Dole1998 annual

Dole Food Company, Inc.

Dole

Food C

om

pany, In

c.A

nnual R

eport 19

98

Annual Report 1998

Dole Food Company, Inc.www.Dole.com

R2/Dole AR 98 cover.03/11/99 4/23/99 12:01 AM Page 1

Company and Shareholder Information

DOLE® IS A REGISTERED TRADEMARK OF DOLE FOOD COMPANY, INC. ©1998 DOLE FOOD COMPANY, INC. ALL RIGHTS RESERVED.

Corporate Officers: (Seated – Left to Right): David H. Murdock, David A. DeLorenzo(Standing – Left to Right): George R. Horne, Roberta Wieman, J. Brett Tibbitts,James A. Dykstra, Beth Potillo, Patrick A. Nielson, David W. Perrigo

(Not Shown): John W. Tate

Operating Officers:(Seated – Left to Right): David A. DeLorenzo, David H. Murdock(Standing – Left to Right): Juergen Schumacher, Paul Cuyegkeng, William F. Feeney,Peter M. Nolan, Roberto Zacarias, Gregory L. Costley, Lawrence A. Kern

2 DOLE FOOD COMPANY, INC . ANNUAL REPORT 1998

SourcingRipening/DistributionMarkets

✸ Corporate

FOOD OPERATING DIVISIONS AND LOCATIONS

EUROPE AND AFRICA • Belgium • Cameroon • Canary Islands • France • Germany • Ghana • Greece • Italy

Ivory Coast • Kenya • Namibia • Netherlands • South Africa • Spain • Tunisia • Turkey • United Kingdom • Zimbabwe

LATIN AMERICA AND CARIBBEAN • Argentina • Brazil • Chile • Colombia • Costa Rica • Ecuador

Guadeloupe • Guatemala • Honduras • Jamaica • Martinique • Mexico • Nicaragua • Peru • Venezuela • Windward Islands

ASIA • Australia • China • Japan • New Zealand • Philippines • Thailand

NORTH AMERICA • Canada • United States: Arizona, California, Florida, Hawaii, Ohio, Washington

FOOD MARKETING DIVISIONS AND LOCATIONS

EUROPE AND MIDDLE EAST • Albania • Algeria • Austria • Azerbaijan • Bahrain • Belarus • Belgium

Bosnia • Bulgaria • Croatia • Czech Republic • Denmark • Estonia • Egypt • Finland • France • Georgia • Germany

Greece • Hungary • Iceland • India • Ireland • Israel • Italy • Jordan • Kazakhstan • Kuwait • Latvia • Lebanon • Lithuania

Luxembourg • Malta • Morocco • Netherlands • Norway • Oman • Poland • Portugal • Qatar • Romania • Russia

Saudia Arabia • Senegal • Slovakia • Spain • Sweden • Switzerland • Syria • Tajikistan • Tunisia • Turkey • Ukraine

United Arab Emirates • United Kingdom • Uzbekistan • LATIN AMERICA AND CARIBBEAN • Argentina • Bahamas • Barbados

Bermuda • Bolivia • Brazil • Chile • Colombia • Costa Rica • Dominican Republic • Ecuador • Guadeloupe • Guatemala

Honduras • Jamaica • Martinique • Mexico • Netherlands-Antilles • Peru • Puerto Rico • Trinidad & Tobago

Uruguay • Venezuela • ASIA • Australia • China • Cambodia • Hong Kong • Indonesia • Japan • Malaysia

New Zealand • Philippines • Singapore • South Korea • Taiwan • Thailand

NORTH AMERICA • Canada • United States

DOLE WORLDWIDE OPERATIONS

✸

Auditors

Arthur Andersen LLP633 West Fifth Street, Los Angeles, CA 90071

Securities Transfer and Dividend Disbursement Agent

EquiServe P.O. Box 8040, Boston, MA 02266-8040(800) 733-5001Internet Address: www.equiserve.com

Dividend Information

A cash dividend of $0.10 per common share was declared ineach quarter of 1998 for a total annual dividend of $0.40 pershare. Dole Food Company, Inc. does not have a dividend rein-vestment plan.

Investment Industry Inquiries

Members of the investment industry should direct inquiries to:Office of the TreasurerDole Food Company, Inc.31365 Oak Crest Drive, Westlake Village, CA 91361(818) 879-6600

Additional Information Requests

For a copy of the Annual Report and Form 10-K, please contact:Office of the Corporate SecretaryDole Food Company, Inc.31365 Oak Crest Drive, Westlake Village, CA 91361Telephone: (818) 879-6814Facsimile: (818) 879-6615

Dole’s Annual Report is available on the internet athttp://www.dole.com

E-mail Address: [email protected]

Stock Exchange

Dole Food Company, Inc.’s common stock (DOL) is traded onThe New York and Pacific Stock Exchanges

Internet Addresses

http://www.dole.comhttp://www.dole5aday.com

THE COMPANY

Founded in Hawaii in 1851, Dole Food Company, Inc. is the world’s largest producer and marketer of fresh fruit, vegetables and flowers, and markets a growing line of packaged foods. The Company does business in more than 90 countries and employs approximately53,500 full-time people.

Corporate Headquarters

31365 Oak Crest Drive, Westlake Village, CA 91361 (818) 879-6600


Revenue(in millions)

Shareholder Equity(in millions)

Return on Equity**(in percent)

EBITDA* (in millions)

Depreciation & Amortization EBIT

3,4

99

3,8

04

3,8

40 4,3

36

4,4

24

94 95 96 97 98

1,081

508

550

666

622

94 95 96 97 98

6.4

%

16.0

%

24.6

%

26.3

%

17.5

%

94 95 96 97 98

265

94

308

95

338

96

372

97

328

98

* Before special charges in 1998 and 1996 and net gain on asset dispositions in 1995. ** Before special charges in 1998 and 1996 and asset impairment in 1995.

GROWTH CASH FLOW RETURNCAPITALIZATION

Dole Financial Highlights

(in millions, except per share data) 1998 1997 1996 1995 1994

Revenue $ 4,424 $ 4,336 $ 3,840 $ 3,804 $ 3,499

Income from continuing operations $ 12 $ 160 $ 89 $ 120 $ 58Income (loss) from discontinued operations – – – (97) 10

Net income $ 12 $ 160 $ 89 $ 23 $ 68

Diluted net income (loss) per common share

Continuing operations $ 0.20 $ 2.65 $ 1.47 $ 2.00 $ 0.98Discontinued operations – – – (1.61) 0.16

Net income $ 0.20 $ 2.65 $ 1.47 $ 0.39 $ 1.14Diluted average common shares outstanding 60 60 60 60 60

Total assets $ 2,915 $ 2,464 $ 2,487 $ 2,442 $ 3,685

Capitalization

Short-term debt $ 36 $ 14 $ 22 $ 24 $ 54

Long-term debt 1,116 755 904 896 1,555

Minority interests 57 38 30 26 25Common shareholders’ equity 622 666 550 508 1,081

Total $ 1,831 $ 1,473 $ 1,506 $ 1,454 $ 2,715

Book value per common share $ 10.49 $ 11.10 $ 9.18 $ 8.49 $ 18.17

Common stock price at year-end $ 30 $ 453/4 $ 34 $ 35 $ 23

Market price range

High $ 57 1/8 $ 495/8 $ 431/2 $ 38 $ 351/2

Low $ 285/16 $ 333/8 $ 327/8 $ 24 $ 221/2

Annual cash dividends per common share $ 0.40 $ 0.40 $ 0.40 $ 0.40 $ 0.40

Note: Income from continuing operations for 1998 and 1996 includes pre-tax charges of $120 million and $50 million, respectively. Income from continuing operations for1995 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 presentedthroughout this report as discontinued operations.

Inside Front Cover:Use File Named

“Dole AR 98 cover.03/11/99”

Dole Financial Highlights

1DOLE FOOD COMPANY, INC . ANNUAL REPORT 1998

FC-9 4/23/99 12:30 AM Page fc-2

Dole strives to lead in environmental protection andover the last decade has reduced its reliance on tradi-tional crop protection products by integrating culturaland biological controls into its pest management strate-gies. Dole standards of environmental excellence in itsworldwide operations intend to meet standards held inthe United States and European Union.

ACQUISITIONS

Flowers In 1998, Dole made a strategic move into the fresh-cut flower industry with the acquisition of several of the largest companies in the floral and flower

growing business. First year revenues from these acquisitions are expected to exceed $200 million. Theflower business offers many parallels to existing core businesses. For example, flowers are perishable,imported, and industry growth comes through the same supermarket channel of distribution as other Doleproducts. We are very pleased with the acquisitions of Sunburst Farms, Four Farmers, Finesse, CCI and theiraffiliated companies. The combination of these premiercompanies, their assets and employees into the DoleFlower Division, is an exciting first step in building aglobal flower network.

To Our Shareholders

1998 was a difficult and challeng-ing year for Dole Food Company.We entered the year coping withthe Asian economic crisis, whichslowed growth in one of our mostdynamic markets. The El Niñoweather phenomenon adverselyaffected the agricultural produc-tion in virtually every area inwhich Dole operates. Late in theyear, the collapse of the Russian

economy in essence destroyed an important market forDole products. During the last week of October, Hurri-cane Mitch, perhaps the worst hurricane of the century,made a direct hit on the country of Honduras and Doleoperations in that country, leaving destruction in itswake. Finally, in late December, the California citrusindustry suffered a devastating freeze, which essentiallydestroyed most of the orange crop in the state. While itis saddening to recall such a litany of difficulties, it isgratifying to remember the response of the Dole teamthroughout the world to each adversity.

FINANCIAL RESULTS

In the 4th Quarter of 1998, Dole took two specialcharges. The first charge of $100 million reflected the$160 million in damages caused by Hurricane Mitch. Thesecond charge of $20 million was primarily due to thedamage caused by a major freeze to the California citruscrop just prior to harvest. After these charges, Dole’s netincome was $12.1 million in 1998 on revenues of $4.4 bil-lion. Before the special charges, operating earnings totaled$206.2 million and EBITDA totaled $328.3 million.

HURRICANE MITCH

Hurricane Mitch, one of the strongest hurricanes in recorded history, with sustained winds up to 180mph, had a devastating effect on the country of Honduras, as well as caused severe damage toNicaragua and Guatemala. Dole has a 100-year historyof investments in Honduras, which were severely dam-aged or destroyed by winds and floods. Operationsaffected included growing crops of over 20,000 acres of

bananas, 10,000 acres of sugar cane, 2,000 acres ofAfrican palm, as well as roads, bridges, employee hous-ing, packing plants, irrigation systems, river dikes, ware-houses, trucks, trailers, and other equipment, all ofwhich were virtually destroyed. Fortunately, due to ini-tial preparations and a rapid response to the crisis, noemployee lives were lost. I would like to personallyacknowledge and thank the thousands of employees,friends and associates from around the world thatresponded immediately to the relief and rehabilitationeffort. The heroic efforts of so many are too great to list,but their actions and deeds will always be gratefullyremembered by all of us at Dole and the entire populacewe serve in these areas.

OPERATIONS

Dole’s worldwide operations were severely tested in1998 by the weather disruptions in all of its growing areas.

The El Niño weather pattern caused severe floodingin Ecuador, extremely heavy rains in California, anddrought in Thailand and the Philippines. The yearended with Hurricane Mitch in Honduras and the freezein California. In turn, these weather anomalies causedproduction shortages and logistical disruptions through-out the year in our banana, pineapple, vegetable and cit-rus businesses. Despite these issues, most of our corebusinesses performed well and are indeed well posi-tioned for a more normal 1999.

The financial crisis in Russia, which began inSeptember 1998, had a significant negative effect ondemand for bananas in that country. In recent years, theRussian market had grown to consume approximatelyeight percent of the world banana supply, so the loss ofthis market will be an ongoing concern for the bananaindustry in general.

MANAGEMENT CHANGES/ENVIRONMENTAL

In May 1998, Sharon Hayes joined Dole as its newDirector of Environmental Affairs. Having spent overthirteen years with the Environmental ProtectionAgency, including working for the Agency’s administra-tor on pesticide and toxic chemical issues, Ms. Hayes’background and expertise are assets for Dole.

Dole Food Company Board of Directors(Seated): David H. Murdock (Standing, left to right): David A. DeLorenzo,

James F. Gary, Richard M. Ferry, Elaine L. Chao, Mike Curb, Zoltan Merszei

David H. MurdockChairman and Chief Executive Officer

2 DOLE FOOD COMPANY, INC . ANNUAL REPORT 1998 3DOLE FOOD COMPANY, INC . ANNUAL REPORT 1998

FC-9 4/23/99 12:31 AM Page 2

Dole strives to lead in environmental protection andover the last decade has reduced its reliance on tradi-tional crop protection products by integrating culturaland biological controls into its pest management strate-gies. Dole standards of environmental excellence in itsworldwide operations intend to meet standards held inthe United States and European Union.

ACQUISITIONS

Flowers In 1998, Dole made a strategic move into the fresh-cut flower industry with the acquisition of several of the largest companies in the floral and flower

growing business. First year revenues from these acquisitions are expected to exceed $200 million. Theflower business offers many parallels to existing core businesses. For example, flowers are perishable,imported, and industry growth comes through the same supermarket channel of distribution as other Doleproducts. We are very pleased with the acquisitions of Sunburst Farms, Four Farmers, Finesse, CCI and theiraffiliated companies. The combination of these premiercompanies, their assets and employees into the DoleFlower Division, is an exciting first step in building aglobal flower network.

To Our Shareholders

1998 was a difficult and challeng-ing year for Dole Food Company.We entered the year coping withthe Asian economic crisis, whichslowed growth in one of our mostdynamic markets. The El Niñoweather phenomenon adverselyaffected the agricultural produc-tion in virtually every area inwhich Dole operates. Late in theyear, the collapse of the Russian

economy in essence destroyed an important market forDole products. During the last week of October, Hurri-cane Mitch, perhaps the worst hurricane of the century,made a direct hit on the country of Honduras and Doleoperations in that country, leaving destruction in itswake. Finally, in late December, the California citrusindustry suffered a devastating freeze, which essentiallydestroyed most of the orange crop in the state. While itis saddening to recall such a litany of difficulties, it isgratifying to remember the response of the Dole teamthroughout the world to each adversity.

FINANCIAL RESULTS

In the 4th Quarter of 1998, Dole took two specialcharges. The first charge of $100 million reflected the$160 million in damages caused by Hurricane Mitch. Thesecond charge of $20 million was primarily due to thedamage caused by a major freeze to the California citruscrop just prior to harvest. After these charges, Dole’s netincome was $12.1 million in 1998 on revenues of $4.4 bil-lion. Before the special charges, operating earnings totaled$206.2 million and EBITDA totaled $328.3 million.

HURRICANE MITCH

Hurricane Mitch, one of the strongest hurricanes in recorded history, with sustained winds up to 180mph, had a devastating effect on the country of Honduras, as well as caused severe damage toNicaragua and Guatemala. Dole has a 100-year historyof investments in Honduras, which were severely dam-aged or destroyed by winds and floods. Operationsaffected included growing crops of over 20,000 acres of

bananas, 10,000 acres of sugar cane, 2,000 acres ofAfrican palm, as well as roads, bridges, employee hous-ing, packing plants, irrigation systems, river dikes, ware-houses, trucks, trailers, and other equipment, all ofwhich were virtually destroyed. Fortunately, due to ini-tial preparations and a rapid response to the crisis, noemployee lives were lost. I would like to personallyacknowledge and thank the thousands of employees,friends and associates from around the world thatresponded immediately to the relief and rehabilitationeffort. The heroic efforts of so many are too great to list,but their actions and deeds will always be gratefullyremembered by all of us at Dole and the entire populacewe serve in these areas.

OPERATIONS

Dole’s worldwide operations were severely tested in1998 by the weather disruptions in all of its growing areas.

The El Niño weather pattern caused severe floodingin Ecuador, extremely heavy rains in California, anddrought in Thailand and the Philippines. The yearended with Hurricane Mitch in Honduras and the freezein California. In turn, these weather anomalies causedproduction shortages and logistical disruptions through-out the year in our banana, pineapple, vegetable and cit-rus businesses. Despite these issues, most of our corebusinesses performed well and are indeed well posi-tioned for a more normal 1999.

The financial crisis in Russia, which began inSeptember 1998, had a significant negative effect ondemand for bananas in that country. In recent years, theRussian market had grown to consume approximatelyeight percent of the world banana supply, so the loss ofthis market will be an ongoing concern for the bananaindustry in general.

MANAGEMENT CHANGES/ENVIRONMENTAL

In May 1998, Sharon Hayes joined Dole as its newDirector of Environmental Affairs. Having spent overthirteen years with the Environmental ProtectionAgency, including working for the Agency’s administra-tor on pesticide and toxic chemical issues, Ms. Hayes’background and expertise are assets for Dole.

Dole Food Company Board of Directors(Seated): David H. Murdock (Standing, left to right): David A. DeLorenzo,

James F. Gary, Richard M. Ferry, Elaine L. Chao, Mike Curb, Zoltan Merszei



FC-9 4/23/99 12:31 AM Page 2

Dole Pineapple Strawberry Juice Drink

Dole Pineapple Tidbits for PizzaDole Pineapple Tidbits in Juice or Syrup

Dole Pine Orange Banana JuiceDole Rambutan in SyrupDole Rambutan Snack CupDole Red Papaya Chunks in Light Syrup

Dole Tropical Fruit Cocktail in Juice and Syrup

Dole Tropical Fruit Cocktail in Syrup with Passion Fruit Juice

Dole Tropical Fruit Juice BoxDole Tropical Fruit Salad, Easy Open

Dole Yellow Papaya Chunks in Syrup

Dole White AsparagusSeasons Pineapple JuiceSeasons Tropical Fruit Mix

Dole Fresh-Cut VegetablesDole American Special Blend SaladDole Caesar Lunch For One™Dole Chopped Romaine SaladDole Classic Cole SlawDole Classic Iceberg SaladDole Classic Romaine SaladDole Complete Caesar SaladDole Complete Caesar Salad with Fat Free Dressing

Dole Complete Creamy Garlic Caesar Salad

Dole Complete Oriental SaladDole Complete Roasted Garlic Caesar Salad with Fat FreeDressing

Dole Complete Romano SaladDole Complete Sunflower Ranch Salad

Dole Complete Zesty Italian Salad with Fat Free Dressing

Dole European Special Blend SaladDole French Special Blend SaladDole Greener Selection™ SaladDole Italian Special Blend SaladDole Mediterranean Special Blend Salad

Dole Peeled-Mini CarrotsDole Ranch Lunch For One™Dole Romaine Special Blend SaladDole Shredded CarrotsDole Shredded LettuceDole Shredded Red CabbageDole Spring Mix Special Blend SaladDole Tuscany Special Blend SaladDole Verona Special Blend Salad

Dole Food Products Worldwide

Dole Fresh FruitDole ApplesDole ApricotsDole BananasDole BlueberriesDole CantaloupeDole CherriesDole ClementinesDole CoconutsDole CranberriesDole GrapefruitDole GrapesDole Honeydew MelonDole Kiddie Pack (bananas)Dole KiwiDole LemonsDole Lychees Dole MangosDole Morado BananaDole Native BananaDole NectarinesDole OrangesDole PapayasDole PeachesDole PearsDole PersimmonsDole Fresh-Cut PineappleDole PineappleDole PlantainsDole PlumsDole PomegranatesDole RaspberriesDole SatsumasDole StrawberriesDole Super Sweet PineDole Sweet BananaDole TangelosDole TangerinesDole Yucca

Dole Dried Fruit & NutsDole Blanched Slivered Almonds in Recloseable Bags

Dole Blanched Whole Almonds in Reclosable Bags

Dole Chopped Dates in Reclosable Bags

Dole Chopped Natural Almonds in Reclosable Bags

Dole CinnaRaisins in Reclosable Bags

Dole Golden Seedless RaisinsDole Pitted Dates in Reclosable Bags

Dole Pitted Prunes CanisterDole Pitted Prunes Carton

Dole Fruit Bowls – Diced PeachesDole Fruit Bowls – Mixed FruitDole Fruit Bowls – Pineapple Tidbits

Dole Fruit Bowls – Tropical Fruit in Blended Juice

Dole Fruit Festival Snack CupDole Fruit Mix, Easy OpenDole Guava in SyrupDole Guava HalvesDole Ketchup (Regular and Hot Spice)

Dole Longans in SyrupDole Mandarin Orange Fruit CupsDole Mandarin Orange SegmentsDole Mandarin Orange Segments, Easy Open

Dole Mango Cubes Snack CupDole Mango Juice DrinkDole Mango Slices in Blended Juice or Syrup

Dole MushroomDole Nata de Coco in SyrupDole Papaya in SyrupDole Peach Halves in SyrupDole Peach Snack CupDole Peaches in Juice and Syrup Dole Sliced Peaches, Easy OpenDole Pear Snack CupDole Pears in Juice and SyrupDole Pineapple Chunks in Juice or Syrup

Dole Pineapple ConcentrateDole Pineapple Cubes in SyrupDole Pineapple Fun Shapes – Cosmic

Dole Pineapple Fun Shapes – Sea Creatures

Dole Pineapple Grapefruit JuiceDole Pineapple Grapefruit Juice Drink

Dole Pineapple JuiceDole Pineapple Juice DrinkDole Pineapple Lychee Juice DrinkDole Pineapple Orange JuiceDole Pineapple Orange Juice BoxDole Pineapple Orange Juice DrinkDole Pineapple Orange Raspberry Juice Box

Dole Pineapple Pink Grapefruit Drink

Dole Pineapple Slices in Juice or Syrup

Dole Pineapple Snack CupDole Pineapple Snack Wedges, Easy Open

Dole Fresh FlowersAgapanthusAlstroemeriaAster ButterflyAster Mini RainbowAster MontecasinoBells of IrelandBouvardiaBypluremCalla LilliesCarnationsChinese CarnationsDelphiniumEremurusFarm BouquetsFreesiaGerberaGerspiderGipsyGodetiaGypsophiliaKangaroo PawsLeatherleafLiatrisLilliesLimoniumLisianthusMini CarnationsMonk’s HoodMumsOrchidiolaPomponsQueen Anne’s LaceRoses (Hybrid Tea)Rover MumsSnapdragonsSolidagoSolidasterSpider MumsSpray RosesStar of BethlehemStaticeStockStrawflowerSunflowersSweetheart RosesTreefernWaxflowerYarrow

Dole Pitted Prunes in Reclosable Bags

Dole Seedless Raisins CanisterDole Seedless Raisins CartonDole Seedless Raisins in Reclosable Bags

Dole Seedless Raisins Mini SnacksDole Seedless Raisins Six PacksDole Sliced Natural Almonds in Reclosable Bags

Dole Whole Natural Almonds in Reclosable Bags

Saman Dole Soelia PistachiosGuyennoise Prunor Pitted PrunesGuyennoise Prunor Whole PrunesJA Whole DatesJA Whole PrunesSoelia Blanched Whole AlmondsSoelia Dried ApricotsSoelia Dried FigsSoelia Pitted PrunesSoelia Sliced Thin AlmondsSoelia Whole PeanutsSoelia Whole PrunesWhole Deglet Nour Dates

Dole Fresh Vegetables Dole ArtichokesDole AsparagusDole Bell PeppersDole BroccoliDole Brussels SproutsDole Butter LettuceDole CarrotsDole CauliflowerDole CeleryDole Green Leaf LettuceDole Green OnionsDole Iceberg LettuceDole Idaho PotatoesDole RadishesDole Red Leaf LettuceDole Romaine LettuceDole Sugar PeasDole Taro

Dole Packaged FoodsDole Aloe Vera (Solid)Dole Apricot HalvesDole Apricot Snack CupDole Apricots in Juice or SyrupDole Crushed Pineapple in Juice or Syrup

Dole Deciduous Fruit Cocktail in Juice and Syrup

Dole Fruit Bowls – Cherry Flavored Mixed Fruit

SABA Trading AB During 1998, Dole also purchasedsixty percent of SABA Trading AB, the leading importerand distributor of fresh fruit, vegetables, and flowers inSweden. Dole purchased its position from Axel JohnsonAB and the Swedish Cooperative Society, each of whichwill remain as minority shareholders. Annual sales totalapproximately $500 million, with 950 employees. SABAadds another strong company to Dole’s distribution sys-tem, which continues to grow throughout the world.

