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Dole 1996 annual

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    Dole 1996 annual Dole 1996 annual Document Transcript

    • D o l e F o o d C o m pa n y, I n c . A n n u a l R e p o r t 
    • DOLE FOOD COMPANY’S worldwide team of growers, packers,processors,shippers and employees is committed to consistently providing safe, high quality fruit, vegetables and food products while protecting the environment in which its products are grown and processed. Dole’s dedication to quality is a commitment solidly backed by: scientific pest management programs, strin- gent quality control measures, state-of-the-art production and transportation technologies, continuous improvement through research and innovation, dedication to the safety of our employees, and communities and the environment.
    • F H INANCIAL IGHLIGHTS (in millions, except per share data) 1996 1995 1994 1993 1992 Revenue $3,840 $3,804 $3,499 $3,108 $3,120 Income from continuing operations before cumulative effect of accounting change $ 89 $ ,120 $ , 58 $ 62 $ 66 Discontinued operations – (97) 10 16 (2) Cumulative effect of accounting change – – – – (48) Net income $ 89 $ 23 $ 68 $ 78 $ 16 Earnings per common share Income from continuing operations before cumulative effect of accounting change $ 1.47 $ 2.00 $ .98 $ 1.04 $ 1.11 Discontinued operations – (1.61) .16 .26 (.04) Cumulative effect of accounting change – – – – (.81) Net income $ 1.47 $ .39 $ 1.14 $ 1.30 $ .26 Average common shares outstanding 60 60 60 60 60 Total assets $2,487 $2,442 $3,685 $3,159 $2,926 Capitalization Short-term debt $ 22 $ ,24 $ , 54 $ , 79 $ , 81 Long-term debt 904 896 1,555 1,111 950 Minority interests 30 26 25 39 35 Common shareholders’ equity 550 508 1,081 1,052 1,001 Total $1,506 $1,454 $2,715 $2,281 $2,067 Book value per common share $ 9.18 $ 8.49 $18.17 $17.70 $16.85 Common stock price at year-end $34.00 $35.00 $23.00 $26.75 $32.13 Market price range High $ 431⁄2 $ 38 $ 351⁄2 $ 377⁄8 $ 40 Low $ 327⁄8 $ 24 $ 221⁄2 $ 257⁄8 $ 26 Annual cash dividends per common share $ .40 $ .40 $ .40 $ .40 $ .40 Note: Income from continuing operations for 1996, 1993 and 1992 includes pre-tax restructuring charges of $50 million, $43 million and $42 million, respectively. Income from continuing operations for 1995 includes a pre-tax gain of $62 million related to assets sold or held for sale. The real estate and resorts business distributed to shareholders in 1995 has been presented throughout this report as discontinued operations. 24.6% 3,840 1,081 3,804 1,052 214 1,001 3,499 193 3,120 3,108 175 166 16.0% 138 550 508 7.6% 6.5% 6.4% 92 93 94 95 96 92 93 94 95 96 92 93 94 95 96 92 93 94 95 96 REVENUE O P E R AT I N G I N C O M E COMMON SHAREHOLDERS’ RETURN EQUITY ON EQUITY (in millions) (in millions) (in percent) (in millions) Page  d o l e f o o d c o m pa n y, i n c .
    • T O S O UR HAREHOLDERS Dole celebrated its 145th anniversary in 1996 with a revitalized spirit and direction. Following the spin-off of its extensive real estate assets to shareholders in December of 1995, Dole has singularly focused on building its global food business into one of the premier food companies of the world. Dole concentrated on creating shareholder value by focusing management efforts on increasing the return on assets employed.These efforts included: Accelerating the growth of its core businesses where Dole has definite competen- s cies, competitive advantages, and high existing returns. Leveraging its global shipping and distribution infrastructure to carry more prod- s ucts with marginal incremental costs. Joint venturing with partners to mutually benefit from the synergies of combined s strengths. Downsizing or liquidating operations that do not meet minimum return on s investment criteria. Selling assets that are either nonproductive or do not produce adequate returns. s Concurrently, Dole has shifted its management emphasis from the supply side to the market side of the business, in order to differentiate itself and meet the unique requirements of retail chains and consumers in the various regions of the world served by Dole. The sum total of these efforts positions Dole to grow its businesses profitably into the future, reduce debt, and generate cash flow to be used for the further expansion of Dole. Dole took a number of steps to grow its core businesses in 1996. E X PA N S I O N Early in the year, Dole acquired Pascual Hermanos, the largest fruit and vegetable grower in Spain. Pascual is the largest supplier of iceberg lettuce to the European continent and, therefore, a strategic acquisition to position Dole to expand its suc- cessful North American salad business into Europe. Dole also entered into a joint venture in Norway with the BAMA Group to build its first European salad plant for the Norwegian market. This plant was built and entered into production in 1996, and Dole salads quickly gained the leading market share in Norway. During the year, Dole also continued the strategic expansion of its distribution net- works in Europe and Japan. Dole distribution centers now carry an increasing per- centage of Dole’s total sales in Europe and Japan and offer strategic advantages for Page  d o l e f o o d c o m pa n y, i n c .
    • logistical consolidation as well as closer relationships with customers in these coun- tries. In December of 1996, Dole completed construction and inaugurated its largest distribution facility in Tokyo, Japan. As the retail industry continues to consolidate, Dole’s distribution centers, category management efforts, and supply partnerships continue to strengthen the Dole market position globally. To leverage its infrastructure and create additional synergies, Dole entered into a joint venture marketing program with the prestigious Langeberg Foods of South Africa to market its supply of canned deciduous fruit in Europe that uniquely complement Dole’s canned pineapple sales on the continent and in the United Kingdom. Dole also completed the acquisition of Fyffes PLC’s Guatemalan operations and entered into a shipping agreement to supply the seller part of its European banana market requirements. This transaction provided an opportunity to expand Dole’s North American operations as well as improve production and shipping economies of scale. While growing its core businesses, Dole is concen- MAXIMIZING RETURNS trating on downsizing or liquidating businesses or assets that have not provided ade- quate returns. Dole continued its program of an orderly liquidation of its North American agricultural lands, and announced in December 1996 the restructuring and liquidation of its dried fruit business in North America. As a result of the significant reduction in debt, Dole entered into a new $600 million five-year revolving credit facility, which replaces its former $1 billion credit facility. Agents in the new facility are Chase Manhattan Bank, Bank of America and Citibank. Board of Directors (Seated – Left to Right) Elaine L. Chao and David H. Murdock (Standing – Left to Right) Richard M. Ferry, Zoltan Merszei, James F. Gary, Mike Curb, David A. DeLorenzo Page  d o l e f o o d c o m pa n y, i n c .
    • To increase shareholder value, Dole also announced a program providing for the repurchase of up to five percent of its outstanding common shares. Shares will be repurchased from time to time based on prevailing market conditions. NUTRITION E D U C AT I O N Dole proudly produces nutritious, wholesome products that enable consumers to lead a healthier lifestyle. Dedicated to increasing consumer knowledge on the benefits of good nutrition, Dole’s mission is to encour- age people to eat at least five servings of fruits and vegetables a day. Much of Dole’s nutritional educational resources are focused on children. The “5 A Day Adventures,” a nutrition education CD-ROM, teaches children to eat five servings of fruits and vegetables a day and is available free to schools.This interactive tool is now in use in more than 32,000 schools nationwide. Dole is expanding in the area of nutritional education by underwriting a study in collaboration with nutrition experts at University of California, Los Angeles and Mayo Clinic to ascertain and assemble the nutritional values of various foods. In conjunction with this project, Dole is undertaking the compilation of a nutritional encyclopedia to designate proper consumption of fruits, vegetables, grains, nuts and protein. Eventually the information will be disseminated to customers, consumers, and the general public to promote nutritional awareness to create a healthier society. Dole continues to see excellent prospects for growth. The developing markets in Europe, Asia and Latin America, where per capita consumption of bananas and pineapples is still low, offer opportunities for continued market expansion. Introductions of new products, such as Dole’s expanding salad lines and new fruit cups, offer excellent growth potential both domestically and internationally. Joint ventures with supply partners, which leverage shipping and distribution assets, con- tinue to offer Dole attractive possibilities for sound economic growth. I am also very pleased with the depth and experience of our entire management team. Dole has a multi-cultural reservoir of talent which is its most valuable resource. This exceptional workforce enables Dole to successfully grow the Dole brand across the globe. We wish to thank our employees, shareholders and customers for their continued support and confidence. Sincerely, David H. Murdock Chairman and Chief Executive Officer
    • D W O OLE ORLDWIDE PERATIONS q q qq q q q q q q q qv qvv q qv q q qq q q q q qq s q s v vq q q q qq qv q q sqv q s s vq sq q s 5s q q q q q q q q q s s q q q s q q q q q q q q q s qs q s s q q sq sq sq q s q q ss q q s sq s q sq s ss s s q q q q s s q q q s s s q q s q q s s Sourcing v Ripening/Distribution q q Markets 5 Corporate FOOD OPERATING DIVISIONS AND LOCATIONS FOOD MARKETING DIVISIONS LOCATIONS AND Morocco Nicaragua EUROPE AND Costa Rica EUROPE AND AFRICA Netherlands Belgium Panama Dominican Republic MIDDLE EAST Norway Cameroon Peru Albania Ecuador Oman Canary Islands Venezuela Algeria Guadeloupe Poland France Windward Islands Austria Guatemala Portugal Germany Azerbaijan Honduras ASIA Qatar Ghana Bahrian Jamaica Australia Romania Greece Belarussia Martinique China Russia Italy Belgium Mexico Japan Saudia Arabia Ivory Coast Bosnia Netherlands-Antilles New Zealand Senegal Netherlands Bulgaria Panama Philippines Slovakia Somalia Croatia Peru Thailand Spain South Africa Czech Republic Trinidad & Tobago NORTH AMERICA Sweden Spain Denmark Uruguay Canada Switzerland Tunisia Estonia Venezuela United States Syria Turkey Egypt ASIA Arizona Tunisia United Kingdom Finland Australia California Turkey France LATIN AMERICA AND China Florida Ukraine Germany CARIBBEAN Hong Kong Hawaii United Arab Emirates Greece Argentina Indonesia Washington United Kingdom Hungary Chile Japan Uzbekistan Iceland Colombia Malaysia India LATIN AMERICA Costa Rica New Zealand AND Ireland Dominican Republic Philippines CARIBBEAN Italy Ecuador Singapore Argentina Jordan Guadeloupe South Korea Bahamas Kuwait Guatemala Taiwan Barbados Latvia Honduras Thailand Bermuda Lebanon Jamaica Brazil NORTH AMERICA Lithuania Martinique Chile Canada Luxembourg Mexico Colombia United States Malta Page  d o l e f o o d c o m pa n y, i n c .
