005 | |
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2005 | |
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(In thousands) | |
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Audit Fees(a)
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$ |
3,250 |
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$ |
2,932 |
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Audit-Related Fees(b)
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1,108 |
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1,546 |
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Total Audit and Audit Related Fees
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4,358 |
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4,478 |
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Tax Fees(c)
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351 |
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363 |
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All Other Fees(d)
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— |
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— |
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Total
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$ |
4,709 |
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$ |
4,841 |
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| (a) |
Audit fees include $3,250,000 and $2,932,000 for services
related to the audit of the annual consolidated financial
statements and reviews of the quarterly condensed consolidated
financial statements for 2005 and 2004, respectively. |
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(b) |
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Audit-related fees include $593,000 and $1,042,000
Section 404 advisory services for 2005 and 2004
respectively. Audit-related fees for 2005 and 2004 also include
$195,000 and $175,000, respectively, for employee benefit plan
audits. The remaining amounts relate to accounting and financial
reporting consultations, and various agreed-upon procedures and
compliance reports. |
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(c) |
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Fees for tax services billed in 2005 and 2004 consisted of $0
and $125,000, respectively, for tax compliance and $351,000 and
$238,000, respectively, for tax planning and advice. |
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(d) |
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There were no other services billed to the Company in 2005 and
2004. |
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Fiscal Year Ended | |
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December 31, 2005 | |
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January 1, 2005 | |
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Ratio of Tax Planning and Advice Fees and All Other Fees to
Audit Fees, Audit-Related Fees and Tax Compliance Fees
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0.1:1 |
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0.1:1 |
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In considering the nature of the services provided by the
independent auditor, the Audit Committee determined that such
services are compatible with the provision of independent audit
services. The Audit Committee discussed these services with the
independent auditor and Company management to determine that
they are permitted under the rules and regulations concerning
auditor independence promulgated by the Securities and Exchange
Commission to implement the Sarbanes-Oxley Act of 2002, as well
as the American Institute of Certified Public Accountants.
119
PART IV
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| Item 15. |
Exhibits and Financial Statement Schedules |
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(a) 1.
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Financial Statements: The following consolidated
financial statements are included herein in Item 8 above. |
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| Exhibit | |
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Title |
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3.1(a) |
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Amended and Restated Certificate of Incorporation of Dole Food
Company, Inc. (incorporated by reference to Exhibit 3.1 to
Dole’s Quarterly Report on Form 10-Q for the quarterly
period ended March 22, 2003, File No. 1-4455). |
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3.1(b)† |
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Articles of Incorporation of Oceanic Properties Arizona, Inc.,
dated as of January 12, 1988. Articles of Amendment to the
Articles of Incorporation of Oceanic Properties Arizona, Inc.,
dated as of November 16, 1990, changed the company’s
name to Castle & Cooke Arizona, Inc. Articles of
Amendment to the Articles of Incorporation of Castle &
Cooke Arizona, Inc., dated as of December 21, 1995, changed
the company’s name to Calazo Corporation. |
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3.1(c)† |
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Articles of Incorporation of AG 1970, Inc., dated as of
September 25, 1987. Certificate of Amendment of Articles of
Incorporation of AG 1970, Inc., dated as of
December 13, 1989. |
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3.1(d)† |
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Articles of Incorporation of AG 1971, Inc., dated as of
September 25, 1987. Certificate of Amendment of Articles of
Incorporation of AG 1971, Inc., dated as of
December 13, 1989. |
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3.1(e)† |
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Articles of Incorporation of AG 1972, Inc., dated as of
September 25, 1987. Certificate of Amendment of Articles of
Incorporation of AG 1972, Inc., dated as of
December 13, 1989. |
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3.1(f)† |
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Articles of Incorporation of Castle & Cooke Homes,
Inc., dated as of February 10, 1992. Certificate of
Amendment of Articles of Incorporation of Castle &
Cooke Homes, Inc., dated as of March 18, 1996, changed the
company’s name to Alyssum Corporation. |
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3.1(g)† |
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Articles of Incorporation of Barclay Hollander Curci, Inc.,
dated as of February 28, 1969. Certificate of Amendment of
Articles of Incorporation, dated as of February 1975, changed
the company’s name to Barclay Hollander Corporation.
Certificate of Amendment of Articles of Incorporation of Barclay
Hollander Corporation, dated as of November 26, 1980.
Certificate of Amendment of Articles of Incorporation of Barclay
Hollander Corporation, dated as of June 11, 1990. |
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3.1(h)† |
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Articles of Incorporation of Grandma Mac’s Orchard, dated
as of August 27, 1976. Certificate of Amendment of Articles
of Incorporation of Grandma Mac’s Orchard, dated as of
January 6, 1988, changed the company’s name to Sun
Giant, Inc. Certificate of Amendment of Articles of
Incorporation of Sun Giant, Inc., dated as of March 4,
1988, changed the company’s name to Dole Bakersfield, Inc.
Certificate of Amendment of Articles of Incorporation of Dole
Bakersfield, Inc., dated as of June 11, 1990. Agreement of
Merger of Bud Antle, Inc. and Dole Bakersfield, Inc., dated as
of December 18, 2000, changed the company’s name to
Bud Antle, Inc. |
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3.1(i)† |
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Articles of Incorporation of Lake Anderson Corporation, dated as
of June 26, 1964. Certificate of Amendment of Articles of
Incorporation, dated as of November 12, 1971. Certificate
of Amendment of Articles of Incorporation, dated as of
August 28, 1972, changed the company’s name to Oceanic
California Inc. Certificate of Amendment of Articles of
Incorporation, dated as of July 14, 1977. Certificate of
Amendment of Articles of Incorporation of Oceanic California
Inc., dated as of June 17, 1981. Certificate of Amendment
of Articles of Incorporation of Oceanic California Inc., dated
as of November 16, 1990, changed the company’s name to
Castle & Cooke California, Inc. Certificate of
Amendment of Articles of Incorporation of Castle &
Cooke California, Inc., dated as of December 21, 1995,
changed the company’s name to Calicahomes, Inc. |
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3.1(j)† |
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Articles of Incorporation of California Polaris, Inc., dated as
of April 6, 1979. |
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3.1(k)† |
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Articles of Incorporation of Dole ABPIK, Inc., dated as of
November 15, 1988. Certificate of Amendment of Articles of
Incorporation of Dole ABPIK, Inc., dated as of December 13,
1989. |
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3.1(l)† |
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Articles of Incorporation of Castle & Cooke Sierra
Vista, Inc., dated as of June 8, 1992. Certificate of
Amendment of Articles of Incorporation of Castle &
Cooke Sierra Vista, Inc., dated as of March 18, 1996,
changed the company’s name to Dole Arizona Dried Fruit and
Nut Company. |
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3.1(m)† |
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Articles of Incorporation of CCJM, Inc., dated as of
December 11, 1989. Certificate of Amendment of Articles of
Incorporation of CCJM, Inc., dated as of September 9, 1991,
changed the company’s name to Dole Carrot Company. |
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3.1(n)† |
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Articles of Incorporation of Miracle Fruit Company, dated as of
September 12, 1979. Certificate of Amendment of Articles of
Incorporation of Miracle Fruit Company, dated as of
October 1, 1979, changed the company’s name to Blue
Goose Growers, Inc. Certificate of Amendment of Articles of
Incorporation of Blue Goose Growers, Inc., dated as of
June 11, 1990. Certificate of Amendment of Articles of
Incorporation of Blue Goose Growers, Inc., dated as of
February 15, 1991, changed the company’s name to Dole
Citrus. |
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3.1(o)† |
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Articles of Incorporation of Dole DF&N, Inc., dated as of
November 15, 1988. Certificate of Amendment of Articles of
Incorporation of Dole DF&N, Inc., dated as of
December 13, 1989. |
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3.1(p)† |
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General Partnership Agreement of Dole Dried Fruit and Nut
Company, a California general partnership, dated as of
October 15, 1995. |
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3.1(q)† |
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Articles of Incorporation of Canfield Farming Company, dated as
of July 17, 1963. Certificate of Amendment of Articles of
Incorporation of Canfield Farming Company, dated as of
March 15, 1971, changed the company’s name to Tenneco
Farming Company. Certificate of Amendment of Articles of
Incorporation of Tenneco Farming Company, dated as of
January 6, 1988, changed the company’s name to Sun
Giant Farming, Inc. Certificate of Amendment of Articles of
Incorporation of Sun Giant Farming, Inc., dated as of
April 25, 1988, changed the company’s name to Dole
Farming, Inc. Certificate of Amendment of Articles of
Incorporation of Dole Farming, Inc., dated as of June 11,
1990. |
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3.1(r)† |
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Articles of Incorporation of Castle & Cooke Fresh
Vegetables, Inc., dated as of July 14, 1983. Certificate of
Amendment of Articles of Incorporation of Castle &
Cooke Fresh Vegetables, Inc., dated as of December 13,
1989. Certificate of Amendment of Articles of Incorporation of
Castle & Cooke Fresh Vegetables, Inc., dated as of
January 2, 1990, changed the company’s name to Dole
Fresh Vegetables, Inc. |
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3.1(s)† |
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Restated Articles of Incorporation of T.M. Duche Nut Co., Inc.,
dated as of October 15, 1986. Certificate of Amendment of
Articles of Incorporation of T.M. Duche Nut Co., Inc., dated as
of November 14, 1986. Certificate of Amendment of Articles
of Incorporation, dated as of April 20, 1988, changed the
company’s name to Dole Nut Company. Certificate of
Amendment of Articles of Incorporation of Dole Nut Company,
dated as of December 13, 1989. Certificate of Amendment of
Articles of Incorporation of Dole Nut Company, dated as of
January 28, 1998, changed the company’s name to Dole
Orland, Inc. |
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3.1(t)† |
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Articles of Incorporation of S & J Ranch, Inc., dated
as of December 15, 1952. Certificate of Amendment of
Articles of Incorporation of S & J Ranch, Inc., dated
as of December 13, 1989. Certificate of Amendment of
Articles of Incorporation of S & J Ranch, Inc., dated
as of September 27, 2000, changed the company’s name
to Dole Visage, Inc. |
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3.1(u)† |
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Articles of Incorporation of E.T. Wall, Grower-Shipper,
Inc., dated as of November 25, 1975. Certificate of
Amendment of Articles of Incorporation of E.T. Wall,
Grower-Shipper, Inc., dated as of July 25, 1984, changed
the company’s name to E.T. Wall Company. Certificate
of Amendment of Articles of Incorporation of E.T. Wall
Company, dated as of June 11, 1990. |
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3.1(v)† |
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Articles of Incorporation of Earlibest Orange Association, Inc.,
dated as of November 7, 1963. Certificate of Amendment of
Articles of Incorporation of Earlibest Orange Association, Inc.,
dated as of December 13, 1989. |
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3.1(w)† |
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Articles of Incorporation of The Citrus Company, dated as of
February 1, 1984. Certificate of Amendment of Articles of
Incorporation of The Citrus Company, dated as of
February 16, 1984, changed the company’s name to
Fallbrook Citrus Company, Inc. Certificate of Amendment of
Articles of Incorporation, dated as of March 15, 1994.
