e10vq
Table of Contents

 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
Form 10-Q
 
     
(Mark One)    
þ
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    For the quarterly period ended June 18, 2011
or
o
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    For the transition period from          to          
 
Commission file number 1-4455
 
 
 
 
Dole Food Company, Inc.
(Exact name of registrant as specified in its charter)
 
     
Delaware
  99-0035300
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
 
One Dole Drive, Westlake Village, California 91362
(Address of principal executive offices and zip code)
 
Registrant’s telephone number, including area code:
(818) 879-6600
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ     No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer o Accelerated filer þ Non-accelerated filer o Smaller reporting company o
(Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
         
Class   Shares Outstanding at July 22, 2011
 
Common Stock, $0.001 Par Value
    88,603,399  
 


 

 
DOLE FOOD COMPANY, INC.
 
INDEX
 
             
        Page
        Number
 
  Financial Statements (Unaudited)        
    Condensed Consolidated Statements of Operations — Quarters and Half Years Ended June 18, 2011 and June 19, 2010     3  
    Condensed Consolidated Statements of Comprehensive Income — Quarters and Half Years Ended June 18, 2011 and June 19, 2010     4  
    Condensed Consolidated Balance Sheets — June 18, 2011 and January 1, 2011     5  
    Condensed Consolidated Statements of Cash Flows — Half Years Ended June 18, 2011 and June 19, 2010     6  
    Condensed Consolidated Statements of Shareholders’ Equity — Half Years Ended June 18, 2011 and June 19, 2010     7  
    Notes to Condensed Consolidated Financial Statements     8  
  Management’s Discussion and Analysis of Financial Condition and Results of Operations     40  
  Quantitative and Qualitative Disclosures About Market Risk     49  
  Controls and Procedures     50  
 
  Legal Proceedings     50  
  Exhibits     50  
    Signatures     51  
    Exhibit Index     52  
    Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act     53  
    Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act     54  
    Certification by the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act     55  
    Certification by the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act     56  
 EX-10.24
 EX-31.1
 EX-31.2
 EX-32.1
 EX-32.2
 EX-101 INSTANCE DOCUMENT
 EX-101 SCHEMA DOCUMENT
 EX-101 CALCULATION LINKBASE DOCUMENT
 EX-101 LABELS LINKBASE DOCUMENT
 EX-101 PRESENTATION LINKBASE DOCUMENT
 EX-101 DEFINITION LINKBASE DOCUMENT


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PART I. FINANCIAL INFORMATION
 
Item 1.   FINANCIAL STATEMENTS
 
DOLE FOOD COMPANY, INC.
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
                                 
    Quarter Ended     Half Year Ended  
    June 18,
    June 19,
    June 18,
    June 19,
 
    2011     2010     2011     2010  
    (In thousands, except per share data )  
    (Unaudited)  
 
Revenues, net
  $ 1,915,725     $ 1,741,522     $ 3,601,829     $ 3,347,396  
Cost of products sold
    (1,657,519 )     (1,540,722 )     (3,136,862 )     (2,974,389 )
                                 
Gross margin
    258,206       200,800       464,967       373,007  
Selling, marketing and general and administrative expenses
    (130,233 )     (120,490 )     (254,963 )     (235,080 )
Charges for restructuring and long-term receivables (Notes 5 and 7)
    (5,947 )     (762 )     (8,702 )     (1,370 )
Gain on asset sales (Note 13)
    11       950       11       2,921  
                                 
Operating income
    122,037       80,498       201,313       139,478  
Other income (expense), net (Note 3)
    4,337       (5,496 )     (35,014 )     (889 )
Interest income
    1,166       1,516       2,484       3,118  
Interest expense
    (34,837 )     (37,138 )     (70,307 )     (78,188 )
                                 
Income from continuing operations before income taxes and equity earnings
    92,703       39,380       98,476       63,519  
Income taxes
    (13,518 )     (9,067 )     (18,658 )     (12,242 )
Earnings from equity method investments
    3,480       2,832       4,690       4,283  
                                 
Income from continuing operations
    82,665       33,145       84,508       55,560  
Income from discontinued operations, net of income taxes
    29       327       231       674  
Gain on disposal of discontinued operations, net of income taxes
    339             339        
                                 
Net income
    83,033       33,472       85,078       56,234  
Less: Net income attributable to noncontrolling interests
    (1,267 )     (1,151 )     (2,272 )     (1,760 )
                                 
Net income attributable to shareholders of Dole Food Company, Inc. 
  $ 81,766     $ 32,321     $ 82,806     $ 54,474  
                                 
Earnings per share — Basic (Note 16):
                               
Income from continuing operations
  $ 0.94     $ 0.38     $ 0.96     $ 0.64  
Net income attributable to shareholders of Dole Food Company, Inc. 
  $ 0.93     $ 0.37     $ 0.95     $ 0.62  
Earnings per share — Diluted (Note 16):
                               
Income from continuing operations
  $ 0.94     $ 0.38     $ 0.96     $ 0.64  
Net income attributable to shareholders of Dole Food Company, Inc. 
  $ 0.93     $ 0.37     $ 0.94     $ 0.62  
 
See Accompanying Notes to Condensed Consolidated Financial Statements


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DOLE FOOD COMPANY, INC.
 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
                                 
    Quarter Ended     Half Year Ended  
    June 18,
    June 19,
    June 18,
    June 19,
 
    2011     2010     2011     2010  
    (In thousands)  
    (Unaudited)  
 
Net income
  $ 83,033     $ 33,472     $ 85,078     $ 56,234  
Net foreign currency translation adjustment
    (3,377 )     (11,848 )     7,526       (24,741 )
Unrealized hedging gains (losses), net of income taxes of ($61), ($14), ($639) and $166, respectively
    (13,114 )     (396 )     (14,197 )     8,406  
Reclassification of realized losses to net income, net of income taxes of $379, ($26), $680 and ($26), respectively
    8,748       1,102       13,723       2,259  
                                 
Comprehensive income
    75,290       22,330       92,130       42,158  
Less: Comprehensive income attributable to noncontrolling interests
    (1,287 )     (1,142 )     (2,295 )     (1,734 )
                                 
Comprehensive income attributable to Shareholders of Dole Food Company, Inc. 
  $ 74,003     $ 21,188     $ 89,835     $ 40,424  
                                 
 
See Accompanying Notes to Condensed Consolidated Financial Statements


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DOLE FOOD COMPANY, INC.
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 
                 
    June 18,
    January 1,
 
    2011     2011  
    (In thousands, except per share data)  
    (Unaudited)  
 
ASSETS
Cash and cash equivalents
  $ 238,884     $ 170,147  
Restricted cash and deposits
    5,994       51,108  
Receivables, net of allowances of $32,255 and $36,533, respectively
    809,642       751,265  
Inventories
    790,763       734,966  
Prepaid expenses and other assets
    65,169       67,909  
Deferred income tax assets
    40,361       36,810  
Assets held-for-sale (Note 13)
    133,371       86,050  
                 
Total current assets
    2,084,184       1,898,255  
Investments
    96,814       87,914  
Property, plant and equipment, net of accumulated depreciation of $1,142,139 and $1,117,461, respectively
    912,935       943,030  
Goodwill
    407,247       407,247  
Intangible assets, net
    699,277       701,081  
Other assets, net
    208,720       219,463  
                 
Total assets
  $ 4,409,177     $ 4,256,990  
                 
 
LIABILITIES AND EQUITY
Accounts payable
  $ 562,790     $ 521,330  
Liabilities related to assets held-for-sale (Note 13)
    22,098        
Accrued liabilities
    557,177       642,481  
Current portion of long-term debt, net
    8,013       7,348  
Notes payable
    28,080       31,922  
                 
Total current liabilities
    1,178,158       1,203,081  
Long-term debt, net
    1,545,036       1,564,325  
Deferred income tax liabilities
    254,095       244,324  
Other long-term liabilities
    520,915       428,476  
Commitments and contingencies (Note 12)
               
Shareholders’ equity
               
Preferred stock — $0.001 par value; 10,000 shares authorized, none issued or outstanding
           
Common stock — $0.001 par value; 300,000 shares authorized, 88,604 and 88,611 shares issued and outstanding as of June 18, 2011 and January 1, 2011, respectively
    89       89  
Additional paid-in capital
    781,227       776,918  
Retained earnings
    153,889       71,083  
Accumulated other comprehensive loss
    (48,892 )     (55,921 )
                 
Equity attributable to shareholders of Dole Food Company, Inc. 
    886,313       792,169  
Equity attributable to noncontrolling interests
    24,660       24,615  
                 
Total equity
    910,973       816,784  
                 
Total liabilities and equity
  $ 4,409,177     $ 4,256,990  
                 
 
See Accompanying Notes to Condensed Consolidated Financial Statements


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DOLE FOOD COMPANY, INC.
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                 
    Half Year Ended  
    June 18,
    June 19,
 
    2011     2010  
    (In thousands)  
    (Unaudited)  
 
Operating Activities
               
Net income
  $ 85,078     $ 56,234  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    47,398       50,022  
Share-based compensation expense
    3,997       2,757  
Net losses on financial instruments
    37,238       8,043  
Asset write-offs and net (gain) loss on sale of assets
    4,222       (5,071 )
Earnings from equity method investments
    (4,690 )     (4,283 )
Amortization of debt discounts and debt issuance costs
    5,228       4,764  
Provision for long-term receivables
          1,370  
Write-off of debt issuance costs
    20       4,650  
Provision for deferred income taxes
    11,875       (632 )
Pension and other postretirement benefit plan expense
    11,656       6,948  
Other
    35       852  
Changes in operating assets and liabilities:
               
Receivables
    (98,222 )     (67,434 )
Inventories
    (64,222 )     26,837  
Prepaid expenses and other assets
    (336 )     (324 )
Income taxes
    (4,796 )     (1,829 )
Accounts payable
    62,709       30,651  
Accrued liabilities
    (5,096 )     (3,586 )
Other long-term liabilities
    (15,125 )     (19,006 )
                 
Cash flow provided by operating activities
    76,969       90,963  
Investing Activities
               
Cash received from sales of assets and businesses, net of cash disposed
    7,996       18,784  
Capital expenditures
    (35,946 )     (31,823 )
Restricted deposits
    45,114       (890 )
Other
    (465 )     (515 )
                 
Cash flow provided by (used in) investing activities
    16,699       (14,444 )
Financing Activities
               
Short-term debt repayments, net of borrowings
    (3,310 )     (5,613 )
Long-term debt borrowings
    163,043       923,218  
Long-term debt repayments
    (182,975 )     (906,222 )
Payment of debt issuance costs
          (16,986 )
Payment of initial public offering costs
          (957 )
Net proceeds from stock option exercises
    312        
Dividends paid to noncontrolling interests
    (2,250 )     (1,268 )
Settlement of long-term Japanese yen hedge forwards
    (2,212 )      
                 
Cash flow used in financing activities
    (27,392 )     (7,828 )
                 
Effect of foreign currency exchange rate changes on cash
    2,461       (3,015 )
                 
Increase in cash and cash equivalents
    68,737       65,676  
Cash and cash equivalents at beginning of period
    170,147       119,670  
                 
Cash and cash equivalents at end of period
  $ 238,884     $ 185,346  
                 
 
Supplemental cash flow information
 
At June 18, 2011 and January 1, 2011, accounts payable included approximately $2.2 million and $18.3 million, respectively, for capital expenditures. Of the $18.3 million of capital expenditures included in accounts payable at January 1, 2011, approximately $14.2 million had been paid during the half year ended June 18, 2011. Approximately $5.1 million had been paid during the half year ended June 19, 2010 related to $6.1 million of capital additions included in accounts payable at January 2, 2010.
 
During the first quarter of 2011, Dole effectively extinguished its cross currency swap liability by entering into a series of Japanese yen forward contracts (“long-term Japanese yen hedges”) that mature over a four year period. Refer to Note 14 — Derivative Financial Instruments for additional information.
 
See Accompanying Notes to Condensed Consolidated Financial Statements


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DOLE FOOD COMPANY, INC.
 
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
 
                                                                         
    Equity Attributable to Shareholders’ of Dole Food Company, Inc.              
                            Accumulated Other
             
                            Comprehensive Income (Loss)     Equity
       
                            Pension &
                Attributable
       
    Common
          Additional
          Other
    Cumulative
    Unrealized
    to
       
    Shares
    Common
    Paid-in
    Retained
    Postretirement
    Translation
    Gains (Losses)
    Noncontrolling
    Total
 
    Outstanding     Stock     Capital     Earnings     Benefits     Adjustment     on Hedges     Interests     Equity  
    (In thousands)  
    (Unaudited)  
 
Balance at January 2, 2010
    88,233     $ 88     $ 768,973     $ 105,207     $ (52,393 )   $ 38,226     $ (21,126 )   $ 27,004     $ 865,979  
Net income
                      54,474                         1,760       56,234  
Share-based compensation
                2,757                                     2,757  
Cancellation of restricted stock
    (6 )                                                
Dividends paid
                                              (1,268 )     (1,268 )
Net foreign currency translation adjustment
                                  (24,715 )           (26 )     (24,741 )
Unrealized hedging gains (losses), net of income taxes of $166
                                        8,406             8,406  
Reclassification of realized losses to net income, net of income taxes of ($26)
                                        2,259             2,259  
                                                                         
Balance at June 19, 2010
    88,227     $ 88     $ 771,730     $ 159,681     $ (52,393 )   $ 13,511     $ (10,461 )   $ 27,470     $ 909,626  
                                                                         
Balance at January 1, 2011
    88,611     $ 89     $ 776,918     $ 71,083     $ (71,836 )   $ 42,067     $ (26,152 )   $ 24,615     $ 816,784  
Net income
                      82,806                         2,272       85,078  
Share-based compensation
                3,997                                     3,997  
Exercise of stock options
    27             312                                     312  
Issuance of restricted stock
    6                                                  
Cancellation of restricted stock
    (40 )                                                
Dividends paid
                                              (2,250 )     (2,250 )
Net foreign currency translation adjustment
                                  7,503             23       7,526  
Unrealized hedging gains (losses), net of income taxes of ($639)
                                        (14,197 )           (14,197 )
Reclassification of realized losses to net income, net of income taxes of $680
                                        13,723             13,723  
                                                                         
Balance at June 18, 2011
    88,604     $ 89     $ 781,227     $ 153,889     $ (71,836 )   $ 49,570     $ (26,626 )   $ 24,660     $ 910,973  
                                                                         
 
See Accompanying Notes to Condensed Consolidated Financial Statements


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
NOTE 1 — BASIS OF PRESENTATION
 
In the opinion of management, the accompanying unaudited condensed consolidated financial statements of Dole Food Company, Inc. and its consolidated subsidiaries (“Dole” or the “Company”) include all adjustments necessary, which are of a normal recurring nature, to present fairly Dole’s financial position, results of operations and cash flows. Dole operates under a 52/53-week year. The quarters ended June 18, 2011 and June 19, 2010 are twelve weeks in duration. For a summary of significant accounting policies and additional information relating to Dole’s financial statements, refer to the Notes to Consolidated Financial Statements in Item 8 of Dole’s Annual Report on Form 10-K for the year ended January 1, 2011.
 
Interim results are subject to seasonal variations and are not necessarily indicative of the results of operations for a full year. Dole’s operations are sensitive to a number of factors including weather-related phenomena and their effects on industry volumes, prices, product quality and costs. Operations are also sensitive to fluctuations in foreign currency exchange rates in both sourcing and selling locations as well as economic crises and security risks.
 
In March 2003, Dole completed a going-private merger transaction. As a result of the transaction, Dole became wholly-owned by David H. Murdock, Dole’s Chairman. On October 28, 2009, Dole completed a $446 million initial public offering (“IPO”) of 35,715,000 common shares at $12.50 per share. On October 23, 2009, Dole’s common stock began trading on the New York Stock Exchange under the ticker symbol “DOLE.” Since the completion of the IPO, Dole’s chairman, David H. Murdock, and his affiliates have beneficially owned 51,710,000 common shares, or approximately 58.4% of Dole’s outstanding common shares.
 