    • Dole North America Dole North America generated $1.8 billion of 1996 revenue of which 28 percent was sourced in Latin America, 16 percent from the Far East and 56 percent from within North America. These operations include the distribution, marketing and sales of bananas sourced in Latin America, deciduous fruit sourced in Chile, and pineapple and canned fruit products sourced in Asia. Also included are citrus, deciduous fruits and vegetables procured locally and sold primarily in the North The complementary winter and summer growing seasons American market. This sourcing diversification provides Dole with a of Monterey, California and year-round supply of a wide array of fruit and vegetable products. Yuma, Arizona offer year- round production for Dole’s value added salad and vegetable business, the The fresh vegetable market in North America is a $25 billion V E G E TA B L E S fastest growing segment in business sourced from a large number of regional suppliers, most of which offer the grocery store today. limited product selection and seasonal supplies. Dole’s strategy is to offer a wide range of products year-round to provide retailers an efficient, dependable source of supply. As the retail food chains continue to consolidate, Dole believes its strategy will attract an increasing percentage of food chains as retailers seek fewer suppliers that consistent- ly offer quality, dependable supply and efficient logistical support.A continuing focus on the marketing and customer service aspects of the business distinguish Dole in the market place and builds long-term, brand based relationships with its customers. Fresh cut salads and packaged vegetable assortments continue to increase market share in North America reaching an estimated eight percent of total vegetable sales in 1996, or $2 billion, a 22 percent increase over 1995. Dole’s growth in the value added market in 1996 exceeded the overall market growth. Dole continued to be a leader in fresh cut salads by pioneering an entirely new fresh cut segment, the single David H. Murdock Chairman and Chief Executive Officer serve salads. Dole Lunch For One, introduced to supermarkets in early 1996, David A. DeLorenzo includes a single portion, complete salad and bread accompaniment.The product is President and Chief Operating Officer Page  d o l e f o o d c o m pa n y, i n c .
    • F RE S H year-round
    • A D VA N C E D technology
    • Innovative in-field harvest- designed for the consumer who wants a healthy, quick lunch. Dole Lunch For One ing and state-of-the-art is the top selling single serve salad and consumers confirm it as the most nutritious, packing plants satisfy convenient and the best value on the market today. rapidly growing consumer demand for convenient sal- Dole’s distribution system and customer service continue to expand and improve. ads and vegetables. More The highly automated cooler in Marina, California affords customers the quickest than 25% of American consumers eat fresh salads and most accurate truck pick-up in the produce industry. In addition to distribut- from a bag. ing products from Soledad, California, Yuma, Arizona and New York City, Dole’s national distribution system was further enhanced in 1996 by distributing products from Bolingbrook, Illinois (a Chicago suburb) and Atlanta, Georgia. To further Dole’s penetration of the Eastern markets, a third state-of-the-art processing plant will be built in Ohio in 1997.When this plant is functional in 1998, it will reduce Dole’s recently developed the response and lead time for buyers in the East to one or two days. Dole contin- fresh cut rack in-store ues to be on the leading edge of providing retailers assistance in managing their busi- merchandising system nesses.A comprehensive category management program has been developed to help allows value added bagged produce to be organized retailers better manage produce inventories and space in the supermarket. As another and displayed prominently service to the retailer, Dole is providing an in-store merchandising system to enable and attractively to consumers. retailers to better organize sections for easier shopping and customer convenience. The fresh fruit division supplies Dole retail customers with a F R E S H F RU I T dependable source of high quality fruit on a year-round basis. Core fruit products — bananas, apples, oranges, grapes, pears, stonefruit, pineapples and specialty items such as melons and kiwis — are those most in demand by consumers. Products are sourced throughout the Americas to ensure that selections are available throughout all the North American seasons. This not only reduces seasonal fluctuation in sales but permits sales personnel to be in contact with retail store buyers year-round maintaining relationships and enhancing customer service capacity. Focusing more on the customer service aspect of the business, Dole is downsizing its investment in agricultural properties. By concentrating resources on processing and distribution, Dole believes it can deliver greater value to both its customers and share- holders. This customer service orientation includes a 100 percent containerized Fresh, sliced, cubed, crushed or chunked, Dole banana delivery capacity, establishing strong long-term relationships with customers, pineapple has been a cross marketing various product offerings and investing in processing technology that worldwide bestseller for permits optimal sorting and storage of products to enable products to retain freshness. decades. Page  d o l e f o o d c o m pa n y, i n c .
    • Fresh fruit is sourced from Dole continues to enjoy strong market preference for its tra- PA C K A G E D F R U I T California, Florida, Hawaii, ditional canned pineapple products as well as for its tropical fruit salads. Through Washington, and through marketing and packaging innovation, traditional Dole products are enjoying increas- the jet-fresh program in Chile. Dole boasts the ing market share by meeting the specific needs of particular customers.This contin- largest fully integrated uing emphasis on customer service is a key to Dole’s success in growing market citrus organization in share while maintaining good financial returns. North America with pro- duction from over 30,000 Market share for the holiday periods approached near record levels of 50 percent on acres of prime farmland. Dole is also the continent’s both pineapple and juice. Two major consumer promotions in conjunction with leading supplier of table American Hawaiian Cruise Lines at Easter and a joint promotion with Microsoft for grapes. the holiday season generated large displays of canned pineapple, pineapple juice and tropical fruit salad in grocery stores, drug stores and mass merchandisers. Following its successful debut in Europe, Dole Pineapple Chunks and Tropical Fruit Dole apples enjoy a consis- tently high rank in Asia Salads, packaged in clear plastic cups, are presently being test marketed on retail where uniform color, shape shelves in Seattle and Portland.This new method of packaging fresh fruit is designed and crispiness are the to satisfy the consumer’s need for safe, healthy and convenient snacks. Additional critical factors for success. In Hong Kong, Dole fruit items will be added in 1997. controls 15 percent of the apple market. Dole Pizza Tidbits were introduced nationally in 1996 and have become a hit with pizza parlor operators. Processed pineapple continues to have significant growth opportunities in the area of sandwich toppings, salad bars and as an ingredient for Asian cooking.The combination of a strong base business coupled with new prod- ucts drove volume and earnings to historical highs in 1996. Gregory L. Costley, Lawrence A. Kern, Peter M. Nolan President – Dole North America Fruit President – Dole Fresh Vegetables President – Dole Packaged Foods Pa g e  d o l e f o o d c o m pa n y, i n c .
    • Q UA L I T Y variety P a g e  d o l e f o o d c o m pa n y, i n c .
    • Dole Latin America Dole Latin America production and exports grew to 137.5 million boxes during 1996, produced in its traditional South and Central American operations as well as in certain Caribbean countries. Bananas, pineapples, grapes, apples, pears, kiwis, stonefruit, mangos and melons are shipped in modern refrigerated vessels not only to North America, Western and Eastern Europe, but also to the Mid- and Far-Eastern markets. Dole supplies its customers Despite very adverse climatic conditions in Central I N C R E A S E D P RO D U C T I O N year-round through its America associated with excessive rainfall in 1996, Dole was able to increase its own extensive sourcing capabili- banana production as well as that from associate growers. More than 21,000 Dole ties in Latin America. Dole’s refrigerated container employees take excellent care of all products produced on company-owned farms, shipping fleet, the world’s constantly striving for higher yields, better quality and lower costs. In countries largest, rapidly delivers where Dole does not control production, it assists independent growers to success- produce to global markets. fully improve productivity and the quality of crops, enabling Dole to maintain the highest standard of the industry in the countries in which it operates. A team of highly skilled agronomists and other technical personnel in each country help to achieve desired results and maintain high standards. Dole programs addressing environmental concerns and worker safety lead the industry in all countries in which it operates. While the total Latin America banana production increased NEW MARKETS approximately 3.5 percent in 1996, Dole’s production and sourcing of bananas was up 10 percent versus 1995.This additional production was principally used to serve new markets, primarily in Eastern Europe. Dole’s ability to remain a low cost producer is a key factor in its success in the sales and marketing of increased banana volumes. Juergen Schumacher President – Dole Latin America North America continues to be Dole’s largest banana market, but remarkable growth Roberto Zacarias has taken place in Russia where a regular shipping program into St. Petersburg com- President – Dole Honduran Beverage Pa g e  d o l e f o o d c o m pa n y, i n c .
    • WO R L DW I D E distribution Pa g e  d o l e f o o d c o m pa n y, i n c .
    • P RE M I E R grower
    • Fresh bananas arriving menced in 1995. Today, Dole is the dominant brand sold in Russia with deliveries directly from the harvest through the Baltic and Black Sea ports. In addition, during 1996 the Chinese sig- field are readied for clean- nificantly increased banana consumption with the support of Dole bananas shipped ing, washing, inspection and grading. Once packed, both from Ecuador and the Philippines. they are shipped in refrig- Dole Chile continued its exports of grapes, apples, erated containers to prevent NUMBER CHILE ONE IN ripening until they reach pears, stonefruit and kiwis at a record pace and remains Chile’s number one exporter market. Dole Latin of fruits. Chile has soil and climate comparable to that of California’s fertile San America sources bananas from a well diversified per- Joaquin Valley enabling it to provide the same quality and variety of fruit that manent sourcing structure Americans have come to expect from North American growers. Located in the transporting bananas from Southern Hemisphere, Chile’s growing season is the exact opposite of the United Colombia, Costa Rica, Ecuador, Guatemala, States. Produced under the same stringent quality controls and regulations, Dole Honduras, Nicaragua, Chilean fruit permits the American consumer to enjoy summer fruit in the winter. Panama, and Venezuela. For 1997, Dole Latin America’s most important commitment is to continue improv- ing fruit quality, customer service and maintain a low cost structure. Production of bananas and other tropical fruits is expected to increase in order to participate in the normal growth of the traditional markets as well as the many opportunities available in the emerging new markets around the world. Dole’s majority-owned beverage HONDURAN BEVERAGE O P E R AT I O N operation in Honduras continues to be a leading supplier of beverages, edible oils and soap products. It is also the largest bottler and distributor of soft drink products in Honduras, which has the highest per capita soft drink consumption in Central America. The beverage operation is exclusively authorized to bottle Coca-Cola®, Sprite® and Canada Dry® in Honduras.The Coca-Cola® brand, which has been bot- tled for over 60 years, currently holds a soft drink market share approximately three times as large as that of its nearest competitor. The beverage operation represents approximately 75 percent of the Honduran soft drink market. Its distribution sys- tem, which includes company-owned routes and independent distributors and depots, allows it to distribute its products throughout the entire country. Chilean grapes, nectarines, peaches, plums, apples, and more, are available from early December through April. P a g e  d o l e f o o d c o m pa n y, i n c .