FINANCING ACTIVITIES

Dole strengthened its financial infrastructure in 1998with a highly successful $300 million public bond issue.Additionally, the five-year revolving $400 million creditfacility continues to provide strong operational flexibili-ty. Agents in the facility are Chase Manhattan Bank,Bank of America and Citibank.

OUTLOOK

In a year filled with adversity, Dole continued todemonstrate the strength of its worldwide sourcing anddistribution network. The Dole® brand and quality con-tinued to flourish on supermarket and foodserviceshelves around the globe. In addition to its acquisitions,Dole took a number of steps to ensure continued, accel-erated growth of the Dole® brand.

In the United States, our value-added salads hadanother spectacular year of growth. In Springfield, Ohio,Dole opened its first processing plant to meet thedemands for these safe, convenient, ready to eat saladsin the Midwestern and Eastern states. New salad prod-ucts, ready for introduction in early 1999, should con-tinue to spur demand for Dole salads into the year 2000.

Dole also built and opened its first salad plant inJapan in 1998, and gained excellent distribution on itsfirst product introduction. Fresh-cut salads are a naturalextension to Dole’s powerful perishable distributionnetwork in Japan, and are expected to be a significantgrowth vehicle in that market.

Dole also established itself firmly in South Africa in1998, following that country’s deregulation of its freshfruit industry. In South Africa, Dole was the secondlargest citrus exporter in its first year of operation, and

the Company is positioning the unit to be a leadingdeciduous fruit exporter as well. Dole South Africa ser-vices the winter fruit market needs of Dole’s global dis-tribution system, complementing the leading exportposition it already maintains in Chile.

These strategic moves, combined with the 1998acquisitions and a return to normality of our base busi-nesses, gives us every reason to be optimistic for a yearof profitability in 1999.

Dole’s new headquarters facility in Westlake Village,a suburb of Los Angeles, will be completed in the latterpart of 1999. We are looking forward to combining ourcurrent offices into one building. The efficiency of prox-imity for management and staff will materially enhanceoperations and eliminate duplication of efforts.

Throughout the 14 years that I have been chief exec-utive officer of Dole,we have consistentlybuilt upon and,I believe, attained the strongest management team inDole’s history. Throughout the world we have excellentsenior management as well as creative, well-trained anddedicated day-to-day managers and employees. Throughthe combined efforts of our workforce, Dole’s fresh fruit,vegetable and flower products are grown with respectfor the environment and with a genuine interest in thehealth and welfare of our people and the consumer.

We begin 1999 with renewed spirit and commitmentto rebuild and rehabilitate, and to accelerate our growthand profitability. We would like to express our apprecia-tion and gratitude to our employees, shareholders andcustomers for their continued support and confidence.Once again, we offer our support and sympathy to themany thousands of people in Honduras, Nicaragua,Guatemala, and Ecuador where lives were lost andeconomies affected by this year’s weather disruptions.

Sincerely,



FC-9 4/23/99 12:31 AM Page 4

9500A

Dole Pineapple Strawberry Juice Drink

Dole Pineapple Tidbits for PizzaDole Pineapple Tidbits in Juice or Syrup

Dole Pine Orange Banana JuiceDole Rambutan in SyrupDole Rambutan Snack CupDole Red Papaya Chunks in Light Syrup

Dole Tropical Fruit Cocktail in Juice and Syrup

Dole Tropical Fruit Cocktail in Syrup with Passion Fruit Juice

Dole Tropical Fruit Juice BoxDole Tropical Fruit Salad, Easy Open

Dole Yellow Papaya Chunks in Syrup

Dole White AsparagusSeasons Pineapple JuiceSeasons Tropical Fruit Mix

Dole Fresh-Cut VegetablesDole American Special Blend SaladDole Caesar Lunch For One™Dole Chopped Romaine SaladDole Classic Cole SlawDole Classic Iceberg SaladDole Classic Romaine SaladDole Complete Caesar SaladDole Complete Caesar Salad with Fat Free Dressing

Dole Complete Creamy Garlic Caesar Salad

Dole Complete Oriental SaladDole Complete Roasted Garlic Caesar Salad with Fat FreeDressing

Dole Complete Romano SaladDole Complete Sunflower Ranch Salad

Dole Complete Zesty Italian Salad with Fat Free Dressing

Dole European Special Blend SaladDole French Special Blend SaladDole Greener Selection™ SaladDole Italian Special Blend SaladDole Mediterranean Special Blend Salad

Dole Peeled-Mini CarrotsDole Ranch Lunch For One™Dole Romaine Special Blend SaladDole Shredded CarrotsDole Shredded LettuceDole Shredded Red CabbageDole Spring Mix Special Blend SaladDole Tuscany Special Blend SaladDole Verona Special Blend Salad

Dole Food Products Worldwide

Dole Fresh FruitDole ApplesDole ApricotsDole BananasDole BlueberriesDole CantaloupeDole CherriesDole ClementinesDole CoconutsDole CranberriesDole GrapefruitDole GrapesDole Honeydew MelonDole Kiddie Pack (bananas)Dole KiwiDole LemonsDole Lychees Dole MangosDole Morado BananaDole Native BananaDole NectarinesDole OrangesDole PapayasDole PeachesDole PearsDole PersimmonsDole Fresh-Cut PineappleDole PineappleDole PlantainsDole PlumsDole PomegranatesDole RaspberriesDole SatsumasDole StrawberriesDole Super Sweet PineDole Sweet BananaDole TangelosDole TangerinesDole Yucca

Dole Dried Fruit & NutsDole Blanched Slivered Almonds in Recloseable Bags

Dole Blanched Whole Almonds in Reclosable Bags

Dole Chopped Dates in Reclosable Bags

Dole Chopped Natural Almonds in Reclosable Bags

Dole CinnaRaisins in Reclosable Bags

Dole Golden Seedless RaisinsDole Pitted Dates in Reclosable Bags

Dole Pitted Prunes CanisterDole Pitted Prunes Carton

Dole Fruit Bowls – Diced PeachesDole Fruit Bowls – Mixed FruitDole Fruit Bowls – Pineapple Tidbits

Dole Fruit Bowls – Tropical Fruit in Blended Juice

Dole Fruit Festival Snack CupDole Fruit Mix, Easy OpenDole Guava in SyrupDole Guava HalvesDole Ketchup (Regular and Hot Spice)

Dole Longans in SyrupDole Mandarin Orange Fruit CupsDole Mandarin Orange SegmentsDole Mandarin Orange Segments, Easy Open

Dole Mango Cubes Snack CupDole Mango Juice DrinkDole Mango Slices in Blended Juice or Syrup

Dole MushroomDole Nata de Coco in SyrupDole Papaya in SyrupDole Peach Halves in SyrupDole Peach Snack CupDole Peaches in Juice and Syrup Dole Sliced Peaches, Easy OpenDole Pear Snack CupDole Pears in Juice and SyrupDole Pineapple Chunks in Juice or Syrup

Dole Pineapple ConcentrateDole Pineapple Cubes in SyrupDole Pineapple Fun Shapes – Cosmic

Dole Pineapple Fun Shapes – Sea Creatures

Dole Pineapple Grapefruit JuiceDole Pineapple Grapefruit Juice Drink

Dole Pineapple JuiceDole Pineapple Juice DrinkDole Pineapple Lychee Juice DrinkDole Pineapple Orange JuiceDole Pineapple Orange Juice BoxDole Pineapple Orange Juice DrinkDole Pineapple Orange Raspberry Juice Box

Dole Pineapple Pink Grapefruit Drink

Dole Pineapple Slices in Juice or Syrup

Dole Pineapple Snack CupDole Pineapple Snack Wedges, Easy Open

Dole Fresh FlowersAgapanthusAlstroemeriaAster ButterflyAster Mini RainbowAster MontecasinoBells of IrelandBouvardiaBypluremCalla LilliesCarnationsChinese CarnationsDelphiniumEremurusFarm BouquetsFreesiaGerberaGerspiderGipsyGodetiaGypsophiliaKangaroo PawsLeatherleafLiatrisLilliesLimoniumLisianthusMini CarnationsMonk’s HoodMumsOrchidiolaPomponsQueen Anne’s LaceRoses (Hybrid Tea)Rover MumsSnapdragonsSolidagoSolidasterSpider MumsSpray RosesStar of BethlehemStaticeStockStrawflowerSunflowersSweetheart RosesTreefernWaxflowerYarrow

Dole Pitted Prunes in Reclosable Bags

Dole Seedless Raisins CanisterDole Seedless Raisins CartonDole Seedless Raisins in Reclosable Bags

Dole Seedless Raisins Mini SnacksDole Seedless Raisins Six PacksDole Sliced Natural Almonds in Reclosable Bags

Dole Whole Natural Almonds in Reclosable Bags

Saman Dole Soelia PistachiosGuyennoise Prunor Pitted PrunesGuyennoise Prunor Whole PrunesJA Whole DatesJA Whole PrunesSoelia Blanched Whole AlmondsSoelia Dried ApricotsSoelia Dried FigsSoelia Pitted PrunesSoelia Sliced Thin AlmondsSoelia Whole PeanutsSoelia Whole PrunesWhole Deglet Nour Dates

Dole Fresh Vegetables Dole ArtichokesDole AsparagusDole Bell PeppersDole BroccoliDole Brussels SproutsDole Butter LettuceDole CarrotsDole CauliflowerDole CeleryDole Green Leaf LettuceDole Green OnionsDole Iceberg LettuceDole Idaho PotatoesDole RadishesDole Red Leaf LettuceDole Romaine LettuceDole Sugar PeasDole Taro

Dole Packaged FoodsDole Aloe Vera (Solid)Dole Apricot HalvesDole Apricot Snack CupDole Apricots in Juice or SyrupDole Crushed Pineapple in Juice or Syrup

Dole Deciduous Fruit Cocktail in Juice and Syrup

Dole Fruit Bowls – Cherry Flavored Mixed Fruit

SABA Trading AB During 1998, Dole also purchasedsixty percent of SABA Trading AB, the leading importerand distributor of fresh fruit, vegetables, and flowers inSweden. Dole purchased its position from Axel JohnsonAB and the Swedish Cooperative Society, each of whichwill remain as minority shareholders. Annual sales totalapproximately $500 million, with 950 employees. SABAadds another strong company to Dole’s distribution sys-tem, which continues to grow throughout the world.

FINANCING ACTIVITIES

Dole strengthened its financial infrastructure in 1998with a highly successful $300 million public bond issue.Additionally, the five-year revolving $400 million creditfacility continues to provide strong operational flexibili-ty. Agents in the facility are Chase Manhattan Bank,Bank of America and Citibank.

OUTLOOK

In a year filled with adversity, Dole continued todemonstrate the strength of its worldwide sourcing anddistribution network. The Dole® brand and quality con-tinued to flourish on supermarket and foodserviceshelves around the globe. In addition to its acquisitions,Dole took a number of steps to ensure continued, accel-erated growth of the Dole® brand.

In the United States, our value-added salads hadanother spectacular year of growth. In Springfield, Ohio,Dole opened its first processing plant to meet thedemands for these safe, convenient, ready to eat saladsin the Midwestern and Eastern states. New salad prod-ucts, ready for introduction in early 1999, should con-tinue to spur demand for Dole salads into the year 2000.

Dole also built and opened its first salad plant inJapan in 1998, and gained excellent distribution on itsfirst product introduction. Fresh-cut salads are a naturalextension to Dole’s powerful perishable distributionnetwork in Japan, and are expected to be a significantgrowth vehicle in that market.

Dole also established itself firmly in South Africa in1998, following that country’s deregulation of its freshfruit industry. In South Africa, Dole was the secondlargest citrus exporter in its first year of operation, and

the Company is positioning the unit to be a leadingdeciduous fruit exporter as well. Dole South Africa ser-vices the winter fruit market needs of Dole’s global dis-tribution system, complementing the leading exportposition it already maintains in Chile.

These strategic moves, combined with the 1998acquisitions and a return to normality of our base busi-nesses, gives us every reason to be optimistic for a yearof profitability in 1999.

Dole’s new headquarters facility in Westlake Village,a suburb of Los Angeles, will be completed in the latterpart of 1999. We are looking forward to combining ourcurrent offices into one building. The efficiency of prox-imity for management and staff will materially enhanceoperations and eliminate duplication of efforts.

Throughout the 14 years that I have been chief exec-utive officer of Dole,we have consistentlybuilt upon and,I believe, attained the strongest management team inDole’s history. Throughout the world we have excellentsenior management as well as creative, well-trained anddedicated day-to-day managers and employees. Throughthe combined efforts of our workforce, Dole’s fresh fruit,vegetable and flower products are grown with respectfor the environment and with a genuine interest in thehealth and welfare of our people and the consumer.

We begin 1999 with renewed spirit and commitmentto rebuild and rehabilitate, and to accelerate our growthand profitability. We would like to express our apprecia-tion and gratitude to our employees, shareholders andcustomers for their continued support and confidence.Once again, we offer our support and sympathy to themany thousands of people in Honduras, Nicaragua,Guatemala, and Ecuador where lives were lost andeconomies affected by this year’s weather disruptions.

Sincerely,



FC-9 4/23/99 12:31 AM Page 4

Dole Food Company is the largestproducer of fresh fruits, vegetablesand flowers in the world. Doleemploys over 53,500 people whoare dedicated to the production,handling, and distribution of per-ishable products throughout theglobe. Its products are shipped onDole vessels which continuallycross all of the world’s seaways.

Dole is organized on both aproduct and a regional basis. Regions are divided intoboth sources and markets, and products are producedboth for local regional markets as well as for export toother regions of the world. For example, our Asianregion produces both for its own market demand withinAsia as well as exports to Dole markets in North America, Europe and Latin America.

The recently acquired fresh-cut flower businesses will integrate well into Dole’s established distributionnetwork and customer base.

Operational Review

David A. DeLorenzoPresident andChief OperatingOfficer

This is true of all of our regions and thus creates aninternational web of Dole trade, tied together by Dole’sshipping services and its experienced managementgroup who work together as a cross-cultural global team.

Proprietary agricultural practices, customized sys-tems, worldwide refrigerated shipping capability, andspecialized customer service and distribution allowDole to properly handle over five million perishablecartons per week in over 90 countries of the world.

Despite the weather, 1998 was a very significant yearfor the Dole environmental management program. InJuly 1998, Dole’s banana operations in Costa Ricabecame the first agricultural producer in the world toreceive certification that its operations conform to theenvironmental management system requirements ofISO 14001 (the International Standard Organization’senvironmental management standard). Certification tothe standard means that Standard Fruit de Costa Rica, awholly-owned Dole company, has the systems in placeto manage its environmental obligations responsibly,minimizing risks to the environment while maximizingthe quality and safety of its products. Later in 1998,Dole’s subsidiaries in Thailand and Ecuador became thenext operations to be ISO 14001 certified. Other Doleoperations around the world are soon to demonstratethat they also deserve ISO 14001 certification. Certifica-tion to the ISO 14001 standard is just one more indicatorthat, for Dole, excellence in product quality and excel-lence in environmental protection go hand in hand.

The nutritional facts, presented in this report by some of

the Dole 5 A Day Fruit and Vegetable Friends, are taken from

Dole5aday.com. This website, developed along with

other interactive materials, is part of Dole’s commitment

to the nutritional education of children and their

families. Another educational project, scheduled for release

in 1999, is THE ENCYCLOPEDIA OF FOODS:

THE HOW AND WHY OF HEALTHY NUTRITION,

a comprehensive publication authored by

nutrition experts at the Mayo Clinic, the

University of California, Los Angeles, and Dole

Food Company. The beautifully illustrated

book will provide healthful dietary guidelines

for nutrition and fitness as well as teach

the connection between food and nutrients.

Flower Division Management

(Seated): Geno Valdes(Standing, left to right): Lorenzo de la Torre, Lourdes Espinoza, Evelyn Macia, Josefina de Zuluaga

To further diversify its wide range of products, Dole acquired several large fresh-cut flower companies in 1998. These acquisitions afford the opportunity of supplying flowers to the supermarketcustomers that already purchase the Company’s other perishable products.


FC-9 4/23/99 12:32 AM Page 6

Dole Food Company is the largestproducer of fresh fruits, vegetablesand flowers in the world. Doleemploys over 53,500 people whoare dedicated to the production,handling, and distribution of per-ishable products throughout theglobe. Its products are shipped onDole vessels which continuallycross all of the world’s seaways.

Dole is organized on both aproduct and a regional basis. Regions are divided intoboth sources and markets, and products are producedboth for local regional markets as well as for export toother regions of the world. For example, our Asianregion produces both for its own market demand withinAsia as well as exports to Dole markets in North America, Europe and Latin America.

The recently acquired fresh-cut flower businesses will integrate well into Dole’s established distributionnetwork and customer base.

Operational Review

David A. DeLorenzoPresident andChief OperatingOfficer

This is true of all of our regions and thus creates aninternational web of Dole trade, tied together by Dole’sshipping services and its experienced managementgroup who work together as a cross-cultural global team.

Proprietary agricultural practices, customized sys-tems, worldwide refrigerated shipping capability, andspecialized customer service and distribution allowDole to properly handle over five million perishablecartons per week in over 90 countries of the world.

Despite the weather, 1998 was a very significant yearfor the Dole environmental management program. InJuly 1998, Dole’s banana operations in Costa Ricabecame the first agricultural producer in the world toreceive certification that its operations conform to theenvironmental management system requirements ofISO 14001 (the International Standard Organization’senvironmental management standard). Certification tothe standard means that Standard Fruit de Costa Rica, awholly-owned Dole company, has the systems in placeto manage its environmental obligations responsibly,minimizing risks to the environment while maximizingthe quality and safety of its products. Later in 1998,Dole’s subsidiaries in Thailand and Ecuador became thenext operations to be ISO 14001 certified. Other Doleoperations around the world are soon to demonstratethat they also deserve ISO 14001 certification. Certifica-tion to the ISO 14001 standard is just one more indicatorthat, for Dole, excellence in product quality and excel-lence in environmental protection go hand in hand.

The nutritional facts, presented in this report by some of

the Dole 5 A Day Fruit and Vegetable Friends, are taken from

Dole5aday.com. This website, developed along with

other interactive materials, is part of Dole’s commitment

to the nutritional education of children and their

families. Another educational project, scheduled for release

in 1999, is THE ENCYCLOPEDIA OF FOODS:

THE HOW AND WHY OF HEALTHY NUTRITION,

a comprehensive publication authored by

nutrition experts at the Mayo Clinic, the

University of California, Los Angeles, and Dole

Food Company. The beautifully illustrated

book will provide healthful dietary guidelines

for nutrition and fitness as well as teach

the connection between food and nutrients.

Flower Division Management

(Seated): Geno Valdes(Standing, left to right): Lorenzo de la Torre, Lourdes Espinoza, Evelyn Macia, Josefina de Zuluaga

To further diversify its wide range of products, Dole acquired several large fresh-cut flower companies in 1998. These acquisitions afford the opportunity of supplying flowers to the supermarketcustomers that already purchase the Company’s other perishable products.


FC-9 4/23/99 12:32 AM Page 6

DOLE FRESH VEGETABLES

Dole Fresh Vegetables achieved record sales and earn-ings in 1998. The commodity business was the one seg-ment that capitalized upon favorable market conditionsassociated with El Niño rains. Additionally, investment inDole’s state-of-the-art manufacturing plants, customerservice and new products drove fresh-cut salads to newsales, earnings and market share records. The retail fresh-cut salad category continued to exhibit strong growth,with an eighteen percent increase in sales for 1998. Dole’sgrowth outpaced the category posting a thirty-five per-cent increase in retail sales for the same period.

Based upon strong customer demand, Dole expand-ed its asparagus operations to provide year-round sup-plies. Sales to the food service trade grew significantly asfood service operators turned to Dole for reliable sup-plies of consistently high quality and safe vegetableproducts. Dole Fresh Vegetables leads the industry infood safety.

After extensive research, Dole will introduce anexciting new line of gourmet salads called “GreatRestaurant Salads” in early 1999. New products contin-ue to energize the fresh-cut category and Dole is com-mitted to introducing marketing programs and newproducts that will continue to attract consumers to theDole franchise.

FRUIT OPERATIONS

Adverse weather conditions in 1998 affect-ed Dole North American fruit opera-tions. Due to El Niño, rainfall inCalifornia and Florida hit record

levels, affecting the citrus, deciduous andalmond operations. The Washington appleoperations were impacted by hail-relatedproblems in key orchards.