NOTE 2 — RECENTLY ISSUED AND ADOPTED ACCOUNTING PRONOUNCEMENTS
 
During June 2011, the Financial Accounting Standards Board (“FASB”) issued a standard which revised the presentation of other comprehensive income (“OCI”). The new guidance requires entities to present net income and OCI in either a single continuous statement or in separate consecutive statements. The guidance does not change the components of net income or OCI, when OCI should be reclassified to net income, or the earnings per share calculation. This accounting guidance is effective for annual reporting periods beginning after December 15, 2011, and is effective for Dole beginning the first quarter of 2012. Dole adopted the guidance early during the second quarter of 2011. The adoption of the standard had no impact on Dole’s results of operations or financial position.


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
NOTE 3 — OTHER INCOME (EXPENSE), NET
 
Included in other income (expense), net in Dole’s condensed consolidated statements of operations for the quarters and half years ended June 18, 2011 and June 19, 2010 are the following items:
 
                                 
    Quarter Ended     Half Year Ended  
    June 18,
    June 19,
    June 18,
    June 19,
 
    2011     2010     2011     2010  
    (In thousands)  
 
Unrealized loss on cross currency swap
  $     $ (10,713 )   $ (3,787 )   $ (14,301 )
Realized gain on cross currency swap
          2,291       1,885       4,547  
Gain (loss) on long-term Japanese yen hedges
    4,825             (22,580 )      
Unrealized gain (loss) on foreign denominated borrowings
    (581 )     2,058       (8,147 )     7,467  
Realized gain (loss) on foreign denominated borrowings
    (15 )     1,102       (100 )     1,102  
Foreign currency exchange gain (loss) on vessel obligation
    (130 )     (81 )     (2,539 )     5,093  
Write-off of debt issuance costs
    (20 )           (20 )     (4,650 )
Other
    258       (153 )     274       (147 )
                                 
Other income (expense), net
  $ 4,337     $ (5,496 )   $ (35,014 )   $ (889 )
                                 
 
Refer to Note 14 — Derivative Financial Instruments for further discussion regarding Dole’s cross currency swap and long-term Japanese yen hedges.
 
NOTE 4 — INCOME TAXES
 
Dole recorded $18.7 million of income tax expense on $98.5 million of pretax income from continuing operations for the half year ended June 18, 2011. Income tax expense included an interest benefit of $2.6 million related to Dole’s unrecognized tax benefits. Income tax expense of $12.2 million on $63.5 million of pretax income from continuing operations was recorded for the half year ended June 19, 2010 which included interest expense of $0.1 million related to Dole’s unrecognized tax benefits. Dole’s effective tax rate varies significantly from period to period due to the level, mix and seasonality of earnings generated in its various U.S. and foreign jurisdictions. For the periods presented, Dole’s income tax expense differs from the U.S. federal statutory rate applied to Dole’s pretax income primarily due to operations in foreign jurisdictions that are taxed at a rate lower than the U.S. federal statutory rate. Income tax expense for the half year ended June 18, 2011 also benefitted by $8.4 million, including tax and interest, due to a favorable court ruling in Ecuador relating to a non-U.S unrecognized tax benefit. Income tax expense for the half year ended June 19, 2010 included $2.4 million recorded to establish a valuation allowance against deferred income tax assets in Ecuador which, as the result of a recently enacted tax law, have been determined to be not recoverable. This was offset by a reduction in Dole’s liability for unrecognized tax benefits related to certain foreign jurisdictions.
 
Dole is required to adjust its effective tax rate for each quarter to be consistent with the estimated annual effective tax rate. Jurisdictions with a projected loss where no tax benefit can be recognized are excluded from the calculation of the estimated annual effective tax rate. This could result in a higher or lower effective tax rate during a particular quarter, based upon the mix and timing of actual earnings versus annual projections.
 
Dole recognizes accrued interest and penalties related to its unrecognized tax benefits as a component of income taxes in the accompanying condensed consolidated statements of operations. Accrued interest and penalties


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
before tax benefits were $22.7 million and $25.3 million at June 18, 2011 and January 1, 2011, respectively. Of the $22.7 million, $13.2 million is included in accrued liabilities as of June 18, 2011. The remaining balances are included as a component of other long-term liabilities in the accompanying condensed consolidated balance sheets.
 
Dole Food Company, Inc. or one or more of its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. With few exceptions, Dole is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years prior to 2001.
 
Income Tax Audits:  Dole believes its tax positions comply with the applicable tax laws and that it has adequately provided for all tax related matters. Matters raised upon audit may involve substantial amounts and could result in material cash payments if resolved unfavorably. Management considers it unlikely that the resolution of these matters will have a material adverse effect on Dole’s results of operations.
 
Dole has received an income tax assessment in Costa Rica in the amount of approximately $43 million, including interest and penalties, relating to the audit of the years 2006 and 2007. Dole is challenging the assessment and believes it is without merit. No tax liability has been provided for this matter.
 
Internal Revenue Service Audit:  On August 27, 2009, the IRS completed its examination of Dole’s U.S. federal income tax returns for the years 2002-2005 and issued a Revenue Agent’s report (“RAR”) that includes various proposed adjustments, including with respect to the 2003 going-private merger transactions. The IRS proposed that certain funding used in the going-private merger was taxable and that some related investment banking fees were not deductible. The net tax deficiency associated with the RAR is $122 million, plus interest. On October 27, 2009, Dole filed a protest letter challenging the proposed adjustments contained in the RAR and has been pursuing resolution of these issues with the Appeals Division of the IRS. During the quarter ended June 18, 2011, Dole reached an agreement in principle with the Appeals Division on all issues. As a result, Dole’s total amount of unrecognized tax benefits is expected to decrease by approximately $41 million, of which $20 million represents a cash payment. This agreement is expected to be finalized in the third quarter at which time the tax of $20 million plus interest of approximately $13 million will be paid.
 
NOTE 5 — LONG-TERM RECEIVABLES
 
At June 18, 2011, Dole’s long-term financing receivables consisted of $14.8 million grower advances, net of allowances, an $8.3 million note receivable related to the sale of discontinued operations and net long-term trade receivables of $3.3 million. These assets have been included in other assets, in the accompanying condensed consolidated balance sheet as of June 18, 2011.
 
Dole’s grower advances are generally secured by the underlying assets of the grower, and Dole monitors the collectability of these advances through periodic review of financial information received from these growers. At June 18, 2011, these advances had an allowance for credit losses of $13 million, and approximately $7.8 million of the net grower advances were 90 days past due. Dole’s historical losses on its long-term grower advances have been immaterial and expect this to continue. During the first half of 2011, the provision for grower advances increased by $2.2 million, of which $1.3 million was recorded to cost of products sold, and the remaining $0.9 million related to the reclassification of grower advances from short-term to long-term.
 
At June 18, 2011, Dole has an $8.3 million note receivable from the buyer of the fresh-cut flowers business. The note receivable is secured by land and buildings that have an estimated fair value in excess of the note which was due in January 2011. Dole is currently renegotiating with the buyer the terms of the note, including the timing of payment and the interest rate. The note receivable is classified as long-term at June 18, 2011.
 
Dole has long-term trade receivables of $19.1 million due from an Eastern European customer, for which it is likely that payment will not be received during the next year. During fiscal 2010 and 2009, Dole recorded provisions for bad debt of $11.4 million and $4.4 million, respectively. Of the $11.4 million, $0.8 million and $1.4 million were recorded during the quarter and half year ended June 19, 2010, respectively. The net receivable of $3.3 million


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
represents management’s best estimate of its net realizable value after consideration of collateral securing the receivable.
 
NOTE 6 — INVENTORIES
 
The major classes of inventories were as follows:
 
                 
    June 18,
    January 1,
 
    2011     2011  
    (In thousands)  
 
Finished products
  $ 430,038     $ 362,799  
Raw materials and work in progress
    144,605       119,222  
Crop-growing costs
    157,487       195,010  
Operating supplies and other
    58,633       57,935  
                 
    $ 790,763     $ 734,966  
                 
 
NOTE 7 — CHARGES FOR RESTRUCTURING
 
As a result of continued challenging market conditions in Dole’s fresh fruit operations, Dole committed to a restructuring plan during the third quarter of 2010 in its fresh fruit segment in Europe, Latin America and Asia. These restructuring efforts are designed to reduce costs by realigning fruit supply with expected demand. As part of these initiatives, Dole restructured certain farming operations in Latin America and Asia, reorganized its European operations and rationalized vessel charters. As a result of these various initiatives, Dole expects to realize cash savings in its fresh fruit segment. These savings are expected to result from lower production costs including lower labor costs on our farms and in our ports, enhanced farm productivity, lower distribution costs resulting from more efficient utilization of our shipping fleet, and lower selling and general and administrative costs as a result of streamlining its organization in Europe.
 
Dole incurred restructuring costs of $5.9 million and $8.7 million during the quarter and half year ended June 18, 2011, respectively. Dole has incurred cumulative restructuring costs of $30 million since the third quarter of 2010. Of these costs, $17.2 million were paid or will be paid in cash, with the remaining amounts related to the non-cash write-down of long-lived assets and deferred crop-growing costs of $6.7 million as well as pension-related settlement charges of $6.1 million. Severance charges relating to employee terminations involved approximately 2,700 employees.
 
Dole expects to continue restructuring its fresh fruit operations beyond the second quarter of 2011. Related to these efforts, Dole expects to incur additional restructuring charges of approximately $4 million during the remainder of fiscal 2011 and $0.2 million in fiscal 2012. These additional charges will primarily consist of employee severance, contract termination and pension-related settlement costs. Approximately 900 additional employees are expected to be impacted by these initiatives.


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
The following table summarizes restructuring charges:
 
                                 
    Charges
                   
    Incurred in
    Cumulative
    Additional
       
    Half Year
    Charges
    Charges to be
    Total
 
    2011     Incurred     Incurred     Charges  
    (In thousands)  
 
Severance and other employee-related costs
  $ 1,096     $ 7,764     $ 1,318     $ 9,082  
Contract termination and other costs
    4,978       9,436       896       10,332  
Pension-related settlement charges
    658       6,107       1,995       8,102  
Asset write-downs
    1,970       6,739             6,739  
                                 
Total
  $ 8,702     $ 30,046     $ 4,209     $ 34,255  
                                 
 
A rollforward of activity for Dole’s restructuring liabilities, which are classified in accrued liabilities in the accompanying condensed consolidated balance sheets, is summarized as follows:
 
                                         
    Balance as of
                      Balance as of
 
    January 1,
                      June 18,
 
    2011     Charges     Cash Payments     Non-cash     2011  
    (In thousands)  
 
Severance and other employee-related costs
  $ 2,092     $ 1,096     $ (1,616 )   $ (215 )   $ 1,357  
Contract termination and other costs
    3,555       4,978       (4,709 )           3,824  
                                         
Total
  $ 5,647     $ 6,074     $ (6,325 )   $ (215 )   $ 5,181  
                                         
 
NOTE 8 — GOODWILL AND INTANGIBLE ASSETS
 
Goodwill has been allocated to Dole’s reporting segments as follows:
 
                                 
          Fresh
    Packaged
       
    Fresh Fruit     Vegetables     Foods     Total  
    (In thousands)  
 
Balance as of January 1, 2011 and June 18, 2011
  $ 275,430     $ 71,206     $ 60,611     $ 407,247  
                                 
 
Details of Dole’s intangible assets were as follows:
 
                 
    June 18,
    January 1,
 
    2011     2011  
    (In thousands)  
 
Amortized intangible assets:
               
Customer relationships
  $ 38,501     $ 38,501  
Other amortized intangible assets
    770       2,064  
                 
      39,271       40,565  
Accumulated amortization — customer relationships
    (29,301 )     (27,605 )
Other accumulated amortization
    (308 )     (1,494 )
                 
Accumulated amortization — intangible assets
    (29,609 )     (29,099 )
                 
Amortized intangible assets, net
    9,662       11,466  
Indefinite-lived intangible assets:
               
Trademark and trade names
    689,615       689,615  
                 
Total identifiable intangible assets, net
  $ 699,277     $ 701,081  
                 


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Amortization expense of intangible assets totaled $0.8 million and $0.9 million for the quarters ended June 18, 2011 and June 19, 2010, respectively, and $1.7 million and $1.8 million for the half years ended June 18, 2011 and June 19, 2010, respectively.
 
As of June 18, 2011, the estimated amortization expense associated with Dole’s intangible assets for the remainder of 2011 and in each of the next four fiscal years is as follows (in thousands):
 
         
Fiscal Year   Amount
 
2011 (remainder of year)
  $ 1,981  
2012
  $ 3,677  
2013
  $ 1,498  
2014
  $ 842  
2015
  $ 842  
 
Dole performed its annual impairment test for goodwill for all of its reporting units during the second quarter of 2011. In performing the valuations, Dole estimated the fair value of its reporting units using a combination of a market approach based on revenue and earnings before interest expense, income taxes, depreciation and amortization multiples of comparable public companies that are engaged in similar lines of business, and using an income approach based on expected future cash flows that are discounted at rates that reflect the risks associated with the current market. In determining the estimated cash flows for each of the reporting units, Dole considered recent economic and industry trends in estimating the expected future cash flows, which are subject to change based upon market conditions. As a result of the test, Dole concluded that goodwill was not impaired. Reasonably possible fluctuations in the market guideline multiples, cash flow estimates, and the discount rates used do not indicate that there is an impairment of goodwill.
 
In addition, Dole also performed its annual impairment test for its DOLE® trademark during the second quarter of 2011. Dole estimated the fair value of its trademark using the relief-from-royalty method. The relief-from-royalty method estimates the royalty expense that could be avoided in the operating business as a result of owning the respective trademark. The royalty savings are measured by applying a royalty rate to projected sales and then discounting by a discount rate that reflects the risks associated with the current market. The royalty rate is determined based on market data. As a result of the test, Dole concluded that the value of the trademark was not impaired. The fair value estimate is most sensitive to the royalty rate used. Reasonably possible changes to the royalty rate and the discount rate do not indicate impairment for the Dole trademark.


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
NOTE 9 — NOTES PAYABLE AND LONG-TERM DEBT
 
Notes payable and long-term debt consisted of the following:
 
                 
    June 18,
    January 1,
 
    2011     2011  
    (In thousands)  
 
Unsecured debt:
               
8.75% debentures due 2013
  $ 155,000     $ 155,000  
Secured debt:
               
13.875% notes due 2014
    227,437       227,437  
8% notes due 2016
    315,000       315,000  
Revolving credit facility
           
Term loan facilities
    811,428       829,829  
Contracts and notes, at a weighted-average interest rate of 3.0% in 2011 (4.1% in 2010)
    5,575       9,070  
Capital lease obligations, at a weighted-average interest rate of 2.6% in 2011 (2.6% in 2010)
    60,540       59,552  
Notes payable, at a weighted-average interest rate of 3.4% in 2011 (3.5% in 2010)
    28,080       31,922  
Unamortized debt discount
    (21,931 )     (24,215 )
                 
      1,581,129       1,603,595  
Current maturities, net of unamortized debt discount
    (36,093 )     (39,270 )
                 
    $ 1,545,036     $ 1,564,325  
                 
 
Notes Payable
 
Dole borrows funds primarily on a short-term basis to finance current operations. The terms of these borrowings range from one month to three months. Dole’s notes payable at June 18, 2011 consist primarily of foreign borrowings in Asia and Latin America.
 
Term Loans and Revolving Credit Facility
 
As of June 18, 2011, the term loan facilities consisted of $232.9 million of Term Loan B and $578.5 million of Term Loan C. The term loan facilities bore interest, at Dole’s option, at a rate per annum equal to either (i) the London Interbank Offer Rate (“LIBOR”) plus 3.25%, with a LIBOR floor of 1.75%; or (ii) a base rate plus 2.25%. Interest on the term loan facilities was payable quarterly in arrears. The weighted average variable interest rate at June 18, 2011 for Term Loan B and Term Loan C was 5.17%. The term loan facilities required quarterly principal payments, plus a balloon payment due in 2017. During April 2011, Dole repaid $16.3 million of the term loan facilities due 2017. Dole had an interest rate swap to hedge future changes in interest rates on Term Loan C which matured June 2011. Refer to Note 14 — Derivative Financial Instruments for additional information related to this instrument.
 