Certificate of Amendment of Articles of Incorporation of
Fallbrook Citrus Company, Inc., dated as of June 11, 1990. |
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3.1(x)† |
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Articles of Incorporation of Lindero Headquarters Company, Inc.,
dated as of February 12, 1998. |
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3.1(y)† |
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Articles of Incorporation of Lindero Property, Inc., dated as of
October 10, 1991. |
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3.1(z)† |
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Articles of Incorporation of Oceanview Produce Company, dated as
of June 15, 1989. Certificate of Amendment of Articles of
Incorporation of Oceanview Produce Company, dated as of
August 7, 1989. |
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3.1(aa)† |
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Articles of Incorporation of Prairie Vista, Inc., dated as of
November 23, 1953. |
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3.1(ab)† |
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Articles of Incorporation of Kingsize Packing Co., dated as of
February 5, 1990. Certificate of Amendment of Articles of
Incorporation of Kingsize Packing Co., dated as of
March 30, 1990, changed the company’s name to Royal
Packing Co. |
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3.1(ac)† |
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Articles of Incorporation of Trojan Transport Co., dated as of
August 31, 1955. Certificate of Amendment of Articles of
Incorporation of Trojan Transport Co., dated as of July 31,
1956, changed the company’s name to Trojan Transportation
and Warehouse Co. Certificate of Amendment of Articles of
Incorporation of Trojan Transportation Co., dated as of
January 24, 1961, changed the company’s name to
Veltman Terminal Co. |
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3.1(ad)† |
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Certificate of Incorporation of Bananera Antillana (Columbia),
Inc., dated as of November 16, 1977. |
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3.1(ae)† |
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Certificate of Incorporation of Clovis Citrus Association, dated
as of January 24, 1990. Certificate of Amendment of
Certificate of Incorporation of Clovis Citrus Association, dated
as of January 24, 1990. |
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3.1(af)† |
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Certificate of Incorporation of Tenneco Sudan, Inc., dated as of
June 8, 1977. Certificate of Amendment of Certificate of
Incorporation of Tenneco Sudan, Inc., dated as of
December 10, 1986, changed the company’s name to
Tenneco Realty Development Holding Corporation. Certificate of
Amendment of Certificate of Incorporation of Tenneco Realty
Development Holding Corporation, dated as of April 21,
1988, changed the company’s name to Oceanic California
Realty Development Holding Corporation. Certificate of Amendment
of Certificate of Incorporation of Oceanic California Realty
Development Holding Corporation, dated as of November 16,
1990, changed the company’s name to Castle & Cooke
Bakersfield Holdings, Inc. Certificate of Amendment of
Certificate of Incorporation of Castle & Cooke
Bakersfield Holdings, Inc., dated as of March 18, 1996,
changed the company’s name to Delphinium Corporation. |
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3.1(ag)† |
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Certificate of Incorporation of Standard Banana Company, dated
as of March 21, 1955. Certificate of Amendment of
Certificate of Incorporation of Standard Banana Company, dated
as of January 8, 1971, changed the company’s name to
Standard Fruit Sales Company. Certificate of Amendment of
Certificate of Incorporation of Standard Fruit Sales Company,
dated as of June 6, 1973, changed the company’s name
to Castle & Cooke Food Sales Company. Certificate of
Amendment of Certificate of Incorporation of Castle &
Cooke Food Sales Company, dated as of September 25, 1984,
changed the company’s name to Dole Europe Company.
Certificate of Change of Location of Registered Office and of
Registered Agent, dated as of April 18, 1988. |
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3.1(ah)† |
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Certificate of Incorporation of Castle Aviation, Inc., dated as
of June 25, 1987. Certificate of Amendment of Certificate
of Incorporation of Castle Aviation, Inc., dated as of
April 10, 1992, changed the company’s name to Dole
Foods Flight Operations, Inc. |
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3.1(ai)† |
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Certificate of Incorporation of Cut Flower Exchange, Inc., dated
as of February 11, 1988. Certificate of Merger, dated as of
July 31, 1991, changed the company’s name Sunburst
Farms, Inc. Certificate of Amendment of Certificate of
Incorporation of Sunburst Farms, Inc., dated as of June 23,
1999, changed the company’s name to Dole Fresh Flowers, Inc. |
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3.1(aj)† |
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Certificate of Incorporation of Wenatchee-Beebe Orchard Company,
dated as of November 7, 1927. Certificate of Ownership and
Merger in Wenatchee-Beebe Orchard Company, dated as of
June 23, 1943. Certificate of Amendment of Certificate of
Incorporation of Wenatchee-Beebe Orchard Company, dated as of
April 20, 1983, changed the company’s name to Beebe
Orchard Company. Certificate of Merger of Wells and Wade Fruit
Company and Beebe Orchard Company, dated as of March 23,
2001, changed the company’s name to Dole Northwest, Inc. |
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3.1(ak)† |
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Certificate of Incorporation of Dole Sunburst Express, Inc.
Certificate of Amendment of Certificate of Incorporation of Dole
Sunburst Express, Inc., dated as of July 21, 1996, changed
the company’s name to Dole Sunfresh Express, Inc. |
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3.1(al)† |
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Certificate of Incorporation of Standard Fruit and Steamship
Company, dated as of January 2, 1968. |
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3.1(am)† |
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Certificate of Incorporation of Standard Fruit Company, dated as
of March 14, 1955. Certificate of Change of Location of
Registered Office and of Registered Agent, dated as of
April 18, 1988. |
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3.1(an)† |
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Certificate of Incorporation of Produce America, Inc., dated as
of June 24, 1982. Certificate of Amendment of Certificate
of Incorporation Before Payment of Capital of Produce America,
Inc., dated as of October 29, 1982, changed the
company’s name to CCFV, Inc. Certificate of Amendment of
Certificate of Incorporation of CCFV, Inc., dated as of
September 29, 1983, changed the company’s name to Sun
Country Produce, Inc. |
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3.1(ao)† |
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Certificate of Incorporation of West Foods, Inc., dated as of
March 9, 1973. |
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3.1(ap)† |
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Certificate of Incorporation of Cool Advantage, Inc., dated as
of December 14, 1998. |
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3.1(aq)† |
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Articles of Incorporation of Cool Care Consulting, Inc., dated
as of September 16, 1986. Articles of Amendment of Cool
Care Consulting, Inc., dated as of April 4, 1996, changed
the company’s name to Cool Care, Inc. |
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3.1(ar)† |
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Articles of Incorporation of Flowernet, Inc., dated as of
September 11, 1987. |
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3.1(as)† |
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Articles of Incorporation of Saw Grass Transport, Inc., dated as
of June 24, 1999. |
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3.1(at)† |
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Articles of Incorporation of Castle & Cooke Development
Corporation, dated as of June 8, 1992. Articles of
Amendment to Change Corporate Name, dated as of March 1,
1993, changed the company’s name to Castle & Cooke
Communities, Inc. Articles of Amendment to Change Corporate
Name, dated as of March 18, 1996, changed the
company’s name to Blue Anthurium, Inc. |
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3.1(au)† |
|
|
Articles of Incorporation of Dole Acquisition Corporation, dated
as of October 13, 1994. Articles of Amendment to Change
Corporate Name, dated as of January 10, 1995, changed the
company’s name to Castle & Cooke Homes, Inc.