Foremost among the year’s weather-related events was the freeze that hit California’s San Joaquin Valley duringChristmas week. The extremely low tem-peratures associated with this freeze severe-ly damaged the Company’s citrus cropsthat are located throughout the Valley. Aspreviously announced, Dole took a chargeof $20 million, which consists primarily of

The North American consumer demand for fresh,

healthy products allowed Dole to once again reach

record market shares in its leading products, such as

bananas, packaged salads and canned pineapple.

Dole North America

(from top)Lawrence A. Kern, President, Dole Fresh VegetablesGregory L. Costley, President, Dole North American FruitPeter M. Nolan, President, Dole Packaged Foods

Innovative field harvesting and packing ensures better quality produce and fast, fresh delivery from field to supermarket.


FC-9 4/23/99 12:33 AM Page 8

DOLE FRESH VEGETABLES

Dole Fresh Vegetables achieved record sales and earn-ings in 1998. The commodity business was the one seg-ment that capitalized upon favorable market conditionsassociated with El Niño rains. Additionally, investment inDole’s state-of-the-art manufacturing plants, customerservice and new products drove fresh-cut salads to newsales, earnings and market share records. The retail fresh-cut salad category continued to exhibit strong growth,with an eighteen percent increase in sales for 1998. Dole’sgrowth outpaced the category posting a thirty-five per-cent increase in retail sales for the same period.

Based upon strong customer demand, Dole expand-ed its asparagus operations to provide year-round sup-plies. Sales to the food service trade grew significantly asfood service operators turned to Dole for reliable sup-plies of consistently high quality and safe vegetableproducts. Dole Fresh Vegetables leads the industry infood safety.

After extensive research, Dole will introduce anexciting new line of gourmet salads called “GreatRestaurant Salads” in early 1999. New products contin-ue to energize the fresh-cut category and Dole is com-mitted to introducing marketing programs and newproducts that will continue to attract consumers to theDole franchise.

FRUIT OPERATIONS

Adverse weather conditions in 1998 affect-ed Dole North American fruit opera-tions. Due to El Niño, rainfall inCalifornia and Florida hit record

levels, affecting the citrus, deciduous andalmond operations. The Washington appleoperations were impacted by hail-relatedproblems in key orchards.

Foremost among the year’s weather-related events was the freeze that hit California’s San Joaquin Valley duringChristmas week. The extremely low tem-peratures associated with this freeze severe-ly damaged the Company’s citrus cropsthat are located throughout the Valley. Aspreviously announced, Dole took a chargeof $20 million, which consists primarily of

The North American consumer demand for fresh,

healthy products allowed Dole to once again reach

record market shares in its leading products, such as

bananas, packaged salads and canned pineapple.

Dole North America

(from top)Lawrence A. Kern, President, Dole Fresh VegetablesGregory L. Costley, President, Dole North American FruitPeter M. Nolan, President, Dole Packaged Foods

Innovative field harvesting and packing ensures better quality produce and fast, fresh delivery from field to supermarket.


FC-9 4/23/99 12:33 AM Page 8

crop inventory losses and reductions in grower receiv-able recovery estimates. In addition to that charge, threeof five California citrus packing houses have beenclosed, and will remain closed for most of 1999. Themajor thrust of the California citrus operation in 1999will be to rehabilitate properties in anticipation of thenext season. In addition to the charge taken in 1998,Dole currently estimates that the freeze will negativelyimpact 1999 operating earnings by approximately $10million to $15 million.

Major changes have been made which will positionDole for greater success in the future. The Florida citrusoperation entered into a joint venture with MetropolitanLife Insurance Company. This venture brings togetherDole’s farming, packing and selling expertise, withMetLife’s citrus production properties. The alliance hasresulted in one of the strongest operations in the state of Florida. In California, Dole will be reformatting itsfresh cherry business, which will involve relocatingassets to match the growth of the early-season Californiacherry crop.

Apple operations in Washington State were signifi-cantly enhanced by the acquisition of a third packingfacility. This purchase, done in conjunction with anacreage acquisition by Prudential Insurance Company,has resulted in Dole packing facilities operating at nearcapacity. It has also positioned the Company to betterhandle the increasing varieties of specialty apples,including the Cameo apple.

The Cameo apple has enjoyed great success and pro-duction is rapidly increasing. Dole markets the vastmajority of the available Cameo crop, and its marketleadership has led to strong acceptance of this productand has enhanced returns to Dole Cameo growers.

PACKAGED FOODS

Dole’s market shares in canned pineapple and cannedpineapple juice reached new highs for the 1990 decadeof forty-five percent and forty-two percent, respectively.This growth was achieved in spite of significant El Niño-related supply disruptions from Thailand and thePhilippines in 1998.

New products continue to play a large role in thegrowth of Dole Packaged Foods. Two new fruit items,Dole peaches and Dole mixed fruit, were successfullyintroduced in Atlanta and Jacksonville in early 1998.The expanded line will be introduced to additional mar-kets in 1999. Dole’s cinnamon covered raisins, CinnaraisinsTM, the first new item in the dried fruit category in years, has been successfully introduced inselected markets.

The food service division posted its second year ofrecord earnings. Pineapple as a pizza topping hasbecome extremely popular. Dominos Pizza® namedDole as its “Pizza Topping Supplier of the Year.” In thenew product area, mangoes have been added to the“salad bar” line-up to complement tropical fruit salad.

The fresh vegetable business achieved record sales and earnings in 1998 as the business transitions from commodity to value-added. The highly profitable fresh-cut salad business continues to benefit from strong demand, and the 1998 opening of the Springfield, Ohio plant has helped gain market share, particularly in East Coast markets.

Barney Broccoli says, “Eating cruciferous vegetables such as broccoli, Brussels sprouts, cabbage, cauliflower,and turnips may guard against cancer. Broccoli is an excellent source of vitamin C and a good source of vitamin A and fiber.”

Automation is the key to improving the commodity vegetable segment. Also, Dole has been a leader in developing and expanding the value-added pre-cut salad and vegetable segment, investing in production capacity to satisfy growing demand.


8.15 4/23/99 2:24 AM Page 10

crop inventory losses and reductions in grower receiv-able recovery estimates. In addition to that charge, threeof five California citrus packing houses have beenclosed, and will remain closed for most of 1999. Themajor thrust of the California citrus operation in 1999will be to rehabilitate properties in anticipation of thenext season. In addition to the charge taken in 1998,Dole currently estimates that the freeze will negativelyimpact 1999 operating earnings by approximately $10million to $15 million.

Major changes have been made which will positionDole for greater success in the future. The Florida citrusoperation entered into a joint venture with MetropolitanLife Insurance Company. This venture brings togetherDole’s farming, packing and selling expertise, withMetLife’s citrus production properties. The alliance hasresulted in one of the strongest operations in the state of Florida. In California, Dole will be reformatting itsfresh cherry business, which will involve relocatingassets to match the growth of the early-season Californiacherry crop.

Apple operations in Washington State were signifi-cantly enhanced by the acquisition of a third packingfacility. This purchase, done in conjunction with anacreage acquisition by Prudential Insurance Company,has resulted in Dole packing facilities operating at nearcapacity. It has also positioned the Company to betterhandle the increasing varieties of specialty apples,including the Cameo apple.

The Cameo apple has enjoyed great success and pro-duction is rapidly increasing. Dole markets the vastmajority of the available Cameo crop, and its marketleadership has led to strong acceptance of this productand has enhanced returns to Dole Cameo growers.

PACKAGED FOODS

Dole’s market shares in canned pineapple and cannedpineapple juice reached new highs for the 1990 decadeof forty-five percent and forty-two percent, respectively.This growth was achieved in spite of significant El Niño-related supply disruptions from Thailand and thePhilippines in 1998.

New products continue to play a large role in thegrowth of Dole Packaged Foods. Two new fruit items,Dole peaches and Dole mixed fruit, were successfullyintroduced in Atlanta and Jacksonville in early 1998.The expanded line will be introduced to additional mar-kets in 1999. Dole’s cinnamon covered raisins, CinnaraisinsTM, the first new item in the dried fruit category in years, has been successfully introduced inselected markets.

The food service division posted its second year ofrecord earnings. Pineapple as a pizza topping hasbecome extremely popular. Dominos Pizza® namedDole as its “Pizza Topping Supplier of the Year.” In thenew product area, mangoes have been added to the“salad bar” line-up to complement tropical fruit salad.

The fresh vegetable business achieved record sales and earnings in 1998 as the business transitions from commodity to value-added. The highly profitable fresh-cut salad business continues to benefit from strong demand, and the 1998 opening of the Springfield, Ohio plant has helped gain market share, particularly in East Coast markets.

Barney Broccoli says, “Eating cruciferous vegetables such as broccoli, Brussels sprouts, cabbage, cauliflower,and turnips may guard against cancer. Broccoli is an excellent source of vitamin C and a good source of vitamin A and fiber.”

Automation is the key to improving the commodity vegetable segment. Also, Dole has been a leader in developing and expanding the value-added pre-cut salad and vegetable segment, investing in production capacity to satisfy growing demand.


8.15 4/23/99 2:24 AM Page 10

Dole Latin America

BANANA PRODUCTION AND HURRICANE MITCH

In October of 1998, Hurricane Mitch struck Honduras,Guatemala and Nicaragua. This devastating event dam-aged eighty-two percent of Dole’s producing acres inHonduras. The Dole team immediately mobilized toassist with relief efforts in the region. Dole employeesworked around-the-clock to provide emergency rescueservices, food, clothing, shelter and medical supplies tothe recovering populations. After extensive review,Dole has started to rehabilitate selected parts of the lostproduction areas and a recovery program is under way.

Looking to the future, Dole expects to recover theproduction losses of 1998 and has implemented plans toreplace the lost volume related to Hurricane Mitch withits Ecuadorian and Colombian sources.

The past year has been one of the most challengingproduction years in recent history for Dole’s bananaoperations. Extreme flooding from the El Niño weatherphenomenon reduced overall banana industry produc-tion by eighteen percent in Ecuador, and drought condi-tions caused by El Niño reduced industry production byseven percent in Colombia. Despite extremely adverseweather effects, total Dole production decreased onlyseven percent from the record year in 1997.

Over 22,000 employees are part of the Dole LatinAmerica team which strives to bring to market the highest quality, safest fresh produce possible. Dolep a ck s f r u i t i n m o r e t h a n 1, 0 0 0 p a ck i n g

houses throughout Latin America and controls over 135,000 acres of banana producing land.

Dole supplements Company produc-tion and reduces risk by purchasing a significant portion of product needs fromindependent growers throughout LatinAmerica. Dole assists over 350 growers tosuccessfully grow and pack Dole qualitybananas. Dole’s team of highly skilledagronomists and technical staff train growers about Dole’s environmental pro-cedures and standards.

BEVERAGES

Dole’s majority-owned beverage operation is the domi-nant supplier of carbonated beverages in Honduras,with commanding market shares of approximately seventy-five percent in soft drinks and ninety-nine per-cent in beer. The operation exclusively represents Coca-Cola® and Canada Dry® products, and has its ownbrand of fruit-flavored soft drinks, Tropical®, whichaccounts for twenty percent of its soft drink sales vol-ume in Honduras. Soft drink consumption per capita inHonduras is one of the highest in Latin America. Thedivision also produces and/or distributes four leadingdomestic brands of beer, along with the internationallyrecognized brands of Holsten®

and Budweiser®. Vertical

(from top)Juergen Schumacher President,Dole Latin AmericaRoberto ZacariasPresident,Dole Honduran Beverage

Hurricane Mitch wrought devastation to over 30,000 acres of Dole agricultural plantings and infrastructure in Honduras,Guatemala and Nicaragua. Thankfully, no employee lives were lost in the hurricane or its aftermath due to a tremendous out-pouring of assistance and relief aid from Dole’s worldwide family.

Dole packs fruit in more than 1,000 packing housesthroughout Latin America and controls over 135,000acres of banana producing land.





Over 22,000 employees are part of the Dole LatinAmerica team which strives to bring to market the highest quality, safest fresh produce possible. Dolepacks fruit in more than 1,000 packing


8.15 4/23/99 2:25 AM Page 12

Dole Latin America





Over 22,000 employees are part of the Dole LatinAmerica team which strives to bring to market the highest quality, safest fresh produce possible. Dolep a ck s f r u i t i n m o r e t h a n 1, 0 0 0 p a ck i n g

houses throughout Latin America and controls over 135,000 acres of banana producing land.

Dole supplements Company produc-tion and reduces risk by purchasing a significant portion of product needs fromindependent growers throughout LatinAmerica. Dole assists over 350 growers tosuccessfully grow and pack Dole qualitybananas. Dole’s team of highly skilledagronomists and technical staff train growers about Dole’s environmental pro-cedures and standards.

BEVERAGES

Dole’s majority-owned beverage operation is the domi-nant supplier of carbonated beverages in Honduras,with commanding market shares of approximately seventy-five percent in soft drinks and ninety-nine per-cent in beer. The operation exclusively represents Coca-Cola® and Canada Dry® products, and has its ownbrand of fruit-flavored soft drinks, Tropical®, whichaccounts for twenty percent of its soft drink sales vol-ume in Honduras. Soft drink consumption per capita inHonduras is one of the highest in Latin America. Thedivision also produces and/or distributes four leadingdomestic brands of beer, along with the internationallyrecognized brands of Holsten®

and Budweiser®. Vertical

(from top)Juergen Schumacher President,Dole Latin AmericaRoberto ZacariasPresident,Dole Honduran Beverage

Hurricane Mitch wrought devastation to over 30,000 acres of Dole agricultural plantings and infrastructure in Honduras,Guatemala and Nicaragua. Thankfully, no employee lives were lost in the hurricane or its aftermath due to a tremendous out-pouring of assistance and relief aid from Dole’s worldwide family.

Dole packs fruit in more than 1,000 packing housesthroughout Latin America and controls over 135,000acres of banana producing land.





Over 22,000 employees are part of the Dole LatinAmerica team which strives to bring to market the highest quality, safest fresh produce possible. Dolepacks fruit in more than 1,000 packing


8.15 4/23/99 2:25 AM Page 12

operations include a sugar mill, a plastic case and bottlebusiness, and bottle cap manufacturing. The divisionalso operates an edible oil and soap operation with well-established local brands.

During the year, a new soft drink bottling line wasinstalled. State-of-the-art technology is used for the pro-duction of the family-size returnable plastic bottle thatCoca-Cola® has strategically positioned in Latin Ameri-ca to expand sales. Additionally, eight new beer tanks forfermentation and maturation were added to Dole’s exist-ing facility. These and other plant upgrades are beingmade to fulfill projected growth in product demand.

Dole’s efforts to expand its responsibility for productdistribution in Honduras’ rural regions continue andDole now handles approximately eighty percent of thesesales. This strategic move has rendered outstandingresults as new routes and distribution centers are added.

Damage by Hurricane Mitch, particularly in the ruralregions of Honduras, continues to affect Dole’s distribu-tion in this market but it is expected that this situationwill significantly improve in the forthcoming months.

JOINT VENTURES/NEW BUSINESS

OPPORTUNITIES

Proban Alliance At the close of 1998, Dole entered into astrategic alliance with Proban, a well-established promi-nent grower group in Colombia. As a result of thisalliance, Dole will ship approximately twenty-eight per-cent of total Colombian banana exports. This additionwill yield greater efficiencies and lower production andshipping costs.

Value-Added Dole Latin America continues to focus onits core products and markets and evaluate opportuni-ties to build earnings and expand the Dole® brand namethroughout Latin and South America. Dole expandedits local Chilean distribution business by opening a new,state-of-the-art distribution center. Additionally, Doleconstructed a new salad processing facility at this sitethat marks Dole Latin America’s entry into the freshvegetable value-added business.

Dole also completed a state-of-the art fruit processingfacility in Honduras and plans to launch fresh, processedproducts into the North American market in 1999.

CHILE

Today, Dole Chile exports to over fifty countries world-wide. Dole Chile had another record year of export vol-umeswith the exportation of 18 million packagesof grapes,stonefruit, apples, pears and kiwis. Dole continues to beChile's largest fruit exporter and the volumes in 1998further established Dole’s position as the premierChilean exporter.

Throughout the world, the diversification of marketsgives Dole great flexibility in maximizing sales anddirecting product volumes when facing challenges incertain markets. In 1998, this allowed Dole to success-fully send fruit to different markets after the virtual eco-nomic collapse of several Asian nations as well as Russia.

“Just one-half of a grapefruit contains all of the vitamin Cyour body needs for the day,” proclaims Gretta Grapefruit.Vitamin C heals cuts and scrapes, helps teeth and gumsstay healthy, bones stay strong, and may also reduce therisk of heart disease and some types of cancer.

Dole has the world’s largest dedicated refrigerated containerized shipping fleet, which will be strengthened in 1999 with the addition of two new state-of-the-art vessels.

Great care goes into the packing of Dole bananas by thousands of dedicated employees throughout the world.


8.15 4/23/99 2:26 AM Page 14

operations include a sugar mill, a plastic case and bottlebusiness, and bottle cap manufacturing. The divisionalso operates an edible oil and soap operation with well-established local brands.

During the year, a new soft drink bottling line wasinstalled. State-of-the-art technology is used for the pro-duction of the family-size returnable plastic bottle thatCoca-Cola® has strategically positioned in Latin Ameri-ca to expand sales. Additionally, eight new beer tanks forfermentation and maturation were added to Dole’s exist-ing facility. These and other plant upgrades are beingmade to fulfill projected growth in product demand.

Dole’s efforts to expand its responsibility for productdistribution in Honduras’ rural regions continue andDole now handles approximately eighty percent of thesesales. This strategic move has rendered outstandingresults as new routes and distribution centers are added.

Damage by Hurricane Mitch, particularly in the ruralregions of Honduras, continues to affect Dole’s distribu-tion in this market but it is expected that this situationwill significantly improve in the forthcoming months.

JOINT VENTURES/NEW BUSINESS

OPPORTUNITIES

Proban Alliance At the close of 1998, Dole entered into astrategic alliance with Proban, a well-established promi-nent grower group in Colombia. As a result of thisalliance, Dole will ship approximately twenty-eight per-cent of total Colombian banana exports. This additionwill yield greater efficiencies and lower production andshipping costs.

Value-Added Dole Latin America continues to focus onits core products and markets and evaluate opportuni-ties to build earnings and expand the Dole® brand namethroughout Latin and South America. Dole expandedits local Chilean distribution business by opening a new,state-of-the-art distribution center. Additionally, Doleconstructed a new salad processing facility at this sitethat marks Dole Latin America’s entry into the freshvegetable value-added business.

Dole also completed a state-of-the art fruit processingfacility in Honduras and plans to launch fresh, processedproducts into the North American market in 1999.

CHILE

Today, Dole Chile exports to over fifty countries world-wide. Dole Chile had another record year of export vol-umeswith the exportation of 18 million packagesof grapes,stonefruit, apples, pears and kiwis. Dole continues to beChile's largest fruit exporter and the volumes in 1998further established Dole’s position as the premierChilean exporter.

Throughout the world, the diversification of marketsgives Dole great flexibility in maximizing sales anddirecting product volumes when facing challenges incertain markets. In 1998, this allowed Dole to success-fully send fruit to different markets after the virtual eco-nomic collapse of several Asian nations as well as Russia.

“Just one-half of a grapefruit contains all of the vitamin Cyour body needs for the day,” proclaims Gretta Grapefruit.Vitamin C heals cuts and scrapes, helps teeth and gumsstay healthy, bones stay strong, and may also reduce therisk of heart disease and some types of cancer.

Dole has the world’s largest dedicated refrigerated containerized shipping fleet, which will be strengthened in 1999 with the addition of two new state-of-the-art vessels.

Great care goes into the packing of Dole bananas by thousands of dedicated employees throughout the world.


8.15 4/23/99 2:26 AM Page 14

Increased automated field harvesting and packing at Pascual Hermanos in Spain has assisted in expandingthe division to be a year-round, rather than seasonal producer of fresh vegetables.

FORWARD INTEGRATION

Dole Europe completed the acquisition of sixty percentof SABA Trading AB during the fall of 1998. SABA isScandinavia’s largest fruit and vegetable importer anddistributor with over $500 million in sales. Headquar-tered in Stockholm, Sweden, SABA has banana ripen-ing facilities, produce distribution centers and flowerdistribution facilities throughout Sweden. Dole is themajority shareholder while two of Sweden’s largestretail groups each hold minority shares. SABA providesDole with an opportunity, in joint venture with retailers,to develop retail service centers and add value toDole’s produce imports.

SABA owns one of Europe’s largest exotic fruit import and distribution companies, FTKNetherlands. Together with Dole’s exotic fruitimporter VBH, Belgium, Dole has added leadinglines of exotic fruits, such as mango, avocado,passion fruit and lychee to its expandingproduct range.

SOUTH AFRICA

The new South African government deregulated freshfruit exports at the end of 1997. Previously, growerswere required to export through export boards, whichcontrolled distribution through European panelists.South Africa is a major supplier of citrus, apples, grapes,pears and stonefruits to Europe. Dole founded DoleSouth Africa in March 1998, at the beginning of the cit-rus export season, establishing it as the second largestcitrus exporter behind the South African Citrus Board.

William F. Feeney, President,Dole Europe

Dole Europe


Dole Europe sales were $1.2 billion in

1998. Dole Europe continued to concentrate

on building retail relationships through

service. The essence of the Dole® brand is

consistency in both product quality and

condition, on-time delivery, innovation,

range of product line, and an assurance of

agricultural and distribution practices that

meet the highest criteria of food safety and

environmental protection.

R4/Dole AR98 finalOps 03/1 4/23/99 4:24 AM Page 16

Increased automated field harvesting and packing at Pascual Hermanos in Spain has assisted in expandingthe division to be a year-round, rather than seasonal producer of fresh vegetables.

FORWARD INTEGRATION

Dole Europe completed the acquisition of sixty percentof SABA Trading AB during the fall of 1998. SABA isScandinavia’s largest fruit and vegetable importer anddistributor with over $500 million in sales. Headquar-tered in Stockholm, Sweden, SABA has banana ripen-ing facilities, produce distribution centers and flowerdistribution facilities throughout Sweden. Dole is themajority shareholder while two of Sweden’s largestretail groups each hold minority shares. SABA providesDole with an opportunity, in joint venture with retailers,to develop retail service centers and add value toDole’s produce imports.

SABA owns one of Europe’s largest exotic fruit import and distribution companies, FTKNetherlands. Together with Dole’s exotic fruitimporter VBH, Belgium, Dole has added leadinglines of exotic fruits, such as mango, avocado,passion fruit and lychee to its expandingproduct range.