    • Dole Asia Dole Asia continued its rapid expansion, with sales reaching $974 million in 1996. Dole Asia produces its own products in the Philippines, Thailand and China, and imports products into the region from its affiliated divisions in the United States and Latin America. Dole’s pineapple opera- In Asia, Dole’s pineapple canneries in the Philippines and P R E M I U M P RO D U C E R tions are located in the Thailand lead the world in productivity, quality, sanitation and dedication to excel- Southern Philippines just lence. Dole Philippines farms 25,000 acres on its plantations where pineapples are above the equator.The fields are situated on the grown and harvested at optimum color and ripeness to provide the best quality, fla- slopes of Mount Matutum vor and handling characteristics for fresh and processed requirements. Dole’s total (7,550 Ft.) where weather quality commitment is shared by its more than 6,000 employees who proudly pro- conditions provide a cool year-round climate, ideal duce, process, label and ship 100 percent of Dole’s high quality canned pineapple to for pineapple production. all of the world’s markets. Adhering to a tradition that started more than 110 years ago, Dole is committed to maintaining the distinct quality of its canned pineapple. Today’s employees are educated, dedicated, and devoted to keeping Dole pineapple Number One in consumer satisfaction in the world. While Japan remains Dole’s largest and most diversified Asian market, increasing demand from Korea,Thailand, China, Singapore, the Philippines, and New Zealand offers strong growth opportunities for the future. Despite a continued weak econo- my in Japan in 1996, Dole products continue to benefit from the increasing demand for imported foods into the Japanese market. In order to facilitate this trend in Japan, Dole has DISTRIBUTION CENTERS created a nationwide infrastructure to efficiently process and distribute its increasing volumes of imported goods. In 1996 Dole inaugurated its largest and most modern facility in Tokyo which completes the first phase of Dole’s distribution network in the major cities of Japan.These facilities allow for the efficient import, handling, pro- cessing, packaging and delivery systems to meet Japanese consumer preferences and Paul Cuyegkeng retailer needs. Today, Dole centers are sprouting up all over Japan, offering banana President – Dole Asia Pa g e  d o l e f o o d c o m pa n y, i n c .
    • GLOBAL sourcing
    • L OW C O S T producer
    • Dole’s pineapple cannery ripening rooms, pineapple peeling centers and fresh produce repacking facilities in the Philippines is one of with operational efficiencies that deliver the lowest cost. In addition, all products the largest fruit canneries offered in this market meet Japanese requirements for premium sized, high quality in the world. Similar canning operations in produce as well as packaged products that meet the taste preference of the Japanese Thailand produce processed consumer. Many products initially developed for the Japanese market are easily and fresh pineapple from adaptable for the North American and European consumer. Dole recently contract- company-owned plantations for shipping worldwide. ed nearly one thousand Japanese farmers to grow fruit and vegetables commencing in the first few months of 1998. To further capitalize on Japan’s growing taste for import- D O L E F RU I T C A F É S ed foods, Dole has opened its first directly owned restaurant, the Dole Fruit Café in the Shibuya district of Tokyo. The southern European resort style cafés feature an upbeat ambiance and will have a varied menu specializing in fresh juices, vegetables and fruits. Targeted to serve young Japanese consumers, the lunch and dinner menus will feature new and unique tropical fruit-accented dishes at reasonable prices. Plans to expand the Dole Cafés include franchises as well as other directly owned Dole stores. The economy of the Philippines experienced a G ROW T H O P P O RT U N I T I E S continued resurgence in 1996 and Dole distribution facilities have grown to keep pace with this market expansion. For years Dole has made significant investments in pineapple, banana and vegetable production in the Philippines. This region is now becoming a major market for its fresh vegetable and processed products, many devel- oped especially for the Philippine consumer. Through its affiliate Quantum Corporation, Dole efficiently distributes packaged foods and select amounts of fresh products throughout the Philippines. Providing nationwide sales, marketing and distribution service, Quantum boasts 100 percent penetration in the supermarket and grocery channels. As trade restraints in China,Taiwan and Korea decrease, these markets offer tremen- dous growth potential as well as many challenges.To ensure success, Dole constantly Dole Japan markets broccoli strives to understand local food and taste preferences, work with local distribution and asparagus produced by operators and build a presence in markets that are both profitable and long lasting. its affiliated divisions in North America and the Philippines. Pa g e  d o l e f o o d c o m pa n y, i n c .
    • Dole Europe Dole Europe reported record sales of $1 billion in 1996.This was achieved through the expansion of sales in Europe, Ukraine, Russia, Turkey, Syria and additional sales revenue from successful joint ventures with Compagnie Fruitiere in France, Jamaican Producer Fruit Distributors in the United Kingdom, and Canary Islands Banana Producers. Innovative technologies developed in Dole’s canning Dole is one of the leading producers, marketers, F O RWA R D I N T E G R A T I O N operations allow fresh fruit to be packed into a small processors and distributors of high quality fruits and vegetables in Europe. Dole’s plastic cup.This convenient European strategy has been to broaden its fresh fruit business and expand as a sup- snack, already a success plier of processed fruit and vegetables. By growing its forward distribution network, in Europe and Asia, is being test-marketed in Dole is reducing overall distribution costs and developing lasting relationships direct- North America. ly with Europe’s major retail organizations. Until the early 1990’s, Dole imported products solely through Germany and Italy. Now, Dole delivers fresh fruit and veg- etable products through 20 ports throughout Europe to meet the ever increasing demands of this region. Dole’s vast network of distribution centers services these countries with 12 facilities in France, seven in Spain, four in Italy, three in the United Kingdom, and one in Germany, all offering supermarkets a complete array of products. Dole has also established a distribution center near Istanbul, Turkey to service this country’s 60 million consumers. In 1996, Dole completed its acquisition of Pascual Hermanos, Spain, one of S PA I N the largest fruit and vegetable production companies in Europe. Pascual owns or leases over 2,000 hectares of farms, production centers and packing houses. Pascual grows, processes and packs over 90 percent of its vegetable exports which include tomatoes and cherry tomatoes, lettuce, onions, and zucchini. It is also a major packer and marketer of citrus, primarily purchased from independent growers.This acquisi- William F. Feeney President – Dole Europe tion provides Dole with a European source of vegetables and citrus products to fill Andrew J. Biles the demands generated by Dole’s marketing and distribution network throughout Executive Vice President – Dole Europe Page  d o l e f o o d c o m pa n y, i n c .
    • P RO D U C T innovation
    • Strategic acquisitions and Europe. Additionally, Pascual provides Dole with the production base to allow joint venture partnerships entrance into the European value-added, prepared fresh salad category. have positioned Dole to expand its successful Agronomically, Spain is the California of Europe.The primary citrus and vegetable North American value production as well as large volume of deciduous products such as grapes, stonefruit added salad business into and exotics grown in Europe come from Spain. Entry into Spain, the fifth largest Europe. European market, broadens Dole’s product line and increases its shelf-space in supermarkets. Additionally, it will ensure year-round availability of Dole products complementing those imported from Chile, Latin America and Florida. Dole also entered into a joint-venture with BAMA Group, Norway’s N O RWA Y largest importer, marketer and distributor of fresh fruit and vegetables, forming Dole-BAMA Fresh Salads. Capitalizing on its valued-added success in North America, Dole Europe applied tested technological and marketing expertise to its Norway joint venture. Incorporating the year-round production capabilities provid- ed by the summers in Norway and the winters in Spain, Dole agricultural experts from California assisted Norwegian farmers with production of specialty salads. Construction of a state-of-the-art facility was initiated in January 1996. Production commenced in July 1996 and the Dole-BAMA Group quickly became an estab- lished market leader in Norway. The success of Dole-BAMA serves as a model for the roll-out of Dole’s value-added salads throughout Europe. In its joint venture with Compagnie Fruitiere, Dole extended its West AFRICA African shipping service and sourcing. In March 1996, the Cameroon shipping and sourcing program was extended to the Ivory Coast and Ghana. Dole golden pineap- ples, which are preferred by European consumers, are now being produced by joint ventures in the Ivory Coast and traveling on Dole vessels to the European market. With its alliance with Langeberg Food Limited of South Africa, Dole extended its product line of deciduous canned fruit to include new single serve plastic cups. The joint venture has provided Dole with products which enhance its marketing programs to European supermarkets, complementing existing canned pineapple and From planting through harvesting, Dole bananas exotic fruit product lines. are carefully nurtured and undergo numerous quality checks on Dole plantations. Page  d o l e f o o d c o m pa n y, i n c .