As of June 18, 2011, the asset-based lending senior secured revolving credit facility (“ABL revolver”) borrowing base was $289.2 million. There were no borrowings under the ABL revolver at June 18, 2011. Amounts outstanding under the ABL revolver bore interest, at Dole’s option, at a rate per annum equal to either (i) LIBOR plus 3.00% to 3.50%, or (ii) a base rate plus 2.00% to 2.50%, in each case, based upon Dole’s historical borrowing availability under this facility. The ABL revolver was scheduled to mature in March 2014. After taking into account approximately $87.1 million of outstanding letters of credit issued under the ABL revolver, Dole had approximately $202.1 million available for borrowings as of June 18, 2011.


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
2011 Refinancing
 
Dole’s term loan and ABL revolver facilities were amended on July 8, 2011. The amendments, among other things: (i) for the ABL revolver facility, decreased the applicable margin for LIBOR borrowings to 1.75% — 2.25%, and for base rate borrowings to 0.75% — 1.25%, with the rate at any time determined by the average historical borrowing availability; (ii) for the term loan facilities, reduced the LIBOR floor to 1.25% and increased the LIBOR applicable margin to 3.75%, and the base rate applicable margin to 2.75%, with an opportunity to reduce the applicable margin by 0.25% after December 31, 2011 if Dole’s Total Leverage Ratio is 3.50:1.00 or lower; (iii) eliminated the financial maintenance covenants of total leverage ratio and minimum interest coverage ratio (such covenants had been in the previous term loan facilities, but not the revolving credit facility); (iv) added greater operating and financial flexibility for Dole; and (v) provided for other technical and clarifying changes. The amended credit facilities provide $900 million of term debt due 2018 and up to $350 million of revolving debt due 2016.
 
Partial Retirement of 137/8% Notes due 2014
 
During the third quarter of 2011, Dole repurchased and retired $38 million of the 13.875% Notes due 2014. As a result of the repurchase, Dole will record a charge of approximately $10 million to other income (expense) in the condensed consolidated statement of operations during the third quarter of 2011. This charge relates to premium paid in connection with the early debt retirement as well as the write-off of deferred debt issuance costs and debt discounts.
 
Covenants
 
Provisions under the amended senior secured credit facilities and the indentures governing Dole’s senior notes and debentures require Dole to comply with certain covenants. These covenants include limitations on, among other things, indebtedness, investments, liens, loans to subsidiaries, employees and third parties, the issuance of guarantees and the payment of dividends. The ABL revolver also contains a “springing covenant,” which would not be effective unless the availability under the ABL revolver were to fall below the greater of (i) $35 million and (ii) 12.5% of the lesser of the Total Commitment (as defined) and the borrowing base. To date, the springing covenant has never been effective and Dole does not currently anticipate that the springing covenant will become effective. At June 18, 2011 Dole was in compliance with all applicable covenants.
 
A breach of a covenant or other provision in any debt instrument governing Dole’s current or future indebtedness could result in a default under that instrument and, due to customary cross-default and cross-acceleration provisions, could result in a default under Dole’s other debt instruments. Upon the occurrence of an event of default under the senior secured credit facilities or other debt instrument, the lenders or holders of such other debt instruments could elect to declare all amounts outstanding to be immediately due and payable and terminate all commitments to extend further credit. If Dole were unable to repay those amounts, the lenders could proceed against the collateral granted to them, if any, to secure the indebtedness. If the lenders under Dole’s indebtedness were to accelerate the payment of the indebtedness, Dole cannot give assurance that its assets would be sufficiently liquid to repay in full its outstanding indebtedness on an accelerated basis.
 
Debt Discounts and Debt Issuance Costs
 
In connection with the March 2, 2010 amendments of the senior secured credit facilities, Dole incurred debt issuance costs of $17 million. Debt issuance costs are capitalized and amortized into interest expense over the term of the underlying debt. During the quarter and half year ended June 18, 2011, Dole amortized deferred debt issuance costs of $1.3 million and $2.8 million, respectively. During the quarter and half year ended June 19, 2010, Dole amortized deferred debt issuance costs of $1.4 million and $2.6 million, respectively.


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Dole wrote off approximately $4.6 million of deferred debt issuance costs during the half year ended June 19, 2010 resulting from the amendments of the senior secured credit facilities as well as the refinancing of the term loan facilities in connection with the amendments. The refinancing of the term loans and a portion of the ABL revolver, as a result of the amendments, was accounted for as extinguishment of debt. The write-off related to these amendments was recorded in other income (expense), net in the condensed consolidated statement of operations for the half year ended June 19, 2010.
 
Debt discounts on term loan facilities in connection with the 2010 amendments of the senior secured credit facilities totaled $8.5 million. Debt discounts are amortized into interest expense over the term of the underlying debt. During the quarter and half year ended June 18, 2011, Dole amortized debt discounts of $1.1 million and $2.3 million, respectively. During the quarter and half year ended June 19, 2010, Dole amortized debt discounts of $1.1 million and $2 million, respectively.
 
As a result of the July 8, 2011 amendment of the term loan and ABL revolver facilities, Dole will record a charge of approximately $13 million to other income (expense) in the condensed consolidated statement of operations during the third quarter of 2011. This charge relates to fees incurred in connection with the refinancing as well as the write-off of deferred debt issuance costs and debt discounts.
 
Fair Value of Debt
 
Dole estimates the fair value of its secured and unsecured notes and debentures based on current quoted market prices. The term loans are traded between institutional investors on the secondary loan market, and the fair values of the term loans are based on the last available trading price. The carrying values and estimated fair values of Dole’s debt are summarized below:
 
                                 
    June 18, 2011   January 1, 2011
    Carrying
  Estimated
  Carrying
  Estimated
    Values   Fair Values   Values   Fair Values
    (In thousands)
 
Secured and unsecured notes and debentures
  $ 682,375     $ 772,649     $ 680,674     $ 774,873  
Term loans
    804,559       810,414       822,377       844,351  
 
Carrying values are net of debt discounts.


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
NOTE 10 — EMPLOYEE BENEFIT PLANS
 
The components of net periodic benefit cost for Dole’s U.S. and international pension plans and other postretirement benefit (“OPRB”) plans were as follows:
 
                                                 
          International
       
    U.S. Pension Plans     Pension Plans     OPRB Plans  
    Quarter Ended     Quarter Ended     Quarter Ended  
    June 18,
    June 19,
    June 18,
    June 19,
    June 18,
    June 19,
 
    2011     2010     2011     2010     2011     2010  
    (In thousands)  
 
Service cost
  $ 43     $ 45     $ 1,459     $ 1,281     $ 18     $ 19  
Interest cost
    3,440       3,639       1,599       1,582       482       541  
Expected return on plan assets
    (3,779 )     (3,774 )     (104 )     (103 )            
Amortization of:
                                               
Unrecognized net loss (gain)
    1,525       888       211       108       15       (27 )
Unrecognized prior service cost (benefit)
                97       81       (813 )     (813 )
Unrecognized net transition obligation
                1       6              
Restructuring related settlements and other
                1,155             1,731        
                                                 
    $ 1,229     $ 798     $ 4,418     $ 2,955     $ 1,433     $ (280 )
                                                 
 
                                                 
          International
       
    U.S. Pension Plans     Pension Plans     OPRB Plans  
    Half Year Ended     Half Year Ended     Half Year Ended  
    June 18,
    June 19,
    June 18,
    June 19,
    June 18,
    June 19,
 
    2011     2010     2011     2010     2011     2010  
    (In thousands)  
 
Service cost
  $ 86     $ 90     $ 2,911     $ 2,562     $ 35     $ 37  
Interest cost
    6,880       7,278       3,187       3,167       964       1,082  
Expected return on plan assets
    (7,558 )     (7,548 )     (207 )     (206 )            
Amortization of:
                                               
Unrecognized net loss (gain)
    3,050       1,776       421       216       30       (54 )
Unrecognized prior service cost (benefit)
                194       162       (1,626 )     (1,626 )
Unrecognized net transition obligation
                1       12              
Restructuring related settlements and other
                1,557             1,731        
                                                 
    $ 2,458     $ 1,596     $ 8,064     $ 5,913     $ 1,134     $ (561 )
                                                 
 
NOTE 11 — SEGMENT INFORMATION
 
Dole has three reportable operating segments: fresh fruit, fresh vegetables and packaged foods. 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, among other measures, earnings before interest expense and income taxes (“EBIT”). EBIT before discontinued operations is calculated from net income by adding interest expense and income tax expense, and subtracting income from discontinued operations, net of income taxes, and gain on disposal of discontinued operations, net of income taxes. 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 Dole as a whole. EBIT is not defined under U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and should not be considered in


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
isolation or as a substitute for net income or cash flow measures prepared in accordance with U.S. GAAP or as a measure of Dole’s profitability. Additionally, Dole’s computation of EBIT may not be comparable to similarly titled measures computed by other companies, because not all companies calculate EBIT in the same manner.
 
Revenues from external customers and EBIT for the reportable operating segments and corporate were as follows:
 
                                 
    Quarter Ended     Half Year Ended  
    June 18,
    June 19,
    June 18,
    June 19,
 
    2011     2010     2011     2010  
    (In thousands)  
 
Revenues from external customers:
                               
Fresh fruit
  $ 1,364,778     $ 1,223,438     $ 2,539,444     $ 2,346,401  
Fresh vegetables
    278,425       268,869       524,939       499,395  
Packaged foods
    272,341       249,061       537,121       501,304  
Corporate
    181       154       325       296  
                                 
    $ 1,915,725     $ 1,741,522     $ 3,601,829     $ 3,347,396  
                                 
 
                                 
    Quarter Ended     Half Year Ended  
    June 8,
    June 19,
    June 18,
    June 19,
 
    2011     2010     2011     2010  
    (In thousands)  
 
Fresh fruit EBIT
  $ 109,597     $ 67,846     $ 176,600     $ 110,999  
Fresh vegetables EBIT
    3,634       7,396       14,730       17,886  
Packaged foods EBIT
    25,881       24,815       38,061       53,829  
                                 
Total operating segments EBIT
    139,112       100,057       229,391       182,714  
Corporate:
                               
Unrealized loss on cross currency swap
          (10,713 )     (3,787 )     (14,301 )
Net gain (loss) on long-term Japanese yen hedges
    4,825             (22,580 )      
Net unrealized gain (loss) on foreign denominated instruments
    (514 )     1,739       (6,434 )     6,465  
Operating and other expenses
    (12,403 )     (11,733 )     (23,117 )     (28,888 )
                                 
Corporate
    (8,092 )     (20,707 )     (55,918 )     (36,724 )
Interest expense
    (34,837 )     (37,138 )     (70,307 )     (78,188 )
Income taxes
    (13,518 )     (9,067 )     (18,658 )     (12,242 )
                                 
Income from continuing operations
    82,665       33,145       84,508       55,560  
Income from discontinued operations, net of income taxes
    29       327       231       674  
Gain from disposal of discontinued operations, net of income taxes
    339             339        
                                 
Net income
  $ 83,033     $ 33,472     $ 85,078     $ 56,234  
                                 
 
Dole’s equity earnings from equity method investments, which have been included in EBIT in the table above, relate primarily to the fresh fruit operating segment.


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Total assets for the three reportable operating segments, corporate and fresh-cut flowers were as follows:
 
                 
    June 18,
    January 1,
 
    2011     2011  
    (In thousands)  
 
Total assets:
               
Fresh fruit
  $ 2,276,857     $ 2,149,345  
Fresh vegetables
    379,072       403,252  
Packaged foods
    751,047       678,929  
                 
Total operating segments
    3,406,976       3,231,526  
Corporate
    997,178       1,017,868  
Fresh-cut flowers — discontinued operation
    5,023       7,596  
                 
    $ 4,409,177     $ 4,256,990  
                 
 
NOTE 12 — CONTINGENCIES
 
Dole is a guarantor of indebtedness of some of its key fruit suppliers and other entities integral to Dole’s operations. At June 18, 2011, guarantees of $2.5 million consisted primarily of amounts advanced under third-party bank agreements to independent growers that supply Dole with product. In addition, Dole had cash on deposit at June 18, 2011 of $5.4 million securing the indebtedness of a fruit supplier. Dole has not historically experienced any significant losses associated with these guarantees.
 
Dole issues letters of credit and bank guarantees through its ABL revolver and, in addition, separately through major banking institutions. Dole also provides bonds issued by insurance companies. These letters of credit, bank guarantees and insurance company bonds are required by certain regulatory authorities, suppliers and other operating agreements. As of June 18, 2011, total letters of credit, bank guarantees and bonds outstanding under these arrangements were $179.2 million.
 
Dole 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. Dole guaranteed $254.4 million of its subsidiaries’ obligations to their suppliers and other third parties as of June 18, 2011.
 
Dole 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 in connection with a change of control (as defined) of Dole.
 
Dole is involved from time to time in claims and legal actions incidental to its operations, both as plaintiff and defendant. Dole 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 Dole is a party are not expected to have a material adverse effect, individually or in the aggregate, on Dole’s financial position or results of operations.
 
DBCP Cases:  A significant portion of Dole’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 entities of The Dow Chemical Company and Royal Dutch Shell plc and registered by the U.S. government for use on food crops. Dole and other growers applied DBCP on banana farms in Latin America and the Philippines and on pineapple


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
farms in Hawaii. Specific periods of use varied among the different locations. Dole 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 227 lawsuits, in various stages of proceedings, alleging injury as a result of exposure to DBCP or seeking enforcement of Nicaragua judgments. In addition, there are 12 labor cases pending in Costa Rica under that country’s national insurance program.
 
Dole has reached a tentative settlement with the plaintiff group represented by the Provost & Umphrey Law Firm, L.L.P., which with full implementation will bring to an end all of their DBCP lawsuits and judgments. Of the 227 lawsuits pending worldwide, the tentative settlement includes five lawsuits in the United States and 33 lawsuits in Nicaragua, which includes any and all Nicaragua judgments and plaintiff claims associated with Provost & Umphrey. The 33 Nicaragua cases represent approximately $9 billion in claimed damages and, in seven of those cases, judgments totaling $907.5 million. Once the definitive settlement agreement is signed, the effectiveness of the settlement will be contingent upon the satisfaction of a number of conditions. There is no assurance, if a definitive settlement agreement is signed, that the settlement effectiveness conditions will be satisfied. This tentative settlement is consistent with the position Dole has taken in the past, that it is willing to seek reasonable resolution of pending DBCP litigation. The tentative settlement, if it becomes effective, will not have a material effect on Dole’s financial position, results of operations or cash flows.
 
Of the 189 lawsuits not included in the Provost & Umphrey tentative settlement, 14 are currently pending in various jurisdictions in the United States (9 cases that had been pending in Hawaii have been dismissed, and 7 new cases have been filed in Louisiana by the same plaintiff lawyer). One case in Los Angeles Superior Court, the last remaining lawsuit brought in the United States by Nicaraguan plaintiffs, was dismissed after the Court found that the plaintiffs and their representatives engaged in blatant fraud, witness tampering and active manipulation. On March 11, 2011, the Court issued a final Statement of Decision, followed on March 31, 2011 by a Judgment, that vacates the prior judgment and dismisses all plaintiffs’ claims with prejudice. Plaintiffs filed a notice of appeal of that judgment on May 6, 2011.
 
The remaining lawsuits are pending in Latin America and the Philippines. Claimed damages in DBCP cases worldwide total approximately $45 billion ($36 billion not counting lawsuits included in the Provost & Umphrey tentative settlement), with lawsuits in Nicaragua representing approximately 87% of this amount. Typically, in these cases Dole is a joint defendant with the major DBCP manufacturers. Except as described below, none of these lawsuits has resulted in a verdict or judgment against Dole.
 
In Nicaragua, 195 cases are currently filed (of which 33 are active) in various courts throughout the country (162 cases not counting lawsuits included in the Provost & Umphrey tentative settlement), all but two of which were 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. Thirty-two cases have resulted in judgments in Nicaragua (25 cases not counting lawsuits included in the Provost & Umphrey tentative settlement): $489.4 million (nine cases consolidated with 465 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 85 claimants) on June 15, 2004; $27.7 million (one case with 36 claimants) on March 17, 2005; $46.4 million (one case with 62 claimants) on August 20, 2005;


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
$38.4 million (one case with 192 claimants) on November 14, 2007; and $357.7 million (eight cases with 417 claimants) on January 12, 2009, which Dole learned of unofficially. Except for the latest one, Dole has appealed all judgments. Dole will appeal the $357.7 million judgment once it has been served. The two judgments that resulted from seven of the cases filed by Provost & Umphrey, the $809 million judgment dated December 1, 2006 (six cases consolidated with 1,248 claimants) and the $98.5 million judgment dated August 8, 2005 (one case with 150 claimants), are included in the tentative settlement.
 