SOUTH AFRICA

The new South African government deregulated freshfruit exports at the end of 1997. Previously, growerswere required to export through export boards, whichcontrolled distribution through European panelists.South Africa is a major supplier of citrus, apples, grapes,pears and stonefruits to Europe. Dole founded DoleSouth Africa in March 1998, at the beginning of the cit-rus export season, establishing it as the second largestcitrus exporter behind the South African Citrus Board.

William F. Feeney, President,Dole Europe

Dole Europe


Dole Europe sales were $1.2 billion in

1998. Dole Europe continued to concentrate

on building retail relationships through

service. The essence of the Dole® brand is

consistency in both product quality and

condition, on-time delivery, innovation,

range of product line, and an assurance of

agricultural and distribution practices that

meet the highest criteria of food safety and

environmental protection.


First season citrus exports exceeded $25 million. DoleSouth Africa began stonefruit and grape exports inNovember while the main export season of grapes,apples and pears is early 1999. Dole South Africa willhave nearly $100 million in sales for 1999, supplyingsouthern hemisphere fruits to Asia, North America, andEurope, fully complementing the Dole Chile export andmarketing programs.

SPAIN

Dole’s Spanish citrus and vegetable business, PascualHermanos, greatly improved performance during 1998.Management was changed and the citrus operationdownsized. Citrus programs focused on supermarketrequirements. The iceberg lettuce operation wasimproved with increased drip irrigation and expandedfield packing. Production was increased in specialty sal-ads such as baby lettuce and leafy salads. Specialty tomato production, especially cherry tomatoes, wasincreased with expanded green housing. Pascual Her-manos is now a year-round, rather than a seasonal pro-

ducer. Dole looks forward to a large contribution fromPascual Hermanos through expanded produce volume,distribution range and profit growth.

RUSSIA

The collapse of the Russian economy during the sum-mer of 1998, resulted in drastically reduced banana andother fresh fruit sales to that market. The Russian prob-lem also had short-term effects on adjacent marketssuch as the Ukraine, Poland and the Balkan states.Dole’s St. Petersburg office has reduced receivables andselected only sound and reliable distributors that canwithstand the pressures of uncertain economic policy.Dole continues to cautiously supply the Russian marketwhich represents over 150 million consumers. Thereduction in Russian imports puts considerable pressureon other Eastern European markets which made pricingin the second half of the year very challenging.

NEW EUROPEAN UNION QUOTA

The European Union has changed the E.U. bananaregime, commencing January 1999, due to a ruling bythe World Trade Organization (“WTO”) subsequent tocomplaints from the United States, Ecuador,Guatemala, Honduras, Panama and Mexico. There willcontinue to be a Latin American Quota and an ACPQuota (i.e., former European colonies in Africa, and theCaribbean) as well as licenses and tariffs on Latin American production. The new regime is still beingchallenged by the United States and Latin Americanbanana producers and will be subject to new WTOpanel findings early in 1999.

Kevin Kiwi is proud of the fact that two kiwifruit provide240% of your body’s daily requirement for vitamin C, and one serving provides 16%, 14% and 10% of your daily requirementsfor fiber, potassium and vitamin E, respectively.

Dole’s acquisitions of SABA Trading AB of Sweden and Pascual Hermanos of Spain have increased the Company’s European growing and packing capacity and added strength to Dole’s transportationand distribution network.

SABA, the recently acquired Scandinavian fruit and vegetable distribution business, is a significant step in Dole’s strategy to be the dominant supplier of fresh produce in Europe.



First season citrus exports exceeded $25 million. DoleSouth Africa began stonefruit and grape exports inNovember while the main export season of grapes,apples and pears is early 1999. Dole South Africa willhave nearly $100 million in sales for 1999, supplyingsouthern hemisphere fruits to Asia, North America, andEurope, fully complementing the Dole Chile export andmarketing programs.

SPAIN

Dole’s Spanish citrus and vegetable business, PascualHermanos, greatly improved performance during 1998.Management was changed and the citrus operationdownsized. Citrus programs focused on supermarketrequirements. The iceberg lettuce operation wasimproved with increased drip irrigation and expandedfield packing. Production was increased in specialty sal-ads such as baby lettuce and leafy salads. Specialty tomato production, especially cherry tomatoes, wasincreased with expanded green housing. Pascual Her-manos is now a year-round, rather than a seasonal pro-

ducer. Dole looks forward to a large contribution fromPascual Hermanos through expanded produce volume,distribution range and profit growth.

RUSSIA

The collapse of the Russian economy during the sum-mer of 1998, resulted in drastically reduced banana andother fresh fruit sales to that market. The Russian prob-lem also had short-term effects on adjacent marketssuch as the Ukraine, Poland and the Balkan states.Dole’s St. Petersburg office has reduced receivables andselected only sound and reliable distributors that canwithstand the pressures of uncertain economic policy.Dole continues to cautiously supply the Russian marketwhich represents over 150 million consumers. Thereduction in Russian imports puts considerable pressureon other Eastern European markets which made pricingin the second half of the year very challenging.

NEW EUROPEAN UNION QUOTA

The European Union has changed the E.U. bananaregime, commencing January 1999, due to a ruling bythe World Trade Organization (“WTO”) subsequent tocomplaints from the United States, Ecuador,Guatemala, Honduras, Panama and Mexico. There willcontinue to be a Latin American Quota and an ACPQuota (i.e., former European colonies in Africa, and theCaribbean) as well as licenses and tariffs on Latin American production. The new regime is still beingchallenged by the United States and Latin Americanbanana producers and will be subject to new WTOpanel findings early in 1999.

Kevin Kiwi is proud of the fact that two kiwifruit provide240% of your body’s daily requirement for vitamin C, and one serving provides 16%, 14% and 10% of your daily requirementsfor fiber, potassium and vitamin E, respectively.

Dole’s acquisitions of SABA Trading AB of Sweden and Pascual Hermanos of Spain have increased the Company’s European growing and packing capacity and added strength to Dole’s transportationand distribution network.

SABA, the recently acquired Scandinavian fruit and vegetable distribution business, is a significant step in Dole’s strategy to be the dominant supplier of fresh produce in Europe.



operation in 1998. This year, Stanfilco shippedmore than twenty-three million boxes of fruit toJapan, Korea, China, New Zealand and the Mid-dle East, while Dolefil, Dole’s pineapple produc-tion division also located on Mindanao, produced414,000 tons of fresh and processed pineapple.

In early 1998, Dole Asia’s key divisions in thePhilippines and Thailand embarked upon a costreduction program designed to counter theexpected negative effects of El Niño. Tropifresh,Dole Asia’s diversified fruit, vegetable and cutflower producer located in the Philippines, sig-nificantly reduced its farm maintenance costs.

DISTRIBUTION

Despite the economic recession in Asia, demandremains high for Dole® products in Japan.Dole currently markets more than 100products in Japan, the broadest product

In Asia, Dole has the broadest product mix of any regionin the world. In Japan, Dole is developing partnershipswith local retailers and distributors to jointly establishripening facilities and distribution centers. Dole Asia

Dole Asia sales in Japan, its flagship market,increased seventeen percent in local currencycompared to 1997. This increase was achieved bycontinued consumer confidence in Dole’s highquality banana and pineapple products, and thesuccessful new product introduction of locallyprocessed, fresh-cut vegetables and salads.

Dole’s new product line of fruits packed inclear plastic cups continues to enjoy brisk sales inAsia and Europe. Manufactured primarily byDole Philippines and Dole Thailand, these conve-nient fruit cup products provide Dole’s customerswith an excellent alternative to conventional,canned fruit packaging.

The addition of Dole’s high quality, value-added pre-cut vegetables and fruit cups furtherexpanded consumer awareness of the Dole brandin Asia where Dole enjoys a ninety-two percentconsumer brand recognition.

LOW COST PRODUCER

Devaluation of currencies in Asia contributedfavorably to reducing the cost of Dole Asia keyoperations from production to marketing. Asexpected, Dole Asia experienced downturns in itspineapple, banana, asparagus and papaya opera-tions due, in part, to the El Niño-related droughtin Thailand and the Philippines.

Stanfilco, Dole Asia’s producer of highquality bananas located on Mindanao inthe Philippines, celebrated its 30th year of

Despite the 1998 El Niño weather pattern, Dole Asia

achieved sales of approximately $800 million by the

maximum utilization of its production resources in

Asia and its sourcing capability with affiliated

companies and strategic partners around the world.Paul CuyegkengPresident,Dole Asia



operation in 1998. This year, Stanfilco shippedmore than twenty-three million boxes of fruit toJapan, Korea, China, New Zealand and the Mid-dle East, while Dolefil, Dole’s pineapple produc-tion division also located on Mindanao, produced414,000 tons of fresh and processed pineapple.

In early 1998, Dole Asia’s key divisions in thePhilippines and Thailand embarked upon a costreduction program designed to counter theexpected negative effects of El Niño. Tropifresh,Dole Asia’s diversified fruit, vegetable and cutflower producer located in the Philippines, sig-nificantly reduced its farm maintenance costs.

DISTRIBUTION

Despite the economic recession in Asia, demandremains high for Dole® products in Japan.Dole currently markets more than 100products in Japan, the broadest product

In Asia, Dole has the broadest product mix of any regionin the world. In Japan, Dole is developing partnershipswith local retailers and distributors to jointly establishripening facilities and distribution centers. Dole Asia

Dole Asia sales in Japan, its flagship market,increased seventeen percent in local currencycompared to 1997. This increase was achieved bycontinued consumer confidence in Dole’s highquality banana and pineapple products, and thesuccessful new product introduction of locallyprocessed, fresh-cut vegetables and salads.

Dole’s new product line of fruits packed inclear plastic cups continues to enjoy brisk sales inAsia and Europe. Manufactured primarily byDole Philippines and Dole Thailand, these conve-nient fruit cup products provide Dole’s customerswith an excellent alternative to conventional,canned fruit packaging.

The addition of Dole’s high quality, value-added pre-cut vegetables and fruit cups furtherexpanded consumer awareness of the Dole brandin Asia where Dole enjoys a ninety-two percentconsumer brand recognition.

LOW COST PRODUCER

Devaluation of currencies in Asia contributedfavorably to reducing the cost of Dole Asia keyoperations from production to marketing. Asexpected, Dole Asia experienced downturns in itspineapple, banana, asparagus and papaya opera-tions due, in part, to the El Niño-related droughtin Thailand and the Philippines.

Stanfilco, Dole Asia’s producer of highquality bananas located on Mindanao inthe Philippines, celebrated its 30th year of

Despite the 1998 El Niño weather pattern, Dole Asia

achieved sales of approximately $800 million by the

maximum utilization of its production resources in

Asia and its sourcing capability with affiliated

companies and strategic partners around the world.Paul CuyegkengPresident,Dole Asia



mix of any region in the world. Following Dole Asia’sstrategy of forward integration, nine Dole distributioncenters were fully operational in 1998, which allowsDole to service its customers more efficiently with theoptimal product quality control. Dole Asia opened itslatest Dole Distribution Center in Manila, again affirm-ing Dole Asia’s commitment to deliver the freshest,highest-quality products possible to all of its customers.

MAJOR INVESTMENTS

Dole Asia pursued an aggressive strategy of infra-structure development during 1998. In September, Dole opened a Vapor Heat Treatment Plant in thePhilippines, the first plant of its kind in the SouthernPhilippines. The Vapor Heat Treatment Plant is particu-larly important to the efficient, high-quality productionof mango and papaya and is enabling Dole Asia to forgenew partnerships with mango and papaya growerslocated on Mindanao.

By early 1999, Dole Asia’s largest corrugated boxmanufacturing plant, Carmen Corrugated Containers(“CCC”), will be in full operation. CCC will service theincreased packaging requirements of Dole Asia’s divi-sions in the Philippines as the new century begins.

PARTNERSHIP WITH GROWERS

Following its successful partnering with growers in thePhilippines, Dole Asia expanded its contract-grower program to other parts of the region, creating revolution-ary changes in the Asian agribusiness structure. From aninitial base of 1,200 Japanese farmers in 1997, Dole’s net-work of contract growers has rapidly expanded, givingDole a larger source of domestically grown products,such as broccoli, tomatoes, cherry tomatoes, cabbage,radishes, carrots, lettuce and melons for distribution toDole Distribution Centers throughout Japan. Dole Asiahopes to enlist 20,000 Japanese farmers by the year2002. Dole Asia’s contract-grower program is beingexpanded to include local farmers in Thailand, forpineapple, papaya, guava and passion fruit.

GROWTH OPPORTUNITIES

As the effects of 1998’s long drought diminish, Dole looks forward to opportunities for growth in the Asia-Pacific region.

In New Zealand, the newest and largest supermarket,Pak ’N Save, opened for business during 1998 carryingDole products as its preferred fresh produce brand. InJapan, increased demand for value-added products willprovide further opportunities for growth into the future.Economic resurgence in the Philippines, increaseddemand in Japan and New Zealand, and decreasedtrade restrictions in China, Taiwan and Korea offergrowth opportunities for Dole Asia.

Dole Asia’s Philippine banana division has begunphasing in a new cropping technology. This new processis designed to augment productivity by as much as thir-ty-five percent, and enable Dole to match high yieldperiods to seasons of high market demand. The system,developed by Dole scientists based in Mindanao,assures lower chemical usage, consistent with Dole’scommitment to establishing ways to provide high-qualityproducts while protecting the environment.

Dole canneries processed and shipped over 648,000 tons of fresh and packaged pineapples in 1998.

One of the keys to delivering the freshest, highest quality produce throughout the world isDole’s substantial investment in refrigerated containerized shipping.

Bananas are a good source of fiber, vitamin C, and potassium.One Bobby Banana has 16% of the fiber, 15% of vitamin C, and11% of the potassium we need every day for good health.



mix of any region in the world. Following Dole Asia’sstrategy of forward integration, nine Dole distributioncenters were fully operational in 1998, which allowsDole to service its customers more efficiently with theoptimal product quality control. Dole Asia opened itslatest Dole Distribution Center in Manila, again affirm-ing Dole Asia’s commitment to deliver the freshest,highest-quality products possible to all of its customers.

MAJOR INVESTMENTS

Dole Asia pursued an aggressive strategy of infra-structure development during 1998. In September, Dole opened a Vapor Heat Treatment Plant in thePhilippines, the first plant of its kind in the SouthernPhilippines. The Vapor Heat Treatment Plant is particu-larly important to the efficient, high-quality productionof mango and papaya and is enabling Dole Asia to forgenew partnerships with mango and papaya growerslocated on Mindanao.

By early 1999, Dole Asia’s largest corrugated boxmanufacturing plant, Carmen Corrugated Containers(“CCC”), will be in full operation. CCC will service theincreased packaging requirements of Dole Asia’s divi-sions in the Philippines as the new century begins.

PARTNERSHIP WITH GROWERS

Following its successful partnering with growers in thePhilippines, Dole Asia expanded its contract-grower program to other parts of the region, creating revolution-ary changes in the Asian agribusiness structure. From aninitial base of 1,200 Japanese farmers in 1997, Dole’s net-work of contract growers has rapidly expanded, givingDole a larger source of domestically grown products,such as broccoli, tomatoes, cherry tomatoes, cabbage,radishes, carrots, lettuce and melons for distribution toDole Distribution Centers throughout Japan. Dole Asiahopes to enlist 20,000 Japanese farmers by the year2002. Dole Asia’s contract-grower program is beingexpanded to include local farmers in Thailand, forpineapple, papaya, guava and passion fruit.

GROWTH OPPORTUNITIES

As the effects of 1998’s long drought diminish, Dole looks forward to opportunities for growth in the Asia-Pacific region.

In New Zealand, the newest and largest supermarket,Pak ’N Save, opened for business during 1998 carryingDole products as its preferred fresh produce brand. InJapan, increased demand for value-added products willprovide further opportunities for growth into the future.Economic resurgence in the Philippines, increaseddemand in Japan and New Zealand, and decreasedtrade restrictions in China, Taiwan and Korea offergrowth opportunities for Dole Asia.

Dole Asia’s Philippine banana division has begunphasing in a new cropping technology. This new processis designed to augment productivity by as much as thir-ty-five percent, and enable Dole to match high yieldperiods to seasons of high market demand. The system,developed by Dole scientists based in Mindanao,assures lower chemical usage, consistent with Dole’scommitment to establishing ways to provide high-qualityproducts while protecting the environment.

Dole canneries processed and shipped over 648,000 tons of fresh and packaged pineapples in 1998.

One of the keys to delivering the freshest, highest quality produce throughout the world isDole’s substantial investment in refrigerated containerized shipping.

Bananas are a good source of fiber, vitamin C, and potassium.One Bobby Banana has 16% of the fiber, 15% of vitamin C, and11% of the potassium we need every day for good health.




Consolidated Statements of Income

(in thousands, except per share data) 1998 1997 1996

Revenue $ 4,424,160 $ 4,336,120 $ 3,840,303Cost of products sold 3,785,745 3,692,277 3,256,345

Gross margin 638,415 643,843 583,958

Selling, marketing and administrative expenses 433,509 399,800 369,675

Hurricane Mitch charge 100,000 – –

Citrus charge 20,000 – –Dried Fruit restructuring charge – – 50,000

Operating income 84,906 244,043 164,283

Interest income 9,312 7,776 8,412Other income (expense) – net (7,996) 8,034 4,535

Earnings before interest and taxes 86,222 259,853 177,230Interest expense 68,943 64,589 68,699

Income from operations before income taxes 17,279 195,264 108,531Income taxes 5,200 35,100 19,500

Net income $ 12,079 $ 160,164 $ 89,031

Net income per common share

Basic $ 0.20 $ 2.67 $ 1.48

Diluted 0.20 2.65 1.47

See Notes to Consolidated Financial Statements


Other OperatingSegments

Fresh Vegetables Processed Foods Fresh Fruit Total OperatingSegments

OTHER OPERATING SEGMENTSFRESH FRUIT FRESH VEGETABLES PROCESSED FOODS

96 97 98

254.8 280.9

252.2

172.2

150.0

110.5

96 97 98

30.3 40.2

49.4

96 97 98

52.2

89.8

89.5

97 989696 97

0.1

2.8

0.9

98

1,459

1,383

1,516

96 97 98

303

336

362

96 97 98

659

533

591

96 97 9896 97

10

287

15

98 96 97 98

2,3

55

2,3

43

2,7

56

2,2

38

2,5

83

2,6

92

96 97 98

654

756

790

96 97 98

915 962

835

96 97 98 96 97 98

3,8

40 4

,336

4,4

24

96 97

33 10

7

35

98

ASSETS(in millions)

REVENUE(in millions)

EBIT*(in millions)


Fresh Vegetables Processed FoodsFresh Fruit Total


Fresh Vegetables Processed FoodsFresh Fruit Total OperatingSegments

*excludes special charges

Dole Product Category Highlights

24.25 4/23/99 5:12 AM Page 24


Consolidated Statements of Income


Revenue $ 4,424,160 $ 4,336,120 $ 3,840,303Cost of products sold 3,785,745 3,692,277 3,256,345

Gross margin 638,415 643,843 583,958

Selling, marketing and administrative expenses 433,509 399,800 369,675

Hurricane Mitch charge 100,000 – –

Citrus charge 20,000 – –Dried Fruit restructuring charge – – 50,000

Operating income 84,906 244,043 164,283

Interest income 9,312 7,776 8,412Other income (expense) – net (7,996) 8,034 4,535

Earnings before interest and taxes 86,222 259,853 177,230Interest expense 68,943 64,589 68,699

Income from operations before income taxes 17,279 195,264 108,531Income taxes 5,200 35,100 19,500

Net income $ 12,079 $ 160,164 $ 89,031

Net income per common share

Basic $ 0.20 $ 2.67 $ 1.48

Diluted 0.20 2.65 1.47




Fresh Vegetables Processed Foods Fresh Fruit Total OperatingSegments

OTHER OPERATING SEGMENTSFRESH FRUIT FRESH VEGETABLES PROCESSED FOODS

96 97 98

254.8 280.9

252.2

172.2

150.0

110.5

96 97 98

30.3 40.2

49.4

96 97 98

52.2

89.8

89.5

97 989696 97

0.1

2.8

0.9

98

1,459

1,383

1,516

96 97 98

303

336

362

96 97 98

659

533

591

96 97 9896 97

10

287

15

98 96 97 98

2,3

55

2,3

43

2,7

56

2,2

38

2,5

83

2,6

92

96 97 98

654

756

790

96 97 98

915 962

835

96 97 98 96 97 98

3,8

40 4

,336

4,4

24

96 97

33 10

7

35

98

ASSETS(in millions)

REVENUE(in millions)

EBIT*(in millions)


Fresh Vegetables Processed FoodsFresh Fruit Total


Fresh Vegetables Processed FoodsFresh Fruit Total OperatingSegments

*excludes special charges

Dole Product Category Highlights

24.25 4/23/99 5:12 AM Page 24

27DOLE FOOD COMPANY, INC . ANNUAL REPORT 199826 DOLE FOOD COMPANY, INC . ANNUAL REPORT 1998

Consolidated Balance Sheets Consolidated Statements of Cash Flow

(in thousands) 1998 1997

Current assets

Cash and short-term investments $ 35,352 $ 31,202

Receivables – net 616,579 534,844Inventories 475,524 468,692Prepaid expenses 43,200 48,438

Total current assets 1,170,655 1,083,176

Investments 71,923 69,248

Property, plant and equipment – net 1,102,285 1,024,247

Goodwill – net 277,962 65,942Other assets 292,228 221,282

Total assets $ 2,915,053 $ 2,463,895

Current liabilities

Notes payable $ 29,637 $ 11,290

Current portion of long-term debt 6,451 2,326

Accounts payable 264,732 230,143Accrued liabilities 504,058 432,680

Total current liabilities 804,878 676,439

Long-term debt 1,116,422 754,849

Deferred income taxes and other long-term liabilities 314,527 328,293

Minority interests 57,394 37,842

Commitments and contingenciesCommon shareholders’ equity 621,832 666,472

Total liabilities and equity $ 2,915,053 $ 2,463,895


(in thousands) 1998 1997 1996

Operating activities

Income from operations $ 12,079 $ 160,164 $ 89,031

Adjustments to operations

Depreciation and amortization 122,058 112,081 111,073

Equity earnings, net of distributions (4,421) 373 (2,875)

Provision for deferred income taxes (33,288) 11,575 (1,741)

Hurricane Mitch charge, net 86,312 — —

Citrus charge 20,000 — —

Dried Fruit restructuring charge — – 50,000

Other (1,342) (23,005) (8,203)