    • D F P W : OLE OOD RODUCTS ORLDWIDE DOLE FRESH FRUIT Dromedary Pitted Dates Carton Dole French Special Blend Salad Dole Apples Dromedary Chopped Dates Carton Dole Italian Special Blend Salad Dole Apricots Dole Romaine Special Blend Salad SAMAN Dole Bananas Dole Complete Caesar Salad Guyennoise Prunor Pitted Prunes Dole Cherries Dole Complete Spinach/Bacon Salad Guyennoise Prunor Whole Prunes Dole Clementines Dole Complete Oriental Salad JA Whole Dates Dole Coconuts Dole Complete Sunflower Ranch Salad JA Whole Prunes Dole Cranberries Dole Complete Romano Salad Whole Deglet Nour Dates Dole Grapefruit Dole Complete Caesar Salad Soelia Dried Apricots Dole Grapes with Fat Free Dressing Soelia Dried Figs Dole Honeydew Melon Dole Complete Herb Ranch Salad Soelia Blanched Whole Almonds Dole Kiwi with Fat Free Dressing Soelia Sliced Thin Almonds Dole Lemons Dole Complete Raspberry Romaine Salad Soelia Whole Peanuts Dole Lychees with Fat Free Dressing Soelia Pistachios Dole Mangos Dole Complete Zesty Italian Salad Soelia Pitted Prunes Dole Nectarines with Fat Free Dressing Soelia Whole Prunes Dole Oranges Dole Caesar Lunch For One Dole Papayas Dole Classic Ranch Lunch For One DOLE PACKAGED FOODS Dole Peaches Dole Caesar with Fat Free Dressing Lunch For One Dole Apricots in Juice or Syrup Dole Pears Dole Italian with Fat Free Dressing Lunch For One Dole Apricot Halves Dole Persimmons Dole Family Salad Dole Apricot Snack Cup Dole Pineapple Dole Provence Salad Dole Fruit Festival Snack Cup Dole Pineapple Fresh-Cut Bags Dole Napoli Salad Dole Guava Halves Dole Plums Dole Spring Mix Special Salad Dole Orange Fruit Jelly Cups Dole Pomegranates Dole Taco-Chips Salad Dole Peach Halves Dole Raspberries Dole Oriental Stir Fry Vegetables Dole Peach Snack Cup Dole Satsumas Dole Wok Stir Fry Vegetables Dole Pear Snack Cup Dole Strawberries Dole Pineapple Chunks in Juice or Syrup DOLE DRIED FRUIT AND NUTS Dole Tangelos Dole Pineapple Snack Cup Dole Blanched Slivered Almonds in Reclosable Bags Dole Tangerines Dole Pineapple Select Fruit Cups in Fruit Juice Dole Blanched Whole Almonds in Reclosable Bags Dole Pineapple Snack Wedges, Easy Open DOLE FRESH VEGETABLES Dole Chopped Natural Almonds in Reclosable Bags Dole Pineapple Tidbits in Juice or Syrup Dole Artichokes Dole Sliced Natural Almonds in Reclosable Bags Dole Crushed Pineapple in Juice or Syrup Dole Asparagus Dole Whole Natural Almonds in Reclosable Bags Dole Pineapple & Peach Cups Dole Bell Peppers Dole Roasted Almonds in Single Serve Bags Dole Pineapple & Papaya Fruit Jelly Cups Dole Broccoli Dole Golden Seedless Raisins Dole Pineapple Juice Dole Brussels Sprouts Dole Seedless Raisins Canister Dole Pineapple Orange Juice Dole Carrots Dole Seedless Raisins Carton Dole Pine-Orange Banana Juice Dole Cauliflower Dole Seedless Raisins Mini Snacks Dole Pine-Orange Guava Juice Dole Celery Dole Seedless Raisins Six Packs Dole Pine-Passion Banana Juice Dole Baby Lettuce Dole Seedless Raisins in Single Serve Bags Dole Pineapple Orange Juice Box Dole Butter Lettuce Dole Seedless Raisins in Reclosable Bags Dole Pineapple Orange Banana Juice Box Dole Green Leaf Lettuce Dole Chopped Dates Canister Dole Pineapple Orange Raspberry Juice Box Dole Iceberg Lettuce Dole Chopped Dates Carton Dole Pineapple Juice Drink Dole Red Batavia Lettuce Dole Pitted Dates Canister Dole Pineapple Grapefruit Juice Dole Red Butter Lettuce Dole Pitted Dates Carton Dole Pineapple Pink Grapefruit Drink Dole Red Leaf Lettuce Dole Chopped Dates Cup Dole Pineapple Lychee Juice Drink Dole Romaine Lettuce Dole Pitted Dates Cup Dole Pineapple Orange Juice Drink Dole Green Onions Dole Whole Dates Cup Dole Pineapple Strawberry Juice Drink Dole Spring Onions Dole Pitted Dates Gelatin Mold Cup Dole Pineapple Slices in Juice or Syrup Dole Sugar Peas Dole Medjool Dates Dole Mandarin Orange Segments Dole Idaho Potatoes Dole Date Nut Roll Dole Mandarin Orange Fruit Cups Dole Radishes Dole Baking Dates Dole Papaya in Syrup Dole Cherry Tomatoes Dole California Style Trail Mix in Single Serve Bags Dole Yellow Papaya Chunks Dole Tomatoes Dole Hawaiian Style Trail Mix in Single Serve Bags Dole Red Papaya Chunks in Light Syrup Dole Zucchini Squash Dole Breakfast Prunes in Reclosable Bags Dole Pears in Juice and Syrup Dole Large Prunes in Reclosable Bags DOLE FRESH-CUT VEGETABLES Dole Peaches in Juice and Syrup Dole Pitted Prunes Canister Dole Peeled-Mini Carrots Dole Deciduous Fruit Cocktail in Juice Dole Pitted Prunes Carton Dole Shredded Carrots and Syrup Dole Pitted Prunes in Reclosable Bags Dole Cole Slaw Dole Select Fruit Tropical Fruit Cups Dole Pistachio Kernels in Single Serve Bags Dole Shredded Lettuce in Fruit Juice Dole Shredded Red Cabbage DROMEDARY Dole Tropical Fruit Salad Dromedary Pitted Dates Bag Dole Classic Iceberg Salad Dole Tropical Fruit Salad, Easy Open Dromedary Chopped Dates Bag Dole American Special Blend Salad Dromedary Morsel Date Bag Dole European Special Blend Salad Pa g e  d o l e f o o d c o m pa n y, i n c .
    • F H INANCIAL IGHLIGHTS R E V E N U E G RO W T H REGION, 1986 1996 BY TO Europe Europe $873 22% North America North 30% America Europe $641 40% Asia $562 Asia 13% North Latin America Latin America America Latin 5% 4% 4% America Asia $90 26% G ROW T H BY REGION P E R C E N T O F TOTA L C O M P O U N D E D A N N UA L G ROW T H B Y R E G I O N G ROW T H R AT E B Y R E G I O N (in millions) 3,840 1,563 3,804 325 3,499 306 3,120 3,108 272 265 258 1,155 995 891 847 92 93 94 95 96 92 93 94 95 96 92 93 94 95 96 REVENUE G RO S S O P E R AT I N G NET DEBT C A S H F L OW (in millions) (in millions) (in millions) s Depreciation & Amortization (EBITDA) s Operating Income (EBIT) (a) Before restructuring charge Page  d o l e f o o d c o m pa n y, i n c .
    • C S I ONSOLIDATED TATEMENTS OF NCOME (in thousands, except per share data) 1996 1995 1994 Revenue $3,840,303 $3,803,846 $3,498,553 Cost of products sold 3,256,345 3,217,869 2,965,675 Gross margin 583,958 585,977 532,878 Selling, marketing and administrative expenses 369,675 392,694 394,763 Restructuring charge 50,000 – – Operating income 164,283 193,283 138,115 Interest expense (68,699) (81,186) (76,911) Interest income 8,412 7,501 9,884 Net gain on assets sold or held for disposal – 61,655 – Other income (expense) – net 4,535 (5,429) (2,943) Income from continuing operations before income taxes 108,531 175,824 68,145 Income taxes (19,500) (56,000) (9,900) Income from continuing operations 89,031 119,824 58,245 Income (loss) from discontinued operations, net of income taxes – (96,493) 9,638 Net income $ 89,031 $ 23,331 $ 67,883 Earnings (loss) per common share, primary and fully diluted Continuing operations $ 1.47 $ 2.00 $ .98 Discontinued operations – (1.61) .16 Net income $ 1.47 $ .39 $ 1.14 See Notes to Consolidated Financial Statements. Page  d o l e f o o d c o m pa n y, i n c .
    • C B S ONSOLIDATED ALANCE HEETS (in thousands) 1996 1995 Current assets Cash and short-term investments $ 34,342 $ 72,151 Receivables – net 518,266 462,303 Inventories 526,052 559,660 Prepaid expenses 47,164 43,087 Total current assets 1,125,824 1,137,201 Investments 72,930 63,319 Property, plant and equipment – net 1,024,135 1,016,991 Long-term receivables – net 69,861 28,409 Other assets 194,057 196,272 $2,486,807 $2,442,192 Current liabilities Notes payable $ 20,478 $ 21,778 Current portion of long-term debt 1,497 1,779 Accounts payable 185,747 182,152 Accrued liabilities 454,208 451,181 Total current liabilities 661,930 656,890 Long-term debt 903,807 895,998 Deferred income taxes and other long-term liabilities 341,798 354,545 Minority interests 29,712 26,324 Commitments and contingencies Common shareholders’ equity 549,560 508,435 $2,486,807 $2,442,192 See Notes to Consolidated Financial Statements. Page  d o l e f o o d c o m pa n y, i n c .
    • C S C F ONSOLIDATED TATEMENTS OF ASH LOW (in thousands) 1996 1995 1994 Operating activities Income from continuing operations $ 89,031 $ 119,824 $ 58,245 Adjustments to continuing operations Depreciation and amortization 111,073 113,325 119,847 Equity earnings net of distributions (2,875) (6,533) (2,539) Net gain on assets sold or held for disposal – (61,655) – Provision for deferred income taxes (1,741) 30,429 14,073 Restructuring charge 50,000 – – Other (8,203) 41 1,191 Change in operating assets and liabilities, net of effects from acquisitions Receivables - net (89,176) 53,142 (103,628) Inventories 27,222 (57,588) 1,376 Prepaid expenses (3,823) 445 (9,383) Other assets (5,023) (19,245) (29,086) Accounts payable and accrued liabilities (54,311) 57,995 35,252 Income taxes payable 20,041 (27,153) 8,558 Other (37,262) 31,592 20,573 Cash flow provided by operating activities of continuing operations 94,953 234,619 114,479 Cash flow (used in) operating activities of discontinued operations – (11,467) (44,906) Cash flow provided by operating activities 94,953 223,152 69,573 Investing activities Proceeds from sales of businesses and assets 58,417 432,746 17,223 Capital additions (109,686) (90,276) (211,882) Purchases of investments and acquisitions, net of cash acquired (58,775) (35,251) (66,660) Other 438 998 879 Cash flow provided by (used in) investing activities of continuing operations (109,606) 308,217 (260,440) Cash flow used in investing activities of discontinued operations – (15,144) (143,635) Cash flow provided by (used in) investing activities (109,606) 293,073 (404,075) Financing activities Short-term borrowings 19,694 29,348 54,213 Repayments of short-term debt (20,449) ( 62,944) (69,202) Long-term borrowings 168,060 12,384 462,885 Repayments of long-term debt (163,799) (675,098) (33,952) Proceeds from distribution of real estate and resorts business – 235,186 – Cash dividends paid (24,020) (23,861) (23,791) Other (2,642) 5,101 1,170 Cash flow provided by (used in) financing activities of continuing operations (23,156) (479,884) 391,323 Cash flow (used in) financing activities of discontinued operations – (9,352) (45,712) Cash flow provided by (used in) financing activities (23,156) (489,236) 345,611 Increase (decrease) in cash and short-term investments (37,809) 26,989 11,109 Cash and short-term investments at beginning of year 72,151 45,162 34,053 Cash and short-term investments at end of year $ 34,342 $ 72,151 $ 45,162 See Notes to Consolidated Financial Statements. Page  d o l e f o o d c o m pa n y, i n c .