Articles of Amendment to Change Corporate Name, dated as of
March 18, 1996, changed the company’s name to
Cerulean, Inc. |
123
| |
|
|
|
|
| Exhibit | |
|
|
| Number | |
|
Title |
| | |
|
|
| |
| |
3.1(av)† |
|
|
Articles of Incorporation of Castle & Cooke Land
Company, Inc., dated as of March 8, 1990. Articles of
Amendment to Change Corporate Name, dated as of May 7,
1997, changed the company’s name to Dole Diversified, Inc. |
| |
| |
3.1(aw)† |
|
|
Articles of Association of Kohala Sugar Company, dated as of
February 3, 1863. Articles of Amendment to Change Corporate
Name, dated as of May 1, 1989, changed the company’s
name to Dole Land Company, Inc. |
| |
| |
3.1(ax)† |
|
|
Articles of Incorporation of Dole Packaged Foods Corporation,
dated as of April 4, 1990. |
| |
| |
3.1(ay)† |
|
|
Articles of Association of Oceanic Properties, Inc., dated as of
May 19, 1961. Articles of Amendment to Change Corporate
Name, dated as of October 23, 1990, changed the
company’s name to Castle & Cooke Properties, Inc.
Articles of Amendment, dated as of November 26, 1990.
Articles of Amendment to Change Corporate Name, dated as of
December 4, 1995, changed the company’s name to
La Petite d’Agen, Inc. |
| |
| |
3.1(az)† |
|
|
Articles of Incorporation of Lanai Holdings, Inc., dated as of
May 4, 1990. Articles of Amendment, dated as of
November 26, 1990. Articles of Amendment to Change
Corporate Name, dated as of January 22, 1996, changed the
company’s name to Malaga Company, Inc. |
| |
| |
3.1(ba)† |
|
|
Articles of Incorporation of M K Development, Inc., dated as of
February 26, 1988. Articles of Amendment, dated as of
November 26, 1990. |
| |
| |
3.1(bb)† |
|
|
Articles of Incorporation of Mililani Town, Inc., dated as of
December 29, 1966. Articles of Amendment, dated as of
November 26, 1990. Articles of Amendment to Change
Corporate Name, December 24, 1990, changed the
company’s name to Castle & Cooke Residential, Inc.
Articles of Amendment to Change Corporate Name, dated as of
October 21, 1993, changed the company’s name to
Castle & Cooke Homes Hawaii, Inc. Articles of Amendment
to Change Corporate Name, dated as of December 4, 1995,
changed the company’s name to Muscat, Inc. |
| |
| |
3.1(bc)† |
|
|
Articles of Incorporation of Oahu Transport Company, Limited,
dated as of April 15, 1947. Articles of Amendment, dated as
of July 24, 1987. Articles of Amendment, dated as of May
1997. |
| |
| |
3.1(bd)† |
|
|
Articles of Incorporation of Wahiawa Water Company, Inc., dated
as of June 24, 1975. |
| |
| |
3.1(be)† |
|
|
Articles of Incorporation of Waialua Sugar Company, Inc., dated
as of January 12, 1968. Certificate of Amendment, dated as
of January 24, 1986. |
| |
| |
3.1(bf)† |
|
|
Certificate of Incorporation of Lanai Company, Inc., dated as of
June 15, 1970. Articles of Amendment, dated as of
November 26, 1990. Articles of Amendment to Change
Corporate Name, dated as of December 4, 1995, changed the
company’s name to Zante Currant, Inc. |
| |
| |
3.1(bg)† |
|
|
Articles of Incorporation of Diversified Imports Co., dated as
of December 1, 1987. |
| |
| |
3.1(bh)† |
|
|
Articles of Incorporation of Dole Assets, Inc., dated as of
September 9, 1997. |
| |
| |
3.1(bi)† |
|
|
Articles of Incorporation of Dole Fresh Fruit Company, dated as
of September 12, 1985. |
| |
| |
3.1(bj)† |
|
|
Articles of Incorporation of Castle & Cooke Fresh
Fruit, Inc., dated as of October 27, 1983. Certificate of
Amendment of Articles of Incorporation of Castle &
Cooke Fresh Fruit Company, dated as of May 9, 1997, changed
the company’s name to Dole Holdings Inc. |
| |
| |
3.1(bk)† |
|
|
Articles of Incorporation of Dole Logistics Services, Inc.,
dated as of February 4, 1993. |
| |
| |
3.1(bl)† |
|
|
Articles of Incorporation of Dole Ocean Cargo Express, Inc.,
dated as of July 8, 1999. |
| |
| |
3.1(bm)† |
|
|
Articles of Incorporation of Dole Ocean Liner Express, Inc.,
dated as of June 3, 1993. |
| |
| |
3.1(bn)† |
|
|
Articles of Incorporation of Renaissance Capital Corporation,
dated as of July 28, 1995. |
| |
| |
3.1(bo)† |
|
|
Certificate of Incorporation of Sun Giant, Inc., dated as of
December 8, 1987. |
| |
| |
3.1(bp)† |
|
|
Certificate of Incorporation of Miradero Fishing Company, Inc.,
dated as of August 9, 1971. |
| |
| |
3.1(bq)† |
|
|
Articles of Incorporation of DNW Services Company, dated as of
June 4, 1998. |
| |
| |
3.1(br)† |
|
|
Articles of Incorporation of Pacific Coast Truck Company, dated
as of June 27, 1995. |
| |
| |
3.1(bs)† |
|
|
Articles of Incorporation of Pan-Alaska Fisheries, Inc., dated
as of July 28, 1959. Articles of Amendment to Articles of
Incorporation of Pan-Alaska Fisheries, Inc., dated as of
May 26, 1972. Articles of Amendment to Articles of
Incorporation of Pan-Alaska Fisheries, Inc., dated as of
August 30, 1973. Amendment to Articles of Incorporation,
dated as of June 25, 1976. |
124
| |
|
|
|
|
| Exhibit | |
|
|
| Number | |
|
Title |
| | |
|
|
| |
| |
3.2(a) |
|
|
By-Laws of Dole Food Company, Inc. (incorporated by reference to
Exhibit 3.2 to Dole’s Quarterly Report on
Form 10-Q for the quarterly period ended March 22,
2003, File No. 1-4455). |
| |
| |
3.2(b)† |
|
|
Form of By-Laws of the Additional Registrants. |
| |
| |
4.1 |
|
|
Indenture, dated as of July 15, 1993, between Dole and
Chase Manhattan Bank and Trust Company (formerly Chemical Trust
Company of California) (incorporated by reference to
Exhibit 4.6 to Dole’s Quarterly Report on
Form 10-Q for the quarterly period ended March 23,
2002, File No. 1-4455). |
| |
| |
4.2 |
|
|
First Supplemental Indenture, dated as of April 30, 2002,
between Dole and J.P. Morgan Trust Company, National
Association, to the Indenture dated as of July 15, 1993,
pursuant to which $400 million of Dole’s senior notes
due 2009 were issued (incorporated by reference to
Exhibit 4.9 to Dole’s Quarterly Report on
Form 10-Q for the quarterly period ended March 23,
2002, File No. 1-4455). |
| |
| |
4.3 |
|
|
Officers’ Certificate, dated August 3, 1993, pursuant
to which $175 million of Dole’s debentures due 2013
were issued (incorporated by reference to Exhibit 4.3 to
Dole’s Annual Report on Form 10-K for the fiscal year
ended January 2, 1999, File No. 1-4455). |
| |
| |
4.4 |
|
|
Second Supplemental Indenture, dated as of March 28, 2003,
between Dole and Wells Fargo Bank, National Association
(successor trustee to J.P. Morgan Trust Company), to the
Indenture dated as of July 15, 1993 (incorporated by
reference to Exhibit 4.10 to Dole’s Current Report on
Form 8-K, event date April 4, 2003, File
No. 1-4455). |
| |
| |
4.5† |
|
|
Agreement of Removal, Appointment and Acceptance, dated as of
March 28, 2003, by and among Dole, J.P. Morgan Trust
Company, National Association, successor in interest to Chemical
Trust Company of California, as Prior Trustee, and Wells Fargo
Bank, National Association. |
| |
| |
4.6† |
|
|
Third Supplemental Indenture, dated as of June 25, 2003, by
and among Dole, Miradero Fishing Company, Inc., the guarantors
signatory thereto and Wells Fargo Bank, National Association, as
trustee. |
| |
| |
4.7 |
|
|
Indenture, dated as of March 28, 2003, by and among Dole,
the guarantors signatory thereto and Wells Fargo Bank, National
Association, as trustee, pursuant to which $475 million of
Dole’s
87/8
% senior notes due 2011 were issued (incorporated by
reference to Exhibit 4.10 to Dole’s Quarterly Report
on Form 10-Q for the quarterly period ended March 22,
2003, File No. 1-4455). |
| |
| |
4.8† |
|
|
First Supplemental Indenture, dated as of June 25, 2003, by
and among Dole, Miradero Fishing Company, Inc., the guarantors