In all but one of the active cases where the proceeding has reached the appropriate stage, Dole has sought to have the cases returned to the United States. In all of the cases where Dole’s request to return the case to the United States has been ruled upon, the courts have denied Dole’s request and Dole has appealed those decisions.
 
On November 10, 2009, the United States District Court for the Southern District of Florida issued final judgment in favor of Dole denying recognition and enforcement of the $98.5 million Nicaragua judgment against Dole and another U.S. company. On March 10, 2010, Plaintiffs filed an appeal before the United States Court of Appeals for the Eleventh Circuit. On March 25, 2011, the Eleventh Circuit affirmed the district court’s judgment, agreeing that “the Nicaraguan judgment is not due recognition and enforcement.” On April 14, 2011, Plaintiffs filed a Petition for Rehearing En Banc before the 11th Circuit, which was denied by the Court on June 28, 2011. This enforcement action is included in the Provost & Umphrey tentative settlement.
 
Dole believes that none of the Nicaraguan 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.
 
On October 23, 2006, Dole announced that its subsidiary, Standard Fruit de Honduras, S.A., reached an agreement with the Government of Honduras and representatives of Honduran banana workers. This agreement establishes a Worker Program that is intended by the parties to resolve in a fair and equitable manner the claims of male banana workers alleging sterility as a result of exposure to DBCP. The Honduran Worker Program will not have a material effect on Dole’s financial position or results of operations. The official start of the Honduran Worker Program was announced on January 8, 2007. On August 15, 2007, Shell Oil Company was included in the Worker Program.
 
As to all the DBCP matters, Dole has denied liability and asserted substantial defenses. Although no assurance can be given concerning the outcome of the DBCP 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 Dole’s financial position or results of operations.
 
European Union Antitrust Inquiry:  On October 15, 2008, the European Commission (“EC”) adopted a Decision against Dole Food Company, Inc. and Dole Fresh Fruit Europe OHG and against other unrelated banana companies, finding violations of the European competition (antitrust) laws. The Decision imposes €45.6 million in fines on Dole.
 
The Decision follows a Statement of Objections, issued by the EC on July 25, 2007, and searches carried out by the EC in June 2005 at certain banana importers and distributors, including two of Dole’s offices.
 
Dole received the Decision on October 21, 2008 and appealed the Decision to the European General Court in Luxembourg on December 24, 2008.
 
Dole made an initial $10 million (€7.6 million) provisional payment towards the €45.6 million fine on January 22, 2009, which is classified as other assets, net in the accompanying consolidated balance sheets. As agreed with the European Commission (DG Budget), Dole provided the required bank guaranty for the remaining balance of the fine plus interest to the EC by the deadline of April 30, 2009. The bank guaranty renews annually


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
during the appeals process (which may take several years) and carries interest of 6.15% (accrued from January 23, 2009). If the European General Court fully agrees with Dole’s arguments presented in its appeal, Dole will be entitled to the return of all monies paid, plus interest.
 
Although no assurances can be given, and although there could be a material adverse effect on Dole, Dole believes that it has not violated the European competition laws. No accrual for the Decision has been made in the accompanying consolidated financial statements, since Dole cannot determine at this time the amount of probable loss, if any, incurred as a result of the Decision.
 
Honduran Tax Case:  In 2005, Dole received a tax assessment from Honduras of approximately $137 million (including the claimed tax, penalty, and interest through the date of assessment) relating to the disposition of all of Dole’s interest in Cervecería Hondureña, S.A in 2001. Dole 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, Dole 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 sought dismissal of the lawsuit and attachment of assets, which Dole challenged. The Honduran Supreme Court affirmed the decision of the Honduran intermediate appellate court that a statutory prerequisite to challenging the tax assessment on the merits is the payment of the tax assessment or the filing of a payment plan with the Honduran courts; Dole has challenged the constitutionality of the statute requiring such payment or payment plan. Dole and the Honduran government have had discussions regarding possible ways to resolve pending lawsuits and tax-related matters. Although no assurance can be given concerning the outcome of this case, in the opinion of management, after consultation with legal counsel, the pending lawsuits and tax-related matters are not expected to have a material adverse effect on Dole’s financial position or results of operations.
 
Former Shell Site:  Shell Oil Company and Dole were sued in several cases filed in Los Angeles Superior Court, beginning in 2009, alleging property damage and personal injury by persons claiming to be current or former residents of a housing development built in the 1960s by a predecessor of what is now a Dole subsidiary, on land that had been owned and used by Shell as a crude oil storage facility for 40 years prior to the housing development. On April 20, 2011, the Court dismissed the case with prejudice, including all claims against Dole. On May 2, 2011, plaintiffs filed a motion for reconsideration with the Court, which is still pending. The California Regional Water Quality Control Board is supervising the cleanup on the former Shell site. On March 11, 2011, the Water Board issued a Cleanup and Abatement Order naming Shell as the Discharger and a Responsible Party, and ordering Shell to assess, monitor, and cleanup and abate the effects of contaminants discharged to soil and groundwater at the site. On April 22, 2011, the Water Board sent Dole a letter requiring Dole to supply information concerning ownership, development and activities of the former Shell site.
 
NOTE 13 — ASSETS HELD-FOR-SALE
 
Dole continuously reviews its assets in order to identify those assets that do not meet Dole’s future strategic direction or internal economic return criteria. As a result of this review, Dole has identified and is in the process of selling specific businesses and long-lived assets. Accordingly, Dole has reclassified these assets as held-for-sale.
 
Total assets held-for-sale by segment were as follows:
 
                                         
                      Fresh-Cut
       
                      Flowers —
       
          Fresh
    Packaged
    Discontinued
    Total Assets
 
    Fresh Fruit     Vegetables     Foods     Operation     Held-For-Sale  
    (In thousands)  
 
Balance as of January 1, 2011
  $ 74,641     $ 599     $ 3,214     $ 7,596     $ 86,050  
Additions
    49,902                         49,902  
Sales
    (8 )                 (2,573 )     (2,581 )
                                         
Balance as of June 18, 2011
  $ 124,535     $ 599     $ 3,214     $ 5,023     $ 133,371  
                                         


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Total liabilities related to assets held-for-sale by segment were as follows:
 
                                         
                      Fresh-Cut
       
                      Flowers —
       
          Fresh
    Packaged
    Discontinued
    Total Liabilities
 
    Fresh Fruit     Vegetables     Foods     Operation     Held-For-Sale  
    (In thousands)  
 
Balance as of January 1, 2011
  $     $     $     $     $  
Additions
    22,098                         22,098  
                                         
Balance as of June 18, 2011
  $ 22,098     $     $     $     $ 22,098  
                                         
 
The major classes of assets and liabilities held-for-sale included in Dole’s condensed consolidated balance sheet at June 18, 2011 were as follows:
 
                                         
                      Fresh-Cut
       
                      Flowers —
       
          Fresh
    Packaged
    Discontinued
    Total Assets
 
    Fresh Fruit     Vegetables     Foods     Operation     Held-For-Sale  
    (In thousands)  
 
Assets held-for-sale:
                                       
Receivables
  $ 32,245     $     $     $     $ 32,245  
Inventories
    4,835                         4,835  
Prepaid expenses
    3,072                         3,072  
Deferred income tax assets
    2,506                         2,506  
Property, plant and equipment, net of accumulated depreciation
    81,566       599       3,214       5,023       90,402  
Intangible assets, net
    59                         59  
Other assets, net
    252                         252  
                                         
Total assets held-for-sale
  $ 124,535     $ 599     $ 3,214     $ 5,023     $ 133,371  
                                         
 
                                         
                      Fresh-Cut
       
                      Flowers —
       
          Fresh
    Packaged
    Discontinued
    Total Liabilities
 
    Fresh Fruit     Vegetables     Foods     Operation     Held-For-Sale  
    (In thousands)  
 
Liabilities related to assets held-for-sale:
                                       
Accounts payable and accrued liabilities
  $ 17,122     $     $     $     $ 17,122  
Current portion of long-term debt
    865                         865  
Long-term debt
    3,742                         3,742  
Other liabilities
    369                         369  
                                         
Total liabilities related to assets held-for-sale
  $ 22,098     $     $     $     $ 22,098  
                                         
 
Due to challenges experienced in the global real estate markets, certain assets have been classified in assets held-for-sale for greater than one year. Dole expects market conditions to improve and as a result, continues to actively market these assets and classify them as assets held-for-sale.


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Gains on asset sales by segment for the quarters ended June 18, 2011 and June 19, 2010 were as follows:
 
                                                 
                Total from
       
        Fresh
  Packaged
  Continuing
  Discontinued
   
    Fresh Fruit   Vegetables   Foods   Operations   Operations   Total
    (In thousands)
 
June 18, 2011
  $ 11     $     $     $ 11     $ 339     $ 350  
June 19, 2010
  $ 950     $     $     $ 950     $     $ 950  
 
Gains on asset sales by segment for the half years ended June 18, 2011 and June 19, 2010 were as follows:
 
                                                 
                Total from
       
        Fresh
  Packaged
  Continuing
  Discontinued
   
    Fresh Fruit   Vegetables   Foods   Operations   Operations   Total
    (In thousands)
 
June 18, 2011
  $ 11     $     $     $ 11     $ 339     $ 350  
June 19, 2010
  $ 2,921     $     $     $ 2,921     $     $ 2,921  
 
Proceeds from asset sales by segment for the quarters ended June 18, 2011 and June 19, 2010 were as follows:
 
                                                 
                Total from
       
        Fresh
  Packaged
  Continuing
  Discontinued
   
    Fresh Fruit   Vegetables   Foods   Operations   Operations   Total
    (In thousands)
 
June 18, 2011
  $ 1,329     $     $     $ 1,329     $ 2,912     $ 4,241  
June 19, 2010
  $ 8,097     $     $     $ 8,097     $     $ 8,097  
 
Proceeds from asset sales by segment for the half years ended June 18, 2011 and June 19, 2010 were as follows:
 
                                                 
                Total from
       
        Fresh
  Packaged
  Continuing
  Discontinued
   
    Fresh Fruit   Vegetables   Foods   Operations   Operations   Total
    (In thousands)
 
June 18, 2011
  $ 1,329     $     $     $ 1,329     $ 2,912     $ 4,241  
June 19, 2010
  $ 17,583     $     $     $ 17,583     $     $ 17,583  
 
Fresh Fruit
 
During the quarter ended June 18, 2011, Dole added $49.9 million and $22.1 million to the assets held-for-sale and liabilities related to assets held-for-sale balances, respectively. These balances relate to a subsidiary in Spain and certain assets of an Italian subsidiary, which are both part of the European ripening and distribution business and met the criteria to be classified as assets held-for-sale during the second quarter of 2011.
 
At June 18, 2011, the assets held-for-sale balance in the fresh fruit reporting segment also includes approximately 9,300 acres of land in Hawaii. During the second quarter of 2011, Dole sold a nominal amount of land in Hawaii.
 
Packaged Foods
 
At June 18, 2011, the assets held-for-sale balance in the packaged foods reporting segment consists primarily of approximately 400 acres of peach orchards located in California.
 
Flowers — Discontinued Operations
 
At June 18, 2011, the assets held-for-sale balance in the fresh-cut flowers — discontinued operation consists of a portion of the real estate of the former flowers divisions. During the second quarter of 2011, Dole sold a warehouse located in Miami, Florida to the buyer of the flowers business. In addition, during the second quarter of 2011 Dole sold a farm in Colombia. Related to these two transactions, Dole received cash proceeds of $2.9 million and


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
recorded a gain of $0.3 million, which is included as a component of gain on disposal of discontinued operations, net of incomes taxes in the condensed consolidated statement of operations for the quarter and half year ended June 18, 2011.
 
NOTE 14 — DERIVATIVE FINANCIAL INSTRUMENTS
 
Dole 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, Dole uses derivative instruments to hedge some of these exposures. Dole’s objective is to offset gains and losses resulting from these exposures with gains and losses on the derivative contracts used to hedge them, thereby reducing volatility of earnings. Dole does not hold or issue derivative financial instruments for trading or speculative purposes.
 
Cash Flow Hedges
 
A majority of Dole’s foreign currency derivative instruments are designated as cash flow hedges. Specifically, Dole designated a majority of its foreign currency exchange forward contracts and participating forward contracts as cash flow hedges of its forecasted revenue and operating expense transactions. As a result, changes in fair value of the foreign currency derivative instruments since hedge designation, to the extent effective, are recorded as a component of accumulated other comprehensive income (loss) (“AOCI”) in the condensed consolidated balance sheet and are reclassified into earnings in the same period the underlying transactions affect earnings. Any portion of a cash flow hedge deemed ineffective is recognized into current period earnings.
 
Interest Rate Swap, Cross Currency Swap and Long-term Japanese Yen Hedges
 
Dole entered into an interest rate swap in 2006 to hedge future changes in interest rates. This agreement effectively converted $320 million of borrowings under Term Loan C, which was variable-rate debt, to a fixed-rate basis, maturing June 16, 2011.
 
In connection with the March 2010 refinancing transaction, some of the terms of Dole’s senior secured credit facilities were amended. Dole evaluated the impact of these amendments on its hedge designation for its interest rate swap and determined not to re-designate the interest rate swap as a cash flow hedge of its interest rate risk associated with Term Loan C. As a result, changes in the fair value of the interest rate swap after de-designation on March 2, 2010 were recorded in interest expense. The unrealized loss in AOCI was recognized into interest expense through the June 2011 maturity as the underlying Term Loan C interest payments were made.
 
During 2006 (subsequently amended in 2009), Dole executed a cross currency swap to synthetically convert $320 million of Term Loan C into Japanese yen denominated debt in order to effectively lower the U.S. dollar fixed interest rate. The cross currency swap was scheduled to mature in June 2011. Dole also entered into a collateral arrangement which required Dole to provide collateral to its counterparties when the fair market value of the cross currency and interest rate swaps exceeded a combined liability of $35 million.
 
During the first quarter of 2011, Dole entered into a transaction to effectively unwind the cross currency swap by refinancing its obligation under the cross currency swap and entering into a series of long-term Japanese yen hedges that mature through December 2014. As a result of the unwind of the cross currency swap, the collateral arrangement with the counterparties was no longer required and the related $60 million of letters of credit were canceled during the second quarter of 2011.
 
The long-term Japanese yen hedges require Dole to buy U.S. Dollars and sell Japanese yen at an exchange rate of ¥101.3. At inception, these contracts were in a liability position and the total notional amount outstanding of the long-term Japanese yen hedges was $596.3 million. The value of these contracts will fluctuate based on changes in the exchange rate over the life of the individual forward contracts.


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
In addition, Dole has designated the long-term Japanese yen forward contracts as cash flow hedges of its forecasted Japanese yen revenue stream, and to the extent this hedge is deemed effective, changes in the fair value of these contracts will be recorded as a component of AOCI in the condensed consolidated balance sheet and reclassified into earnings in the same period the underlying transactions affect earnings.
 
Due to the fact that there is a significant financing element present at the inception of the long-term Japanese yen hedges, the cash inflows or outflows associated with settlement of these contracts are included within the financing activities in Dole’s condensed consolidated statement of cash flows. A portion of the long-term Japanese yen hedges are deemed ineffective. With respect to this portion, changes in the fair value of the hedges are recorded in other income (expense), net in the statement of operations, because the ineffectiveness is considered to be caused by the financing element of this instrument.
 