    • N C F S OTES TO ONSOLIDATED INANCIAL TATEMENTS 1995 and 1994, respectively. Net foreign exchange NOTE 1 – NATURE OF OPERATIONS gains or losses resulting from the translation of assets Dole Food Company, Inc. and its consolidated and liabilities of foreign subsidiaries whose local cur- subsidiaries (“the Company”) is engaged in the world- rency is the functional currency are accumulated as a wide sourcing, processing, distributing and marketing separate component of common shareholders’ equity. of high quality, branded fresh produce food products Income Taxes – Deferred income taxes are recognized including fruits and vegetables. Operations are conducted for the tax consequences of temporary differences throughout North America, Latin America, Europe, by applying enacted statutory tax rates to the differ- including eastern European countries, and Asia, pri- ences between financial statement carrying amounts marily in Japan and the Philippines.The Company is and the tax bases of assets and liabilities.The income also engaged in beverage operations in Honduras. taxes which would be due upon the distribution The Company’s principal products are produced on of foreign subsidiary earnings have not been provided both Company-owned or leased land and acquired where the undistributed earnings are considered through associated producer and independent grower permanently invested. arrangements.The Company’s products are primarily Earnings Per Common Share – Primary earnings per packed and processed by the Company and sold to common share are based on the weighted average retail and institutional customers and other food number of shares outstanding during the period after product companies. consideration of the dilutive effect of stock options. NOTE 2 – SUMMARY OF ACCOUNTING POLICIES The primary weighted average number of common shares outstanding was 60.4 million, 59.8 million and Principles of Consolidation – The consolidated financial 59.7 million for 1996, 1995 and 1994, respectively. statements include the accounts of all significant majority-owned subsidiaries. All significant intercom- Cash and Short-Term Investments – Cash and short- pany accounts and transactions have been eliminated term investments include cash on hand and time in consolidation. deposits. Such short-term investments generally have original maturities of three months or less. Annual Closing Date – The Company’s fiscal year ends on the Saturday closest to December 31. Fair Value of Financial Instruments – The historical car- rying amount is a reasonable estimate of fair value for Inventories – Inventories are valued at the lower of short-term financial instruments. Fair values for long- cost or market. Cost is determined principally on a term financial instruments not readily marketable first-in, first-out basis. Specific identification and aver- were estimated based upon discounted future cash age cost methods are also used for packing materials flows at prevailing market interest rates. Based on and operating supplies. these assumptions, management believes the fair mar- Agricultural Costs – The costs of growing bananas and ket values of the Company’s financial instruments are pineapples are charged to operations as incurred. not materially different from their recorded amounts Growing costs related to other crops are recognized as of December 28, 1996. when the crops are harvested and sold. Stock Based Compensation – Statement of Financial Investments – Investments in affiliates and joint ven- Accounting Standards No. 123 (“SFAS 123”) defines a tures with ownership of 20% to 50% are generally fair value based method of accounting for employee recorded on the equity method. Other investments are stock compensation plans but allows for the continua- accounted for using the cost method. tion of the intrinsic value based method of accounting Property, Plant and Equipment – Property, plant and to measure compensation cost prescribed by Account- equipment are stated at cost, less accumulated depreci- ing Principles Board Opinion No. 25 (“APB 25”). In ation. Depreciation is computed principally by the accordance with SFAS 123, the Company has elected straight-line method over the estimated useful lives of to continue to utilize the accounting method pre- the assets. scribed by APB 25 and adopt the disclosure require- Foreign Exchange – Net foreign exchange transaction ments of SFAS 123. gains or losses for subsidiaries with the United States dollar as their functional currency are included in determining net income and resulted in net losses of $2.1 million, $2.4 million, and $3.5 million for 1996, Page  d o l e f o o d c o m pa n y, i n c .
    • plan of distribution, each Company shareholder of Use of Estimates – The preparation of financial state- record on December 20, 1995 received a dividend ments requires management to make estimates and of one share of Castle common stock for every three assumptions that affect the reported amounts of assets shares of the Company’s common stock. Approxi- and liabilities and disclosures of contingent assets and mately $1.0 billion of net assets were transferred to liabilities at the date of the financial statements and Castle, and in partial consideration thereof the the reported amounts of revenues and expenses dur- Company received cash proceeds of approximately ing the reporting period. Actual results could differ $235 million and a $10 million note receivable from from those estimates. Castle which bears interest at the rate of 7% per Reclassifications – Certain prior year amounts have annum and is due December 8, 2000. As a result, the been reclassified to conform to the 1996 presentation. Company’s common shareholders’ equity was reduced by approximately $582 million. (See Note 10.) NOTE 3 – ACQUISITIONS AND DISPOSITIONS In connection with the distribution, the operating During 1996 and 1995, the Company acquired results of the real estate and resorts business have been production and distribution operations in Europe accounted for as discontinued operations. Revenues and Latin America. Each of the acquisitions was from discontinued operations for 1995 and 1994 accounted for as a purchase and accordingly, the pur- were $349 million and $343 million, respectively. chase price was allocated to the net assets acquired Income (loss) from discontinued operations reflects based upon their estimated fair values as of the date of an allocation of the Company’s overall interest costs, acquisition.The fair values of assets acquired and lia- based on the cash proceeds and the interest bearing bilities assumed were $106 million and $48 million in note received by the Company at distribution, of 1996 and $70 million and $35 million in 1995. $7.3 million and $6.8 million after tax for 1995 and In 1996, the Company implemented a formal plan to 1994, respectively. close its dried fruit facility located in Fresno, Cali- During the third quarter of 1995, the Company fornia which has suffered continued losses. During reviewed certain of its real estate and resort proper- the fourth quarter of 1996, a restructuring charge of ties to determine whether expected future cash flows $50 million was recorded related to the closure of this (undiscounted and without interest charges) from facility.The principal component of the charge was each property would result in the recovery of the car- a provision for asset write-downs of $38.5 million. rying amount of such property. Certain adverse Management anticipates the closure of this facility to developments in 1995 affecting the Lana’i resort and be completed in the second quarter of 1997. certain other properties caused management to sub- During 1995, the Company completed the sale of its stantially lower its estimates of future cash flow juice business, resulting in net proceeds of approxi- and led to a determination that the properties were mately $270 million and a pretax gain of approxi- impaired in accordance with generally accepted mately $145 million. In addition, during 1995 the accounting principles and, accordingly, an impairment Company began to implement its plan to sell certain loss of $103.8 million after tax was recorded as part of of its agricultural properties and other assets which discontinued operations in the accompanying 1995 have generated low returns.The book value of the statement of income. assets to be sold exceeded the estimated fair value less costs to sell, resulting in an adjustment of $83.3 mil- NOTE 5 – CURRENT ASSETS AND LIABILITIES lion.The above dispositions resulted in a net pretax Short-term investments of $7.5 million and $16.3 mil- gain of $61.7 million. lion as of December 28, 1996 and December 30, 1995, respectively, consisted principally of time deposits. NOTE 4 – DISCONTINUED OPERATIONS Outstanding checks which are funded as presented for On December 28, 1995, the Company completed the payment totaled $48.8 million and $54.8 million as of separation of its real estate and resorts business [Castle December 28, 1996 and December 30, 1995, respec- & Cooke, Inc. (“Castle”)] from its food business in a tively, and were included in accounts payable. nontaxable distribution to its shareholders. Under the Page  d o l e f o o d c o m pa n y, i n c .
    • Long-term debt consisted of: Details of certain current assets were as follows: (in thousands) 1996 1995 (in thousands) 1996 1995 Receivables Unsecured debt Trade $428,186 $374,441 Notes payable to banks at an Notes and other 138,577 125,534 average interest rate of 5.9% Affiliated operations 13,257 9,322 (6.8% – 1995) $172,300 $169,547 6.75% notes due 2000 225,000 225,000 580,020 509,297 7% notes due 2003 300,000 300,000 Allowance for doubtful accounts (61,754) (46,994) 7.875% debentures due 2013 175,000 175,000 $518,266 $462,303 Various other notes due 1997- Inventories 2006 at an average interest rate Finished products $169,280 $179,390 of 5.2% (5.4% – 1995) 23,808 17,085 Raw materials and work in Secured debt progress 198,306 216,830 Mortgages, contracts and notes Growing crop costs 46,887 51,980 due 1998-2012, at an average Packing materials 23,213 25,227 interest rate of 9.7% Operating supplies and other 88,366 86,233 (9.0% – 1995) 11,594 13,890 Unamortized debt discount and $526,052 $559,660 issue costs (2,398) (2,745) Accrued liabilities as of December 28, 1996 and 905,304 897,777 December 30, 1995 included approximately $101 mil- Current maturities (1,497) (1,779) lion and $109 million, respectively, of amounts due $903,807 $895,998 to growers. The estimated fair value of fixed interest rate debt NOTE 6 – PROPERTY, PLANT AND EQUIPMENT approximated book value at December 28, 1996 and Major classes of property, plant and equipment were December 30, 1995. as follows: Prior to 1996, the Company had a $1 billion, 5-year revolving credit facility. Net borrowings outstanding (in thousands) 1996 1995 under this facility were approximately $81 million at Land and land improvements $ 391,561 $ 397,015 December 30, 1995. In July 1996, the Company Buildings and improvements 277,984 259,974 replaced its existing revolving credit facility with a Machinery and equipment 910,785 832,855 $600 million, five-year revolving credit facility (“Facil- Construction in progress 54,728 81,339 ity”). At the Company’s option, borrowings under the 1,635,058 1,571,183 Facility bear interest at a certain percentage over the Accumulated depreciation (610,923) (554,192) agent’s prime rate or the London Interbank Offered $1,024,135 $1,016,991 Rate (“LIBOR”). Provisions under the Facility require the Company to comply with certain financial Depreciation expense for 1996, 1995 and 1994 totaled covenants which include a maximum permitted ratio $102.5 million, $106.2 million and $107.3 million, of consolidated debt to net worth and a minimum respectively. required fixed charge coverage ratio. At December 28, 1996 net borrowings outstanding under this facility NOTE 7 – DEBT were approximately $90 million.The Company may Notes payable consisted primarily of short-term bor- also borrow under uncommitted lines of credit at rates rowings required to fund certain foreign operations offered from time to time by various banks that may and totaled $20.5 million with a weighted average not be lenders under the Facility. Net borrowings out- interest rate of 15.7% as of December 28, 1996 and standing under the uncommitted lines of credit totaled $21.8 million with a weighted average interest rate $82 million and $89 million at December 28, 1996 of 12.8% as of December 30, 1995. and December 30, 1995, respectively. Sinking fund requirements and maturities with respect to long-term debt as of December 28, 1996 were as follows (in millions): 1997 – $1.5; 1998 – $7.7; 1999 – $1.8; 2000 – $226.1; 2001 – $173.5; and thereafter $494.7. Page  d o l e f o o d c o m pa n y, i n c .