signatory thereto and Wells Fargo Bank, National Association, as
trustee. |
| |
| |
4.9 |
|
|
Form of Global Note and Guarantee for Dole’s new
87/8
% senior notes due 2011 (included as Exhibit B
to Exhibit Number 4.7 hereto). |
| |
| |
4.11† |
|
|
Indenture, dated as of May 29, 2003, by and among Dole, the
guarantors signatory thereto and Wells Fargo Bank, National
Association, as trustee, pursuant to which $400 million of
Dole’s
71/4
% senior notes due 2010 were issued. |
| |
| |
4.12† |
|
|
First Supplemental Indenture, dated as of June 25, 2003, by
and among Dole, Miradero Fishing Company, Inc., the guarantors
signatory thereto and Wells Fargo Bank, National Association, as
trustee. |
| |
| |
4.13 |
|
|
Form of Global Note and Guarantee for Dole’s
71/4
% senior notes due 2010 (included as Exhibit A
to Exhibit Number 4.11 hereto). |
| |
| |
4.14 |
|
|
Dole Food Company, Inc. Master Retirement Savings
Trust Agreement, dated as of February 1, 1999, between
Dole and The Northern Trust Company (incorporated by reference
to Exhibit 4.7 to Dole’s Annual Report on
Form 10-K for the fiscal year ended January 2, 1999,
File No. 1-4455). |
125
| |
|
|
|
|
| Exhibit | |
|
|
| Number | |
|
Title |
| | |
|
|
| |
| |
10.1* |
|
|
Credit Agreement, dated as of March 28, 2003, amended and
restated as of April 18, 2005 and further amended and
restated as of April 12, 2006, among DHM Holding
Company, Inc., a Delaware corporation, Dole Holding Company,
LLC, a Delaware limited liability company, Dole Food Company,
Inc., a Delaware corporation, Solvest, Ltd., a company organized
under the laws of Bermuda, the Lenders from time to time party
hereto, Deutsche Bank AG New York Branch, as Deposit Bank,
Deutsche Bank AG New York Branch, as Administrative Agent, Banc
Of America Securities LLC, as Syndication Agent, The Bank of
Nova Scotia, as Documentation Agent and Deutsche Bank Securities
Inc., as Lead Arranger and Sole Book Runner. |
| |
| |
10.2* |
|
|
Credit Agreement, dated as of April 12, 2006, among
DHM Holding Company, Inc., a Delaware corporation, Dole
Holding Company, LLC, a Delaware limited liability company, Dole
Food Company, Inc., a Delaware corporation, the Lenders party
hereto from time to time, Deutsche Bank AG New York Branch,
as Administrative Agent, Banc of America Securities LLC, as
Syndication Agent, Deutsche Bank Securities LLC and Banc of
America Securities LLC, as Joint Book Running Managers and
Deutsche Bank Securities Inc. as Lead Arranger. |
| |
| |
10.3 |
|
|
Dole’s Supplementary Executive Retirement Plan, effective
January 1, 1989, First Restatement (incorporated by
reference to Exhibit 10(c) to Dole’s Annual Report on
Form 10-K for the fiscal year ended December 29, 1990,
File No. 1-4455). This Plan was amended on March 22,
2001 (the March 22, 2001 amendments are incorporated by
reference to Exhibit 10.10 to Dole’s Annual Report on
Form 10-K for the fiscal year ended December 30, 2000,
File No. 1-4455). |
| |
| |
10.4 |
|
|
Dole’s Executive Deferred Compensation Plan (incorporated
by reference to Exhibit 10.9 to Dole’s Annual Report
on Form 10-K for the fiscal year ended December 31,
1994, File No. 1-4455). This Plan was amended on
March 22, 2001 (the March 22, 2001 amendments are
incorporated by reference to Exhibit 10.10 to Dole’s
Annual Report on Form 10-K for the fiscal year ended
December 30, 2000, File No. 1-4455). |
| |
| |
10.5 |
|
|
Dole’s 1996 Non-Employee Directors Deferred Stock and Cash
Compensation Plan, as amended effective October 9, 1998
(incorporated by reference to Exhibit 10 to Dole’s
Quarterly Report on Form 10-Q for the fiscal quarter ended
October 10, 1998, File No. 1-4455). This Plan was
amended on March 22, 2001 (the March 22, 2001
amendments are incorporated by reference to Exhibit 10.10
to Dole’s Annual Report on Form 10-K for the fiscal
year ended December 30, 2000, File No. 1-4455). |
| |
| |
10.6 |
|
|
Consulting Agreement, dated as of December 28, 2001,
between Dole and David A. DeLorenzo (incorporated by reference
to Exhibit 10.12 to Dole’s Quarterly Report on
Form 10-Q for the quarterly period ended March 23,
2002, File No. 1-4455). |
| |
| |
10.7 |
|
|
Schedule of executive officers having Form 1 Change of
Control Agreement (incorporated by reference to
Exhibit 10.7 to Dole’s Current Report on Form 8-K
dated February 4, 2005, File No. 1-4455). |
| |
| |
10.8 |
|
|
Form 1 Change of Control Agreement (incorporated by
reference to Exhibit 10.14 to Dole’s Quarterly Report
on Form 10-Q for the quarterly period ended March 23,
2002, File No. 1-4455). |
| |
| |
12* |
|
|
Ratio of Earnings to Fixed Charges. |
| |
| |
21* |
|
|
Subsidiaries of Dole Food Company, Inc. |
| |
| |
23* |
|
|
Consent of Deloitte & Touche LLP. |
| |
| |
31.1* |
|
|
Certification by the Chairman and Chief Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley Act. |
| |
| |
31.2* |
|
|
Certification by the Vice President and Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act. |
| |
| |
32.1** |
|
|
Certification by the Chairman and Chief Executive Officer
pursuant to Section 906 of the Sarbanes-Oxley Act. |
| |
| |
32.2** |
|
|
Certification by the Vice President and Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act. |
126
|
|
| † |
Incorporated by reference to the correspondingly numbered
exhibits to Dole’s Registration Statement on
Form S-4, filed
with the Commission on June 25, 2004, File
No. 333-106493 |
127
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.
|
|
| |
Dole Food Company, Inc.
|
| |
Registrant |
|
|
| |
|
| |
David H. Murdock |
| |
Chairman and Chief Executive Officer |
April 14, 2006
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints C. Michael Carter and
Richard J. Dahl, or any of them, as his true and lawful
attorney-in-fact and
agent, with full power of substitution and resubstitution, for
him and in his name, place and stead, in any and all capacities,
to sign any and all amendments to this Annual Report on
Form 10-K, and to
file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, granting unto said
attorney-in-fact and
agent, full power and authority to do and perform each and every
act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he might
or could do in person, lawfully do or cause to be done by virtue
hereof.
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
David H. Murdock |
|
Chairman of the Board and Chief Executive Officer and Director |
|
April 14, 2006 |
| |
/s/ Richard J. Dahl
Richard J. Dahl |
|
President and Chief Operating Officer and Director |
|
April 14, 2006 |
| |
/s/ C. Michael Carter
C. Michael Carter |
|
Executive Vice President, General Counsel and Corporate
Secretary
and Director |
|
April 14, 2006 |
| |
/s/ Scott A. Griswold
Scott A. Griswold |
|
Executive Vice President, Corporate Development and Director |
|
April 14, 2006 |
| |
/s/ Roberta Wieman
Roberta Wieman |
|
Executive Vice President, Chief of Staff
and Director |
|
April 14, 2006 |
| |
/s/ Joseph S. Tesoriero
Joseph S. Tesoriero |
|
Vice President and
Chief Financial Officer |
|
April 14, 2006 |
| |
/s/ Yoon J. Hugh
Yoon J. Hugh |
|
Vice President, Controller and
Chief Accounting Officer
(Principal Accounting Officer) |
|
April 14, 2006 |
| |
/s/ Andrew J. Conrad
Andrew J. Conrad |
|
Director |
|
April 14, 2006 |
| |
/s/ David A. DeLorenzo
David A. DeLorenzo |
|
Director |
|
April 14, 2006 |
| |
/s/ Richard M. Ferry
Richard M. Ferry |
|
Director |
|
April 14, 2006 |
| |
/s/ Justin Murdock
Justin Murdock |
|
Director |
|
April 14, 2006 |
| |
/s/ Edward C. Roohan
Edward C. Roohan |
|
Director |
|
April 14, 2006 |
128
DOLE FOOD COMPANY, INC.