Change in operating assets and liabilities,

net of effects from acquisitions

Receivables – net 39,027 (10,438) (89,176)

Inventories 2,463 72,066 27,222

Prepaid expenses and other assets (9,716) (1,167) (8,846)Accounts payable and accrued liabilities (41,537) (7,487) (34,270)

Internal Revenue Service payment

related to prior years’ audits (17,145) — —Other (17,392) (23,126) (37,262)

Cash flow provided by operating activities 157,098 291,036 94,953

Investing activities

Proceeds from sales of assets 19,291 38,700 58,855

Capital additions (150,207) (129,171) (109,686)Purchases of investments and acquisitions,

net of cash acquired (332,100) (40,010) (58,775)Hurricane Mitch insurance proceeds 22,500 — —

Cash flow used in investing activities (440,516) (130,481) (109,606)

Financing activities

Short-term borrowings 39,508 28,414 19,694

Repayments of short-term debt (38,693) (40,887) (20,449)

Long-term borrowings 366,785 35,232 168,060

Repayments of long-term debt (25,692) (169,110) (163,799)

Cash dividends paid (24,027) (23,988) (24,020)

Issuance of common stock 11,773 6,644 11,232Repurchase of common stock (42,086) – (13,874)

Cash flow provided by (used in) financing activities 287,568 (163,695) (23,156)

Increase (decrease) in cash and short-term investments 4,150 (3,140) (37,809)Cash and short term investments at beginning of year 31,202 34,342 72,151

Cash and short term investments at end of year $ 35,352 $ 31,202 $ 34,342


R4/Dole AR98 Fincls 032099 4/22/99 4:50 AM Page 26


Consolidated Balance Sheets Consolidated Statements of Cash Flow


Current assets

Cash and short-term investments $ 35,352 $ 31,202

Receivables – net 616,579 534,844Inventories 475,524 468,692Prepaid expenses 43,200 48,438

Total current assets 1,170,655 1,083,176

Investments 71,923 69,248

Property, plant and equipment – net 1,102,285 1,024,247

Goodwill – net 277,962 65,942Other assets 292,228 221,282

Total assets $ 2,915,053 $ 2,463,895

Current liabilities

Notes payable $ 29,637 $ 11,290

Current portion of long-term debt 6,451 2,326

Accounts payable 264,732 230,143Accrued liabilities 504,058 432,680

Total current liabilities 804,878 676,439

Long-term debt 1,116,422 754,849

Deferred income taxes and other long-term liabilities 314,527 328,293

Minority interests 57,394 37,842

Commitments and contingenciesCommon shareholders’ equity 621,832 666,472

Total liabilities and equity $ 2,915,053 $ 2,463,895


(in thousands) 1998 1997 1996

Operating activities

Income from operations $ 12,079 $ 160,164 $ 89,031

Adjustments to operations

Depreciation and amortization 122,058 112,081 111,073

Equity earnings, net of distributions (4,421) 373 (2,875)

Provision for deferred income taxes (33,288) 11,575 (1,741)

Hurricane Mitch charge, net 86,312 — —

Citrus charge 20,000 — —

Dried Fruit restructuring charge — – 50,000

Other (1,342) (23,005) (8,203)

Change in operating assets and liabilities,

net of effects from acquisitions

Receivables – net 39,027 (10,438) (89,176)

Inventories 2,463 72,066 27,222

Prepaid expenses and other assets (9,716) (1,167) (8,846)Accounts payable and accrued liabilities (41,537) (7,487) (34,270)

Internal Revenue Service payment

related to prior years’ audits (17,145) — —Other (17,392) (23,126) (37,262)

Cash flow provided by operating activities 157,098 291,036 94,953

Investing activities

Proceeds from sales of assets 19,291 38,700 58,855

Capital additions (150,207) (129,171) (109,686)Purchases of investments and acquisitions,

net of cash acquired (332,100) (40,010) (58,775)Hurricane Mitch insurance proceeds 22,500 — —

Cash flow used in investing activities (440,516) (130,481) (109,606)

Financing activities

Short-term borrowings 39,508 28,414 19,694

Repayments of short-term debt (38,693) (40,887) (20,449)

Long-term borrowings 366,785 35,232 168,060

Repayments of long-term debt (25,692) (169,110) (163,799)

Cash dividends paid (24,027) (23,988) (24,020)

Issuance of common stock 11,773 6,644 11,232Repurchase of common stock (42,086) – (13,874)

Cash flow provided by (used in) financing activities 287,568 (163,695) (23,156)

Increase (decrease) in cash and short-term investments 4,150 (3,140) (37,809)Cash and short term investments at beginning of year 31,202 34,342 72,151

Cash and short term investments at end of year $ 35,352 $ 31,202 $ 34,342




Notes to Consolidated Financial Statements

Note 1 — Nature Of Operations

Dole Food Company, Inc. and its consolidated subsidiaries(“the Company”) are engaged in the worldwide sourcing, pro-cessing, distributing and marketing of high quality, brandedfood products including fresh fruits and vegetables, as well asprocessed foods including packaged fruits, fruit juices and bev-erage operations in Honduras. Additionally, the Companysources and markets a full line of premium fresh-cut flowers.

Operations are conducted throughout North America,Latin America, Europe (including eastern European countries)and Asia (primarily in Japan and the Philippines).

The Company’s principal products are produced on bothCompany-owned and leased land and are also acquiredthrough associated producer and independent grower arrange-ments. The Company’s products are primarily packed andprocessed by the Company and sold to retail and institutionalcustomers and other food product and flower companies.

Note 2 — Summary Of Accounting Policies

Principles of Consolidation: The Consolidated Financial State-ments include the accounts of all significant majority-ownedsubsidiaries. All significant intercompany accounts and trans-actions have been eliminated in consolidation.Annual Closing Date: The Company’s fiscal year ends on theSaturday closest to December 31. Fiscal year 1998 ended January 2, 1999 and included 52 weeks, while fiscal years 1997and 1996 included 53 weeks and 52 weeks, respectively.Cash and Short-Term Investments: Cash and short-term invest-ments include cash on hand and time deposits with originalmaturities of three months or less.Inventories: Inventories are valued at the lower of cost or mar-ket. Cost is determined principally on a first-in, first-out basis.Specific identification and average cost methods are also usedfor certain packing materials and operating supplies.Recurring Agricultural Costs: The costs of growing bananas andpineapples are charged to operations as incurred. Growingcosts related to other crops are recognized when the crops areharvested and sold. Investments: Investments in affiliates and joint ventures withownership of 20% to 50% are generally recorded on the equitymethod. Other investments are accounted for using the costmethod.Property, Plant and Equipment: Property, plant and equipmentare stated at cost, less accumulated depreciation. Depreciationis computed principally by the straight-line method over theestimated useful lives of the assets. As necessary, the Companyreviews the recoverability of these assets, as well as certainintangible assets including goodwill, based on analyses ofundiscounted expected future cash flows without interestcharges (see Note 4).

Goodwill and Other Intangible Assets: Goodwill and other intan-gible assets, generally representing the excess of the cost overthe net asset value of acquired businesses, are stated at cost andare amortized principally on a straight-line basis over the esti-mated future periods to be benefited (not exceeding 40 years). Foreign Exchange: For subsidiaries in which the functional cur-rency is the United States dollar, net foreign exchange transac-tion gains or losses are included in determining net income.These resulted in net losses of $4.8 million, $5.0 million and$2.1 million for 1998, 1997 and 1996, respectively. Net foreignexchange gains or losses resulting from the translation of assetsand liabilities of foreign subsidiaries whose local currency isthe functional currency are accumulated as a separate compo-nent of common shareholders’ equity.Income Taxes: Deferred income taxes are recognized for the tax consequences of temporary differences by applyingenacted statutory tax rates to the differences between financialstatement carrying amounts and the tax bases of assets andliabilities. Income taxes which would be due upon thedistribution of foreign subsidiary earnings have not beenprovided where the undistributed earnings are consideredpermanently invested.Earnings Per Common Share: In accordance with Statement ofFinancial Accounting Standards No. 128, “Earnings perShare”, basic earnings per common share are calculated usingthe weighted-average number of common shares outstandingduring the period without consideration of the dilutive effectof stock options. The basic weighted-average number of com-mon shares outstanding was 60.0 million for 1998, 1997 and1996. Diluted earnings per common share are calculated usingthe weighted-average number of common shares outstandingduring the period after consideration of the dilutive effect ofstock options. The diluted weighted-average number of com-mon shares and equivalents outstanding was 60.4 million for1998, 1997 and 1996.Financial Instruments: The Company’s financial instrumentsare primarily composed of short-term trade and growerreceivables, notes receivable and notes payable, as well aslong-term grower receivables, notes receivable, notes payableand debentures. For short-term instruments, the historicalcarrying amount is a reasonable estimate of fair value. Fairvalues for long-term financial instruments not readilymarketable were estimated based upon discounted future cashflows at prevailing market interest rates. Based on theseassumptions, management believes the fair market values ofthe Company’s financial instruments, other than certain debtinstruments (see Note 7), are not materially different fromtheir recorded amounts as of January 2, 1999.

The Company has historically not attempted to hedge fluc-tuations resulting from foreign currency denominated transac-tions in both sourcing and selling locations. However, theCompany occasionally enters into forward contracts related tospecific foreign currency denominated purchase commitmentsand sales. Such contracts are designated as hedges and meetthe criteria for correlation and risk mitigation. Accordingly,unrealized gains or losses on the fair value of hedge instru-ments are deferred. Gains or losses on these contracts are rec-ognized when the underlying transactions settle and arerecorded in the income statement or as a component of theunderlying asset or liability, as appropriate. As of January 2,1999, the Company had contracted to purchase Germanmarks to facilitate payment for two German-made refrigeratedcontainer vessels (see Note 11) at a weighted-average exchangerate of DM 1.78 to $1.00 for a total notional value of $98.3 mil-lion. These fixed-rate contracts will be settled during thefourth quarter of 1999, and as of January 2, 1999, their fairvalue was approximately $105.8 million. Stock-Based Compensation: Statement of Financial AccountingStandards No. 123 (“SFAS 123”), “Accounting for Stock-BasedCompensation”, defines a fair value method of accounting foremployee stock-based compensation cost but allows for thecontinuation of the intrinsic value method prescribed byAccounting Principles Board Opinion No. 25 (“APB 25”). Inaccordance with SFAS 123, the Company has elected tocontinue to utilize the accounting method prescribed by APB25 and has adopted the disclosure requirements of SFAS 123(see Note 9).Comprehensive Income: Effective January 4, 1998, the Companyadopted Statement of Financial Accounting Standards No. 130(“SFAS 130”), “Reporting Comprehensive Income”. SFAS 130 established standards for the reporting of comprehensiveincome and its components, which consist of net income andother comprehensive income. Other comprehensive income is comprised of changes to shareholders’ equity, other thancontributions from or distributions to shareholders, excludedfrom the determination of net income under generally accept-ed accounting principles. The Company’s other comprehen-sive income is comprised of unrealized foreign currency trans-lation gains and losses and is presented in the Company’schanges in shareholders’ equity (see Note 10). Adoption ofSFAS 130 did not impact the Company’s net income or share-holders’ equity for the years presented.Use of Estimates: The preparation of financial statementsrequires management to make estimates and assumptions thataffect the reported amounts of assets and liabilities and disclo-sures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results coulddiffer from these estimates. Reclassifications: Certain prior year amounts have been reclassi-fied to conform to the 1998 presentation.

Note 3 — Acquisitions

During the second half of 1998, the Company acquired andinvested in operations in Latin America, North America andEurope with an aggregate cash purchase price, net of cashacquired, of approximately $332 million. The acquisitionswere comprised primarily of the purchases of Sunburst Farms,Inc., Four Farmers, Inc., Finesse Farms, Colombian Carna-tions, Inc. and their affiliated companies and 60% of the SABATrading AB Scandinavian distribution business. Each acquisi-tion was accounted for as a purchase, and accordingly, the pur-chase price was allocated to the net assets acquired based upontheir estimated fair values as of the date of acquisition. Prelimi-nary allocations of purchase price resulted in approximately$217 million of goodwill, which is being amortized over 30years. The fair values of assets acquired and liabilities assumedwere approximately $493 million and $161 million, respec-tively. Net income from acquired operations included in theCompany’s results for 1998 was $1.7 million.

The following unaudited pro forma information presentsthe results of operations of the Company as if the acquisitionshad taken place on December 29, 1996:

(in thousands, except per share data) 1998 1997

Revenues $ 4,954,428 $ 5,050,709Net income 20,638 163,044Net income per common share:

Basic $ 0.34 $ 2.72Diluted 0.34 2.70

These pro forma results of operations have been prepared forcomparative purposes only and may not be indicative of theresults of operations had the acquisitions occurred on the dateindicated or of future results of operations of the Company.

The Company acquired and invested in production anddistribution operations in Europe, Latin America and Asiawith an aggregate purchase price, net of cash acquired, ofapproximately $40 million in 1997 and $59 million in 1996.Each acquisition was accounted for as a purchase, and accord-ingly, the purchase price was allocated to the net assetsacquired based upon their estimated fair values as of the dateof acquisition. The allocations of purchase price resulted inapproximately $11 million and $4 million of goodwill in 1997and 1996, respectively. The goodwill is being amortized over aperiod of up to 40 years. The fair values of assets acquired andliabilities assumed were approximately $79 million and $39million, respectively, in 1997 and approximately $107 millionand $48 million, respectively, in 1996. Results of acquiredoperations were not significant in 1997 or 1996.



Notes to Consolidated Financial Statements

Note 1 — Nature Of Operations

Dole Food Company, Inc. and its consolidated subsidiaries(“the Company”) are engaged in the worldwide sourcing, pro-cessing, distributing and marketing of high quality, brandedfood products including fresh fruits and vegetables, as well asprocessed foods including packaged fruits, fruit juices and bev-erage operations in Honduras. Additionally, the Companysources and markets a full line of premium fresh-cut flowers.

Operations are conducted throughout North America,Latin America, Europe (including eastern European countries)and Asia (primarily in Japan and the Philippines).

The Company’s principal products are produced on bothCompany-owned and leased land and are also acquiredthrough associated producer and independent grower arrange-ments. The Company’s products are primarily packed andprocessed by the Company and sold to retail and institutionalcustomers and other food product and flower companies.

Note 2 — Summary Of Accounting Policies

Principles of Consolidation: The Consolidated Financial State-ments include the accounts of all significant majority-ownedsubsidiaries. All significant intercompany accounts and trans-actions have been eliminated in consolidation.Annual Closing Date: The Company’s fiscal year ends on theSaturday closest to December 31. Fiscal year 1998 ended January 2, 1999 and included 52 weeks, while fiscal years 1997and 1996 included 53 weeks and 52 weeks, respectively.Cash and Short-Term Investments: Cash and short-term invest-ments include cash on hand and time deposits with originalmaturities of three months or less.Inventories: Inventories are valued at the lower of cost or mar-ket. Cost is determined principally on a first-in, first-out basis.Specific identification and average cost methods are also usedfor certain packing materials and operating supplies.Recurring Agricultural Costs: The costs of growing bananas andpineapples are charged to operations as incurred. Growingcosts related to other crops are recognized when the crops areharvested and sold. Investments: Investments in affiliates and joint ventures withownership of 20% to 50% are generally recorded on the equitymethod. Other investments are accounted for using the costmethod.Property, Plant and Equipment: Property, plant and equipmentare stated at cost, less accumulated depreciation. Depreciationis computed principally by the straight-line method over theestimated useful lives of the assets. As necessary, the Companyreviews the recoverability of these assets, as well as certainintangible assets including goodwill, based on analyses ofundiscounted expected future cash flows without interestcharges (see Note 4).

Goodwill and Other Intangible Assets: Goodwill and other intan-gible assets, generally representing the excess of the cost overthe net asset value of acquired businesses, are stated at cost andare amortized principally on a straight-line basis over the esti-mated future periods to be benefited (not exceeding 40 years). Foreign Exchange: For subsidiaries in which the functional cur-rency is the United States dollar, net foreign exchange transac-tion gains or losses are included in determining net income.These resulted in net losses of $4.8 million, $5.0 million and$2.1 million for 1998, 1997 and 1996, respectively. Net foreignexchange gains or losses resulting from the translation of assetsand liabilities of foreign subsidiaries whose local currency isthe functional currency are accumulated as a separate compo-nent of common shareholders’ equity.Income Taxes: Deferred income taxes are recognized for the tax consequences of temporary differences by applyingenacted statutory tax rates to the differences between financialstatement carrying amounts and the tax bases of assets andliabilities. Income taxes which would be due upon thedistribution of foreign subsidiary earnings have not beenprovided where the undistributed earnings are consideredpermanently invested.Earnings Per Common Share: In accordance with Statement ofFinancial Accounting Standards No. 128, “Earnings perShare”, basic earnings per common share are calculated usingthe weighted-average number of common shares outstandingduring the period without consideration of the dilutive effectof stock options. The basic weighted-average number of com-mon shares outstanding was 60.0 million for 1998, 1997 and1996. Diluted earnings per common share are calculated usingthe weighted-average number of common shares outstandingduring the period after consideration of the dilutive effect ofstock options. The diluted weighted-average number of com-mon shares and equivalents outstanding was 60.4 million for1998, 1997 and 1996.Financial Instruments: The Company’s financial instrumentsare primarily composed of short-term trade and growerreceivables, notes receivable and notes payable, as well aslong-term grower receivables, notes receivable, notes payableand debentures. For short-term instruments, the historicalcarrying amount is a reasonable estimate of fair value. Fairvalues for long-term financial instruments not readilymarketable were estimated based upon discounted future cashflows at prevailing market interest rates. Based on theseassumptions, management believes the fair market values ofthe Company’s financial instruments, other than certain debtinstruments (see Note 7), are not materially different fromtheir recorded amounts as of January 2, 1999.

The Company has historically not attempted to hedge fluc-tuations resulting from foreign currency denominated transac-tions in both sourcing and selling locations. However, theCompany occasionally enters into forward contracts related tospecific foreign currency denominated purchase commitmentsand sales. Such contracts are designated as hedges and meetthe criteria for correlation and risk mitigation. Accordingly,unrealized gains or losses on the fair value of hedge instru-ments are deferred. Gains or losses on these contracts are rec-ognized when the underlying transactions settle and arerecorded in the income statement or as a component of theunderlying asset or liability, as appropriate. As of January 2,1999, the Company had contracted to purchase Germanmarks to facilitate payment for two German-made refrigeratedcontainer vessels (see Note 11) at a weighted-average exchangerate of DM 1.78 to $1.00 for a total notional value of $98.3 mil-lion. These fixed-rate contracts will be settled during thefourth quarter of 1999, and as of January 2, 1999, their fairvalue was approximately $105.8 million. Stock-Based Compensation: Statement of Financial AccountingStandards No. 123 (“SFAS 123”), “Accounting for Stock-BasedCompensation”, defines a fair value method of accounting foremployee stock-based compensation cost but allows for thecontinuation of the intrinsic value method prescribed byAccounting Principles Board Opinion No. 25 (“APB 25”). Inaccordance with SFAS 123, the Company has elected tocontinue to utilize the accounting method prescribed by APB25 and has adopted the disclosure requirements of SFAS 123(see Note 9).Comprehensive Income: Effective January 4, 1998, the Companyadopted Statement of Financial Accounting Standards No. 130(“SFAS 130”), “Reporting Comprehensive Income”. SFAS 130 established standards for the reporting of comprehensiveincome and its components, which consist of net income andother comprehensive income. Other comprehensive income is comprised of changes to shareholders’ equity, other thancontributions from or distributions to shareholders, excludedfrom the determination of net income under generally accept-ed accounting principles. The Company’s other comprehen-sive income is comprised of unrealized foreign currency trans-lation gains and losses and is presented in the Company’schanges in shareholders’ equity (see Note 10). Adoption ofSFAS 130 did not impact the Company’s net income or share-holders’ equity for the years presented.Use of Estimates: The preparation of financial statementsrequires management to make estimates and assumptions thataffect the reported amounts of assets and liabilities and disclo-sures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results coulddiffer from these estimates. Reclassifications: Certain prior year amounts have been reclassi-fied to conform to the 1998 presentation.

Note 3 — Acquisitions

During the second half of 1998, the Company acquired andinvested in operations in Latin America, North America andEurope with an aggregate cash purchase price, net of cashacquired, of approximately $332 million. The acquisitionswere comprised primarily of the purchases of Sunburst Farms,Inc., Four Farmers, Inc., Finesse Farms, Colombian Carna-tions, Inc. and their affiliated companies and 60% of the SABATrading AB Scandinavian distribution business. Each acquisi-tion was accounted for as a purchase, and accordingly, the pur-chase price was allocated to the net assets acquired based upontheir estimated fair values as of the date of acquisition. Prelimi-nary allocations of purchase price resulted in approximately$217 million of goodwill, which is being amortized over 30years. The fair values of assets acquired and liabilities assumedwere approximately $493 million and $161 million, respec-tively. Net income from acquired operations included in theCompany’s results for 1998 was $1.7 million.

The following unaudited pro forma information presentsthe results of operations of the Company as if the acquisitionshad taken place on December 29, 1996:

(in thousands, except per share data) 1998 1997

Revenues $ 4,954,428 $ 5,050,709Net income 20,638 163,044Net income per common share:

Basic $ 0.34 $ 2.72Diluted 0.34 2.70

These pro forma results of operations have been prepared forcomparative purposes only and may not be indicative of theresults of operations had the acquisitions occurred on the dateindicated or of future results of operations of the Company.

The Company acquired and invested in production anddistribution operations in Europe, Latin America and Asiawith an aggregate purchase price, net of cash acquired, ofapproximately $40 million in 1997 and $59 million in 1996.Each acquisition was accounted for as a purchase, and accord-ingly, the purchase price was allocated to the net assetsacquired based upon their estimated fair values as of the dateof acquisition. The allocations of purchase price resulted inapproximately $11 million and $4 million of goodwill in 1997and 1996, respectively. The goodwill is being amortized over aperiod of up to 40 years. The fair values of assets acquired andliabilities assumed were approximately $79 million and $39million, respectively, in 1997 and approximately $107 millionand $48 million, respectively, in 1996. Results of acquiredoperations were not significant in 1997 or 1996.