    • Interest payments during 1996, 1995 and 1994 totaled For U.S. plans, the projected benefit obligation was $68.4 million, $86.4 million and $67.6 million, determined using assumed discount rates of 7.75% in respectively. 1996 and 7.5% in 1995 and assumed rates of increase in future compensation levels of 4.5% in 1996 and NOTE 8 – EMPLOYEE BENEFIT PLANS 1995.The expected long-term rate of return on assets was 9% in 1996 and 1995. For international plans, the The Company has qualified and non-qualified defined projected benefit obligation was determined using benefit pension plans covering certain full-time assumed discount rates of 7.75% to 20% in 1996 and employees. Benefits under these plans are generally 7.5% to 20% in 1995 and assumed rates of increase in based on each employee’s eligible compensation and future compensation levels of 4.5% to 17.5% in 1996 years of service except for certain hourly plans which and 1995.The expected long-term rate of return on are based on negotiated benefits. assets for international plans was 9% to 20% in 1996 For U.S. plans, the Company’s funding policy is to and 1995. fund the net periodic pension cost plus a 15-year Pension expense for the U.S. and international plans amortization of the unfunded liability.The plans cover- consisted of the following components: ing international employees are generally not funded. The status of the defined benefit pension plans was (in thousands) 1996 1995 1994 as follows: Service cost – benefits earned during U.S. Plans (in thousands) 1996 1995 the year $ 9,143 $ 8,114 $ 7,158 Actuarial present value of Interest cost on accumulated benefit obligation projected benefit Vested $231,999 $227,572 obligation 21,968 21,270 20,112 Non-vested 3,480 3,581 Actual (return) loss $235,479 $231,153 on plan assets (32,823) (46,944) 4,656 Actuarial present value of Net amortization and projected benefit obligation $248,676 $239,855 deferral 13,885 28,337 (22,980) Plan assets at fair value, primarily Net Periodic stocks and bonds 250,154 238,730 Pension Cost $ 12,173 $ 10,777 $ 8,946 Projected benefit obligation less than (in excess of ) plan assets 1,478 (1,125) The Company recognized net curtailment losses of Unrecognized net transition $1.3 million in 1996 for the domestic plans and asset (774) (942) $3.6 million in 1995 for the international plans.These Unrecognized prior service cost 2,078 2,662 losses were due to additional benefit payments result- Unrecognized net gain (4,969) (83) ing from reductions in workforce. Additional minimum liability (720) (1,941) The Company offers two 401(k) plans generally cov- Accrued pension liability $ (2,907) $ (1,429) ering all full-time U.S. employees. Eligible employees International Plans (in thousands) 1996 1995 may defer a percentage of their annual compensation Actuarial present value of up to a maximum allowable amount under federal accumulated benefit obligation income tax law to supplement their retirement Vested $ 9,099 $ 9,411 income.These plans provide for Company contribu- Non-vested 5,036 3,303 tions based on a certain percentage of each partici- $ 14,135 $ 12,714 pant’s contribution.Total Company contributions to these plans in 1996, 1995 and 1994 were $3.8 million, Actuarial present value of projected benefit obligation $ 30,776 $ 28,796 $4.4 million and $4.7 million, respectively. Plan assets at fair value, primarily The Company is also a party to various industrywide stocks and bonds 2,473 2,176 collective bargaining agreements which provide Projected benefit obligation in pension benefits.Total contributions to these plans excess of plan assets (28,303) (26,620) plus direct payments to pensioners in 1996, 1995 and Unrecognized net transition 1994 were $1.2 million, $0.8 million and $0.9 million, obligation 2,892 3,133 respectively. Unrecognized prior service cost 4,619 3,104 In addition to providing pension benefits, the Com- Unrecognized net loss 108 1,576 pany provides certain health care and life insurance Additional minimum liability (583) (868) Accrued pension liability $ (21,267) $ (19,675) Page  d o l e f o o d c o m pa n y, i n c .
    • NOTE 9 – STOCK OPTIONS AND AWARDS benefits for eligible retired employees. Certain employees may become eligible for such benefits if Under the 1991 and 1982 Stock Option and Award they fulfill established requirements upon reaching Plans (“the Option Plans”), the Company can grant retirement age. incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards The status of the postretirement benefit plans was and performance share awards to officers and key as follows: employees of the Company. Stock options vest over (in thousands) 1996 1995 time or based on stock price appreciation and may Accumulated postretirement be exercised for up to 10 years from the date of grant, benefit obligation (“APBO”) as determined by the committee of the Company’s Retirees $62,991 $66,757 Board of Directors administering the Option Plans. Fully eligible actives 5,746 6,892 No stock appreciation rights, restricted stock awards Other actives 4,439 7,669 or performance share awards were outstanding at 73,176 81,318 December 28, 1996. Unrecognized prior service cost 2,080 1,897 Under the 1995 Non-Employee Directors Stock Unrecognized net gain 13,034 4,660 Option Plan (the “Directors Plan”) each active non- Accrued postretirement employee director will receive a grant of 1,500 non- benefit liability $88,290 $87,875 qualified stock options (the “Options”) on February 15th of each year.The Options vest over three years Postretirement benefit expense included the following and expire 10 years after the date of the grant or upon components: early termination as defined by the plan agreement. (in thousands) 1996 1995 1994 Changes in outstanding stock options were Service cost – benefits as follows: earned during the year $ 237 $ 449 $ 578 Weighted Interest cost on APBO 5,482 7,258 6,755 Average Net amortization and Shares Price deferral (481) (342) 26 Outstanding, January 1, 1994 1,719,782 $29.98 Curtailment gain (577) – – Granted 508,500 29.07 Net periodic Exercised (12,117) 26.69 postretirement Canceled (160,401) 34.39 benefit cost $4,661 $7,365 $7,359 Outstanding, December 31, 1994 2,055,764 $29.43 Granted 563,000 27.21 An annual rate of increase in the per capita cost of Exercised (371,989) 13.73 covered health care benefits of 9.5% in 1997 decreas- Canceled (294,513) 31.30 ing to 5.0% in 2006 and thereafter was assumed in Adjustment for distribution of real determining the APBO for the U.S. and international estate and resorts business 8,158 plans in 1996, and 10.0% in 1996 decreasing to 5.0% Outstanding, December 30, 1995 1,960,420 $29.23 in 2006 was assumed in determining the APBO for Granted 711,000 38.52 the U.S. plans in 1995. For the Company’s interna- Exercised (373,952) 30.04 tional plan, the assumed health care cost trend rate Canceled (103,661) 33.39 was 20% in 1995. Increasing the assumed health care Outstanding, December 28, 1996 2,193,807 $31.91 cost trend rate by one percentage point in each year Exercisable, December 28, 1996 1,313,468 $29.59 would have resulted in an increase in the Company’s APBO as of December 28, 1996 of approximately The number and exercise price of all options out- $7.4 million and the aggregate of the service and standing were adjusted to reflect the impact of interest cost components of postretirement benefit the distribution of the real estate and resorts business in expense for 1996 of approximately $0.6 million.The December 1995. (See Note 4.) weighted average discount rate used in determining the APBO was 7.75% for the international and Of the 2,193,807 options outstanding as of December 28, U.S. plans in 1996 and 7.5% for the U.S. plans and 1996, 589,464 have exercise prices between $17.50 and 20% for the international plan in 1995.The plans are $26.61 with a weighted-average exercise price of $25.40 not funded. and a weighted-average remaining term of 6 years, 792,523 have exercise prices between $27.07 and $34.31 Page  d o l e f o o d c o m pa n y, i n c .
    • respectively, for 1995. Since SFAS 123 was only applied with a weighted-average exercise price of $30.31 and to options granted subsequent to December 31, 1994, a weighted-average remaining term of 6 years and the resulting pro forma compensation cost may not be 811,820 have exercise prices between $36.52 and $41.75 representative of that to be expected in future years. with a weighted-average exercise price of $38.21 and a weighted-average remaining term of 8 years. NOTE 10 – SHAREHOLDERS’ EQUITY The fair value of each option grant was estimated Authorized capital at December 28, 1996 consisted on the date of grant using the Black-Scholes option of 80 million shares of no par value common stock pricing model with the following weighted-average and 30 million shares of no par value preferred stock, assumptions for grants in 1996 and 1995, respectively; issuable in series. At December 28, 1996, approxi- dividend yield of 1.0% and 1.5%, expected volatility mately 5.4 million shares and 53,024 shares of com- of 30% for both years, risk-free interest rates of 5.8% mon stock were reserved for issuance under the and 7.4% and expected lives of 9 years and 7 years. Option Plans and the Directors Plan, respectively. The weighted-average fair value of options granted There was no preferred stock outstanding. during 1996 and 1995 was $15.08 and $11.23, respec- tively.The Company accounts for the Option Plans The Company’s dividend policy is to pay quarterly under APB 25 and, accordingly, no compensation dividends on common shares at an annual rate of costs have been recognized in the accompanying 40 cents per share. statement of income for 1996 or 1995. Had compen- During 1996, the Company announced a program to sation costs for the Option Plans been determined repurchase up to 5% of its outstanding common under SFAS 123, pro forma net income and earnings stock. As of December 28, 1996 the Company had per share would have been $86.0 million and $1.42, repurchased 395,400 shares at a cost of $13.9 million. respectively, for 1996 and $22.2 million and $0.37, Changes in shareholders’ equity were as follows: Cumulative Total Additional Foreign Common Common Common Paid-in Retained Currency Shareholders’ Shares (in thousands, except share data) Stock Capital Earnings Adjustment Equity Outstanding Balance, January 1, 1994 $320,099 $164,908 $ 596,573 $(29,466) $1,052,114 59,455,918 Net income – – 67,883 – 67,883 – Cash dividends declared ($.50 per share) – – (29,739) – (29,739) – Translation adjustments – – – (10,272) (10,272) – Issuance of common stock 22 633 – – 655 22,190 Balance, December 31, 1994 320,121 165,541 634,717 (39,738) 1,080,641 59,478,108 Net income – – 23,331 – 23,331 – Cash dividends declared ($.30 per share) – – (17,913) – (17,913) – Translation adjustments – – – (859) (859) – Distribution of real estate and resorts business – – (581,866) – (581,866) – Issuance of common stock 376 4,725 – – 5,101 376,631 Balance, December 30, 1995 320,497 170,266 58,269 (40,597) 508,435 59,854,739 Net income – – 89,031 – 89,031 – Cash dividends declared ($.40 per share) – – (24,020) – (24,020) – Translation adjustments – – – (21,244) (21,244) – Issuance of common stock 374 10,858 11,232 373,952 Repurchase of common stock (395) (13,479) – – (13,874) (395,400) Balance, December 28, 1996 $320,476 $167,645 $ 123,280 $(61,841) $ 549,560 59,833,291 Page  d o l e f o o d c o m pa n y, i n c .
    • NOTE 11 – CONTINGENCIES Pretax earnings attributable to foreign operations were $173 million, $181 million and $165 million for 1996, At December 28, 1996, the Company was guar- 1995 and 1994, respectively. Undistributed earnings of antor of $73 million of indebtedness of certain key foreign subsidiaries, which have been or are intended fruit suppliers and other entities integral to the to be permanently invested, aggregated $1.1 billion at Company’s operations. December 28, 1996. The Company is involved from time to time in The Company’s reported income tax expense varied various claims and legal actions incident to its opera- from the expense calculated using the U.S. federal tions, both as plaintiff and defendant. In the opinion statutory tax rate for the following reasons: of management, after consultation with legal counsel, none of such claims is expected to have a material (in thousands) 1996 1995 1994 adverse effect on the Company’s financial position or Expense computed at results of operations. U.S. federal statutory income tax rate $ 37,986 $ 61,538 $ 23,851 NOTE 12 – LEASE COMMITMENTS Foreign income taxed The Company has obligations under non-cancelable at different rates (21,656) (16,366) (11,036) operating leases, primarily for ship charters and con- Dividends from tainers, and certain equipment and office facilities. subsidiaries 618 – 187 Lease terms are generally for less than the economic State and local income life of the property. Certain agricultural land leases tax, net of federal income tax benefit 1,100 4,293 (584) provide for increases in minimum rentals based on Other 1,452 6,535 (2,518) production.Total rental expense was $158.7 million, $147.3 million and $117.1 million (net of sub- Reported income tax lease income of $12.4 million, $9.4 million and expense $ 19,500 $ 56,000 $ 9,900 $8.7 million) for 1996, 1995 and 1994, respectively. In 1996, the Company filed for and received a federal During 1995, the Company entered into an agree- income tax refund of $22.9 million related to overpay- ment with a syndicate of banks for the sale and lease- ments made in 1995.Total income tax payments (net back for seven years of certain vessels.This transaction of refunds) for 1996, 1995 and 1994 were $(1.6) mil- generated net proceeds of approximately $133 million. lion, $51.3 million and $4.1 million, respectively. At December 28, 1996, the Company’s aggregate Deferred tax assets (liabilities) were comprised of minimum rental commitments, before sublease the following: income, were as follows (in millions): 1997 – $146.0; 1998 – $86.3; 1999 – $79.2; 2000 – $57.1; 2001 – (in thousands) 1996 1995 1994 $33.2; and thereafter – $195.9.Total future sublease Operating reserves $ 45,246 $ 36,840 $ 2,053 income is $17.1 million. Accelerated depreciation (21,717) (37,868) (35,040) Inventory valuation NOTE 13 – INCOME TAXES methods 3,670 3,690 13,086 Effect of differences Income tax expense (benefit) was as follows: between book values (in thousands) 1996 1995 1994 assigned in prior Current acquisitions and Federal, state and local $ 1,882 $ 2,292 $(25,594) historical tax values (36,941) (37,927) (61,811) Foreign 19,359 23,279 21,421 Postretirement benefits 33,946 31,263 32,484 Current year acquisitions (6,560) – – 21,241 25,571 (4,173) Tax credit carryforward 4,987 39,310 30,509 Deferred Net operating loss Federal, state and local (444) 30,656 8,989 carryforward 77,685 79,616 10,998 Foreign (1,297) (227) 5,084 Other, net (12,117) (22,308) (29,642) (1,741) 30,429 14,073 $ 88,199 $ 92,616 $(37,363) $19,500 $56,000 $ 9,900 Page  d o l e f o o d c o m pa n y, i n c .