VALUATION AND QUALIFYING ACCOUNTS
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Additions | |
|
Deductions(A) | |
|
|
|
|
| |
|
|
|
| |
|
| |
|
|
|
|
| |
|
Balance at | |
|
|
|
Charged to | |
|
Balance at | |
| |
|
Beginning | |
|
Charged to Costs | |
|
Other | |
|
End of | |
| |
|
of Period | |
|
and Expenses | |
|
Accounts(B) | |
|
Period | |
| |
|
| |
|
| |
|
| |
|
| |
| |
|
(In thousands) | |
|
SUCCESSOR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Allowance for doubtful accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Trade receivables
|
|
$ |
49,312 |
|
|
$ |
21,121 |
|
|
$ |
(22,673 |
) |
|
$ |
(3,606 |
) |
|
$ |
44,154 |
|
| |
|
Notes and other current receivables
|
|
|
16,221 |
|
|
|
3,496 |
|
|
|
(8,760 |
) |
|
|
3,474 |
|
|
|
14,431 |
|
| |
|
Long-term notes and other receivables
|
|
|
8,670 |
|
|
|
1,354 |
|
|
|
(2,207 |
) |
|
|
4,766 |
|
|
|
12,583 |
|
|
SUCCESSOR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 1, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Allowance for doubtful accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Trade receivables
|
|
$ |
53,471 |
|
|
$ |
10,128 |
|
|
$ |
(12,672 |
) |
|
$ |
(1,615 |
) |
|
$ |
49,312 |
|
| |
|
Notes and other current receivables
|
|
|
17,125 |
|
|
|
5,486 |
|
|
|
(4,875 |
) |
|
|
(1,515 |
) |
|
|
16,221 |
|
| |
|
Long-term notes and other receivables
|
|
|
3,759 |
|
|
|
5,032 |
|
|
|
(7,336 |
) |
|
|
7,215 |
|
|
|
8,670 |
|
|
SUCCESSOR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Quarters Ended January 3, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Allowance for doubtful accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Trade receivables
|
|
$ |
12,983 |
|
|
$ |
15,229 |
|
|
$ |
(13,304 |
) |
|
$ |
38,563 |
|
|
$ |
53,471 |
|
| |
|
Notes and other current receivables
|
|
|
3,540 |
|
|
|
3,253 |
|
|
|
(4,346 |
) |
|
|
14,678 |
|
|
|
17,125 |
|
| |
|
Long-term notes and other receivables
|
|
|
14,413 |
|
|
|
479 |
|
|
|
(40,975 |
) |
|
|
29,842 |
|
|
|
3,759 |
|
|
PREDECESSOR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended March 22, 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Allowance for doubtful accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Trade receivables
|
|
$ |
54,580 |
|
|
$ |
3,064 |
|
|
$ |
(2,108 |
) |
|
$ |
— |
|
|
$ |
55,536 |
|
| |
|
Notes and other current receivables
|
|
|
16,358 |
|
|
|
425 |
|
|
|
(308 |
) |
|
|
(1,332 |
) |
|
|
15,143 |
|
| |
|
Long-term notes and other receivables
|
|
|
64,917 |
|
|
|
709 |
|
|
|
(5,301 |
) |
|
|
1,332 |
|
|
|
61,657 |
|
Note:
|
|
|
|
(A) |
|
Includes write-off of uncollectible amounts and adjustments for
business dispositions and reconfigurations |
| |
|
(B) |
|
Purchase accounting and transfers among allowance accounts |
129
Exhibit Index
| |
|
|
|
|
| Exhibit | |
|
|
| Number | |
|
Title |
| | |
|
|
| |
3.1(a) |
|
|
Amended and Restated Certificate of Incorporation of Dole Food
Company, Inc. (incorporated by reference to Exhibit 3.1 to
Dole’s Quarterly Report on Form 10-Q for the quarterly
period ended March 22, 2003, File No. 1-4455). |
| |
| |
3.1(b)† |
|
|
Articles of Incorporation of Oceanic Properties Arizona, Inc.,
dated as of January 12, 1988. Articles of Amendment to the
Articles of Incorporation of Oceanic Properties Arizona, Inc.,
dated as of November 16, 1990, changed the company’s
name to Castle & Cooke Arizona, Inc. Articles of
Amendment to the Articles of Incorporation of Castle &
Cooke Arizona, Inc., dated as of December 21, 1995, changed
the company’s name to Calazo Corporation. |
| |
| |
3.1(c)† |
|
|
Articles of Incorporation of AG 1970, Inc., dated as of
September 25, 1987. Certificate of Amendment of Articles of
Incorporation of AG 1970, Inc., dated as of
December 13, 1989. |
| |
| |
3.1(d)† |
|
|
Articles of Incorporation of AG 1971, Inc., dated as of
September 25, 1987. Certificate of Amendment of Articles of
Incorporation of AG 1971, Inc., dated as of
December 13, 1989. |
| |
| |
3.1(e)† |
|
|
Articles of Incorporation of AG 1972, Inc., dated as of
September 25, 1987. Certificate of Amendment of Articles of
Incorporation of AG 1972, Inc., dated as of
December 13, 1989. |
| |
| |
3.1(f)† |
|
|
Articles of Incorporation of Castle & Cooke Homes,
Inc., dated as of February 10, 1992. Certificate of
Amendment of Articles of Incorporation of Castle &
Cooke Homes, Inc., dated as of March 18, 1996, changed the
company’s name to Alyssum Corporation. |
| |
| |
3.1(g)† |
|
|
Articles of Incorporation of Barclay Hollander Curci, Inc.,
dated as of February 28, 1969. Certificate of Amendment of
Articles of Incorporation, dated as of February 1975, changed
the company’s name to Barclay Hollander Corporation.
Certificate of Amendment of Articles of Incorporation of Barclay
Hollander Corporation, dated as of November 26, 1980.
Certificate of Amendment of Articles of Incorporation of Barclay
Hollander Corporation, dated as of June 11, 1990. |
| |
| |
3.1(h)† |
|
|
Articles of Incorporation of Grandma Mac’s Orchard, dated
as of August 27, 1976. Certificate of Amendment of Articles
of Incorporation of Grandma Mac’s Orchard, dated as of
January 6, 1988, changed the company’s name to Sun
Giant, Inc. Certificate of Amendment of Articles of
Incorporation of Sun Giant, Inc., dated as of March 4,
1988, changed the company’s name to Dole Bakersfield, Inc.
Certificate of Amendment of Articles of Incorporation of Dole
Bakersfield, Inc., dated as of June 11, 1990. Agreement of
Merger of Bud Antle, Inc. and Dole Bakersfield, Inc., dated as
of December 18, 2000, changed the company’s name to
Bud Antle, Inc. |
| |
| |
3.1(i)† |
|
|
Articles of Incorporation of Lake Anderson Corporation, dated as
of June 26, 1964. Certificate of Amendment of Articles of
Incorporation, dated as of November 12, 1971. Certificate
of Amendment of Articles of Incorporation, dated as of
August 28, 1972, changed the company’s name to Oceanic
California Inc. Certificate of Amendment of Articles of
Incorporation, dated as of July 14, 1977. Certificate of
Amendment of Articles of Incorporation of Oceanic California
Inc., dated as of June 17, 1981. Certificate of Amendment
of Articles of Incorporation of Oceanic California Inc., dated
as of November 16, 1990, changed the company’s name to
Castle & Cooke California, Inc. Certificate of
Amendment of Articles of Incorporation of Castle &
Cooke California, Inc., dated as of December 21, 1995,
changed the company’s name to Calicahomes, Inc. |
| |
| |
3.1(j)† |
|
|
Articles of Incorporation of California Polaris, Inc., dated as
of April 6, 1979. |
| |
| |
3.1(k)† |
|
|
Articles of Incorporation of Dole ABPIK, Inc., dated as of
November 15, 1988. Certificate of Amendment of Articles of
Incorporation of Dole ABPIK, Inc., dated as of December 13,
1989. |
| |
| |
3.1(l)† |
|
|
Articles of Incorporation of Castle & Cooke Sierra
Vista, Inc., dated as of June 8, 1992. Certificate of
Amendment of Articles of Incorporation of Castle &
Cooke Sierra Vista, Inc., dated as of March 18, 1996,
changed the company’s name to Dole Arizona Dried Fruit and
Nut Company. |
| |
| |
3.1(m)† |
|
|
Articles of Incorporation of CCJM, Inc., dated as of
December 11, 1989. Certificate of Amendment of Articles of
Incorporation of CCJM, Inc., dated as of September 9, 1991,
changed the company’s name to Dole Carrot Company. |
| |
|
|
|
|
| Exhibit | |
|
|
| Number | |
|
Title |
| | |
|
|
| |
| |
3.1(n)† |
|
|
Articles of Incorporation of Miracle Fruit Company, dated as of
September 12, 1979. Certificate of Amendment of Articles of
Incorporation of Miracle Fruit Company, dated as of
October 1, 1979, changed the company’s name to Blue
Goose Growers, Inc. Certificate of Amendment of Articles of
Incorporation of Blue Goose Growers, Inc., dated as of
June 11, 1990. Certificate of Amendment of Articles of
Incorporation of Blue Goose Growers, Inc., dated as of
February 15, 1991, changed the company’s name to Dole
Citrus. |
| |
| |
3.1(o)† |
|
|
Articles of Incorporation of Dole DF&N, Inc., dated as of
November 15, 1988. Certificate of Amendment of Articles of