Note 4 — Special Charges

During the fourth quarter of 1998, the Company recorded a$100 million charge, net of insurance proceeds received, forlosses sustained from Hurricane Mitch. The charge has beenclassified as a separate caption in the Consolidated Statementsof Income. The hurricane impacted over 30,000 acres of agri-cultural plantings and severely damaged the Company’s gen-eral agricultural infrastructure at both its Honduran bananaand beverage operations. A majority of the charge is for write-downs of fixed assets, grower and trade receivables, inventoriesand certain deferred crop growing costs that were completelyor partially destroyed or impaired by the hurricane. The Company has started to rehabilitate selected parts of theaffected areas. In this regard, the Company spent $13.7 millionon rehabilitation and relief efforts during 1998. Future rehabil-itation costs, net of insurance recoveries, will continue to bereported on a separate line in the Consolidated Statements ofIncome in future years.

Included in the charge is $61.8 million related to property,plant and equipment which consists of $23.7 million of assetwrite-offs for property destroyed by the hurricane and $38.1million of assets impaired by the hurricane. The Companyreviewed the impaired assets to determine whether expectedfuture cash flows from them (undiscounted and without inter-est charges) would result in the recovery of the carrying amountof such property. As a result of this review, the Companydetermined that these assets were impaired in accordance withgenerally accepted accounting principles, and accordingly, animpairment loss was recognized. The Company also recorded$3.1 million of accrued liabilities for lease settlements andcommitted relief efforts as of January 2, 1999. The amountsrecorded, utilized and to be utilized in each asset, liability andexpense category are as follows:

1998 Utilized To be(in thousands) Charge 1998 Utilized

Receivables $ 19,283 $ 19,283 $ –Inventory 13,266 13,266 –Investment 2,000 2,000 –Property, plant and

equipment 61,750 61,750 –Deferred costs 9,442 9,442 –Accrued liabilities 3,071 – 3,071Rehabilitation expenses 13,688 13,688 –Insurance recoveries (22,500) (22,500) –

Total Hurricane Mitch charge $ 100,000 $ 96,929 $ 3,071

From December 21 to December 24, 1998 freezing tempera-tures destroyed or severely damaged citrus crops in California.The Company has ownership interests in approximately 6,500 acres of citrus in the areas affected by the freeze. As aresult of the freeze and changes in industry economics, theCompany recorded a $20 million charge. Of the $20 millioncharge, $13.3 million related to write-downs of deferred cropcosts and property, plant and equipment as well as reductionsin grower receivable recovery estimates due to damages sus-tained during the freeze. The remaining $6.7 million of thecharge related to reductions in grower receivable recoveryestimates in other areas of the Company’s North American citrus operations due to the recognition of changes in industryeconomics that impacted certain independent growers. Thecharge has been classified as a separate caption in the Consoli-dated Statements of Income. This loss was largely not coveredby insurance.

Included in the charge is $3.1 million of property, plantand equipment impaired by the freeze. The Companyreviewed these assets to determine whether expected futurecash flows from them (undiscounted and without interestcharges) would result in the recovery of the carrying amountof such assets. As a result of this review, the Company deter-mined that these assets were impaired in accordance with gen-erally accepted accounting principles, and accordingly, animpairment loss was recognized. Included in accrued liabili-ties is $0.2 million related to the severance of 29 employees, aswell as $0.6 million of incremental freeze protection costsincurred in 1998. During 1999, crop costs to finish the cropyear and unutilized overhead in idled packing facilities will becharged to cost of products sold as incurred. The amountsrecorded, utilized and to be utilized in each asset and liabilitycategory are as follows:


Grower receivables – freeze areas $ 6,177 $ 6,177 $ –

Grower receivables – other areas 6,737 6,737 –

Crop costs inventory 3,171 3,171 –Property, plant and

equipment 3,148 3,148 –Accrued liabilities 767 – 767

Total citrus charge $ 20,000 $ 19,233 $ 767

In 1996, the Company implemented a formal plan to close itsdried fruit facility located in Fresno, California, which had suf-fered continued losses. During the fourth quarter of 1996, arestructuring charge of $50.0 million was recorded related tothe closure of this facility. The principal component of thecharge was a provision for asset write-downs of $38.5 million.The closure of this facility was essentially completed in the sec-ond quarter of 1997. During 1997, $30.0 million for asset write-downs, $2.2 million for contract terminations and $2.6 millionfor severance payments were charged against this provision.

During 1998, $1.3 million for asset write-downs, $0.3 millionfor contract terminations and $0.3 million for severance payments were charged against this provision. In total, 466 employees were terminated as a result of the closure ofthis facility.

Note 5 — Current Assets And Liabilities

Short-term investments of $0.6 million and $1.8 million as of January 2, 1999 and January 3, 1998, respectively, consistedprincipally of time deposits. Outstanding checks, which arefunded as presented for payment, totaled $33.5 million and$22.1 million as of January 2, 1999 and January 3, 1998, respec-tively, and were included in accounts payable.

Details of certain current assets were as follows:


ReceivablesTrade $ 494,587 $ 434,781Notes and other 190,331 142,820Affiliated operations 24,426 17,342

709,344 594,943Allowance for doubtful accounts (92,765) (60,099)

$ 616,579 $534,844

InventoriesFinished products $ 168,423 $ 149,933Raw materials and work in progress 156,623 167,426Crop growing costs 47,676 46,207Operating supplies and other 102,802 105,126

$ 475,524 $468,692

Included in notes receivable is a $10 million note from Castle& Cooke, Inc. which bears interest at the rate of 7% per annumand is due December 8, 2000. Accrued liabilities as of January2, 1999 and January 3, 1998 included $92.9 million and $86.4million, respectively, of amounts due to growers.

Note 6 — Property, Plant And Equipment

Major classes of property, plant and equipment were as follows:


Land and land improvements $ 448,151 $ 444,686Buildings and improvements 314,460 264,494Machinery and equipment 957,478 864,431Construction in progress 101,130 84,954

1,821,219 1,658,565Accumulated depreciation (718,934) (634,318)

$ 1,102,285 $1,024,247

Depreciation expense for 1998, 1997 and 1996 totaled $103.4million, $101.9 million and $102.5 million, respectively.

Note 7 — Debt

Notes payable consisted primarily of short-term borrowingsrequired to fund certain foreign operations and totaled $29.6million with a weighted-average interest rate of 13.0% as ofJanuary 2, 1999 and $11.3 million with a weighted-averageinterest rate of 19.3% as of January 3, 1998.

Long-term debt consisted of:


Unsecured debtNotes payable to banks at an

average interest rate of 5.5 %(6.2% – 1997) $ 63,500 $ 14,600

6.75% notes due 2000 225,000 225,0007% notes due 2003 300,000 300,0006.375% notes due 2005 300,000 —7.875% debentures due 2013 175,000 175,000Various other notes due

1999 – 2004 at an average interest rate of 5.8% (7.8% – 1997) 38,064 36,102

Secured debtMortgages, contracts and notes

due 1999 – 2012 at an average interest rate of 6.4% (9.2% – 1997) 23,824 8,525

Unamortized debt discount and issue costs (2,515) (2,052)

1,122,873 757,175Current maturities (6,451) (2,326)

$ 1,116,422 $ 754,849

The Company estimates the fair value of its fixed interest rate unsecured debt based on current quoted market prices.The estimated fair value of unsecured notes (face value $1,000 million in 1998 and $700 million in 1997) was approx-imately $1,017 million at January 2, 1999 and $716 million atJanuary 3, 1998.

In July 1998, the Company extended its 5-year $400 mil-lion revolving credit facility (the “Facility”) to 2003. At theCompany’s option, borrowings under the Facility bear interestat a certain percentage over the agent’s prime rate or the Lon-don Interbank Offered Rate (“LIBOR”). Provisions under theFacility require the Company to comply with certain financialcovenants which include a maximum permitted ratio of consol-idated debt to net worth and a minimum required fixed chargecoverage ratio. At January 2, 1999 and January 3, 1998, therewere no borrowings outstanding under the Facility. The Com-pany may also borrow under uncommitted lines of credit atrates offered from time to time by various banks that may not



Note 4 — Special Charges

During the fourth quarter of 1998, the Company recorded a$100 million charge, net of insurance proceeds received, forlosses sustained from Hurricane Mitch. The charge has beenclassified as a separate caption in the Consolidated Statementsof Income. The hurricane impacted over 30,000 acres of agri-cultural plantings and severely damaged the Company’s gen-eral agricultural infrastructure at both its Honduran bananaand beverage operations. A majority of the charge is for write-downs of fixed assets, grower and trade receivables, inventoriesand certain deferred crop growing costs that were completelyor partially destroyed or impaired by the hurricane. The Company has started to rehabilitate selected parts of theaffected areas. In this regard, the Company spent $13.7 millionon rehabilitation and relief efforts during 1998. Future rehabil-itation costs, net of insurance recoveries, will continue to bereported on a separate line in the Consolidated Statements ofIncome in future years.

Included in the charge is $61.8 million related to property,plant and equipment which consists of $23.7 million of assetwrite-offs for property destroyed by the hurricane and $38.1million of assets impaired by the hurricane. The Companyreviewed the impaired assets to determine whether expectedfuture cash flows from them (undiscounted and without inter-est charges) would result in the recovery of the carrying amountof such property. As a result of this review, the Companydetermined that these assets were impaired in accordance withgenerally accepted accounting principles, and accordingly, animpairment loss was recognized. The Company also recorded$3.1 million of accrued liabilities for lease settlements andcommitted relief efforts as of January 2, 1999. The amountsrecorded, utilized and to be utilized in each asset, liability andexpense category are as follows:


Receivables $ 19,283 $ 19,283 $ –Inventory 13,266 13,266 –Investment 2,000 2,000 –Property, plant and

equipment 61,750 61,750 –Deferred costs 9,442 9,442 –Accrued liabilities 3,071 – 3,071Rehabilitation expenses 13,688 13,688 –Insurance recoveries (22,500) (22,500) –

Total Hurricane Mitch charge $ 100,000 $ 96,929 $ 3,071

From December 21 to December 24, 1998 freezing tempera-tures destroyed or severely damaged citrus crops in California.The Company has ownership interests in approximately 6,500 acres of citrus in the areas affected by the freeze. As aresult of the freeze and changes in industry economics, theCompany recorded a $20 million charge. Of the $20 millioncharge, $13.3 million related to write-downs of deferred cropcosts and property, plant and equipment as well as reductionsin grower receivable recovery estimates due to damages sus-tained during the freeze. The remaining $6.7 million of thecharge related to reductions in grower receivable recoveryestimates in other areas of the Company’s North American citrus operations due to the recognition of changes in industryeconomics that impacted certain independent growers. Thecharge has been classified as a separate caption in the Consoli-dated Statements of Income. This loss was largely not coveredby insurance.

Included in the charge is $3.1 million of property, plantand equipment impaired by the freeze. The Companyreviewed these assets to determine whether expected futurecash flows from them (undiscounted and without interestcharges) would result in the recovery of the carrying amountof such assets. As a result of this review, the Company deter-mined that these assets were impaired in accordance with gen-erally accepted accounting principles, and accordingly, animpairment loss was recognized. Included in accrued liabili-ties is $0.2 million related to the severance of 29 employees, aswell as $0.6 million of incremental freeze protection costsincurred in 1998. During 1999, crop costs to finish the cropyear and unutilized overhead in idled packing facilities will becharged to cost of products sold as incurred. The amountsrecorded, utilized and to be utilized in each asset and liabilitycategory are as follows:


Grower receivables – freeze areas $ 6,177 $ 6,177 $ –

Grower receivables – other areas 6,737 6,737 –

Crop costs inventory 3,171 3,171 –Property, plant and

equipment 3,148 3,148 –Accrued liabilities 767 – 767

Total citrus charge $ 20,000 $ 19,233 $ 767

In 1996, the Company implemented a formal plan to close itsdried fruit facility located in Fresno, California, which had suf-fered continued losses. During the fourth quarter of 1996, arestructuring charge of $50.0 million was recorded related tothe closure of this facility. The principal component of thecharge was a provision for asset write-downs of $38.5 million.The closure of this facility was essentially completed in the sec-ond quarter of 1997. During 1997, $30.0 million for asset write-downs, $2.2 million for contract terminations and $2.6 millionfor severance payments were charged against this provision.

During 1998, $1.3 million for asset write-downs, $0.3 millionfor contract terminations and $0.3 million for severance payments were charged against this provision. In total, 466 employees were terminated as a result of the closure ofthis facility.

Note 5 — Current Assets And Liabilities

Short-term investments of $0.6 million and $1.8 million as of January 2, 1999 and January 3, 1998, respectively, consistedprincipally of time deposits. Outstanding checks, which arefunded as presented for payment, totaled $33.5 million and$22.1 million as of January 2, 1999 and January 3, 1998, respec-tively, and were included in accounts payable.

Details of certain current assets were as follows:


ReceivablesTrade $ 494,587 $ 434,781Notes and other 190,331 142,820Affiliated operations 24,426 17,342

709,344 594,943Allowance for doubtful accounts (92,765) (60,099)

$ 616,579 $534,844

InventoriesFinished products $ 168,423 $ 149,933Raw materials and work in progress 156,623 167,426Crop growing costs 47,676 46,207Operating supplies and other 102,802 105,126

$ 475,524 $468,692

Included in notes receivable is a $10 million note from Castle& Cooke, Inc. which bears interest at the rate of 7% per annumand is due December 8, 2000. Accrued liabilities as of January2, 1999 and January 3, 1998 included $92.9 million and $86.4million, respectively, of amounts due to growers.

Note 6 — Property, Plant And Equipment

Major classes of property, plant and equipment were as follows:


Land and land improvements $ 448,151 $ 444,686Buildings and improvements 314,460 264,494Machinery and equipment 957,478 864,431Construction in progress 101,130 84,954

1,821,219 1,658,565Accumulated depreciation (718,934) (634,318)

$ 1,102,285 $1,024,247

Depreciation expense for 1998, 1997 and 1996 totaled $103.4million, $101.9 million and $102.5 million, respectively.

Note 7 — Debt

Notes payable consisted primarily of short-term borrowingsrequired to fund certain foreign operations and totaled $29.6million with a weighted-average interest rate of 13.0% as ofJanuary 2, 1999 and $11.3 million with a weighted-averageinterest rate of 19.3% as of January 3, 1998.

Long-term debt consisted of:


Unsecured debtNotes payable to banks at an

average interest rate of 5.5 %(6.2% – 1997) $ 63,500 $ 14,600

6.75% notes due 2000 225,000 225,0007% notes due 2003 300,000 300,0006.375% notes due 2005 300,000 —7.875% debentures due 2013 175,000 175,000Various other notes due

1999 – 2004 at an average interest rate of 5.8% (7.8% – 1997) 38,064 36,102

Secured debtMortgages, contracts and notes

due 1999 – 2012 at an average interest rate of 6.4% (9.2% – 1997) 23,824 8,525

Unamortized debt discount and issue costs (2,515) (2,052)

1,122,873 757,175Current maturities (6,451) (2,326)

$ 1,116,422 $ 754,849

The Company estimates the fair value of its fixed interest rate unsecured debt based on current quoted market prices.The estimated fair value of unsecured notes (face value $1,000 million in 1998 and $700 million in 1997) was approx-imately $1,017 million at January 2, 1999 and $716 million atJanuary 3, 1998.

In July 1998, the Company extended its 5-year $400 mil-lion revolving credit facility (the “Facility”) to 2003. At theCompany’s option, borrowings under the Facility bear interestat a certain percentage over the agent’s prime rate or the Lon-don Interbank Offered Rate (“LIBOR”). Provisions under theFacility require the Company to comply with certain financialcovenants which include a maximum permitted ratio of consol-idated debt to net worth and a minimum required fixed chargecoverage ratio. At January 2, 1999 and January 3, 1998, therewere no borrowings outstanding under the Facility. The Com-pany may also borrow under uncommitted lines of credit atrates offered from time to time by various banks that may not



The status of the defined benefit pension plans and other plans was as follows:

U.S. Pension Plans International Pension Plans Other Plans

(in thousands) 1998 1997 1998 1997 1998 1997

Change in projected benefit obligationBenefit obligation at beginning of year $ 276,767 $ 248,676 $ 30,535 $ 30,776 $ 71,507 $ 73,176Service cost 4,238 4,083 1,826 1,828 186 212Interest cost 19,492 18,405 4,079 3,650 5,031 5,423Participant contributions — — 28 41 — —Plan amendments 2,686 — 195 — — —Exchange rate changes — — 605 (9,497) — —Actuarial loss (gain) 20,621 26,825 (1,635) 5,559 (3,063) (1,182)Curtailments and settlements — — — (404) — —Benefits paid (21,716) (21,222) (1,693) (1,418) (5,737) (6,122)

Benefit obligation at end of year $ 302,088 $ 276,767 $ 33,940 $ 30,535 $ 67,924 $ 71,507

Change in plan assetsFair value of plan assets at

beginning of year $ 281,944 $ 250,154 $ 1,737 $ 2,473 — —Actual return on plan assets 39,704 46,222 150 60 — —Company contributions 7,443 6,790 1,679 2,162 5,737 6,122Participant contributions — — 28 41 — —Exchange rate changes — — 128 (831) — —Settlements — — — (750) — —Benefits paid (21,716) (21,222) (1,693) (1,418) (5,737) (6,122)

Fair value of plan assets at end of year $ 307,375 $ 281,944 $ 2,029 $ 1,737 — —

Funded status $ 5,287 $ 5,177 $ (31,911) $ (28,798) $ (67,924) $ (71,507)Unrecognized net loss (gain) (419) (2,967) 1,172 2,588 (18,232) (15,968)Unrecognized prior service cost (benefit) 4,539 2,099 3,589 3,815 (1,407) (1,740)Unrecognized net transition

obligation (asset) (467) (650) 1,655 1,677 — —

Net amount recognized $ 8,940 $ 3,659 $ (25,495) $ (20,718) $ (87,563) $ (89,215)

Amounts recognized in the Consolidated Balance Sheets

Prepaid benefit cost $ 16,234 $ 9,410 — — — —Accrued benefit liability (11,045) (7,455) (25,897) (20,858) (87,563) (89,215)Additional minimum liability 3,751 1,704 402 140 — —


For U.S. plans, the projected benefit obligation was deter-mined using assumed discount rates of 7.0% in 1998 and 7.25%in 1997 and assumed rates of increase in future compensationlevels of 4.5% in 1998 and 1997. The expected long-term rateof return on assets was 9.25% in 1998 and 1997. For interna-tional plans, the projected benefit obligation was determinedusing assumed discount rates of 7.0% to 20.0% in 1998 and7.25% to 20.0% in 1997 and assumed rates of increase in futurecompensation levels of 4.5% to 17.5% in 1998 and 1997. Theexpected long-term rate of return on assets for internationalplans was 9.25% to 20.0% in 1998 and 1997.

The accumulated plan benefit obligation (“APBO”) for the Company’s other plans in 1998 was determined using anannual rate of increase in the per capita cost of covered healthcare benefits of 8.5% in 1999 decreasing to 5.0% in 2006 andthereafter. The annual rate of increase assumed in the 1997APBO was 9.0% in 1998 decreasing to 5.0% in 2006 andthereafter. An increase in the assumed health care cost trendrate of one percentage point in each year would have

The components of net periodic benefit cost for the U.S. and international plans were as follows:

Pension Plans Other Plans

(in thousands) 1998 1997 1996 1998 1997 1996

Components of net periodic benefit costService cost $ 6,064 $ 5,911 $ 9,143 $ 186 $ 212 $ 237Interest cost 23,571 22,055 21,968 5,031 5,423 5,482Expected return on plan assets (22,712) (21,312) (20,156) — — —Amortization of:

Unrecognized net loss (gain) 500 200 486 (799) — (156)Unrecognized prior service cost (benefit) 681 688 673 (333) (333) (325)Unrecognized net obligation (asset) (29) (41) 59 — — —Curtailment (gain) — — — — (600) (577)

$ 8,075 $ 7,501 $ 12,173 $ 4,085 $ 4,702 $ 4,661

increased the Company’s APBO as of January 2, 1999 byapproximately $5.6 million and would have increased the ser-vice and interest cost components of postretirement benefitexpense for 1998 by $0.5 million, in aggregate. A decrease inthe assumed health care cost trend rate by one percentagepoint in each year would have decreased the Company’sAPBO as of January 2, 1999 by approximately $5.5 millionand would have decreased the service and interest cost com-ponents of postretirement benefit expense for 1998 by $0.4million, in aggregate. The weighted-average discount rateused in determining the APBO was 7.0% for the U.S. andinternational plans in 1998 and 7.25% for the U.S. and inter-national plans in 1997.

The Company’s U.S. ERISA Excess Plan had an APBO of $11.0 million in 1998 and $7.5 million in 1997. Due to thenature of the plan, it remains unfunded. The remainder of the Company’s domestic pension plans were fully funded. The APBO for the Company’s unfunded international pension plans, in aggregate, was $15.9 million in 1998 and$13.2 million in 1997.

be lenders under the Facility. Net borrowings outstanding underthe uncommitted lines of credit totaled $63.5 million and $14.6million at January 2, 1999 and January 3, 1998, respectively.

On October 6, 1998 the Company issued $300 million ofunsecured notes in a public offering for which it received cashproceeds of $297.2 million. The notes bear interest at 6.375%and mature in 2005. Net proceeds from the sale of the noteswere used to repay amounts outstanding under the Facilityand to fund acquisitions during the fourth quarter of 1998.

Sinking fund requirements and maturities with respect tolong-term debt as of January 2, 1999 were as follows (in mil-lions): 1999 – $6.5; 2000 – $240.6; 2001 – $13.4; 2002 – $5.1;2003 – $368.4; and thereafter – $488.9.

Interest payments totaled $67.1 million, $66.2 million and$68.4 million, during 1998, 1997 and 1996, respectively.

Note 8 — Employee Benefit Plans

The Company has qualified and non-qualified defined benefitpension plans covering certain full-time employees. Benefitsunder these plans are generally based on each employee’s eligi-ble compensation and years of service except for certain hourlyplans which are based on negotiated benefits. In addition toproviding pension benefits, the Company has other plans thatprovide certain health care and life insurance benefits for eligi-ble retired employees. Covered employees may become eligi-ble for such benefits if they fulfill established requirementsupon reaching retirement age.

ForU.S.plans, theCompany’s policy is to fund the net peri-odic pension cost plus a 15-year amortization of the unfunded lia-bility. Most of the Company’s international pension plans andall of the Company’s plans other than pensions are unfunded.

The Company recognized net curtailment losses of $1.3 mil-lion in 1996 for the domestic plans and $2.4 million in 1997 forthe international plans. These losses were due to additionalbenefit payments resulting from reductions in workforce.