At June 18, 2011, the gross notional value and fair value of Dole’s derivative instruments were as follows:
 
                 
    Average Strike
  Notional
    Price   Amount
    (In thousands)
 
Derivatives designated as cash flow hedging instruments:
               
Foreign currency hedges (buy/sell):
               
U.S. dollar/Japanese yen
    JPY 99.70     $ 707,932  
U.S. dollar/Euro
    EUR 1.39       104,251  
U.S. dollar/Canadian dollar
    CAD 1.01       15,265  
Thai Baht/U.S. dollar
    THB 32.07       53,413  
Philippine Peso/U.S. dollar
    PHP 47.27       49,050  
Chilean Peso/U.S. dollar
    CLP 502.59       4,221  
Derivatives not designated as hedging instruments:
               
Foreign currency hedges (buy/sell):
               
South African Rand/Euro
    ZAR 10.19       3,012  
U.S. dollar/Swedish Krona
    SEK 6.24       1,983  
Bunker fuel hedges
  $ 507       21,667  
      (per metric ton )     (metric tons )
 


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
                     
        Derivative Assets
 
        (Liabilities) Fair Value  
    Balance Sheet
  June 18,
    January 1,
 
    Classification   2011     2011  
        (In thousands)  
 
Derivatives designated as cash flow hedging instruments:
                   
Foreign currency exchange contracts
  Receivables, net   $ 6,615     $ 16,961  
    Accrued liabilities     (44,841 )     (31,061 )
    Other long-term liabilities     (135,880 )      
                     
Total derivatives designated as cash flow hedging instruments
        (174,106 )     (14,100 )
Derivatives not designated as hedging instruments:
                   
Foreign currency exchange contracts
  Receivables, net     87       908  
    Accrued liabilities     (1,330 )      
Cross currency swap
  Receivables, net           1,584  
    Accrued liabilities           (130,380 )
Interest rate swap
  Accrued liabilities           (11,310 )
Bunker fuel hedges
  Receivables, net     1,947       1,587  
                     
Total derivatives not designated as hedging instruments
        704       (137,611 )
                     
Total
      $ (173,402 )   $ (151,711 )
                     
 
Settlement of the foreign currency hedges will occur during 2011 through 2014 and settlement of bunker fuel hedges will occur during 2011 and 2012.
 
The effects of the interest rate swap and foreign currency hedges designated as cash flow hedging instruments on accumulated other comprehensive income (loss) and the condensed consolidated statements of operations for the quarters and half years ended June 18, 2011 and June 19, 2010 were as follows:
 
                                                     
                        Gains (Losses)
                        Recognized in
                        Income
                    Due to Hedge
                    Ineffectiveness
                    or Amounts
    Gains (Losses)
      Gains (Losses)
  Excluded
    Recognized in
      Reclassified
  from Effectiveness
    AOCI During
      Into Income   Testing
    Quarter Ended       Quarter Ended   Quarter Ended
    June 18,
  June 19,
  Income Statement
  June 18,
  June 19,
  June 18,
  June 19,
    2011   2010   Classification   2011   2010   2011   2010
    (In thousands)
 
Interest rate swap
  $     $     Interest expense   $ (3,185 )   $ (3,883 )   $     $  
Foreign currency hedges(1)
    (13,247 )     (382 )   Cost of products sold     (5,184 )     2,755       (2,426 )     (166 )
                    Other income (expense), net                 4,825        
 

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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
                                                     
                        Gains (Losses)
                        Recognized in
                        Income
                    Due to Hedge
                    Ineffectiveness
                    or Amounts
    Gains (Losses)
      Gains (Losses)
  Excluded
    Recognized in
      Reclassified
  from Effectiveness
    AOCI During
      Into Income   Testing
    Half Year Ended       Half Year Ended   Half Year Ended
    June 18,
  June 19,
  Income Statement
  June 18,
  June 19,
  June 18,
  June 19,
    2011   2010   Classification   2011   2010   2011   2010
    (In thousands)
 
Interest rate swap
  $     $ 680     Interest expense   $ (6,644 )   $ (5,040 )   $     $  
Foreign currency hedges(1)
    (14,908 )     7,560     Cost of products sold     (6,399 )     2,755       (790 )     (268 )
                    Other income (expense), net                 4,143        
 
 
(1) Amounts related to the long-term Japanese yen hedges have been included in this line item.
 
Unrealized gains and losses on the interest rate swap were recorded through AOCI through the de-designation date. Amounts included in AOCI as of the de-designation date were amortized into interest expense as the quarterly payments were made, through maturity of the interest rate swap in June 2011. Unrecognized losses of $19.9 million related to the foreign currency hedges are expected to be realized into earnings in the next twelve months.
 
Net gains (losses) on derivatives not designated or prior to being designated as hedging instruments for the quarters and half years ended June 18, 2011 and June 19, 2010 were as follows:
 
                     
        Quarter Ended  
    Income Statement
  June 18,
    June 19,
 
    Classification   2011     2010  
        (In thousands)  
 
Foreign currency exchange contracts
  Cost of products sold   $ (605 )   $ (121 )
Bunker fuel contracts
  Cost of products sold     239       (633 )
Cross currency swap
  Other income (expense), net           (8,422 )
Interest rate swap
  Interest expense     (10,889 )     (561 )
                     
Total
      $ (11,255 )   $ (9,737 )
                     
 
                     
        Half Year Ended  
    Income Statement
  June 18,
    June 19,
 
    Classification   2011     2010  
        (In thousands)  
 
Foreign currency exchange contracts
  Cost of products sold   $ (858 )   $ (87 )
Bunker fuel contracts
  Cost of products sold     2,812       (722 )
Cross currency swap
  Other income (expense), net     (1,902 )     (9,754 )
Long-term Japanese yen hedges(1)
  Other income (expense), net     (26,723 )      
Interest rate swap
  Interest expense     (18,942 )     559  
                     
Total
      $ (45,613 )   $ (10,004 )
                     
 
 
(1) Prior to being designated as cash flow hedges, Dole recorded a $26.7 million unrealized loss on the long-term Japanese yen hedges.

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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
NOTE 15 — FAIR VALUE MEASUREMENTS
 
Dole’s financial instruments primarily consist of short-term trade and grower receivables, trade payables, notes receivable and notes payable, as well as long-term grower receivables, capital lease obligations, term loans, a revolving loan, and notes and debentures. For short-term instruments, the carrying amount approximates fair value because of the short maturity of these instruments. For the long-term financial instruments, excluding Dole’s secured notes and unsecured debentures, and term and revolving loans, the carrying amount approximates fair value since they bear interest at variable rates or fixed rates which approximate market.
 
The inputs used to measure fair value are based on a hierarchy that prioritizes observable and unobservable inputs used in valuation techniques. These levels, in order of highest to lowest priority are described below:
 
Level 1:  Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.
 
Level 2:  Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
 
Level 3:  Unobservable inputs that are not corroborated by market data.
 
The following table provides a summary of the assets and liabilities measured at fair value on a recurring basis:
 
                                 
    June 18, 2011     January 1, 2011  
          Fair Value
          Fair Value
 
          Measurements Using
          Measurements Using
 
          Significant
          Significant
 
          Other Observable
          Other Observable
 
          Inputs
          Inputs
 
    Total     (Level 2)     Total     (Level 2)  
    (In thousands)  
 
Assets:
                               
Foreign currency exchange contracts
  $ 6,702     $ 6,702     $ 17,869     $ 17,869  
Bunker fuel contracts
    1,947       1,947       1,587       1,587  
                                 
    $ 8,649     $ 8,649     $ 19,456     $ 19,456  
                                 
Liabilities:
                               
Foreign currency exchange contracts
  $ 182,051     $ 182,051     $ 31,061     $ 31,061  
Interest rate swap
                11,310       11,310  
Cross currency swap, net
                128,796       128,796  
                                 
    $ 182,051     $ 182,051     $ 171,167     $ 171,167  
                                 
 
For Dole, the assets and liabilities that are required to be recorded at fair value on a recurring basis are the derivative instruments. The fair values of Dole’s derivative instruments are determined using Level 2 inputs, which are defined as “significant other observable inputs.” The fair values of the foreign currency exchange contracts, bunker fuel contracts, interest rate swap and cross currency swap were estimated using internal discounted cash flow calculations based upon forward foreign currency exchange rates, bunker fuel futures, interest-rate yield curves or quotes obtained from brokers for contracts with similar terms, less any credit valuation adjustments. Dole recorded a credit valuation adjustment at June 18, 2011 which reduced the derivative liability balances. The credit valuation adjustment was $6.5 million at June 18, 2011 and $0.5 million at January 1, 2011. For the half year ended June 18, 2011, the net change in credit valuation adjustment resulted in an unrealized gain of $6 million, which was recorded as other income (expense), net. For the half year ended June 19, 2010, the net change in the credit valuation adjustment resulted in a loss of $1.2 million. Of this loss, $0.4 million was recorded as interest expense and $0.8 million was recorded as other income (expense), net. For the quarter ended June 18, 2011, the net change in the credit valuation adjustment resulted in a loss (income) of $1.8 million, which was recorded as other income


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
(expense), net. For the quarter ended June 19, 2010, the net change in the credit valuation adjustment resulted in a loss of $0.2 million. Of this loss, $0.1 million was recorded as interest expense and $0.1 million was recorded as other income (expense), net.
 
In addition to assets and liabilities that are recorded at fair value on a recurring basis, Dole is required to record assets and liabilities at fair value on a nonrecurring basis. Nonfinancial assets such as goodwill, indefinite-lived intangible assets and long-lived assets are measured on an annual basis during the second quarter, or as indicators of impairment arise and recorded at fair value only when an impairment is recognized.
 
The goodwill and indefinite-lived intangible asset impairment analysis was performed in the second quarter of 2011 using a combination of discounted cash flow models and market multiples. The discounted cash flow models used estimates and assumptions including pricing and volume data, anticipated growth rates, profitability levels, tax rates and discount rates.
 
Credit Risk
 
The counterparties to the foreign currency and bunker fuel forward contracts and the interest rate and cross currency swaps consist of a number of major international financial institutions. Dole has established counterparty guidelines and regularly monitors its positions and the financial strength of these institutions. While counterparties to hedging contracts expose Dole 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. Dole does not anticipate any such losses.


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
NOTE 16 — EARNINGS PER SHARE
 
                                 
    Quarter Ended     Half Year Ended  
    June 18,
    June 19,
    June 18,
    June 19,
 
    2011     2010     2011     2010  
    (In thousands, except per share data)  
 
Income from continuing operations
  $ 82,665     $ 33,145     $ 84,508     $ 55,560  
Income (loss) from discontinued operations, net of income taxes
    29       327       231       674  
Gain on disposal of discontinued operations, net of taxes
    339             339        
Less: Net income attributable to noncontrolling interests
    (1,267 )     (1,151 )     (2,272 )     (1,760 )
                                 
Net income attributable to shareholders of Dole Food Company, Inc. 
  $ 81,766     $ 32,321     $ 82,806     $ 54,474  
                                 
Weighted average common shares outstanding — Basic
    87,587       87,425       87,580       87,425  
Diluted effects of stock incentive plan
    535       19       522       26  
                                 
Weighted average common shares outstanding — Diluted
    88,122       87,444       88,102       87,451  
                                 
Earnings Per Share — Basic
                               
Income from continuing operations
  $ 0.94     $ 0.38     $ 0.96     $ 0.64  
Income from discontinued operations, net of income taxes
                       
Gain on disposal of discontinued operations, net of taxes
                       
Less: Net income attributable to noncontrolling interests
    (0.01 )     (0.01 )     (0.01 )     (0.02 )
                                 
Net income attributable to shareholders of Dole Food Company, Inc. 
  $ 0.93     $ 0.37     $ 0.95     $ 0.62  
                                 
Earnings Per Share — Diluted
                               
Income from continuing operations
  $ 0.94     $ 0.38     $ 0.96     $ 0.64  
Income from discontinued operations, net of income taxes
                       
Gain on disposal of discontinued operations, net of taxes
                       
Less: Net income attributable to noncontrolling interests
    (0.01 )     (0.01 )     (0.02 )     (0.02 )
                                 
Net income attributable to shareholders of Dole Food Company, Inc. 
  $ 0.93     $ 0.37     $ 0.94     $ 0.62  
                                 
 
NOTE 17 — GUARANTOR FINANCIAL INFORMATION
 
Dole’s 100% owned domestic subsidiaries (“Guarantors”) have fully and unconditionally guaranteed, on a joint and several basis, Dole’s obligations under the indentures related to Dole’s 8.75% debentures due 2013, the 13.875% senior secured notes due 2014 and the 8% senior secured notes due 2016. Each guarantee is subordinated in right of payment to the Guarantors’ existing and future senior debt, including obligations under the senior secured credit facilities, 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 subsidiaries’ cumulative results of operations, capital contributions and distributions and other changes in equity. Elimination entries relate to the elimination of investments in subsidiaries and associated intercompany balances and transactions as well as cash overdraft and income tax reclassifications.
 
The following are condensed consolidating statements of operations of Dole for the quarters and half years ended June 18, 2011 and June 19, 2010; condensed consolidating balance sheets as of June 18, 2011 and January 1, 2011; and condensed consolidating statements of cash flows for the half years ended June 18, 2011 and June 19, 2010.


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Quarter Ended June 18, 2011
 
                                         
    Dole Food
          Non
             
    Company, Inc.     Guarantors     Guarantors     Eliminations     Total  
    (In thousands)  
 
Revenues, net
  $ 24,277     $ 789,054     $ 1,507,761     $ (405,367 )   $ 1,915,725  
Cost of products sold
    (18,986 )     (702,800 )     (1,338,044 )     402,311       (1,657,519 )
                                         
Gross margin
    5,291       86,254       169,717       (3,056 )     258,206  
Selling, marketing and general and administrative expenses
    (13,828 )     (57,457 )     (62,004 )     3,056       (130,233 )
Charges for restructuring and long-term receivables
                (5,947 )           (5,947 )
Gain on asset sales
    11                         11  
                                         
Operating income (loss)
    (8,526 )     28,797       101,766             122,037  
Equity in subsidiary income
    104,238       79,850             (184,088 )      
Other income (expense), net
    (6 )           4,343             4,337  
Interest income
    230       156       780             1,166  
Interest expense
    (22,702 )     (19 )     (12,116 )           (34,837 )
                                         
Income from continuing operations before income taxes and equity earnings
    73,234       108,784       94,773       (184,088 )     92,703  
Income taxes
    8,532       (4,684 )     (17,366 )           (13,518 )
Earnings from equity method investments
          67       3,413             3,480  
                                         
Income from continuing operations
    81,766       104,167       80,820       (184,088 )     82,665  
Income from discontinued operations, net of income taxes
                29             29  
Gain on disposal of discontinued operations, net of income taxes
                339             339  
                                         
Net income
    81,766       104,167       81,188       (184,088 )     83,033  
Less: Net income attributable to noncontrolling interests
                (1,267 )           (1,267 )
                                         
Net income attributable to shareholders of Dole Food Company, Inc. 
  $ 81,766     $ 104,167     $ 79,921     $ (184,088 )   $ 81,766  
                                         


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Quarter Ended June 19, 2010
 
                                         
    Dole Food
          Non
             
    Company, Inc.     Guarantors     Guarantors     Eliminations     Total  
    (In thousands)  
 
Revenues, net
  $ 21,627     $ 750,192     $ 1,323,716     $ (354,013 )   $ 1,741,522  
Cost of products sold
    (18,681 )     (664,831 )     (1,208,100 )     350,890       (1,540,722 )
                                         
Gross margin
    2,946       85,361       115,616       (3,123 )     200,800  
Selling, marketing and general and administrative expenses
    (16,303 )     (50,330 )     (56,980 )     3,123       (120,490 )
Charges for restructuring and long-term receivables
                (762 )           (762 )
Gain on asset sales
    154             796             950  
                                         
Operating income (loss)
    (13,203 )     35,031       58,670             80,498  
Equity in subsidiary income
    63,666       33,984             (97,650 )      
Other income (expense), net
    (396 )           (5,100 )           (5,496 )
Interest income
    292       59       1,165             1,516  
Interest expense
    (22,770 )     (26 )     (14,342 )           (37,138 )
                                         
Income from continuing operations before income taxes and equity earnings
    27,589       69,048       40,393       (97,650 )     39,380  
Income taxes
    4,732       (5,856 )     (7,943 )           (9,067 )
Earnings from equity method investments
          42       2,790             2,832  
                                         
Income from continuing operations
    32,321       63,234       35,240       (97,650 )     33,145  
Income from discontinued operations, net of income taxes
                327             327  
                                         
Net income
    32,321       63,234       35,567       (97,650 )     33,472  
Less: Net income attributable to noncontrolling interests
                (1,151 )           (1,151 )
                                         
Net income attributable to shareholders of Dole Food Company, Inc. 
  $ 32,321     $ 63,234     $ 34,416     $ (97,650 )   $ 32,321  
                                         


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Half Year Ended June 18, 2011
 