Incorporation of Dole DF&N, Inc., dated as of
December 13, 1989. |
| |
| |
3.1(p)† |
|
|
General Partnership Agreement of Dole Dried Fruit and Nut
Company, a California general partnership, dated as of
October 15, 1995. |
| |
| |
3.1(q)† |
|
|
Articles of Incorporation of Canfield Farming Company, dated as
of July 17, 1963. Certificate of Amendment of Articles of
Incorporation of Canfield Farming Company, dated as of
March 15, 1971, changed the company’s name to Tenneco
Farming Company. Certificate of Amendment of Articles of
Incorporation of Tenneco Farming Company, dated as of
January 6, 1988, changed the company’s name to Sun
Giant Farming, Inc. Certificate of Amendment of Articles of
Incorporation of Sun Giant Farming, Inc., dated as of
April 25, 1988, changed the company’s name to Dole
Farming, Inc. Certificate of Amendment of Articles of
Incorporation of Dole Farming, Inc., dated as of June 11,
1990. |
| |
| |
3.1(r)† |
|
|
Articles of Incorporation of Castle & Cooke Fresh
Vegetables, Inc., dated as of July 14, 1983. Certificate of
Amendment of Articles of Incorporation of Castle &
Cooke Fresh Vegetables, Inc., dated as of December 13,
1989. Certificate of Amendment of Articles of Incorporation of
Castle & Cooke Fresh Vegetables, Inc., dated as of
January 2, 1990, changed the company’s name to Dole
Fresh Vegetables, Inc. |
| |
| |
3.1(s)† |
|
|
Restated Articles of Incorporation of T.M. Duche Nut Co., Inc.,
dated as of October 15, 1986. Certificate of Amendment of
Articles of Incorporation of T.M. Duche Nut Co., Inc., dated as
of November 14, 1986. Certificate of Amendment of Articles
of Incorporation, dated as of April 20, 1988, changed the
company’s name to Dole Nut Company. Certificate of
Amendment of Articles of Incorporation of Dole Nut Company,
dated as of December 13, 1989. Certificate of Amendment of
Articles of Incorporation of Dole Nut Company, dated as of
January 28, 1998, changed the company’s name to Dole
Orland, Inc. |
| |
| |
3.1(t)† |
|
|
Articles of Incorporation of S & J Ranch, Inc., dated
as of December 15, 1952. Certificate of Amendment of
Articles of Incorporation of S & J Ranch, Inc., dated
as of December 13, 1989. Certificate of Amendment of
Articles of Incorporation of S & J Ranch, Inc., dated
as of September 27, 2000, changed the company’s name
to Dole Visage, Inc. |
| |
| |
3.1(u)† |
|
|
Articles of Incorporation of E.T. Wall, Grower-Shipper,
Inc., dated as of November 25, 1975. Certificate of
Amendment of Articles of Incorporation of E.T. Wall,
Grower-Shipper, Inc., dated as of July 25, 1984, changed
the company’s name to E.T. Wall Company. Certificate
of Amendment of Articles of Incorporation of E.T. Wall
Company, dated as of June 11, 1990. |
| |
| |
3.1(v)† |
|
|
Articles of Incorporation of Earlibest Orange Association, Inc.,
dated as of November 7, 1963. Certificate of Amendment of
Articles of Incorporation of Earlibest Orange Association, Inc.,
dated as of December 13, 1989. |
| |
| |
3.1(w)† |
|
|
Articles of Incorporation of The Citrus Company, dated as of
February 1, 1984. Certificate of Amendment of Articles of
Incorporation of The Citrus Company, dated as of
February 16, 1984, changed the company’s name to
Fallbrook Citrus Company, Inc. Certificate of Amendment of
Articles of Incorporation, dated as of March 15, 1994.
Certificate of Amendment of Articles of Incorporation of
Fallbrook Citrus Company, Inc., dated as of June 11, 1990. |
| |
| |
3.1(x)† |
|
|
Articles of Incorporation of Lindero Headquarters Company, Inc.,
dated as of February 12, 1998. |
| |
| |
3.1(y)† |
|
|
Articles of Incorporation of Lindero Property, Inc., dated as of
October 10, 1991. |
| |
| |
3.1(z)† |
|
|
Articles of Incorporation of Oceanview Produce Company, dated as
of June 15, 1989. Certificate of Amendment of Articles of
Incorporation of Oceanview Produce Company, dated as of
August 7, 1989. |
| |
| |
3.1(aa)† |
|
|
Articles of Incorporation of Prairie Vista, Inc., dated as of
November 23, 1953. |
| |
|
|
|
|
| Exhibit | |
|
|
| Number | |
|
Title |
| | |
|
|
| |
| |
3.1(ab)† |
|
|
Articles of Incorporation of Kingsize Packing Co., dated as of
February 5, 1990. Certificate of Amendment of Articles of
Incorporation of Kingsize Packing Co., dated as of
March 30, 1990, changed the company’s name to Royal
Packing Co. |
| |
| |
3.1(ac)† |
|
|
Articles of Incorporation of Trojan Transport Co., dated as of
August 31, 1955. Certificate of Amendment of Articles of
Incorporation of Trojan Transport Co., dated as of July 31,
1956, changed the company’s name to Trojan Transportation
and Warehouse Co. Certificate of Amendment of Articles of
Incorporation of Trojan Transportation Co., dated as of
January 24, 1961, changed the company’s name to
Veltman Terminal Co. |
| |
| |
3.1(ad)† |
|
|
Certificate of Incorporation of Bananera Antillana (Columbia),
Inc., dated as of November 16, 1977. |
| |
| |
3.1(ae)† |
|
|
Certificate of Incorporation of Clovis Citrus Association, dated
as of January 24, 1990. Certificate of Amendment of
Certificate of Incorporation of Clovis Citrus Association, dated
as of January 24, 1990. |
| |
| |
3.1(af)† |
|
|
Certificate of Incorporation of Tenneco Sudan, Inc., dated as of
June 8, 1977. Certificate of Amendment of Certificate of
Incorporation of Tenneco Sudan, Inc., dated as of
December 10, 1986, changed the company’s name to
Tenneco Realty Development Holding Corporation. Certificate of
Amendment of Certificate of Incorporation of Tenneco Realty
Development Holding Corporation, dated as of April 21,
1988, changed the company’s name to Oceanic California
Realty Development Holding Corporation. Certificate of Amendment
of Certificate of Incorporation of Oceanic California Realty
Development Holding Corporation, dated as of November 16,
1990, changed the company’s name to Castle & Cooke
Bakersfield Holdings, Inc. Certificate of Amendment of
Certificate of Incorporation of Castle & Cooke
Bakersfield Holdings, Inc., dated as of March 18, 1996,
changed the company’s name to Delphinium Corporation. |
| |
| |
3.1(ag)† |
|
|
Certificate of Incorporation of Standard Banana Company, dated
as of March 21, 1955. Certificate of Amendment of
Certificate of Incorporation of Standard Banana Company, dated
as of January 8, 1971, changed the company’s name to
Standard Fruit Sales Company. Certificate of Amendment of
Certificate of Incorporation of Standard Fruit Sales Company,
dated as of June 6, 1973, changed the company’s name
to Castle & Cooke Food Sales Company. Certificate of
Amendment of Certificate of Incorporation of Castle &
Cooke Food Sales Company, dated as of September 25, 1984,
changed the company’s name to Dole Europe Company.
Certificate of Change of Location of Registered Office and of
Registered Agent, dated as of April 18, 1988. |
| |
| |
3.1(ah)† |
|
|
Certificate of Incorporation of Castle Aviation, Inc., dated as
of June 25, 1987. Certificate of Amendment of Certificate
of Incorporation of Castle Aviation, Inc., dated as of
April 10, 1992, changed the company’s name to Dole
Foods Flight Operations, Inc. |
| |
| |
3.1(ai)† |
|
|
Certificate of Incorporation of Cut Flower Exchange, Inc., dated
as of February 11, 1988. Certificate of Merger, dated as of
July 31, 1991, changed the company’s name Sunburst
Farms, Inc. Certificate of Amendment of Certificate of
Incorporation of Sunburst Farms, Inc., dated as of June 23,
1999, changed the company’s name to Dole Fresh Flowers, Inc. |
| |
| |
3.1(aj)† |
|
|
Certificate of Incorporation of Wenatchee-Beebe Orchard Company,
dated as of November 7, 1927. Certificate of Ownership and
Merger in Wenatchee-Beebe Orchard Company, dated as of
June 23, 1943. Certificate of Amendment of Certificate of
Incorporation of Wenatchee-Beebe Orchard Company, dated as of
April 20, 1983, changed the company’s name to Beebe
Orchard Company. Certificate of Merger of Wells and Wade Fruit
Company and Beebe Orchard Company, dated as of March 23,
2001, changed the company’s name to Dole Northwest, Inc. |
| |
| |
3.1(ak)† |
|
|
Certificate of Incorporation of Dole Sunburst Express, Inc.