The Company offers two 401(k) plans to salaried U.S.employees. Eligible employees may defer a percentage of theirannual compensation up to a maximum allowable amountunder federal income tax law to supplement their retirementincome. These plans provide for Company contributions basedon a certain percentage of each participant’s contribution, sub-ject to a maximum contribution by the Company. Total Com-pany contributions to these plans in 1998, 1997 and 1996 were$3.4 million, $3.2 million and $3.8 million, respectively.

The Company is also a party to various industry-wide col-lective bargaining agreements which provide pension benefits.Total contributions to these plans plus direct payments to pen-sioners in 1998, 1997 and 1996 were $0.6 million, $0.8 millionand $1.2 million, respectively.

In 1998, the Company adopted Statements of FinancialAccounting Standards No. 132, “Employers’ Disclosures aboutPensions and Other Postretirement Benefits”. Such adoptiondid not impact the Company’s financial position or results of operations.



The status of the defined benefit pension plans and other plans was as follows:

U.S. Pension Plans International Pension Plans Other Plans

(in thousands) 1998 1997 1998 1997 1998 1997

Change in projected benefit obligationBenefit obligation at beginning of year $ 276,767 $ 248,676 $ 30,535 $ 30,776 $ 71,507 $ 73,176Service cost 4,238 4,083 1,826 1,828 186 212Interest cost 19,492 18,405 4,079 3,650 5,031 5,423Participant contributions — — 28 41 — —Plan amendments 2,686 — 195 — — —Exchange rate changes — — 605 (9,497) — —Actuarial loss (gain) 20,621 26,825 (1,635) 5,559 (3,063) (1,182)Curtailments and settlements — — — (404) — —Benefits paid (21,716) (21,222) (1,693) (1,418) (5,737) (6,122)

Benefit obligation at end of year $ 302,088 $ 276,767 $ 33,940 $ 30,535 $ 67,924 $ 71,507

Change in plan assetsFair value of plan assets at

beginning of year $ 281,944 $ 250,154 $ 1,737 $ 2,473 — —Actual return on plan assets 39,704 46,222 150 60 — —Company contributions 7,443 6,790 1,679 2,162 5,737 6,122Participant contributions — — 28 41 — —Exchange rate changes — — 128 (831) — —Settlements — — — (750) — —Benefits paid (21,716) (21,222) (1,693) (1,418) (5,737) (6,122)

Fair value of plan assets at end of year $ 307,375 $ 281,944 $ 2,029 $ 1,737 — —

Funded status $ 5,287 $ 5,177 $ (31,911) $ (28,798) $ (67,924) $ (71,507)Unrecognized net loss (gain) (419) (2,967) 1,172 2,588 (18,232) (15,968)Unrecognized prior service cost (benefit) 4,539 2,099 3,589 3,815 (1,407) (1,740)Unrecognized net transition

obligation (asset) (467) (650) 1,655 1,677 — —


Amounts recognized in the Consolidated Balance Sheets

Prepaid benefit cost $ 16,234 $ 9,410 — — — —Accrued benefit liability (11,045) (7,455) (25,897) (20,858) (87,563) (89,215)Additional minimum liability 3,751 1,704 402 140 — —


For U.S. plans, the projected benefit obligation was deter-mined using assumed discount rates of 7.0% in 1998 and 7.25%in 1997 and assumed rates of increase in future compensationlevels of 4.5% in 1998 and 1997. The expected long-term rateof return on assets was 9.25% in 1998 and 1997. For interna-tional plans, the projected benefit obligation was determinedusing assumed discount rates of 7.0% to 20.0% in 1998 and7.25% to 20.0% in 1997 and assumed rates of increase in futurecompensation levels of 4.5% to 17.5% in 1998 and 1997. Theexpected long-term rate of return on assets for internationalplans was 9.25% to 20.0% in 1998 and 1997.

The accumulated plan benefit obligation (“APBO”) for the Company’s other plans in 1998 was determined using anannual rate of increase in the per capita cost of covered healthcare benefits of 8.5% in 1999 decreasing to 5.0% in 2006 andthereafter. The annual rate of increase assumed in the 1997APBO was 9.0% in 1998 decreasing to 5.0% in 2006 andthereafter. An increase in the assumed health care cost trendrate of one percentage point in each year would have

The components of net periodic benefit cost for the U.S. and international plans were as follows:

Pension Plans Other Plans

(in thousands) 1998 1997 1996 1998 1997 1996

Components of net periodic benefit costService cost $ 6,064 $ 5,911 $ 9,143 $ 186 $ 212 $ 237Interest cost 23,571 22,055 21,968 5,031 5,423 5,482Expected return on plan assets (22,712) (21,312) (20,156) — — —Amortization of:

Unrecognized net loss (gain) 500 200 486 (799) — (156)Unrecognized prior service cost (benefit) 681 688 673 (333) (333) (325)Unrecognized net obligation (asset) (29) (41) 59 — — —Curtailment (gain) — — — — (600) (577)

$ 8,075 $ 7,501 $ 12,173 $ 4,085 $ 4,702 $ 4,661

increased the Company’s APBO as of January 2, 1999 byapproximately $5.6 million and would have increased the ser-vice and interest cost components of postretirement benefitexpense for 1998 by $0.5 million, in aggregate. A decrease inthe assumed health care cost trend rate by one percentagepoint in each year would have decreased the Company’sAPBO as of January 2, 1999 by approximately $5.5 millionand would have decreased the service and interest cost com-ponents of postretirement benefit expense for 1998 by $0.4million, in aggregate. The weighted-average discount rateused in determining the APBO was 7.0% for the U.S. andinternational plans in 1998 and 7.25% for the U.S. and inter-national plans in 1997.

The Company’s U.S. ERISA Excess Plan had an APBO of $11.0 million in 1998 and $7.5 million in 1997. Due to thenature of the plan, it remains unfunded. The remainder of the Company’s domestic pension plans were fully funded. The APBO for the Company’s unfunded international pension plans, in aggregate, was $15.9 million in 1998 and$13.2 million in 1997.

be lenders under the Facility. Net borrowings outstanding underthe uncommitted lines of credit totaled $63.5 million and $14.6million at January 2, 1999 and January 3, 1998, respectively.

On October 6, 1998 the Company issued $300 million ofunsecured notes in a public offering for which it received cashproceeds of $297.2 million. The notes bear interest at 6.375%and mature in 2005. Net proceeds from the sale of the noteswere used to repay amounts outstanding under the Facilityand to fund acquisitions during the fourth quarter of 1998.

Sinking fund requirements and maturities with respect tolong-term debt as of January 2, 1999 were as follows (in mil-lions): 1999 – $6.5; 2000 – $240.6; 2001 – $13.4; 2002 – $5.1;2003 – $368.4; and thereafter – $488.9.

Interest payments totaled $67.1 million, $66.2 million and$68.4 million, during 1998, 1997 and 1996, respectively.

Note 8 — Employee Benefit Plans

The Company has qualified and non-qualified defined benefitpension plans covering certain full-time employees. Benefitsunder these plans are generally based on each employee’s eligi-ble compensation and years of service except for certain hourlyplans which are based on negotiated benefits. In addition toproviding pension benefits, the Company has other plans thatprovide certain health care and life insurance benefits for eligi-ble retired employees. Covered employees may become eligi-ble for such benefits if they fulfill established requirementsupon reaching retirement age.

ForU.S.plans, theCompany’s policy is to fund the net peri-odic pension cost plus a 15-year amortization of the unfunded lia-bility. Most of the Company’s international pension plans andall of the Company’s plans other than pensions are unfunded.

The Company recognized net curtailment losses of $1.3 mil-lion in 1996 for the domestic plans and $2.4 million in 1997 forthe international plans. These losses were due to additionalbenefit payments resulting from reductions in workforce.

The Company offers two 401(k) plans to salaried U.S.employees. Eligible employees may defer a percentage of theirannual compensation up to a maximum allowable amountunder federal income tax law to supplement their retirementincome. These plans provide for Company contributions basedon a certain percentage of each participant’s contribution, sub-ject to a maximum contribution by the Company. Total Com-pany contributions to these plans in 1998, 1997 and 1996 were$3.4 million, $3.2 million and $3.8 million, respectively.

The Company is also a party to various industry-wide col-lective bargaining agreements which provide pension benefits.Total contributions to these plans plus direct payments to pen-sioners in 1998, 1997 and 1996 were $0.6 million, $0.8 millionand $1.2 million, respectively.

In 1998, the Company adopted Statements of FinancialAccounting Standards No. 132, “Employers’ Disclosures aboutPensions and Other Postretirement Benefits”. Such adoptiondid not impact the Company’s financial position or results of operations.


Comprehensive income and changes in shareholders’ equity were as follows:

Common Additional Accumulated Other Total CommonShares Common Paid-in Retained Comprehensive Shareholders’ Comprehensive

(in thousands, except share data) Outstanding Stock Capital Earnings Loss Equity Income

Balance, December 30, 1995 59,854,739 $ 320,497 $ 170,266 $ 58,269 $ (40,597) $ 508,435Net income – – – 89,031 – 89,031 $ 89,031Cash dividends declared

($.40 per share) – – – (24,020) – (24,020) —Translation adjustments – – – – (21,244) (21,244) (21,244)Issuance of common stock 373,952 374 10,858 – – 11,232 —Repurchase of common stock (395,400) (395) (13,479) – – (13,874) —

Comprehensive income — 1996 — — — — — — 67,787

Balance, December 28, 1996 59,833,291 320,476 167,645 123,280 (61,841) 549,560Net income – – – 160,164 – 160,164 160,164Cash dividends declared

($.40 per share) – – – (23,988) – (23,988) —Translation adjustments – – – – (25,908) (25,908) (25,908)Issuance of common stock 231,156 231 6,413 – – 6,644 —


Balance, January 3, 1998 60,064,447 320,707 174,058 259,456 (87,749) 666,472Net income – – – 12,079 – 12,079 12,079Cash dividends declared

($.40 per share) – – – (24,027) – (24,027) —Translation adjustments – – – – (2,379) (2,379) (2,379)Issuance of common stock 394,652 395 11,378 – – 11,773 —Repurchase of common stock (1,165,200) (1,165) (40,921) – – (42,086) —

Comprehensive income — 1998 — — — — — — $ 9,700

Balance, January 2, 1999 59,293,899 $ 319,937 $ 144,515 $ 247,508 $ (90,128) $ 621,832


At January 2, 1999, the Company’s aggregate minimumrental commitments, before sublease income, were as follows(in millions): 1999 – $131.1; 2000 – $103.1; 2001 – $114.7; 2002 – $158.3; 2003 – $28.4; and thereafter – $197.1. Totalfuture sublease income is $25.1 million.

Note 13 — Income Taxes

Income tax expense (benefit) was as follows:

(in thousands) 1998 1997 1996

CurrentFederal, state and local $ 19,427 $ 2,810 $ 1,882Foreign 19,061 20,715 19,359

38,488 23,525 21,241

DeferredFederal, state and local (29,407) 12,285 (444)Foreign (3,881) (710) (1,297)

(33,288) 11,575 (1,741)

$ 5,200 $ 35,100 $ 19,500

Pretax earnings attributable to foreign operations were $44million, $170 million and $173 million for 1998, 1997 and1996, respectively. Undistributed earnings of foreign sub-sidiaries, which have been or are intended to be permanentlyinvested, aggregated $1.3 billion at January 2, 1999.

Note 9 — Stock Options And Awards

Under the 1982 and 1991 Stock Option and Award Plans (“theOption Plans”), the Company can grant incentive stockoptions, non-qualified stock options, stock appreciation rights,restricted stock awards and performance share awards to offi-cers and key employees of the Company. Stock options vestover time or based on stock price appreciation and may beexercised for up to 10 years from the date of grant, as deter-mined by the committee of the Company’s Board of Directorsadministering the Option Plans. No stock appreciation rights,restricted stock awards or performance share awards were out-standing at January 2, 1999.

Under the 1995 Non-Employee Directors Stock OptionPlan (the “Directors Plan”), each active non-employee directorwill receive a grant of 1,500 non-qualified stock options (the“Options”) on February 15th (or the first trading day there-after) of each year. The Options vest over three years andexpire 10 years after the date of the grant or upon early termi-nation as defined by the plan agreement.

Changes in outstanding stock options were as follows:Weighted-

Shares Average Price

Outstanding, December 30, 1995 1,960,420 $ 29.23Granted 711,000 38.52Exercised (373,952) 30.04Canceled (103,661) 33.39

Outstanding, December 28, 1996 2,193,807 31.91Granted 449,630 38.65Exercised (249,365) 28.36Canceled (25,288) 36.78

Outstanding, January 3, 1998 2,368,784 33.51Granted 595,682 52.31Exercised (413,016) 29.56Canceled (158,587) 39.09

Outstanding, January 2, 1999 2,392,863 $ 38.50Exercisable, January 2, 1999 1,286,370 $ 32.34

The following table summarizes information about stockoptions outstanding at January 2, 1999:

(shares in thousands) Options Outstanding Options Exercisable

Number Weighted- Weighted- Number Weighted- Outstanding Average Average Exercisable Average

Range of at January 2, Remaining Exercise at January 2, Exercise Exercise Prices 1999 Years Price 1999 Price

$25.32 - $30.92 629 4.6 $ 27.30 629 $ 27.3033.72 - 44.25 1,193 5.8 37.79 657 37.1350.19 - 54.81 571 9.1 52.32 — —

$25.32 - $54.81 2,393 6.3 $ 38.50 1,286 $ 32.34

Note 11 — Contingencies

At January 2, 1999, the Company was guarantor of approxi-mately $76 million of indebtedness of certain key fruit suppli-ers and other entities integral to the Company’s operations.

The Company has ordered two refrigerated container ves-sels from HDW in Kiel, Germany, which are scheduled for delivery in late 1999. The cost per ship is approximately DM 100 million.

The Company is involved from time to time in variousclaims and legal actions incident to its operations, both asplaintiff and defendant. In the opinion of management, afterconsultation with legal counsel, none of such claims is expect-ed to have a material adverse effect on the Company’s finan-cial position or results of operations.

Note 12 — Lease Commitments

The Company has obligations under non-cancelable operatingleases, primarily for ship charters and containers, and certainequipment and office facilities. Lease terms are for less than theeconomic life of the property. Certain agricultural land leasesprovide for increases in minimum rentals based on production.Lease payments under a significant portion of the Company’soperating leases are based on variable interest rates. Totalrental expense was $150.7 million, $182.2 million and $158.7million (net of sublease income of $8.7 million, $10.6 millionand $12.4 million) for 1998, 1997 and 1996, respectively.

The fair value of each option grant was estimated on the dateof grant using the Black-Scholes option pricing model with thefollowing weighted-average assumptions for grants in 1998,1997 and 1996:

1998 1997 1996

Dividend yields 0.8% 1.0% 1.0%Expected volatility 28.0% 29.0% 30.0%Risk free interest rate 5.7% 6.5% 5.8%Expected lives 10 years 9 years 9 yearsWeighted-average

fair value $ 24.69 $ 17.29 $ 15.08

The Company accounts for stock-based compensation underAPB 25, and accordingly, no compensation costs have beenrecognized in the accompanying Consolidated Statements ofIncome for 1998, 1997 or 1996. Had compensation costs beendetermined under SFAS 123, pro forma net income and netincome per share would have been as follows:


Net income $ 7,547 $156,779 $ 86,022

Net income per share – basic $ 0.13 $ 2.61 $ 1.43Net income per share – diluted 0.12 2.59 1.42

Since SFAS 123 was only applied to options granted subse-quent to December 31, 1994, the resulting pro forma compen-sation cost may not be representative of that to be expected infuture years.

Note 10 — Shareholders’ Equity

Authorized capital at January 2, 1999 consisted of 80 millionshares of no par value common stock and 30 million shares ofno par value preferred stock issuable in series. At January 2,1999, approximately 4.7 million shares and 0.1 million sharesof common stock were reserved for issuance under the OptionPlans and the Directors Plan, respectively. There was no pre-ferred stock outstanding.

The Company’s current policy is to pay quarterly dividendson common shares at an annual rate of 40 cents per share.

During 1996, the Company announced a program torepurchase up to 5% of its outstanding common stock. During1998, the Company increased the number of shares autho-rized for repurchase to 4.5 million, which approximated 7.6%of its common shares outstanding. As of January 2, 1999, theCompany had repurchased 1,560,600 shares at a cost ofapproximately $56.0 million.


Comprehensive income and changes in shareholders’ equity were as follows:

Common Additional Accumulated Other Total CommonShares Common Paid-in Retained Comprehensive Shareholders’ Comprehensive

(in thousands, except share data) Outstanding Stock Capital Earnings Loss Equity Income

Balance, December 30, 1995 59,854,739 $ 320,497 $ 170,266 $ 58,269 $ (40,597) $ 508,435Net income – – – 89,031 – 89,031 $ 89,031Cash dividends declared

($.40 per share) – – – (24,020) – (24,020) —Translation adjustments – – – – (21,244) (21,244) (21,244)Issuance of common stock 373,952 374 10,858 – – 11,232 —Repurchase of common stock (395,400) (395) (13,479) – – (13,874) —


Balance, December 28, 1996 59,833,291 320,476 167,645 123,280 (61,841) 549,560Net income – – – 160,164 – 160,164 160,164Cash dividends declared

($.40 per share) – – – (23,988) – (23,988) —Translation adjustments – – – – (25,908) (25,908) (25,908)Issuance of common stock 231,156 231 6,413 – – 6,644 —


Balance, January 3, 1998 60,064,447 320,707 174,058 259,456 (87,749) 666,472Net income – – – 12,079 – 12,079 12,079Cash dividends declared

($.40 per share) – – – (24,027) – (24,027) —Translation adjustments – – – – (2,379) (2,379) (2,379)Issuance of common stock 394,652 395 11,378 – – 11,773 —Repurchase of common stock (1,165,200) (1,165) (40,921) – – (42,086) —

Comprehensive income — 1998 — — — — — — $ 9,700

Balance, January 2, 1999 59,293,899 $ 319,937 $ 144,515 $ 247,508 $ (90,128) $ 621,832


At January 2, 1999, the Company’s aggregate minimumrental commitments, before sublease income, were as follows(in millions): 1999 – $131.1; 2000 – $103.1; 2001 – $114.7; 2002 – $158.3; 2003 – $28.4; and thereafter – $197.1. Totalfuture sublease income is $25.1 million.

Note 13 — Income Taxes

Income tax expense (benefit) was as follows:

(in thousands) 1998 1997 1996

CurrentFederal, state and local $ 19,427 $ 2,810 $ 1,882Foreign 19,061 20,715 19,359

38,488 23,525 21,241

DeferredFederal, state and local (29,407) 12,285 (444)Foreign (3,881) (710) (1,297)

(33,288) 11,575 (1,741)

$ 5,200 $ 35,100 $ 19,500

Pretax earnings attributable to foreign operations were $44million, $170 million and $173 million for 1998, 1997 and1996, respectively. Undistributed earnings of foreign sub-sidiaries, which have been or are intended to be permanentlyinvested, aggregated $1.3 billion at January 2, 1999.

Note 9 — Stock Options And Awards

Under the 1982 and 1991 Stock Option and Award Plans (“theOption Plans”), the Company can grant incentive stockoptions, non-qualified stock options, stock appreciation rights,restricted stock awards and performance share awards to offi-cers and key employees of the Company. Stock options vestover time or based on stock price appreciation and may beexercised for up to 10 years from the date of grant, as deter-mined by the committee of the Company’s Board of Directorsadministering the Option Plans. No stock appreciation rights,restricted stock awards or performance share awards were out-standing at January 2, 1999.

Under the 1995 Non-Employee Directors Stock OptionPlan (the “Directors Plan”), each active non-employee directorwill receive a grant of 1,500 non-qualified stock options (the“Options”) on February 15th (or the first trading day there-after) of each year. The Options vest over three years andexpire 10 years after the date of the grant or upon early termi-nation as defined by the plan agreement.

Changes in outstanding stock options were as follows:Weighted-

Shares Average Price

Outstanding, December 30, 1995 1,960,420 $ 29.23Granted 711,000 38.52Exercised (373,952) 30.04Canceled (103,661) 33.39

Outstanding, December 28, 1996 2,193,807 31.91Granted 449,630 38.65Exercised (249,365) 28.36Canceled (25,288) 36.78

Outstanding, January 3, 1998 2,368,784 33.51Granted 595,682 52.31Exercised (413,016) 29.56Canceled (158,587) 39.09

Outstanding, January 2, 1999 2,392,863 $ 38.50Exercisable, January 2, 1999 1,286,370 $ 32.34

The following table summarizes information about stockoptions outstanding at January 2, 1999:

(shares in thousands) Options Outstanding Options Exercisable

Number Weighted- Weighted- Number Weighted- Outstanding Average Average Exercisable Average

Range of at January 2, Remaining Exercise at January 2, Exercise Exercise Prices 1999 Years Price 1999 Price

$25.32 - $30.92 629 4.6 $ 27.30 629 $ 27.3033.72 - 44.25 1,193 5.8 37.79 657 37.1350.19 - 54.81 571 9.1 52.32 — —

$25.32 - $54.81 2,393 6.3 $ 38.50 1,286 $ 32.34

Note 11 — Contingencies

At January 2, 1999, the Company was guarantor of approxi-mately $76 million of indebtedness of certain key fruit suppli-ers and other entities integral to the Company’s operations.

The Company has ordered two refrigerated container ves-sels from HDW in Kiel, Germany, which are scheduled for delivery in late 1999. The cost per ship is approximately DM 100 million.

The Company is involved from time to time in variousclaims and legal actions incident to its operations, both asplaintiff and defendant. In the opinion of management, afterconsultation with legal counsel, none of such claims is expect-ed to have a material adverse effect on the Company’s finan-cial position or results of operations.

Note 12 — Lease Commitments

The Company has obligations under non-cancelable operatingleases, primarily for ship charters and containers, and certainequipment and office facilities. Lease terms are for less than theeconomic life of the property. Certain agricultural land leasesprovide for increases in minimum rentals based on production.Lease payments under a significant portion of the Company’soperating leases are based on variable interest rates. Totalrental expense was $150.7 million, $182.2 million and $158.7million (net of sublease income of $8.7 million, $10.6 millionand $12.4 million) for 1998, 1997 and 1996, respectively.