                                         
    Dole Food
          Non
             
    Company, Inc.     Guarantors     Guarantors     Eliminations     Total  
    (In thousands)  
 
Revenues, net
  $ 46,469     $ 1,550,939     $ 2,778,548     $ (774,127 )   $ 3,601,829  
Cost of products sold
    (36,624 )     (1,375,757 )     (2,492,284 )     767,803       (3,136,862 )
                                         
Gross margin
    9,845       175,182       286,264       (6,324 )     464,967  
Selling, marketing and general and administrative expenses
    (26,671 )     (117,705 )     (116,911 )     6,324       (254,963 )
Charges for restructuring and long-term receivables
                (8,702 )           (8,702 )
Gain on asset sales
    11                         11  
                                         
Operating income (loss)
    (16,815 )     57,477       160,651             201,313  
Equity in subsidiary income
    133,778       84,313             (218,091 )      
Other income (expense), net
    (6 )           (35,008 )           (35,014 )
Interest income
    480       403       1,601             2,484  
Interest expense
    (45,498 )     (41 )     (24,768 )           (70,307 )
                                         
Income (loss) from continuing operations before income taxes and equity earnings
    71,939       142,152       102,476       (218,091 )     98,476  
Income taxes
    10,867       (9,111 )     (20,414 )           (18,658 )
Earnings from equity method investments
          292       4,398             4,690  
                                         
Income from continuing operations
    82,806       133,333       86,460       (218,091 )     84,508  
Income from discontinued operations, net of income taxes
                231             231  
Gain on disposal of discontinued operations, net of income taxes
                339             339  
                                         
Net income
    82,806       133,333       87,030       (218,091 )     85,078  
Less: Net income attributable to noncontrolling interests
                (2,272 )           (2,272 )
                                         
Net income attributable to shareholders of Dole Food Company, Inc. 
  $ 82,806     $ 133,333     $ 84,758     $ (218,091 )   $ 82,806  
                                         


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Half Year Ended June 19, 2010
 
                                         
    Dole Food
          Non
             
    Company, Inc.     Guarantors     Guarantors     Eliminations     Total  
    (In thousands)  
 
Revenues, net
  $ 40,123     $ 1,480,471     $ 2,512,088     $ (685,286 )   $ 3,347,396  
Cost of products sold
    (33,470 )     (1,298,045 )     (2,322,113 )     679,239       (2,974,389 )
                                         
Gross margin
    6,653       182,426       189,975       (6,047 )     373,007  
Selling, marketing and general and administrative expenses
    (33,188 )     (100,574 )     (107,365 )     6,047       (235,080 )
Charges for restructuring and long-term receivables
                (1,370 )           (1,370 )
Gain on asset sales
    580             2,341             2,921  
                                         
Operating income (loss)
    (25,955 )     81,852       83,581             139,478  
Equity in subsidiary income
    116,060       44,365             (160,425 )      
Other income (expense), net
    (1,825 )           936             (889 )
Interest income
    565       178       2,375             3,118  
Interest expense
    (47,608 )     (53 )     (30,527 )           (78,188 )
                                         
Income from continuing operations before income taxes and equity earnings
    41,237       126,342       56,365       (160,425 )     63,519  
Income taxes
    13,237       (11,383 )     (14,096 )           (12,242 )
Earnings from equity method investments
          337       3,946             4,283  
                                         
Income from continuing operations
    54,474       115,296       46,215       (160,425 )     55,560  
Income from discontinued operations, net of income taxes
                674             674  
                                         
Net income
    54,474       115,296       46,889       (160,425 )     56,234  
Less: Net income attributable to noncontrolling interests
                (1,760 )           (1,760 )
                                         
Net income attributable to shareholders of Dole Food Company, Inc. 
  $ 54,474     $ 115,296     $ 45,129     $ (160,425 )   $ 54,474  
                                         


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
CONDENSED CONSOLIDATING BALANCE SHEET
As of June 18, 2011
 
                                         
    Dole Food
          Non
             
    Company, Inc.     Guarantors     Guarantors     Eliminations     Total  
    (In thousands)  
 
ASSETS
Cash and cash equivalents
  $ 101,666     $ 1,605     $ 135,613     $     $ 238,884  
Restricted cash and deposits
                5,994             5,994  
Receivables, net of allowances
    566,347       132,039       556,015       (444,759 )     809,642  
Inventories
    6,952       289,843       493,968             790,763  
Prepaid expenses and other assets
    7,841       9,936       47,392             65,169  
Deferred income tax assets
    9,494       27,505       3,362             40,361  
Assets held-for-sale
    74,452       3,813       55,106             133,371  
                                         
Total current assets
    766,752       464,741       1,297,450       (444,759 )     2,084,184  
Investments
    2,546,717       1,906,042       96,648       (4,452,593 )     96,814  
Property, plant and equipment, net
    155,291       271,803       485,841             912,935  
Goodwill
          131,818       275,429             407,247  
Intangible assets, net
    689,615       9,325       337             699,277  
Other assets, net
    68,336       8,675       131,709             208,720  
                                         
Total assets
  $ 4,226,711     $ 2,792,404     $ 2,287,414     $ (4,897,352 )   $ 4,409,177  
                                         
 
LIABILITIES AND EQUITY
Accounts payable
  $ 5,670     $ 597,196     $ 404,683     $ (444,759 )   $ 562,790  
Liabilities related to assets held-for-sale
                22,098             22,098  
Accrued liabilities
    99,487       194,652       263,038             557,177  
Current portion of long-term debt, net
    (1,691 )     295       9,409             8,013  
Notes payable
                28,080             28,080  
                                         
Total current liabilities
    103,466       792,143       727,308       (444,759 )     1,178,158  
Intercompany payables (receivables)
    1,839,849       (568,740 )     (1,271,109 )            
Long-term debt, net
    914,967       2,760       627,309             1,545,036  
Deferred income tax liabilities
    219,884       599       33,612             254,095  
Other long-term liabilities
    262,232       19,806       238,877             520,915  
Equity attributable to shareholders of Dole Food Company, Inc. 
    886,313       2,545,836       1,906,757       (4,452,593 )     886,313  
Equity attributable to noncontrolling interests
                24,660             24,660  
                                         
Total equity
    886,313       2,545,836       1,931,417       (4,452,593 )     910,973  
                                         
Total liabilities and equity
  $ 4,226,711     $ 2,792,404     $ 2,287,414     $ (4,897,352 )   $ 4,409,177  
                                         


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
CONDENSED CONSOLIDATING BALANCE SHEET
As of January 1, 2011
 
                                         
    Dole Food
          Non
             
    Company, Inc.     Guarantors     Guarantors     Eliminations     Total  
    (In thousands)  
 
ASSETS
Cash and cash equivalents
  $ 39,080     $ 2,714     $ 128,353     $     $ 170,147  
Restricted cash and deposits
                51,108             51,108  
Receivables, net of allowances
    560,020       117,936       517,074       (443,765 )     751,265  
Inventories
    7,405       285,757       441,804             734,966  
Prepaid expenses and other assets
    8,419       9,785       49,705             67,909  
Deferred income tax assets
    6,200       27,505       3,105             36,810  
Assets held-for-sale
    76,704       3,813       5,533             86,050  
                                         
Total current assets
    697,828       447,510       1,196,682       (443,765 )     1,898,255  
Investments
    2,453,484       1,831,009       85,081       (4,281,660 )     87,914  
Property, plant and equipment, net
    155,851       275,568       511,611             943,030  
Goodwill
          131,818       275,429             407,247  
Intangible assets, net
    689,615       11,033       433             701,081  
Other assets, net
    69,558       8,037       141,868             219,463  
                                         
Total assets
  $ 4,066,336     $ 2,704,975     $ 2,211,104     $ (4,725,425 )   $ 4,256,990  
                                         
 
LIABILITIES AND EQUITY
Accounts payable
  $ 4,491     $ 586,121     $ 374,483     $ (443,765 )   $ 521,330  
Accrued liabilities
    77,372       209,301       355,808             642,481  
Current portion of long-term debt, net
    (1,665 )     291       8,722             7,348  
Notes payable
                31,922             31,922  
                                         
Total current liabilities
    80,198       795,713       770,935       (443,765 )     1,203,081  
Intercompany payables (receivables)
    1,752,638       (567,550 )     (1,185,088 )            
Long-term debt, net
    918,346       2,921       643,058             1,564,325  
Deferred income tax liabilities
    212,468       599       31,257             244,324  
Other long-term liabilities
    310,517       20,244       97,715             428,476  
Equity attributable to shareholders of Dole Food Company, Inc. 
    792,169       2,453,048       1,828,612       (4,281,660 )     792,169  
Equity attributable to noncontrolling interests
                24,615             24,615  
                                         
Total equity
    792,169       2,453,048       1,853,227       (4,281,660 )     816,784  
                                         
Total liabilities and equity
  $ 4,066,336     $ 2,704,975     $ 2,211,104     $ (4,725,425 )   $ 4,256,990  
                                         


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Half Year Ended June 18, 2011
 
                                         
    Dole Food
          Non
             
    Company, Inc.     Guarantors     Guarantors     Eliminations     Total  
    (In thousands)  
 
OPERATING ACTIVITIES
                                       
Cash flow provided by (used in) operating activities
  $ 65,026     $ 11,161     $ 782     $      —     $ 76,969  
                                         
INVESTING ACTIVITIES
                                       
Cash received from sales of assets and businesses, net of cash disposed
    2,519       881       4,596             7,996  
Capital expenditures
    (41 )     (16,995 )     (18,910 )           (35,946 )
Restricted cash and deposits
                45,114             45,114  
Other
    (465 )                       (465 )
                                         
Cash flow provided by (used in) investing activities
    2,013       (16,114 )     30,800             16,699  
                                         
FINANCING ACTIVITIES
                                       
Short-term debt repayments, net of borrowings
    517       4,001       (7,828 )           (3,310 )
Long-term debt borrowings
    163,000             43             163,043  
Long-term debt repayments
    (168,282 )     (157 )     (14,536 )           (182,975 )
Proceeds from stock option exercises
    312                         312  
Dividends paid to noncontrolling interests
                (2,250 )           (2,250 )
Settlement of long-term Japanese yen hedge forwards
                (2,212 )           (2,212 )
                                         
Cash flow used in financing activities
    (4,453 )     3,844       (26,783 )           (27,392 )
                                         
Effect of foreign currency exchange rate changes on cash
                2,461             2,461  
                                         
Increase (decrease) in cash and cash equivalents
    62,586       (1,109 )     7,260             68,737  
Cash and cash equivalents at beginning of period
    39,080       2,714       128,353             170,147  
                                         
Cash and cash equivalents at end of period
  $ 101,666     $ 1,605     $ 135,613     $     $ 238,884  
                                         


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DOLE FOOD COMPANY, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Half Year Ended June 19, 2010
 
                                         
    Dole Food
          Non
             
    Company, Inc.     Guarantors     Guarantors     Eliminations     Total  
    (In thousands)  
 
OPERATING ACTIVITIES
                                       
Cash flow provided by operating activities
  $ 59,393     $ 20,072     $ 12,121     $ (623 )   $ 90,963  
                                         
INVESTING ACTIVITIES
                                       
Proceeds from sales of assets and businesses, net of cash disposed
    1,514       74       17,196             18,784  
Capital expenditures
    (199 )     (15,500 )     (16,124 )           (31,823 )
Restricted cash and deposits
                (890 )           (890 )
Other
    (515 )                       (515 )
                                         
Cash flow provided by (used in) investing activities
    800       (15,426 )     182             (14,444 )
                                         
FINANCING ACTIVITIES
                                       
Short-term debt repayments, net of borrowings
    (195 )     (6,632 )     1,214             (5,613 )
Long-term debt borrowings
    329,100             594,118             923,218  
Long-term debt repayments
    (335,506 )     (132 )     (570,584 )           (906,222 )
Payment of debt issuance costs
    (10,086 )           (6,900 )           (16,986 )
Payment of initial public offering costs
    (957 )                       (957 )
Dividends paid to noncontrolling interests
                (1,268 )           (1,268 )
                                         
Cash flow provided by (used in) financing activities
    (17,644 )     (6,764 )     16,580             (7,828 )
                                         
Effect of foreign currency exchange rate changes on cash
                (3,015 )           (3,015 )
                                         
Increase (decrease) in cash and cash equivalents
    42,549       (2,118 )     25,868       (623 )     65,676  
Cash and cash equivalents at beginning of period
    20,913       2,118       96,639             119,670  
                                         
Cash and cash equivalents at end of period
  $ 63,462     $     $ 122,507     $ (623 )   $ 185,346  
                                         


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Item 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
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 Dole’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 Dole’s actual results to differ materially from those expressed or implied herein are set forth in Item 1A and Item 7A of Dole’s Annual Report on Form 10-K for the year ended January 1, 2011 and 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; quotas, tariffs and other governmental actions; and international conflict.
 
Overview
 
Significant highlights for Dole Food Company, Inc. and its consolidated subsidiaries (“Dole”) for the quarter and half year ended June 18, 2011 were as follows:
 
  •  Net revenues for the second quarter of 2011 were $1.9 billion, an increase of 10% from the second quarter of 2010. Revenues in all three of our reporting segments increased, driven primarily by higher prices.
 
  •  Operating income for the second quarter of 2011 was $122 million, an increase of 52% from the second quarter of 2010. Higher earnings in our fresh fruit and packaged foods segments were partially offset by lower results from our fresh vegetables segment.
 
  •  Fresh fruit operating income increased primarily as a result of improved global banana markets, as well as lower shipping and distribution costs in Europe.
 
  •  Packaged foods operating income increased due to higher pricing, partially offset by higher product costs worldwide and higher general and administrative expenses.
 
  •  Fresh vegetables operating income decreased due to higher product costs in our fresh-packed vegetables business and packaged salads operations partially offset by higher pricing in packaged salads.
 
  •  The restructuring in our fresh fruit segment in Europe, Latin America and Asia remains on track, with savings for fiscal 2011 estimated at $37 million, of which $14 million has already been realized in the first half of 2011.
 
  •  We completed amendments to our term loan and revolving credit facilities. As a result of the amendments, Dole eliminated certain financial maintenance covenants and reduced borrowing rates on the revolving credit facilities, with an opportunity to also reduce future borrowing rates on the term loan.
 
  •  We reached an agreement in principle with the Appeals Division of the IRS on all issues raised in the examination of Dole’s U.S. federal income tax returns for the years 2002-2005, including those with respect to the 2003 going-private merger transactions. The original net tax deficiency was $122 million, plus interest. The final settlement calls for a cash tax payment of $20 million, plus interest.


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Non-GAAP Financial Measures
 
The following is a reconciliation of earnings before interest expense, income taxes and discontinued operations (“EBIT before discontinued operations”) and adjusted earnings before interest expense, income taxes and depreciation and amortization (“Adjusted EBITDA”) to the most directly comparable U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) financial measure:
 
                                 
    Quarter Ended     Half Year Ended  
    June 18,
    June 19,
    June 18,
    June 19,
 
    2011     2010     2011     2010  
    (In thousands)  
 
Net income
  $ 83,033     $ 33,472     $ 85,078     $ 56,234  
Income from discontinued operations, net of income taxes
    (29 )     (327 )     (231 )     (674 )
Gain on disposal of discontinued operations, net of income taxes
    (339 )           (339 )      
Interest expense
    34,837       37,138       70,307       78,188  
Income taxes
    13,518       9,067       18,658       12,242  
                                 
EBIT before discontinued operations
    131,020       79,350       173,473       145,990  
Depreciation and amortization
    24,045       23,755       47,398       50,022  
Net unrealized loss on derivative instruments
    2,281       11,858       32,617       15,637  
Net gain on long-term Japanese yen hedges
    (4,966 )           (4,284 )      
Foreign currency exchange (gain) loss on vessel obligations
    130       81       2,539       (5,093 )
Net unrealized (gain) loss on foreign denominated instruments
    555       (1,386 )     7,447       (5,998 )
Gain on asset sales
    (11 )     (950 )     (11 )     (2,921 )
                                 
Adjusted EBITDA
  $ 153,054     $ 112,708     $ 259,179     $ 197,637  
                                 
 
EBIT before discontinued operations and Adjusted EBITDA are measures commonly used by financial analysts in evaluating the performance of companies. EBIT before discontinued operations is calculated from net income by adding interest expense and income tax expense, and subtracting income from discontinued operations, net of income taxes, and gain on disposal of discontinued operations, net of income taxes. Adjusted EBITDA is calculated from EBIT before discontinued operations by: (1) adding depreciation and amortization; (2) adding the net unrealized loss or subtracting the net unrealized gain on foreign currency and bunker fuel hedges and the cross currency swap which do not have a more than insignificant financing element present at contract inception; (3) adding the net loss or subtracting the net gain on the long-term Japanese yen hedges; (4) adding the foreign currency loss or subtracting the foreign currency gain on the vessel obligations; (5) adding the net unrealized loss or subtracting the net unrealized gain on foreign denominated instruments; and (6) subtracting the gain on asset sales. Due to the fact that the long-term Japanese yen hedges had more than an insignificant financing element at inception (as discussed in Note 14 to the condensed consolidated financial statements), the liability is treated similar to a debt instrument and the associated cash flows are classified as a financing activity. As a result, both the realized and unrealized gains and losses related to the long-term Japanese yen hedges are subtracted from or added back to EBIT before discontinued operations when calculating Adjusted EBITDA. These adjustments have been made because management excludes these amounts when evaluating the performance of Dole.
 