Certificate of Amendment of Certificate of Incorporation of Dole
Sunburst Express, Inc., dated as of July 21, 1996, changed
the company’s name to Dole Sunfresh Express, Inc. |
| |
| |
3.1(al)† |
|
|
Certificate of Incorporation of Standard Fruit and Steamship
Company, dated as of January 2, 1968. |
| |
| |
3.1(am)† |
|
|
Certificate of Incorporation of Standard Fruit Company, dated as
of March 14, 1955. Certificate of Change of Location of
Registered Office and of Registered Agent, dated as of
April 18, 1988. |
| |
|
|
|
|
| Exhibit | |
|
|
| Number | |
|
Title |
| | |
|
|
| |
| |
3.1(an)† |
|
|
Certificate of Incorporation of Produce America, Inc., dated as
of June 24, 1982. Certificate of Amendment of Certificate
of Incorporation Before Payment of Capital of Produce America,
Inc., dated as of October 29, 1982, changed the
company’s name to CCFV, Inc. Certificate of Amendment of
Certificate of Incorporation of CCFV, Inc., dated as of
September 29, 1983, changed the company’s name to Sun
Country Produce, Inc. |
| |
| |
3.1(ao)† |
|
|
Certificate of Incorporation of West Foods, Inc., dated as of
March 9, 1973. |
| |
| |
3.1(ap)† |
|
|
Certificate of Incorporation of Cool Advantage, Inc., dated as
of December 14, 1998. |
| |
| |
3.1(aq)† |
|
|
Articles of Incorporation of Cool Care Consulting, Inc., dated
as of September 16, 1986. Articles of Amendment of Cool
Care Consulting, Inc., dated as of April 4, 1996, changed
the company’s name to Cool Care, Inc. |
| |
| |
3.1(ar)† |
|
|
Articles of Incorporation of Flowernet, Inc., dated as of
September 11, 1987. |
| |
| |
3.1(as)† |
|
|
Articles of Incorporation of Saw Grass Transport, Inc., dated as
of June 24, 1999. |
| |
| |
3.1(at)† |
|
|
Articles of Incorporation of Castle & Cooke Development
Corporation, dated as of June 8, 1992. Articles of
Amendment to Change Corporate Name, dated as of March 1,
1993, changed the company’s name to Castle & Cooke
Communities, Inc. Articles of Amendment to Change Corporate
Name, dated as of March 18, 1996, changed the
company’s name to Blue Anthurium, Inc. |
| |
| |
3.1(au)† |
|
|
Articles of Incorporation of Dole Acquisition Corporation, dated
as of October 13, 1994. Articles of Amendment to Change
Corporate Name, dated as of January 10, 1995, changed the
company’s name to Castle & Cooke Homes, Inc.
Articles of Amendment to Change Corporate Name, dated as of
March 18, 1996, changed the company’s name to
Cerulean, Inc. |
| |
| |
3.1(av)† |
|
|
Articles of Incorporation of Castle & Cooke Land
Company, Inc., dated as of March 8, 1990. Articles of
Amendment to Change Corporate Name, dated as of May 7,
1997, changed the company’s name to Dole Diversified, Inc. |
| |
| |
3.1(aw)† |
|
|
Articles of Association of Kohala Sugar Company, dated as of
February 3, 1863. Articles of Amendment to Change Corporate
Name, dated as of May 1, 1989, changed the company’s
name to Dole Land Company, Inc. |
| |
| |
3.1(ax)† |
|
|
Articles of Incorporation of Dole Packaged Foods Corporation,
dated as of April 4, 1990. |
| |
| |
3.1(ay)† |
|
|
Articles of Association of Oceanic Properties, Inc., dated as of
May 19, 1961. Articles of Amendment to Change Corporate
Name, dated as of October 23, 1990, changed the
company’s name to Castle & Cooke Properties, Inc.
Articles of Amendment, dated as of November 26, 1990.
Articles of Amendment to Change Corporate Name, dated as of
December 4, 1995, changed the company’s name to
La Petite d’Agen, Inc. |
| |
| |
3.1(az)† |
|
|
Articles of Incorporation of Lanai Holdings, Inc., dated as of
May 4, 1990. Articles of Amendment, dated as of
November 26, 1990. Articles of Amendment to Change
Corporate Name, dated as of January 22, 1996, changed the
company’s name to Malaga Company, Inc. |
| |
| |
3.1(ba)† |
|
|
Articles of Incorporation of M K Development, Inc., dated as of
February 26, 1988. Articles of Amendment, dated as of
November 26, 1990. |
| |
| |
3.1(bb)† |
|
|
Articles of Incorporation of Mililani Town, Inc., dated as of
December 29, 1966. Articles of Amendment, dated as of
November 26, 1990. Articles of Amendment to Change
Corporate Name, December 24, 1990, changed the
company’s name to Castle & Cooke Residential, Inc.
Articles of Amendment to Change Corporate Name, dated as of
October 21, 1993, changed the company’s name to
Castle & Cooke Homes Hawaii, Inc. Articles of Amendment
to Change Corporate Name, dated as of December 4, 1995,
changed the company’s name to Muscat, Inc. |
| |
| |
3.1(bc)† |
|
|
Articles of Incorporation of Oahu Transport Company, Limited,
dated as of April 15, 1947. Articles of Amendment, dated as
of July 24, 1987. Articles of Amendment, dated as of May
1997. |
| |
| |
3.1(bd)† |
|
|
Articles of Incorporation of Wahiawa Water Company, Inc., dated
as of June 24, 1975. |
| |
| |
3.1(be)† |
|
|
Articles of Incorporation of Waialua Sugar Company, Inc., dated
as of January 12, 1968. Certificate of Amendment, dated as
of January 24, 1986. |
| |
| |
3.1(bf)† |
|
|
Certificate of Incorporation of Lanai Company, Inc., dated as of
June 15, 1970. Articles of Amendment, dated as of
November 26, 1990. Articles of Amendment to Change
Corporate Name, dated as of December 4, 1995, changed the
company’s name to Zante Currant, Inc. |
| |
|
|
|
|
| Exhibit | |
|
|
| Number | |
|
Title |
| | |
|
|
| |
| |
3.1(bg)† |
|
|
Articles of Incorporation of Diversified Imports Co., dated as
of December 1, 1987. |
| |
| |
3.1(bh)† |
|
|
Articles of Incorporation of Dole Assets, Inc., dated as of
September 9, 1997. |
| |
| |
3.1(bi)† |
|
|
Articles of Incorporation of Dole Fresh Fruit Company, dated as
of September 12, 1985. |
| |
| |
3.1(bj)† |
|
|
Articles of Incorporation of Castle & Cooke Fresh
Fruit, Inc., dated as of October 27, 1983. Certificate of
Amendment of Articles of Incorporation of Castle &
Cooke Fresh Fruit Company, dated as of May 9, 1997, changed
the company’s name to Dole Holdings Inc. |
| |
| |
3.1(bk)† |
|
|
Articles of Incorporation of Dole Logistics Services, Inc.,
dated as of February 4, 1993. |
| |
| |
3.1(bl)† |
|
|
Articles of Incorporation of Dole Ocean Cargo Express, Inc.,
dated as of July 8, 1999. |
| |
| |
3.1(bm)† |
|
|
Articles of Incorporation of Dole Ocean Liner Express, Inc.,
dated as of June 3, 1993. |
| |
| |
3.1(bn)† |
|
|
Articles of Incorporation of Renaissance Capital Corporation,
dated as of July 28, 1995. |
| |
| |
3.1(bo)† |
|
|
Certificate of Incorporation of Sun Giant, Inc., dated as of
December 8, 1987. |
| |
| |
3.1(bp)† |
|
|
Certificate of Incorporation of Miradero Fishing Company, Inc.,
dated as of August 9, 1971. |
| |
| |
3.1(bq)† |
|
|
Articles of Incorporation of DNW Services Company, dated as of
June 4, 1998. |
| |
| |
3.1(br)† |
|
|
Articles of Incorporation of Pacific Coast Truck Company, dated
as of June 27, 1995. |
| |
| |
3.1(bs)† |
|
|
Articles of Incorporation of Pan-Alaska Fisheries, Inc., dated
as of July 28, 1959. Articles of Amendment to Articles of
Incorporation of Pan-Alaska Fisheries, Inc., dated as of
May 26, 1972. Articles of Amendment to Articles of
Incorporation of Pan-Alaska Fisheries, Inc., dated as of
August 30, 1973. Amendment to Articles of Incorporation,
dated as of June 25, 1976. |
| |
| |
3.2(a) |
|
|
By-Laws of Dole Food Company, Inc. (incorporated by reference to
Exhibit 3.2 to Dole’s Quarterly Report on
Form 10-Q for the quarterly period ended March 22,
2003, File No. 1-4455). |
| |
| |
3.2(b)† |
|
|
Form of By-Laws of the Additional Registrants. |
| |
| |
4.1 |
|
|
Indenture, dated as of July 15, 1993, between Dole and
Chase Manhattan Bank and Trust Company (formerly Chemical Trust
Company of California) (incorporated by reference to