    • The Company has recorded deferred tax assets of (in millions) 1996 1995 1994 $77.7 million reflecting the benefit of approximately Revenue $203 million in federal and state net operating loss North America $1,843 $1,959 $1,933 carryovers which will, if unused, begin to expire in Latin America 801 771 677 2009 (federal) and 2006 (state). Asia 974 914 842 The tax credit carryforward amount of $5 million is Europe 1,040 959 777 primarily comprised of alternative minimum tax Intercompany elimination (818) (799) (730) credits which can be utilized to reduce regular tax liabilities and may be carried forward indefinitely, $3,840 $3,804 $3,499 and general business credits which begin to expire Operating Income (Loss) in 2005. North America $ 76 $ 72 $ (8) Total deferred tax assets and deferred tax liabilities Latin America 149 138 131 were as follows: Asia 17 14 16 Europe 0 3 13 (in thousands) 1996 1995 1994 Corporate (78) (34) (14) Deferred tax assets $ 253,831 $ 281,392 $ 182,078 $ 164 $ 193 $ 138 Deferred tax liabilities (165,632) (188,776) (219,441) Identifiable Assets $ 88,199 $ 92,616 $ (37,363) North America $ 980 $ 973 $1,065 Latin America 695 698 776 The Company remains contingently liable with Asia 289 327 332 respect to certain tax credits sold with recourse by Europe 446 339 339 Flexi-Van Corporation (“Flexi-Van”), the Company’s Net assets held former transportation equipment leasing business, for distribution – – 1,066 to a third party in 1981.These credits, which have Corporate 77 105 107 been contested by the Internal Revenue Service, con- $2,487 $2,442 $3,685 tinue to be litigated by Flexi-Van. Flexi-Van, which separated from the Company in 1987 and was Notes: Revenue includes inter-area transfers from Latin America to North subsequently acquired by David H. Murdock, has America, Asia and Europe of $542 million, $514 million and $444 million indemnified the Company against obligations that in 1996, 1995 and 1994, respectively; from Asia to North America and might result from the resolution of this matter. Europe of $170 million, $184 million and $190 million in 1996, 1995 and 1994, respectively; from North America to Asia and Europe of $78 mil- NOTE 14 – GEOGRAPHIC AREA SEGMENT lion, $72 million and $77 million in 1996, 1995 and 1994, respectively; INFORMATION and from Europe to North America, Asia and Latin America of $28 million, The Company’s only significant segment of business $29 million and $19 million in 1996, 1995 and 1994, respectively. is food products. Revenue, operating income and Corporate operating loss for 1996 includes the restructuring charge of $50 identifiable assets pertaining to the geographic areas million. Net assets held for distribution as of December 31, 1994 are related in which the Company operates are presented to the real estate and resorts business distributed to the Company’s share- below. Product transfers between geographic areas are holders in 1995. (See Note 4.) accounted for based on the estimated fair market value of the products. Page  d o l e f o o d c o m pa n y, i n c .
    • NOTE 15 – QUARTERLY FINANCIAL INFORMATION (UNAUDITED) The following table presents summarized quarterly results. First Second Third Fourth (in thousands, except per share data) Quarter Quarter Quarter Quarter Year 1996 Revenue $814,438 $1,041,191 $1,093,586 $891,088 $3,840,303 Gross margin 126,990 179,592 155,961 121,415 583,958 Net income (loss) 30,009 63,580 22,966 (27,524) 89,031 Net income (loss) per common share $ .50 $ 1.05 $ .38 $ (.46) $ 1.47 1995 Revenue $849,124 $1,068,814 $1,048,594 $837,314 $3,803,846 Gross margin 150,749 183,423 148,756 103,049 585,977 Income from continuing operations 24,411 75,855 14,278 5,280 119,824 Income (loss) from discontinued operations (790) 2,807 (105,054) 6,544 (96,493) Net income (loss) $ 23,621 $ 78,662 $ (90,776) $ 11,824 $ 23,331 Earnings (loss) per common share Continuing operations $ .41 $ 1.27 $ .24 $ .09 $ 2.00 Discontinued operations (.01) .05 (1.76) .11 (1.61) Net income (loss) per common share $ .40 $ 1.32 $ (1.52) $ .20 $ .39 The net loss for the fourth quarter of 1996 includes a charge of $50 million, before tax, related to the restructuring of the Company’s dried fruit business. All quarters have twelve weeks, except the third quarters of both years which have sixteen weeks. NOTE 16 – COMMON STOCK DATA (UNAUDITED) The following table shows the market price range of the Company’s common stock for each quarter in 1996 and 1995. High Low 1996 $42 3/4 $341/8 First Quarter 371/4 Second Quarter 43 431/2 387/8 Third Quarter 401/4 327/8 Fourth Quarter $431/2 $327/8 Year 1995 $283/8 First Quarter $24 281/4 303/4 Second Quarter 281/2 Third Quarter 35 331/2 Fourth Quarter 38 Year $38 $24 Page  d o l e f o o d c o m pa n y, i n c .
    • R I P A EPORT OF NDEPENDENT UBLIC CCOUNTANTS To the Shareholders and Board of Directors of Dole Food Company, Inc.: We have audited the accompanying consolidated bal- ance sheets of Dole Food Company, Inc. (a Hawaii corporation) and subsidiaries as of December 28, 1996 and December 30, 1995, and the related consolidated statements of income and cash flow for the years ended December 28, 1996, December 30, 1995 and December 31, 1994.These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with gener- ally accepted auditing standards.Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial state- ments are free of material misstatement. An audit includes examining, on a test basis, evidence support- ing the amounts and disclosures in the financial state- ments. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.We believe that our audits pro- vide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Dole Food Company, Inc. and subsidiaries as of December 28, 1996 and December 30, 1995, and the results of its operations and its cash flow for the years ended December 28, 1996, December 30, 1995 and December 31, 1994, in conformity with generally accepted accounting principles. Los Angeles, California February 6, 1997 Page  d o l e f o o d c o m pa n y, i n c .
    • MANAGEM ’S DISCUSSI A ENT ON AND NALYSIS OF RESULTS OPERATIONS F P OF AND INANCIAL OSITION The European Union (“E.U.”) banana regulations 1996 COMPARED 1995 WITH which impose quotas and tariffs on bananas remained Revenue – Revenue increased 4% to $3,840.3 million in full effect in 1996, and continue in effect in 1997. in 1996 from $3,694.5 million in 1995, excluding rev- Trade negotiations and discussions continue between enue from the juice business sold in 1995.The rev- the E.U., the United States and the individual banana enue growth resulted from a combination of increased exporting countries.These trade negotiations could sales volumes and favorable pricing and 1996 business lead to further changes in the regulations governing acquisitions and joint ventures. banana exports to the E.U.The net impact of these Selling, Marketing and Administrative Expenses – Selling, changing regulations on the Company’s future results marketing and administrative expenses decreased 6% of operations is not determinable at this time. to $369.7 million or 9.6% of revenue in 1996 from The Company distributes its products in more than $392.7 million or 10.3% of revenue in 1995. Of the 90 countries throughout the world. Its international sales decrease, $17.1 million resulted from the sale of the are usually transacted in U.S. dollars and major European juice business in 1995. and Asian currencies, while certain costs are incurred in Restructuring Charge – In 1996, the Company imple- currencies different from those that are received from the mented a formal plan to close its dried fruit facility sale of the product. Results of operations may be affected located in Fresno, California which has suffered con- by fluctuations of currency exchange rates in both the tinued losses. During the fourth quarter of 1996, a sourcing and selling locations. restructuring charge of $50.0 million ($41.0 million Interest Expense, Net – Interest expense, net of interest after tax or $0.68 per share) was recorded related to income, decreased to $60.3 million in 1996 from the closure of this facility. Principal components of $73.7 million in 1995 as a result of lower average debt the charge are provisions for asset write-downs, con- levels throughout the year. tract terminations and severance payments. Manage- Other Income (Expense) – Other income for 1996 ment anticipates the closure of this facility to be increased $10.0 million from 1995 primarily due to completed in the second quarter of 1997. the gain on the sale of certain investments and other Operating Income – Operating income before the assets and increased earnings from joint ventures. restructuring charge improved 10.9% to $214.3 mil- Income Taxes – The Company’s effective tax rate lion in 1996 compared to $193.3 million in 1995. decreased to 18% in 1996 as a result of a change in Processed pineapple operations improved in 1996 due the mix of the Company’s foreign and domestic earn- to favorable pricing and reduced shipping costs. Fresh ings.The 1995 tax rate was significantly impacted by pineapple operations benefited from the closure of the sale of the juice business. operations in the Dominican Republic which histori- cally generated negative returns. Partially offsetting the 1995 COMPARED 1994 WITH improved results from the pineapple operations was the Revenue – Revenue increased 9% to $3,803.9 million. return to normal pricing levels for the fresh vegetable Excluding revenue from the juice business which was business which benefited from favorable pricing in sold in 1995, revenue increased 14%.The increase in 1995 due to flooding.The return to normal pricing revenue was primarily attributable to growth in exist- levels was somewhat mitigated by increased volumes ing product lines, increases in worldwide banana rev- for the value added, pre-cut salad business. enues and favorable pricing for the fresh vegetable business which resulted from the March 1995 California floods. Page  d o l e f o o d c o m pa n y, i n c .