EBIT before discontinued operations and Adjusted EBITDA are not calculated or presented in accordance with U.S. GAAP, and EBIT before discontinued operations and Adjusted EBITDA are not a substitute for net income attributable to shareholders of Dole Food Company, Inc., net income, income from continuing operations, cash flows from operating activities or any other measure prescribed by U.S. GAAP. Further, EBIT before discontinued operations and Adjusted EBITDA as used herein are not necessarily comparable to similarly titled measures of other companies. However, Dole has included EBIT before discontinued operations and Adjusted EBITDA herein because management believes that EBIT before discontinued operations and Adjusted EBITDA are useful performance measures for Dole. In addition, EBIT before discontinued operations and Adjusted EBITDA are presented because management believes that these measures are frequently used by securities analysts, investors and others in the evaluation of Dole.


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EBIT before discontinued operations and Adjusted EBITDA have limitations as analytical tools and should not be considered in isolation from, or as an alternative to, operating income, cash flow or other combined income or cash flow data prepared in accordance with U.S. GAAP. Because of their limitations, EBIT before discontinued operations and Adjusted EBITDA and the related ratios presented throughout this Item 2 should not be considered as measures of discretionary cash available to invest in business growth or reduce indebtedness. Dole compensates for these limitations by relying primarily on its U.S. GAAP results and using EBIT before discontinued operations and Adjusted EBITDA only supplementally.
 
Results of Operations
 
Selected results of operations for the quarters and half years ended June 18, 2011 and June 19, 2010 were as follows:
 
                                 
    Quarter Ended   Half Year Ended
    June 18,
  June 19,
  June 18,
  June 19,
    2011   2010   2011   2010
    (In thousands)
 
Revenues, net
  $ 1,915,725     $ 1,741,522     $ 3,601,829     $ 3,347,396  
Operating income
    122,037       80,498       201,313       139,478  
Other income (expense), net
    4,337       (5,496 )     (35,014 )     (889 )
Interest expense
    (34,837 )     (37,138 )     (70,307 )     (78,188 )
Income taxes
    (13,518 )     (9,067 )     (18,658 )     (12,242 )
Net income
    83,033       33,472       85,078       56,234  
Less: Net income attributable to noncontrolling interests
    (1,267 )     (1,151 )     (2,272 )     (1,760 )
Net income attributable to shareholders of Dole Food Company, Inc. 
    81,766       32,321       82,806       54,474  
 
Revenues
 
Revenues in the quarter ended June 18, 2011 increased 10% to $1.9 billion from $1.7 billion for the quarter ended June 19, 2010. Higher sales were reported in all three of Dole’s operating segments. Fresh fruit sales increased $141.3 million primarily due to higher banana volumes sold in North America and Asia, higher global banana pricing and favorable foreign currency exchange movements in Europe and Japan. Packaged foods sales increased $23.3 million primarily due to higher volumes sold in North America and Asia, as well as improved pricing worldwide. Fresh vegetables sales increased $9.6 million mainly due to higher volume and pricing of packaged salads and higher pricing for fresh-packed vegetables sold in Asia. Net favorable foreign currency exchange movements in Dole’s selling locations resulted in higher revenues of approximately $95 million. These factors were partially offset by lower volumes of bananas sold in Europe due to the implementation of the European restructuring plan.
 
Revenues in the half year ended June 18, 2011 increased 8% to $3.6 billion from $3.3 billion for the half year ended June 19, 2010. Higher sales were reported in all three of Dole’s operating segments. Fresh fruit sales increased $193 million due primarily to the same factors that impacted sales during the second quarter. Packaged foods sales increased $35.8 million due primarily to higher volume and pricing in Asia and Europe and improved pricing in North America. Fresh vegetables sales increased $25.5 million due primarily to higher volume and pricing of packaged salads and higher pricing for fresh-packed vegetables sold in North America and Asia. Net favorable foreign currency exchange movements in Dole’s selling locations resulted in higher revenues of approximately $115 million.
 
Operating Income
 
For the quarter ended June 18, 2011, operating income increased to $122 million compared with $80.5 million for the quarter ended June 19, 2010. Fresh fruit operating results increased primarily due to higher earnings in Dole’s worldwide banana operations. Packaged foods operating results increased primarily due to higher pricing partially


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offset by higher product costs worldwide and higher general and administrative expenses in North America. These improvements were partially offset by lower fresh vegetables operating results due to higher product costs in Dole’s fresh-packed vegetables business and packaged salads operations. If foreign currency exchange rates in Dole’s significant foreign operations during the quarter ended June 18, 2011 had remained unchanged from those experienced during the quarter ended June 19, 2010, Dole estimates that its operating income would have been lower by approximately $6 million.
 
For the half year ended June 18, 2011, operating income increased to $201.3 million compared with $139.5 million for the half year ended June 19, 2010. Fresh fruit operating results increased due primarily to the same factors that impacted the quarter. These improvements were partially offset by lower operating results in Dole’s packaged foods segment due primarily to higher product costs worldwide and higher levels of marketing expenditures in North America associated with the product launch of FRUIT BOWLS® in 100% juice and fruit in jars in 100% juice. Fresh vegetables operating results decreased as a result of lower packaged salads earnings due primarily to higher raw material costs. If foreign currency exchange rates in Dole’s significant foreign operations during the half year ended June 18, 2011 had remained unchanged from those experienced during the half year ended June 19, 2010, Dole estimates that its operating income would have been lower by approximately $5 million.
 
Other Income (Expense), Net
 
For the quarter ended June 18, 2011, other income (expense), net was income of $4.3 million compared to expense of $5.5 million for the quarter ended June 19, 2010. The improvement was primarily due to the absence of net losses of $8.4 million generated on Dole’s cross currency swap, which was effectively unwound during the first quarter of 2011. In addition, net gains of $4.8 million were recognized on Dole’s long-term Japanese yen hedges during the second quarter of 2011. These improvements were partially offset by losses of $0.6 million recorded during the second quarter of 2011 on Dole’s foreign denominated borrowings compared with unrealized gains of $3.2 million recorded during the second quarter of 2010.
 
For the half year ended June 18, 2011, other income (expense), net was an expense of $35 million compared to expense of $0.9 million for the half year ended June 19, 2010. The change was primarily due to unrealized losses of $27.4 million incurred in connection with unwinding the cross currency swap and entering into a series of long-term Japanese yen hedges. In addition, losses were recorded during the first half of 2011 on Dole’s foreign denominated borrowings and British pound sterling vessel obligation of $8.1 million and $2.5 million, respectively, compared with gains of $8.6 million and $5.1 million, respectively, recorded in the first half of 2010. These factors were partially offset by a decrease in net losses of $7.9 million on Dole’s cross currency swap as well as net gains of $4.8 million from the long-term Japanese yen hedges.
 
The cross currency swap was scheduled to mature in June 2011. During the first quarter of 2011, Dole effectively unwound the cross currency swap by entering into a transaction to refinance its obligation under the cross currency swap and through a series of long-term Japanese yen hedges that mature through December 2014. The value of these contracts will continue to fluctuate based on changes in the exchange rate over the life of the individual forward contracts. Refer to Note 14 — Derivative Financial Instruments for additional information.
 
Interest Expense
 
Interest expense for the quarter ended June 18, 2011 was $34.8 million compared to $37.1 million for the quarter ended June 19, 2010. Interest expense for the half year ended June 18, 2011 was $70.3 million compared to $78.2 million for the half year ended June 19, 2010. Interest expense in both periods decreased primarily as a result of debt reduction. In addition, interest expense during the first half of 2011 benefitted from lower effective borrowing rates.
 
Income Taxes
 
Dole recorded $18.7 million of income tax expense on $98.5 million of pretax income from continuing operations for the half year ended June 18, 2011. Income tax expense included an interest benefit of $2.6 million related to Dole’s unrecognized tax benefits. Income tax expense of $12.2 million on $63.5 million of pretax income from continuing operations was recorded for the half year ended June 19, 2010 which included interest expense of $0.1 million related to Dole’s unrecognized tax benefits. Dole’s effective tax rate varies significantly from period to


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period due to the level, mix and seasonality of earnings generated in its various U.S. and foreign jurisdictions. For the periods presented, Dole’s income tax expense differs from the U.S. federal statutory rate applied to Dole’s pretax income primarily due to operations in foreign jurisdictions that are taxed at a rate lower than the U.S. federal statutory rate. Income tax expense for the half year ended June 18, 2011 also benefitted by $8.4 million, including tax and interest, due to a favorable court ruling in Ecuador relating to a non-U.S unrecognized tax benefit. Income tax expense for the half year ended June 19, 2010 included $2.4 million recorded to establish a valuation allowance against deferred income tax assets in Ecuador which, as the result of a recently enacted tax law, have been determined to be not recoverable. This was offset by a reduction in Dole’s liability for unrecognized tax benefits related to certain foreign jurisdictions.
 
Income tax expense for the quarters ended June 18, 2011 and June 19, 2010 were $13.5 million and $9.1 million, respectively.
 
Dole is required to adjust its effective tax rate for each quarter to be consistent with the estimated annual effective tax rate. Jurisdictions with a projected loss where no tax benefit can be recognized are excluded from the calculation of the estimated annual effective tax rate. This could result in a higher or lower effective tax rate during a particular quarter, based upon the mix and timing of actual earnings versus annual projections.
 
Internal Revenue Service Audit:  On August 27, 2009, the IRS completed its examination of Dole’s U.S. federal income tax returns for the years 2002-2005 and issued a Revenue Agent’s report (“RAR”) that includes various proposed adjustments, including with respect to the 2003 going-private merger transactions. The IRS proposed that certain funding used in the going-private merger was taxable and that some related investment banking fees were not deductible. The net tax deficiency associated with the RAR is $122 million, plus interest. On October 27, 2009, Dole filed a protest letter challenging the proposed adjustments contained in the RAR and has been pursuing resolution of these issues with the Appeals Division of the IRS. During the quarter ended June 18, 2011, Dole reached an agreement in principle with the Appeals Division on all issues. As a result, Dole’s total amount of unrecognized tax benefits is expected to decrease by approximately $41 million, of which $20 million represents a cash payment. This agreement is expected to be finalized in the third quarter at which time the tax of $20 million plus interest of approximately $13 million will be paid.
 
Segment Results of Operations
 
Dole has three reportable operating segments: fresh fruit, fresh vegetables and packaged foods. 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, among other measures, EBIT. EBIT before discontinued operations is calculated from net income by adding interest expense and income tax expense, and subtracting income from discontinued operations, net of income taxes, and gain on disposal of discontinued operations, net of income taxes. 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 Dole as a whole. EBIT is not defined under U.S. GAAP and should not be considered in isolation or as a substitute for net income or cash flow measures prepared in accordance with U.S. GAAP or as a measure of Dole’s profitability. Additionally, Dole’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 manner.


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Revenues from external customers and EBIT for the reportable operating segments and corporate were as follows:
 
                                 
    Quarter Ended     Half Year Ended  
    June 18,
    June 19,
    June 18,
    June 19,
 
    2011     2010     2011     2010  
    (In thousands)  
 
Revenues from external customers:
                               
Fresh fruit
  $ 1,364,778     $ 1,223,438     $ 2,539,444     $ 2,346,401  
Fresh vegetables
    278,425       268,869       524,939       499,395  
Packaged foods
    272,341       249,061       537,121       501,304  
Corporate
    181       154       325       296  
                                 
    $ 1,915,725     $ 1,741,522     $ 3,601,829     $ 3,347,396  
                                 
 
                                 
    Quarter Ended     Half Year Ended  
    June 18,
    June 19,
    June 18,
    June 19,
 
    2011     2010     2011     2010  
    (In thousands)  
 
Fresh fruit EBIT
  $ 109,597     $ 67,846     $ 176,600     $ 110,999  
Fresh vegetables EBIT
    3,634       7,396       14,730       17,886  
Packaged foods EBIT
    25,881       24,815       38,061       53,829  
                                 
Total operating segments EBIT
    139,112       100,057       229,391       182,714  
Corporate:
                               
Unrealized loss on cross currency swap
          (10,713 )     (3,787 )     (14,301 )
Net gain (loss) on long-term Japanese yen hedges
    4,825             (22,580 )      
Net unrealized gain (loss) on foreign denominated instruments
    (514 )     1,739       (6,434 )     6,465  
Operating and other expenses
    (12,403 )     (11,733 )     (23,117 )     (28,888 )
                                 
Corporate
    (8,092 )     (20,707 )     (55,918 )     (36,724 )
Interest expense
    (34,837 )     (37,138 )     (70,307 )     (78,188 )
Income taxes
    (13,518 )     (9,067 )     (18,658 )     (12,242 )
                                 
Income from continuing operations
    82,665       33,145       84,508       55,560  
Income from discontinued operations, net of income taxes
    29       327       231       674  
Gain from disposal of discontinued operations, net of income taxes
    339             339        
                                 
Net income
  $ 83,033     $ 33,472     $ 85,078     $ 56,234  
                                 
 
Fresh Fruit
 
Fresh fruit revenues for the quarter ended June 18, 2011 increased 12% to $1.36 billion from $1.22 billion for the quarter ended June 19, 2010. Worldwide banana sales increased $59 million as a result of higher volumes sold in North America and Asia and higher global banana pricing. Banana sales also benefitted from favorable Japanese yen and euro foreign currency exchange movements. These improvements were partially offset by planned lower volumes sold in Europe. European ripening and distribution sales increased $53 million as a result of higher local pricing and favorable euro and Swedish krona foreign currency exchange movements. Revenues in Asia also increased $16 million due to higher pricing of other fresh fruit as well as higher volume and pricing of fresh pineapple. Sales of Chilean deciduous fruit increased $12 million primarily due to higher volumes worldwide. Net favorable foreign currency exchange movements in Dole’s foreign selling locations resulted in higher revenues of approximately $92 million during the quarter ended June 18, 2011. Fresh fruit revenues for the half year ended


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June 18, 2011 increased 8% to $2.5 billion from $2.3 billion for the half year ended June 19, 2010. The increase in revenues was mainly due to the same factors that impacted sales during the second quarter. Net favorable foreign currency exchange movements in Dole’s foreign selling locations resulted in higher revenues of approximately $111 million during the half year ended June 18, 2011.
 