Exhibit 4.6 to Dole’s Quarterly Report on
Form 10-Q for the quarterly period ended March 23,
2002, File No. 1-4455). |
| |
| |
4.2 |
|
|
First Supplemental Indenture, dated as of April 30, 2002,
between Dole and J.P. Morgan Trust Company, National
Association, to the Indenture dated as of July 15, 1993,
pursuant to which $400 million of Dole’s senior notes
due 2009 were issued (incorporated by reference to
Exhibit 4.9 to Dole’s Quarterly Report on
Form 10-Q for the quarterly period ended March 23,
2002, File No. 1-4455). |
| |
| |
4.3 |
|
|
Officers’ Certificate, dated August 3, 1993, pursuant
to which $175 million of Dole’s debentures due 2013
were issued (incorporated by reference to Exhibit 4.3 to
Dole’s Annual Report on Form 10-K for the fiscal year
ended January 2, 1999, File No. 1-4455). |
| |
| |
4.4 |
|
|
Second Supplemental Indenture, dated as of March 28, 2003,
between Dole and Wells Fargo Bank, National Association
(successor trustee to J.P. Morgan Trust Company), to the
Indenture dated as of July 15, 1993 (incorporated by
reference to Exhibit 4.10 to Dole’s Current Report on
Form 8-K, event date April 4, 2003, File
No. 1-4455). |
| |
| |
4.5† |
|
|
Agreement of Removal, Appointment and Acceptance, dated as of
March 28, 2003, by and among Dole, J.P. Morgan Trust
Company, National Association, successor in interest to Chemical
Trust Company of California, as Prior Trustee, and Wells Fargo
Bank, National Association. |
| |
| |
4.6† |
|
|
Third Supplemental Indenture, dated as of June 25, 2003, by
and among Dole, Miradero Fishing Company, Inc., the guarantors
signatory thereto and Wells Fargo Bank, National Association, as
trustee. |
| |
| |
4.7 |
|
|
Indenture, dated as of March 28, 2003, by and among Dole,
the guarantors signatory thereto and Wells Fargo Bank, National
Association, as trustee, pursuant to which $475 million of
Dole’s
87/8
% senior notes due 2011 were issued (incorporated by
reference to Exhibit 4.10 to Dole’s Quarterly Report
on Form 10-Q for the quarterly period ended March 22,
2003, File No. 1-4455). |
| |
| |
4.8† |
|
|
First Supplemental Indenture, dated as of June 25, 2003, by
and among Dole, Miradero Fishing Company, Inc., the guarantors
signatory thereto and Wells Fargo Bank, National Association, as
trustee. |
| |
|
|
|
|
| Exhibit | |
|
|
| Number | |
|
Title |
| | |
|
|
| |
| |
4.9 |
|
|
Form of Global Note and Guarantee for Dole’s new
87/8
% senior notes due 2011 (included as Exhibit B
to Exhibit Number 4.7 hereto). |
| |
| |
4.11† |
|
|
Indenture, dated as of May 29, 2003, by and among Dole, the
guarantors signatory thereto and Wells Fargo Bank, National
Association, as trustee, pursuant to which $400 million of
Dole’s
71/4
% senior notes due 2010 were issued. |
| |
| |
4.12† |
|
|
First Supplemental Indenture, dated as of June 25, 2003, by
and among Dole, Miradero Fishing Company, Inc., the guarantors
signatory thereto and Wells Fargo Bank, National Association, as
trustee. |
| |
| |
4.13 |
|
|
Form of Global Note and Guarantee for Dole’s
71/4
% senior notes due 2010 (included as Exhibit A
to Exhibit Number 4.11 hereto). |
| |
| |
4.14 |
|
|
Dole Food Company, Inc. Master Retirement Savings
Trust Agreement, dated as of February 1, 1999, between
Dole and The Northern Trust Company (incorporated by reference
to Exhibit 4.7 to Dole’s Annual Report on
Form 10-K for the fiscal year ended January 2, 1999,
File No. 1-4455). |
| |
| |
10.1* |
|
|
Credit Agreement, dated as of March 28, 2003, amended and
restated as of April 18, 2005 and further amended and
restated as of April 12, 2006, among DHM Holding
Company, Inc., a Delaware corporation, Dole Holding Company,
LLC, a Delaware limited liability company, Dole Food Company,
Inc., a Delaware corporation, Solvest, Ltd., a company organized
under the laws of Bermuda, the Lenders from time to time party
hereto, Deutsche Bank AG New York Branch, as Deposit Bank,
Deutsche Bank AG New York Branch, as Administrative Agent, Banc
Of America Securities LLC, as Syndication Agent, The Bank of
Nova Scotia, as Documentation Agent and Deutsche Bank Securities
Inc., as Lead Arranger and Sole Book Runner. |
| |
| |
10.2* |
|
|
Credit Agreement, dated as of April 12, 2006, among
DHM Holding Company, Inc., a Delaware corporation, Dole
Holding Company, LLC, a Delaware limited liability company, Dole
Food Company, Inc., a Delaware corporation, the Lenders party
hereto from time to time, Deutsche Bank AG New York Branch,
as Administrative Agent, Banc of America Securities LLC, as
Syndication Agent, Deutsche Bank Securities LLC and Banc of
America Securities LLC, as Joint Book Running Managers and
Deutsche Bank Securities Inc. as Lead Arranger. |
| |
| |
10.3 |
|
|
Dole’s Supplementary Executive Retirement Plan, effective
January 1, 1989, First Restatement (incorporated by
reference to Exhibit 10(c) to Dole’s Annual Report on
Form 10-K for the fiscal year ended December 29, 1990,
File No. 1-4455). This Plan was amended on March 22,
2001 (the March 22, 2001 amendments are incorporated by
reference to Exhibit 10.10 to Dole’s Annual Report on
Form 10-K for the fiscal year ended December 30, 2000,
File No. 1-4455). |
| |
| |
10.4 |
|
|
Dole’s Executive Deferred Compensation Plan (incorporated
by reference to Exhibit 10.9 to Dole’s Annual Report
on Form 10-K for the fiscal year ended December 31,
1994, File No. 1-4455). This Plan was amended on
March 22, 2001 (the March 22, 2001 amendments are
incorporated by reference to Exhibit 10.10 to Dole’s
Annual Report on Form 10-K for the fiscal year ended
December 30, 2000, File No. 1-4455). |
| |
| |
10.5 |
|
|
Dole’s 1996 Non-Employee Directors Deferred Stock and Cash
Compensation Plan, as amended effective October 9, 1998
(incorporated by reference to Exhibit 10 to Dole’s
Quarterly Report on Form 10-Q for the fiscal quarter ended
October 10, 1998, File No. 1-4455). This Plan was
amended on March 22, 2001 (the March 22, 2001
amendments are incorporated by reference to Exhibit 10.10
to Dole’s Annual Report on Form 10-K for the fiscal
year ended December 30, 2000, File No. 1-4455). |
| |
| |
10.6 |
|
|
Consulting Agreement, dated as of December 28, 2001,
between Dole and David A. DeLorenzo (incorporated by reference
to Exhibit 10.12 to Dole’s Quarterly Report on
Form 10-Q for the quarterly period ended March 23,
2002, File No. 1-4455). |
| |
| |
10.7 |
|
|
Schedule of executive officers having Form 1 Change of
Control Agreement (incorporated by reference to
Exhibit 10.7 to Dole’s Current Report on Form 8-K
dated February 4, 2005, File No. 1-4455). |
| |
| |
10.8 |
|
|
Form 1 Change of Control Agreement (incorporated by
reference to Exhibit 10.14 to Dole’s Quarterly Report
on Form 10-Q for the quarterly period ended March 23,
2002, File No. 1-4455). |
| |
| |
12* |
|
|
Ratio of Earnings to Fixed Charges. |
| |
| |
21* |
|
|
Subsidiaries of Dole Food Company, Inc. |
| |
|
|
|
|
| Exhibit | |
|
|
| Number | |
|
Title |
| | |
|
|
| |
| |
23* |
|
|
Consent of Deloitte & Touche LLP. |
| |
| |
31.1* |
|
|
Certification by the Chairman and Chief Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley Act. |
| |
| |
31.2* |
|
|
Certification by the Vice President and Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act. |
| |
| |
32.1** |
|
|
Certification by the Chairman and Chief Executive Officer
pursuant to Section 906 of the Sarbanes-Oxley Act. |
| |
| |
32.2** |
|
|
Certification by the Vice President and Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act. |
|
|
| † |
Incorporated by reference to the correspondingly numbered
exhibits to Dole’s Registration Statement on
Form S-4, filed
with the Commission on June 25, 2004, File
No. 333-106493 |