    • Interest Expense, Net – Interest expense, net of interest Selling, Marketing and Administrative Expenses – Selling, income, increased to $73.7 million in 1995 from marketing and administrative expenses from continu- $67.0 million in 1994, due to higher interest rates, ing operations were $392.7 million or 10.3% of rev- offset by slightly lower average debt levels. enue in 1995 compared to $394.8 million or 11.3% of revenue in 1994.The decrease was primarily due to Income Taxes – The Company’s effective income tax the sale of the juice business in the second quarter of rate increased to 32% in 1995 from 15% in 1994, pri- 1995 which was partially offset by business expansions marily as a result of a change in the mix of domestic and acquisitions. and foreign earnings impacted by the non-recurring gain on the sale of the juice business in the second Operating Income – Operating income reflected signifi- quarter of 1995. cant improvement, increasing 40% to $193.3 million in 1995 from $138.1 million in 1994. Higher earnings Discontinued Operations – The Company reported a in 1995 were primarily related to improvements in $96.5 million loss, net of tax, ($1.61 per share) from the worldwide banana market, particularly in the discontinued operations in 1995.The loss from dis- Pacific Rim and the fresh vegetable business which continued operations includes distribution expenses of profited from favorable pricing.The fresh and $3.0 million, net of tax, and a write-down of certain processed pineapple and the value-added, pre-cut real estate and resort properties of $103.8 million, net salad businesses also posted improved results in 1995, of tax.The write-down resulted primarily from cer- partially offset by lower results for dried fruit and tain adverse developments in 1995 affecting the Lana’i nut operations. resort and certain other properties which caused man- agement to substantially lower its estimate of their Net Gain on Assets Sold or Held for Disposal – During future cash flows. the second quarter of 1995, the sale of the Company’s juice business was completed, resulting in a pretax LIQUIDITY CAPITAL RESOURCES AND gain of approximately $145 million. Revenues related The Company’s operational and investing activities in to this business totaled approximately $109 million 1996 were financed by funds generated internally and and $300 million in 1995 and 1994, respectively. In cash on hand at December 30, 1995. Cash and short- addition, during the second quarter of 1995, the term investments were $34.3 million at December 28, Company began to implement its plans to sell certain 1996 compared to $72.2 million at December 30, 1995. of its agricultural properties and other assets which generated low returns.The book value of the assets to Operating activities generated cash flow of $95.0 mil- be sold exceeded their estimated fair value less costs lion in 1996 compared to $234.6 million in 1995.The to sell, resulting in an adjustment of $83 million.The decrease was primarily related to higher receivable gain on the sale of the juice business, net of adjust- levels resulting from increased sales and advances to ments related to the planned disposal of assets, resulted key fruit suppliers combined with a significant reduc- in a net pretax gain of $61.7 million and an increase tion in accounts payable and accrued liabilities. Posi- in the Company’s estimated 1995 annualized income tively impacting cash flow from operations were tax rate from 23% to 32%. Page  d o l e f o o d c o m pa n y, i n c .
    • permitted ratio of consolidated debt to net worth and higher sales which resulted in reduced inventory levels a minimum required fixed charge coverage ratio. At at December 28, 1996 compared to December 30, December 28, 1996 net borrowings outstanding under 1995 and the receipt of a federal income tax refund of this facility were approximately $90 million.The $22.9 million. Company may also borrow under uncommitted lines In December 1996, the Company announced its plan of credit at rates offered from time to time by various to close its Fresno, California dried fruit operations banks that may not be lenders under the Facility. Net which will relieve future operations of sizable losses borrowings outstanding under the uncommitted lines and allow for a substantial reduction in working capi- of credit totaled $82 million at December 28, 1996. tal requirements associated with this business.This During 1996, the Company announced a program to initiative was taken as part of the Company’s overall repurchase up to 5% of its outstanding common plan to dispose of or liquidate assets which do not stock. As of December 28, 1996 the Company had meet the Company’s minimum return on investment repurchased 395,400 shares of its outstanding shares requirements. at a cost of $13.9 million.The Company does not Capital expenditures for the acquisition and mainte- expect the stock repurchase program to affect the nance of productive assets were $109.7 million in Company’s ability to fund operating requirements, 1996 and were funded with cash provided by current capital expenditures or acquisitions. year operations and the proceeds from the sale of The Company paid four quarterly dividends of existing assets and agricultural properties.The Com- 10 cents per share on its common stock totaling pany also acquired a Spanish grower/marketer $24.0 million in 1996. of citrus and fresh vegetables, a 50% interest in a Guatemalan banana producer and other food related The Company believes that cash from operations operations in Latin America and Europe for an and its cash position will be sufficient to enable it to aggregate cash purchase price of $58.8 million. meet its capital expenditure, debt maturity, common stock repurchase, dividend payment and other In July 1996, the Company replaced its existing funding requirements. revolving credit facility with a $600 million, five-year revolving credit facility (“Facility”). Provisions under the Facility require the Company to comply with cer- tain financial covenants which include a maximum Page  d o l e f o o d c o m pa n y, i n c .
    • R O S F DATA ESULTS OF PERATIONS AND ELECTED INANCIAL (in millions, except per share data) 1996 1995 1994 1993 1992 Revenue $3,840 $3,804 $3,499 $3,108 $3,120 Cost of products sold 3,256 3,218 2,966 2,609 2,633 Gross margin 584 586 533 499 487 Selling, marketing and administrative expenses 370 393 395 333 312 Cost reduction program – – – 43 42 Restructuring charge 50 – – – – Operating income 164 193 138 123 133 Interest expense – net (60) (74) (67) (48) (48) Net gain on assets sold or held for disposal – 62 – – – Other income (expense) – net 5 (5) (3) (9) (12) Income from continuing operations before income taxes and accounting change 109 176 68 66 73 Income taxes (20) (56) (10) (4) (7) Income from continuing operations before accounting change 89 120 58 62 66 Discontinued operations – (97) 10 16 (2) Income before accounting change 89 23 68 78 64 Cumulative effect of accounting change – – – – (48) Net income $ 89 $ 23 $ 68 $ 78 $ 16 Earnings per common share, fully diluted Continuing operations before accounting change $ 1.47 $ 2.00 $ .98 $ 1.04 $ 1.11 Discontinued operations – (1.61) .16 .26 (.04) Cumulative effect of accounting change – – – (.81) Net income $ 1.47 $ .39 $ 1.14 $ 1.30 $ .26 Other statistics Working capital $ 464 $ 480 $ 495 $ 391 $ 398 Total assets 2,487 2,442 3,685 3,159 2,926 Long-term debt 904 896 1,555 1,111 950 Total debt 926 920 1,609 1,190 1,031 Common shareholders’ equity 550 508 1,081 1,052 1,001 Annual cash dividends per common share .40 .40 .40 .40 .40 Capital additions for continuing operations 110 90 212 174 164 Depreciation and amortization from continuing operations 111 113 120 106 90 Page  d o l e f o o d c o m pa n y, i n c .
    • D O IRECTORS AND FFICERS DOLE FOOD COMPANY DOLE FOOD COMPANY, INC. DOLE FOOD COMPANY, INC. Directors Officers Operating Division Officers Elaine L. Chao2 David H. Murdock Paul Cuyegkeng Distinguished Fellow Chairman of the Board and President – Dole Asia The Heritage Foundation Chief Executive Officer William F. Feeney Mike Curb1,3 David A. DeLorenzo President – Dole Europe President and Chief Operating Officer Chairman Curb Records, Inc. Juergen Schumacher Curb Entertainment International Corp. Gerald W. LaFleur President – Dole Latin America Executive Vice President David A. DeLorenzo Peter M. Nolan President and Chief Operating Officer David A. Cohen President - Dole Packaged Foods Dole Food Company, Inc. Senior Vice President – Acquisitions and Investments Lawrence A. Kern Richard M. Ferry1,2 President – Dole Fresh Vegetables Harvey J. Heimbuch President and Director Vice President and Controller Gregory L. Costley Korn/Ferry International, Inc. President – Dole North America Fruit (international executive search firm) George R. Horne Vice President – Human Resources Roberto Zacarias James F. Gary 2,3 President – Dole Honduran Beverage Chairman Emeritus Edward A. Lang, III Pacific Resources, Inc. Vice President and Treasurer (international energy and holding company) Patrick A. Nielson Vice President – International Legal and Zoltan Merszei 3 Regulatory Affairs Former Chairman and President Dow Chemical Company Thomas J. Pernice Vice President – Public Affairs David H. Murdock1 Chairman of the Board and David W. Perrigo Chief Executive Officer Vice President – Taxes Dole Food Company, Inc. J. Brett Tibbitts Vice President – Corporate General Counsel and Corporate Secretary Roberta Wieman Vice President 1 Executive, Finance and Nominating Committee 2 Audit Committee 3 Compensation and Employee Benefits Committee Page  d o l e f o o d c o m pa n y, i n c .
    • C S I OMPANY AND HAREHOLDER NFORMATION INVESTMENT INDUSTRY INQUIRIES THE COMPANY Founded in Hawaii in 1851, Dole Food Members of the investment industry Company, Inc. is the world’s largest should direct inquiries to: producer and marketer of fresh fruit Office of the Treasurer and vegetables, and markets a growing Dole Food Company, Inc. line of packaged foods. The Company 31365 Oak Crest Drive does business in more than 90 countries Westlake Village, CA 91361 and employs approximately 46,000 (818) 879-6600 full-time people. ADDITIONAL INFORMATION REQUESTS CORPORATE HEADQUARTERS For Annual Reports and Forms 31365 Oak Crest Drive 10-K, please contact: Westlake Village, CA 91361 Office of the Corporate Secretary (818) 879-6600 Dole Food Company, Inc. 31365 Oak Crest Drive Westlake Village, CA 91361 AUDITORS Telephone (818) 879-6814 Arthur Andersen LLP Facsimile (818) 879-6615 633 West Fifth Street Dole’s Annual Report is available on the Los Angeles, CA 90071 internet at http://www.dole.com SECURITIES TRANSFER AND DIVIDEND STOCK EXCHANGE DISBURSEMENT AGENT Dole Food Company, Inc.’s common The First National Bank of Boston stock (DOL) is traded on the New York P.O. Box 644 and Pacific Stock Exchanges. Boston, MA 02102 (800) 733-5001 INTERNET ADDRESS: http://www.dole.com DIVIDEND REINVESTMENT PLAN http://www.dole5aday.com A cash dividend of $0.10 per common share was declared in each quarter of 1996 for a total annual dividend of $0.40 per share. Dole Food Company, Inc. does not have a dividend reinvestment plan. Dole® is a registered trademark of Dole Food Company, Inc. © 1997 Dole Food Company, Inc. All rights reserved.
    • D o l e F o o d C o m pa n y, I n c . 3 1 3 6 5 O a k C r e s t D r i v e , We s t l a k e V i l l a g e , C a l i f o r n i a 9 1 3 6 1