Dole’s fresh fruit segment EBIT is significantly impacted by certain items, which are included in the table below:
 
                                 
    Quarter Ended     Half Year Ended  
    June 18,
    June 19,
    June 18,
    June 19,
 
    2011     2010     2011     2010  
    (In thousands)  
 
Fresh fruit products
  $ 117,183     $ 69,534     $ 188,299     $ 106,390  
Charges for restructuring and long-term receivables
    (5,947 )     (762 )     (8,702 )     (1,370 )
Unrealized loss on foreign currency and fuel hedges
    (1,798 )     (1,473 )     (629 )     (1,543 )
Net gain on long-term Japanese yen hedge hedges
    141             141        
Foreign currency exchange gain (loss) on vessel obligations
    (130 )     (81 )     (2,539 )     5,093  
Net unrealized gain (loss) on foreign denominated instruments
    137       (322 )     19       (492 )
Gain on asset sales
    11       950       11       2,921  
                                 
Total Fresh fruit EBIT
  $ 109,597     $ 67,846     $ 176,600     $ 110,999  
                                 
 
Fresh fruit EBIT for the quarter ended June 18, 2011 increased 62% to $109.6 million from $67.8 million for the quarter ended June 19, 2010. Banana EBIT increased as a result of improved pricing worldwide, as well as lower shipping and distribution costs in Europe. The decrease in shipping costs was due primarily to Dole’s restructuring initiatives which reduced vessel charters and inland freight costs. These improvements were partially offset by higher fruit costs worldwide as well as higher shipping, selling and marketing costs in North America and Asia. Higher fruit costs resulted from adverse weather conditions in Latin America which significantly impacted supply and caused an increase in contract prices from Latin American growers. EBIT in the European ripening and distribution business increased as improved pricing and higher equity earnings were partially offset by higher product and distribution costs. If foreign currency exchange rates in Dole’s significant fresh fruit foreign operations during the quarter ended June 18, 2011 had remained unchanged from those experienced during the quarter ended June 19, 2010, Dole estimates that fresh fruit EBIT would have been lower by approximately $10.5 million. Fresh fruit EBIT for the half year ended June 18, 2011 increased 59% to $176.6 million from $111 million for the half year ended June 19, 2010. The increase in EBIT was mainly due to the same factors that impacted EBIT during the second quarter. If foreign currency exchange rates in Dole’s significant fresh fruit foreign operations during the half year ended June 18, 2011 had remained unchanged from those experienced during the half year ended June 19, 2010, Dole estimates that fresh fruit EBIT would have been lower by approximately $12.3 million.
 
Fresh Vegetables
 
Fresh vegetables revenues for the quarter ended June 18, 2011 increased 4% to $278.4 million from $268.9 million for the quarter ended June 19, 2010. Packaged salads revenues increased as a result of higher volumes sold and higher pricing. Asia fresh-packed vegetables revenues increased primarily due to favorable changes in product mix and a favorable Japanese yen foreign currency exchange rate impact. Revenues in the North America fresh-packed vegetable business during the second quarter were comparable as improved pricing for celery and strawberries was offset by lower volume and pricing of iceberg lettuce. Fresh vegetables revenues for the half year ended June 18, 2011 increased 5% to $524.9 million from $499.4 million for the half year ended June 19, 2010. Packaged salads revenues increased as a result of higher pricing, higher volumes sold and a favorable change in product mix. Higher revenues in the North America fresh-packed vegetable business resulted primarily from


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improved pricing across all major vegetable product lines, partially offset by lower volumes. The increase in pricing resulted from product shortages due to challenging weather conditions during January and February. Asia fresh-packed vegetables revenues increased primarily due to higher local pricing and a favorable Japanese yen foreign currency exchange rate impact partially offset by lower volumes.
 
Fresh vegetables EBIT for the quarter ended June 18, 2011 decreased to $3.6 million from $7.4 million for the quarter ended June 19, 2010. The decrease in EBIT was primarily due to higher product costs in the North America and Asia fresh-packed vegetables business. Earnings in the packaged salads business decreased as result of higher packaging costs and selling expenses partially offset by improved pricing. In addition, higher general and administrative expenses were incurred in the North America fresh-packed vegetables and packaged salads businesses. Fresh vegetables EBIT for the half year ended June 18, 2011 decreased to $14.7 million from $17.9 million for the half year ended June 19, 2010. The decrease in EBIT was mainly due to the same factors that impacted EBIT during the second quarter except for higher pricing of iceberg and romaine lettuce in the North America fresh-packed vegetables business in the first quarter of 2011.
 
Packaged Foods
 
Packaged foods revenues for the quarter ended June 18, 2011 increased 9% to $272.3 million from $249.1 million for the quarter ended June 19, 2010. Revenues increased primarily due to higher volumes of packaged fruit products sold in North America and Asia as well as higher pricing worldwide. Revenues in North America benefitted from higher volumes due to the timing of Easter, which occurred later in 2011 than in 2010. Packaged foods revenues for the half year ended June 18, 2011 increased 7% to $537.1 million from $501.3 million for the half year ended June 19, 2010. The increase in revenues was mainly due to the same factors that impacted revenues during the second quarter except for higher volumes in Europe and lower North America volumes sold in the first quarter of 2011.
 
EBIT in the packaged foods segment for the quarter ended June 18, 2011 increased to $25.9 million from $24.8 million for the quarter ended June 19, 2010. EBIT increased primarily due to higher pricing partially offset by higher product, selling, marketing and general and administrative costs worldwide. The increase in product costs resulted from higher purchased fruit costs, higher commodity costs and unfavorable foreign currency exchange movements in Thailand and the Philippines, where product is sourced. If foreign currency exchange rates in Dole’s packaged foods foreign operations during the quarter ended June 18, 2011 had remained unchanged from those experienced during the quarter ended June 19, 2010, Dole estimates that packaged foods EBIT would have been higher by approximately $4 million. EBIT in the packaged foods segment for the half year ended June 18, 2011 decreased to $38.1 million from $53.8 million for the half year ended June 19, 2010. The decrease in EBIT was due primarily to higher marketing expense, as well as higher product, selling and general and administrative costs worldwide partially offset by higher pricing. The increase in marketing expenditures was associated with the North America product launch of FRUIT BOWLS® in 100% juice and fruit in jars in 100% juice. If foreign currency exchange rates in Dole’s packaged foods foreign operations during the half year ended June 18, 2011 had remained unchanged from those experienced during the quarter ended June 19, 2010, Dole estimates that packaged foods EBIT would have been higher by approximately $7 million.
 
Corporate
 
Corporate EBIT was a loss of $8.1 million for the quarter ended June 18, 2011 compared to a loss of $20.7 million for the quarter ended June 19, 2010. The improvement in EBIT was primarily due to the absence of net losses of $8.4 million generated on the cross currency swap which was effectively ceased during the first quarter of 2011. In addition, unrealized gains of $4.8 million were generated on the long-term Japanese yen hedges during the second quarter of 2011. Corporate EBIT was a loss of $55.9 million for the half year ended June 18, 2011 compared to a loss of $36.7 million for the half year ended June 19, 2010. The change in EBIT was primarily due to unrealized losses of $27.4 million incurred in connection with the end of the cross currency swap. In addition, unrealized losses of $6.4 were recorded during the first half of 2011 on foreign denominated instruments compared with unrealized gains of $6.5 million recorded during the first half of 2010. These factors were partially offset by a decrease in net losses of $7.9 million on Dole’s cross currency swap and unrealized gains of $4.8 million related to the long-term Japanese yen hedges. In addition, there was an absence of write-off of deferred debt issuance costs of $4.6 million


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associated with Dole’s March 2010 debt refinancing transactions and as a well as a decrease in incentive compensation accruals.
 
Liquidity and Capital Resources
 
Cash flows provided by operating activities were $77 million for the half year ended June 18, 2011, compared to $91 million provided by operating activities for the half year ended June 19, 2010. Operating cash flows decreased $14 million primarily due to higher inventory costs due to rising commodity prices and higher receivables due in part to timing of collections. These factors were partially offset by higher net income and higher levels of accounts payables due in part to timing of payments.
 
Cash flows provided by investing activities were $16.7 million for the half year ended June 18, 2011, compared to cash flows used in investing activities of $14.4 million for the half year ended June 19, 2010. The change was primarily due to a $44.2 million decrease in restricted deposits primarily due to the elimination of the collateral requirement due to the end of the cross currency swap and a reduction in cash on deposit related to a bank guarantee. This was partially offset by a decrease in cash proceeds received from the sale of assets and an increase in capital expenditures.
 
Cash flows used in financing activities was $27.4 million for the half year ended June 18, 2011, compared to $7.8 million for the half year ended June 19, 2010. The change was primarily due to an increase in debt repayments.
 
As of June 18, 2011, Dole had a cash balance of $238.9 million and an ABL revolver borrowing base of $289.2 million. There were no borrowings under the ABL revolver at June 18, 2011. After taking into account approximately $87.1 million of outstanding letters of credit issued under the ABL revolver, Dole had approximately $202.1 million available for borrowings as of June 18, 2011.
 
Dole’s term loan and ABL revolver facilities were amended on July 8, 2011. The amendments, among other things: (i) for the ABL revolver facility, decreased the applicable margin for LIBOR borrowings to 1.75% — 2.25%, and for base rate borrowings to 0.75% — 1.25%, with the rate at any time determined by the average historical borrowing availability; (ii) for the term loan facilities, reduced the LIBOR floor to 1.25% and increased the LIBOR applicable margin to 3.75%, and the base rate applicable margin to 2.75%, with an opportunity to reduce the applicable margin by 0.25% after December 31, 2011 if Dole’s Total Leverage Ratio is 3.50:1.00 or lower; (iii) eliminated the financial maintenance covenants of total leverage ratio and minimum interest coverage ratio (such covenants had been in the previous term loan facilities, but not the revolving credit facility); (iv) added greater operating and financial flexibility for Dole; and (v) provided for other technical and clarifying changes. The amended credit facilities provide $900 million of term debt due 2018 and up to $350 million of revolving debt due 2016.
 
In connection with the July 8, 2011 amendment of the term loan and ABL revolver facilities, Dole will record a charge of approximately $13 million to other income (expense) in the condensed consolidated statement of operations during the third quarter of 2011. This charge relates to fees incurred in connection with the refinancing as well as the write-off of deferred debt issuance costs and debt discounts.
 
During the third quarter of 2011, Dole repurchased and retired $38 million of the 13.875% Notes due 2014. As a result of the repurchase, Dole will record a charge of approximately $10 million to other income (expense) in the condensed consolidated statement of operations during the third quarter of 2011. This charge relates to premium paid in connection with the early debt retirement as well as the write-off of deferred debt issuance costs and debt discounts
 
Dole believes that available borrowing capacity under the revolving credit facility and subsidiaries’ uncommitted lines of credit, together with its existing cash balances, future cash flow from operations, planned asset sales and access to capital markets will enable it to meet its working capital, capital expenditure, debt maturity and other commitments and funding requirements over the next 12 months. Management’s plan is dependent upon the occurrence of future events which will be impacted by a number of factors including the general economic environment in which Dole operates, Dole’s ability to generate cash flow from its operations, and its ability to attract buyers for assets being marketed for sale. Factors impacting Dole’s cash flow from operations include, but


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are not limited to, items such as product pricing, commodity prices, interest rates and foreign currency exchange rates.
 
Other Matters
 
Recently Issued and Adopted Accounting Pronouncements:  See Note 2 to the condensed consolidated financial statements for information regarding Dole’s adoption of new accounting pronouncements.
 
European Union (“EU”) Banana Import Regime:  On January 1, 2006, the EU implemented a new “tariff only” import regime for bananas. Under this regime, the EU mandated a tariff of 176 euro per metric ton on all banana imports to the EU market from Latin America. The EU also mandated that 775,000 metric tons of bananas from African, Caribbean, and Pacific (“ACP”) countries could be imported to the EU duty-free.
 
Several Latin American countries challenged the legality of aspects of this trade regime by initiating proceedings in the Dispute Settlement Body (“DSB”) at the World Trade Organization (“WTO”). The DSB issued final rulings against the EU on November 27, 2008, concluding that the 176 euro per metric ton tariff imposed was legally inconsistent with WTO trade rules. The DSB also considered whether the zero tariff reserved for ACP countries was legally inconsistent with WTO trade rules but recognized that, with the current entry into force of Economic Partnership Agreements between the EU and ACP countries, ACP bananas now may have duty-free, quota-free access to the EU market.
 
In light of these WTO rulings against the tariff only regime as implemented, the EU proposed a settlement to the Latin American banana producing countries (Brazil, Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Mexico, Nicaragua, Peru, Panama, and Venezuela) in resolution of the dispute. The settlement provided for a gradual tariff reduction from 148 euros per metric ton in 2010 to a final tariff of 114 euro per metric ton on January 1, 2017 or January 1, 2019 (the 2019 date applies if no further trade agreements are reached in the ongoing Doha Development Agenda global trade discussions). The EU also entered into a settlement with the U.S. and agreed that the EU will maintain a non-discriminatory, tariff-only regime for the importation of bananas.
 
The settlement was accepted and initialed by the EU, the U.S., and 11 Latin American banana producing countries on December 15, 2009. After having provisionally applied since December 15, 2009, the terms of the settlement were approved by the European Council in a Council Decision dated March 7, 2011 and have now entered into force.
 
During fiscal 2010, Dole recorded tariff refunds of $8 million for the period from December 15, 2009 through June 8, 2010, of which $7.4 million was collected. Dole expects the remaining balance to be collected during the third quarter of 2011. The lower tariff rates benefitted fiscal 2010 EBIT by an additional amount of approximately $7 million and first half of 2011 EBIT by approximately $1 million.
 
In addition, the EU has negotiated several free trade areas agreements (“FTA”) which will allow for an even lower import tariff on specified volumes of banana exports from certain countries. An EU-Colombia-Peru FTA has been negotiated and an EU-Central America (i.e., Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama) FTA has been negotiated. Both of these FTAs must be translated into all EU languages and are subject to approval by all EU Member States and the European Parliament before they can come into effect. Ecuador has not yet negotiated an FTA with the EU on bananas and may not benefit, like the other Latin American countries party to an FTA, unless a similar FTA can be negotiated with the EU. Dole continues to monitor these developments but cannot yet anticipate when the necessary approvals will be obtained and when, or if, these FTAs will come into force.
 
Item 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
For the half year ended June 18, 2011, there have been no material changes in the market risk disclosure presented in Dole’s Annual Report on Form 10-K for the fiscal year ended January 1, 2011. For information regarding Dole’s derivative instruments and hedging activities, refer to Note 14 to the condensed consolidated financial statements contained in this Quarterly Report.


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Item 4.   CONTROLS AND PROCEDURES
 
An evaluation was carried out as of June 18, 2011 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 13a-15(e) and 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 June 18, 2011.
 
During the 2nd quarter of 2011, we implemented a new Enterprise Resource Planning (ERP) system for our North American packaged foods operation. The implementation was completed and the system went “live” on April 24, 2011. An ERP system is a fully-integrated set of programs and databases that incorporate order processing, production planning and scheduling, purchasing, accounts receivable, inventory management and accounting. This implementation was subject to various testing and review procedures prior to execution. In connection with this ERP system implementation, we have updated our internal control over financial reporting, as necessary, to accommodate modifications to our business processes and accounting procedures. There were no changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
PART II.

OTHER INFORMATION
DOLE FOOD COMPANY, INC.
 
Item 1.   Legal Proceedings
 
For information regarding legal matters, refer to Note 12 to the condensed consolidated financial statements contained in this Quarterly Report.
 
Item 6.   Exhibits
 
         
Exhibit
   
Number    
 
  10 .24*   Dole Food Company, Inc. Stock Incentive Plan, as amended
  31 .1*   Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
  31 .2*   Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
  32 .1†   Certification by the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act
  32 .2†   Certification by the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act
  101**     The following financial information from Dole Food Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 18, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Statement of Comprehensive Income, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Cash Flows, (v) Condensed Consolidated Statement of Stockholders’ Equity and (vi) the Notes to Condensed Consolidated Financial Statements.
 
 
* Filed herewith
 
** Pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
 
Furnished herewith


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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
DOLE FOOD COMPANY, INC.
 
REGISTRANT
 
  By: 
/s/  Joseph S. Tesoriero
Joseph S. Tesoriero
Executive Vice President and
Chief Financial Officer
 
  By: 
/s/  Yoon J. Hugh
Yoon J. Hugh
Vice President, Controller and
Chief Accounting Officer
(Principal Accounting Officer)
 
July 28, 2011


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EXHIBIT INDEX
 
         
Exhibit
   
Number    
 
  10 .24*   Dole Food Company, Inc. Stock Incentive Plan, as amended
  31 .1*   Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes- Oxley Act.
  31 .2*   Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
  32 .1†   Certification by the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act.
  32 .2†   Certification by the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act.
  101**     The following financial information from Dole Food Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 18, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Statement of Comprehensive Income, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Cash Flows, (v) Condensed Consolidated Statement of Stockholders’ Equity and (vi) the Notes to Condensed Consolidated Financial Statements.
 
 
Filed herewith
 
** Pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
 
†  Furnished herewith


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