The fair value of each option grant was estimated on the dateof grant using the Black-Scholes option pricing model with thefollowing weighted-average assumptions for grants in 1998,1997 and 1996:

1998 1997 1996

Dividend yields 0.8% 1.0% 1.0%Expected volatility 28.0% 29.0% 30.0%Risk free interest rate 5.7% 6.5% 5.8%Expected lives 10 years 9 years 9 yearsWeighted-average

fair value $ 24.69 $ 17.29 $ 15.08

The Company accounts for stock-based compensation underAPB 25, and accordingly, no compensation costs have beenrecognized in the accompanying Consolidated Statements ofIncome for 1998, 1997 or 1996. Had compensation costs beendetermined under SFAS 123, pro forma net income and netincome per share would have been as follows:


Net income $ 7,547 $156,779 $ 86,022

Net income per share – basic $ 0.13 $ 2.61 $ 1.43Net income per share – diluted 0.12 2.59 1.42

Since SFAS 123 was only applied to options granted subse-quent to December 31, 1994, the resulting pro forma compen-sation cost may not be representative of that to be expected infuture years.

Note 10 — Shareholders’ Equity

Authorized capital at January 2, 1999 consisted of 80 millionshares of no par value common stock and 30 million shares ofno par value preferred stock issuable in series. At January 2,1999, approximately 4.7 million shares and 0.1 million sharesof common stock were reserved for issuance under the OptionPlans and the Directors Plan, respectively. There was no pre-ferred stock outstanding.

The Company’s current policy is to pay quarterly dividendson common shares at an annual rate of 40 cents per share.

During 1996, the Company announced a program torepurchase up to 5% of its outstanding common stock. During1998, the Company increased the number of shares autho-rized for repurchase to 4.5 million, which approximated 7.6%of its common shares outstanding. As of January 2, 1999, theCompany had repurchased 1,560,600 shares at a cost ofapproximately $56.0 million.



The Company’s reported income tax expense varied fromthe expense calculated using the U.S. federal statutory tax ratefor the following reasons:

(in thousands) 1998 1997 1996

Expense computed at U.S. federal statutoryincome tax rate $ 6,048 $ 68,341 $ 37,986

Foreign income taxedat different rates (28,097) (36,437) (21,656)

Dividends from subsidiaries 486 456 618

State and local incometax, net of federalincome tax benefit 762 602 1,100

Interest on prior years taxes (3,752) – –

Hurricane losses taxed at different rates 9,886 – –

Valuation allowance on foreign hurricane losses 18,742 – –

Other 1,125 2,138 1,452

Reported income tax expense $ 5,200 $ 35,100 $ 19,500

Total income tax payments (net of refunds) for 1998, 1997 and1996 were $36.7 million, $17.3 million and ($1.6) million,respectively.

Deferred tax assets (liabilities) were comprised of the following:

(in thousands) 1998 1997 1996

Operating reserves $ 44,591 $ 24,892 $ 45,246Accelerated depreciation (16,538) (25,290) (21,717)Inventory valuation

methods 4,699 3,024 3,670Effect of differences

between book values assigned in prioracquisitions and historical tax values (34,032) (33,100) (36,941)

Postretirement benefits 34,098 34,278 33,946Current year acquisitions (114) – (6,560)Tax credit carryforward 1,263 1,263 4,987Net operating loss

carryforward 100,221 86,670 77,685Reserves for

hurricane losses 22,847 – –Valuation allowance on

foreign hurricane losses (18,742) – –Other, net (25,178) (11,729) (12,117)

$ 113,115 $ 80,008 $ 88,199

In connection with the fourth quarter losses related to Hurricane Mitch, a valuation allowance in the amount of $18.7 million has been recognized to offset the deferred tax assets related to these losses.

The Company has recorded deferred tax assets of $100.2million reflecting the benefit of approximately $269 million infederal and state net operating loss carryovers which will, ifunused, begin to expire in 2009.

The tax credit carryforward amount of $1.3 million iscomprised of general business credits which begin to expire in 2008.

Total deferred tax assets and deferred tax liabilities were asfollows:

(in thousands) 1998 1997 1996

Deferred tax assets $ 238,212 $226,028 $ 253,831Deferred tax liabilities (125,097) (146,020) (165,632)

$ 113,115 $ 80,008 $ 88,199

The Company remains contingently liable with respect to certain tax credits sold to Norfolk and Southern Railway(“Norfolk”) with recourse by Flexi-Van Corporation (“Flexi-Van”), the Company’s former transportation equipment leas-ing business. Litigation with the Internal Revenue Serviceinvolving these credits concluded during the year. Litigationand settlement negotiations involving Flexi-Van and Norfolk(and the Company due to its contingent liability) are ongoing.Flexi-Van, which separated from the Company in 1987 andwas subsequently acquired by David H. Murdock, has indem-nified the Company against obligations that might result fromthe resolution of the matter.

Note 14 — Business Segments

In accordance with Statement of Financial Accounting Stan-dards No. 131 (“SFAS 131”), “Disclosures about Segments ofan Enterprise and Related Information”, the Company hasthree reportable segments: Fresh Fruit, Fresh Vegetables, andProcessed Foods. The Fresh Fruit segment contains severaloperating segments that produce and market fresh fruit towholesale, retail and institutional customers worldwide. TheFresh Vegetables segment contains three operating segmentsthat produce and market commodity and fresh packaged veg-etables to wholesale, retail and institutional customers primari-ly in North America, Europe and Asia. Both the Fresh Fruitand Fresh Vegetable segments sell produce grown by a combi-nation of Company-owned and independent farms. TheProcessed Foods segment contains several operating segmentsthat produce and market packaged foods including fruits, bev-erages and snack foods. The reportable segments are managedseparately due to varying products, production processes, dis-tribution channels and customer bases.

The Company has other operating segments which includefresh-cut flower businesses acquired during 1998 and certaindiversified operations.

Accounting policies for the three reportable segments and other operating segments are the same as those describedin the summary of significant accounting policies. Companymanagement evaluates and monitors segment performanceprimarily through earnings before interest and taxes (EBIT).The results of operations and financial position of the threereportable segments, other operating segments, and Corporateand other were as follows:

(in thousands) 1998 1997 1996

RevenueFresh Fruit $ 2,692,147 $ 2,583,277 $ 2,238,257Fresh Vegetables 790,149 756,176 653,730Processed Foods 834,966 962,127 915,335Other operating

segments 106,898 34,540 32,981

$ 4,424,160 $ 4,336,120 $ 3,840,303

EBITFresh Fruit $ 110,505 $ 149,997 $ 172,205Fresh Vegetables 49,418 40,196 30,300Processed Foods 89,462 89,805 52,226Other operating

segments 2,788 912 136

Total operatingsegments 252,173 280,910 254,867

Corporate and other (45,951) (21,057) (27,637)Special charges (120,000) – (50,000)

$ 86,222 $ 259,853 $ 177,230

AssetsFresh Fruit $ 1,516,551 $ 1,459,204 $ 1,383,064Fresh Vegetables 361,544 335,827 302,698Processed Foods 591,188 532,629 658,977Other operating

segments 286,578 15,470 10,652

Total operatingsegments 2,755,861 2,343,130 2,355,391

Corporate and other 159,192 120,765 131,416

$ 2,915,053 $ 2,463,895 $ 2,486,807

Depreciation and amortization

Fresh Fruit $ 75,993 $ 77,634 $ 76,944Fresh Vegetables 12,788 9,145 10,061Processed Foods 21,864 20,727 22,164Other operating

segments 7,969 164 188Corporate and other 3,444 4,411 1,716

$ 122,058 $ 112,081 $ 111,073

Capital additionsFresh Fruit $ 79,746 $ 63,052 $ 52,211Fresh Vegetables 20,724 35,647 8,118Processed Foods 47,078 25,672 36,651Other operating

segments 2,222 – 100Corporate and other 437 4,800 12,606

$ 150,207 $ 129,171 $ 109,686

Note: Corporate and other EBIT in 1997 and 1996 includes certain gains on thedisposition of investments and assets.

The Company’s revenue from external customers and net prop-erty, plant and equipment by geographic area were as follows:

(in thousands) 1998 1997 1996

RevenueUnited States $ 1,886,237 $ 1,943,057 $ 1,741,741Japan 585,658 595,131 551,073Germany 318,787 306,418 238,575Honduras 275,050 240,390 216,375France 232,429 197,580 150,607Other international 1,125,999 1,053,544 941,932

$ 4,424,160 $ 4,336,120 $ 3,840,303

Property, plant and equipment — net

United States $ 408,385 $ 396,254 $ 397,141Honduras 109,650 145,404 125,320Costa Rica 96,293 78,592 58,178Colombia 89,279 29,531 28,037Oceangoing assets 82,213 94,947 104,756Philippines 67,061 66,071 61,561Other international 249,404 213,448 249,142

$ 1,102,285 $ 1,024,247 $ 1,024,135

Note 15 — Subsequent Event

In February 1999, the Company increased the number ofcommon shares authorized under its repurchase program to8.3 million, which approximated 14% of its common sharesoutstanding. In January and February 1999, the Companyrepurchased 2,271,000 common shares, in aggregate, at aweighted-average price of $29.72 per share.



The Company’s reported income tax expense varied fromthe expense calculated using the U.S. federal statutory tax ratefor the following reasons:

(in thousands) 1998 1997 1996

Expense computed at U.S. federal statutoryincome tax rate $ 6,048 $ 68,341 $ 37,986

Foreign income taxedat different rates (28,097) (36,437) (21,656)

Dividends from subsidiaries 486 456 618

State and local incometax, net of federalincome tax benefit 762 602 1,100

Interest on prior years taxes (3,752) – –

Hurricane losses taxed at different rates 9,886 – –

Valuation allowance on foreign hurricane losses 18,742 – –

Other 1,125 2,138 1,452

Reported income tax expense $ 5,200 $ 35,100 $ 19,500

Total income tax payments (net of refunds) for 1998, 1997 and1996 were $36.7 million, $17.3 million and ($1.6) million,respectively.

Deferred tax assets (liabilities) were comprised of the following:

(in thousands) 1998 1997 1996

Operating reserves $ 44,591 $ 24,892 $ 45,246Accelerated depreciation (16,538) (25,290) (21,717)Inventory valuation

methods 4,699 3,024 3,670Effect of differences

between book values assigned in prioracquisitions and historical tax values (34,032) (33,100) (36,941)

Postretirement benefits 34,098 34,278 33,946Current year acquisitions (114) – (6,560)Tax credit carryforward 1,263 1,263 4,987Net operating loss

carryforward 100,221 86,670 77,685Reserves for

hurricane losses 22,847 – –Valuation allowance on

foreign hurricane losses (18,742) – –Other, net (25,178) (11,729) (12,117)

$ 113,115 $ 80,008 $ 88,199

In connection with the fourth quarter losses related to Hurricane Mitch, a valuation allowance in the amount of $18.7 million has been recognized to offset the deferred tax assets related to these losses.

The Company has recorded deferred tax assets of $100.2million reflecting the benefit of approximately $269 million infederal and state net operating loss carryovers which will, ifunused, begin to expire in 2009.

The tax credit carryforward amount of $1.3 million iscomprised of general business credits which begin to expire in 2008.

Total deferred tax assets and deferred tax liabilities were asfollows:

(in thousands) 1998 1997 1996

Deferred tax assets $ 238,212 $226,028 $ 253,831Deferred tax liabilities (125,097) (146,020) (165,632)

$ 113,115 $ 80,008 $ 88,199

The Company remains contingently liable with respect to certain tax credits sold to Norfolk and Southern Railway(“Norfolk”) with recourse by Flexi-Van Corporation (“Flexi-Van”), the Company’s former transportation equipment leas-ing business. Litigation with the Internal Revenue Serviceinvolving these credits concluded during the year. Litigationand settlement negotiations involving Flexi-Van and Norfolk(and the Company due to its contingent liability) are ongoing.Flexi-Van, which separated from the Company in 1987 andwas subsequently acquired by David H. Murdock, has indem-nified the Company against obligations that might result fromthe resolution of the matter.

Note 14 — Business Segments

In accordance with Statement of Financial Accounting Stan-dards No. 131 (“SFAS 131”), “Disclosures about Segments ofan Enterprise and Related Information”, the Company hasthree reportable segments: Fresh Fruit, Fresh Vegetables, andProcessed Foods. The Fresh Fruit segment contains severaloperating segments that produce and market fresh fruit towholesale, retail and institutional customers worldwide. TheFresh Vegetables segment contains three operating segmentsthat produce and market commodity and fresh packaged veg-etables to wholesale, retail and institutional customers primari-ly in North America, Europe and Asia. Both the Fresh Fruitand Fresh Vegetable segments sell produce grown by a combi-nation of Company-owned and independent farms. TheProcessed Foods segment contains several operating segmentsthat produce and market packaged foods including fruits, bev-erages and snack foods. The reportable segments are managedseparately due to varying products, production processes, dis-tribution channels and customer bases.

The Company has other operating segments which includefresh-cut flower businesses acquired during 1998 and certaindiversified operations.

Accounting policies for the three reportable segments and other operating segments are the same as those describedin the summary of significant accounting policies. Companymanagement evaluates and monitors segment performanceprimarily through earnings before interest and taxes (EBIT).The results of operations and financial position of the threereportable segments, other operating segments, and Corporateand other were as follows:

(in thousands) 1998 1997 1996

RevenueFresh Fruit $ 2,692,147 $ 2,583,277 $ 2,238,257Fresh Vegetables 790,149 756,176 653,730Processed Foods 834,966 962,127 915,335Other operating

segments 106,898 34,540 32,981

$ 4,424,160 $ 4,336,120 $ 3,840,303

EBITFresh Fruit $ 110,505 $ 149,997 $ 172,205Fresh Vegetables 49,418 40,196 30,300Processed Foods 89,462 89,805 52,226Other operating

segments 2,788 912 136

Total operatingsegments 252,173 280,910 254,867

Corporate and other (45,951) (21,057) (27,637)Special charges (120,000) – (50,000)

$ 86,222 $ 259,853 $ 177,230

AssetsFresh Fruit $ 1,516,551 $ 1,459,204 $ 1,383,064Fresh Vegetables 361,544 335,827 302,698Processed Foods 591,188 532,629 658,977Other operating

segments 286,578 15,470 10,652

Total operatingsegments 2,755,861 2,343,130 2,355,391

Corporate and other 159,192 120,765 131,416

$ 2,915,053 $ 2,463,895 $ 2,486,807

Depreciation and amortization

Fresh Fruit $ 75,993 $ 77,634 $ 76,944Fresh Vegetables 12,788 9,145 10,061Processed Foods 21,864 20,727 22,164Other operating

segments 7,969 164 188Corporate and other 3,444 4,411 1,716

$ 122,058 $ 112,081 $ 111,073

Capital additionsFresh Fruit $ 79,746 $ 63,052 $ 52,211Fresh Vegetables 20,724 35,647 8,118Processed Foods 47,078 25,672 36,651Other operating

segments 2,222 – 100Corporate and other 437 4,800 12,606

$ 150,207 $ 129,171 $ 109,686

Note: Corporate and other EBIT in 1997 and 1996 includes certain gains on thedisposition of investments and assets.

The Company’s revenue from external customers and net prop-erty, plant and equipment by geographic area were as follows:

(in thousands) 1998 1997 1996

RevenueUnited States $ 1,886,237 $ 1,943,057 $ 1,741,741Japan 585,658 595,131 551,073Germany 318,787 306,418 238,575Honduras 275,050 240,390 216,375France 232,429 197,580 150,607Other international 1,125,999 1,053,544 941,932

$ 4,424,160 $ 4,336,120 $ 3,840,303

Property, plant and equipment — net

United States $ 408,385 $ 396,254 $ 397,141Honduras 109,650 145,404 125,320Costa Rica 96,293 78,592 58,178Colombia 89,279 29,531 28,037Oceangoing assets 82,213 94,947 104,756Philippines 67,061 66,071 61,561Other international 249,404 213,448 249,142

$ 1,102,285 $ 1,024,247 $ 1,024,135

Note 15 — Subsequent Event

In February 1999, the Company increased the number ofcommon shares authorized under its repurchase program to8.3 million, which approximated 14% of its common sharesoutstanding. In January and February 1999, the Companyrepurchased 2,271,000 common shares, in aggregate, at aweighted-average price of $29.72 per share.



Report of Independent Public Accountants

Note 16 — Quarterly Financial Information (Unaudited)

The following table presents summarized quarterly results:

First Second Third Fourth(in thousands, except per share data) Quarter Quarter Quarter Quarter Year

1998Revenue $ 1,011,984 $ 1,163,986 $ 1,209,794 $ 1,038,396 $ 4,424,160Gross margin 139,021 208,198 174,482 116,714 638,415Net income (loss) 22,761 82,095 15,562 (108,339) 12,079

Net income (loss) per common share — diluted $ 0.37 $ 1.35 $ 0.26 $ (1.82) $ 0.20

1997Revenue $ 964,992 $ 1,107,804 $ 1,178,301 $ 1,085,023 $ 4,336,120Gross margin 151,738 191,006 156,157 144,942 643,843Net income 42,043 70,429 24,443 23,249 160,164

Net income per common share – diluted $ 0.70 $ 1.17 $ 0.40 $ 0.38 $ 2.65

The net loss for the fourth quarter of 1998 includes pre-tax charges of $100 million, net of insurance proceeds, and $20 million related to Hurricane Mitch and the Company’s North American citrus operations, respectively. The cumulative total ofnet income (loss) per common share reported in each quarter of 1998 differs from the full-year amount. The difference is due to thetiming and significance of the special charges recorded in the fourth quarter combined with the repurchase of approximately 1.2 million common shares at the end of the third quarter. All quarters have twelve weeks, except the fourth quarter of 1997 whichhas thirteen weeks and the third quarters of both years which have sixteen weeks.

To the Shareholders and Board of Directors of Dole Food Company, Inc.:

We have audited the accompanying consolidated balancesheets of Dole Food Company, Inc., (a Hawaii corporation)and subsidiaries as of January 2, 1999 and January 3, 1998,and the related consolidated statements of income and cashflow for the years ended January 2, 1999, January 3, 1998, andDecember 28, 1996. These financial statements are the respon-sibility of the Company’s management. Our responsibility isto express an opinion on these financial statements based onour audits.

We conducted our audits in accordance with generallyaccepted auditing standards. Those standards require that weplan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing theaccounting principles used and significant estimates made bymanagement, as well as evaluating the overall financialstatement presentation. We believe that our audits provide areasonable basis for our opinion.

In our opinion, the consolidated financial statements referredto above present fairly, in all material respects, the financialposition of Dole Food Company, Inc. and subsidiaries as ofJanuary 2, 1999 and January 3, 1998 and the results of its oper-ations and its cash flow for the years ended January 2, 1999,January 3, 1998, and December 28, 1996, in conformity withgenerally accepted accounting principles.

Los Angeles, CaliforniaFebruary 5, 1999

Note 17 — Common Stock Data (Unaudited)

The following table shows the market price range of the Company’s common stock for each quarter in 1998 and 1997:

High Low

1998First Quarter $ 57 1/8 $ 431/2

Second Quarter 49 1/8 4315/16

Third Quarter 52 7/16 323/8

Fourth Quarter 35 285/16

Year $ 57 1/8 $ 285/16

1997First Quarter $ 40 1/4 $ 33 3/8

Second Quarter 43 3/8 37 3/4

Third Quarter 46 15/16 39 1/16

Fourth Quarter 49 5/8 43 9/16

Year $ 49 5/8 $ 33 3/8



Report of Independent Public Accountants

Note 16 — Quarterly Financial Information (Unaudited)

The following table presents summarized quarterly results:

First Second Third Fourth(in thousands, except per share data) Quarter Quarter Quarter Quarter Year

1998Revenue $ 1,011,984 $ 1,163,986 $ 1,209,794 $ 1,038,396 $ 4,424,160Gross margin 139,021 208,198 174,482 116,714 638,415Net income (loss) 22,761 82,095 15,562 (108,339) 12,079

Net income (loss) per common share — diluted $ 0.37 $ 1.35 $ 0.26 $ (1.82) $ 0.20

1997Revenue $ 964,992 $ 1,107,804 $ 1,178,301 $ 1,085,023 $ 4,336,120Gross margin 151,738 191,006 156,157 144,942 643,843Net income 42,043 70,429 24,443 23,249 160,164

Net income per common share – diluted $ 0.70 $ 1.17 $ 0.40 $ 0.38 $ 2.65

The net loss for the fourth quarter of 1998 includes pre-tax charges of $100 million, net of insurance proceeds, and $20 million related to Hurricane Mitch and the Company’s North American citrus operations, respectively. The cumulative total ofnet income (loss) per common share reported in each quarter of 1998 differs from the full-year amount. The difference is due to thetiming and significance of the special charges recorded in the fourth quarter combined with the repurchase of approximately 1.2 million common shares at the end of the third quarter. All quarters have twelve weeks, except the fourth quarter of 1997 whichhas thirteen weeks and the third quarters of both years which have sixteen weeks.

To the Shareholders and Board of Directors of Dole Food Company, Inc.:

We have audited the accompanying consolidated balancesheets of Dole Food Company, Inc., (a Hawaii corporation)and subsidiaries as of January 2, 1999 and January 3, 1998,and the related consolidated statements of income and cashflow for the years ended January 2, 1999, January 3, 1998, andDecember 28, 1996. These financial statements are the respon-sibility of the Company’s management. Our responsibility isto express an opinion on these financial statements based onour audits.

We conducted our audits in accordance with generallyaccepted auditing standards. Those standards require that weplan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing theaccounting principles used and significant estimates made bymanagement, as well as evaluating the overall financialstatement presentation. We believe that our audits provide areasonable basis for our opinion.

In our opinion, the consolidated financial statements referredto above present fairly, in all material respects, the financialposition of Dole Food Company, Inc. and subsidiaries as ofJanuary 2, 1999 and January 3, 1998 and the results of its oper-ations and its cash flow for the years ended January 2, 1999,January 3, 1998, and December 28, 1996, in conformity withgenerally accepted accounting principles.

Los Angeles, CaliforniaFebruary 5, 1999

Note 17 — Common Stock Data (Unaudited)

The following table shows the market price range of the Company’s common stock for each quarter in 1998 and 1997:

High Low

1998First Quarter $ 57 1/8 $ 431/2

Second Quarter 49 1/8 4315/16

Third Quarter 52 7/16 323/8

Fourth Quarter 35 285/16

Year $ 57 1/8 $ 285/16

1997First Quarter $ 40 1/4 $ 33 3/8

Second Quarter 43 3/8 37 3/4

Third Quarter 46 15/16 39 1/16

Fourth Quarter 49 5/8 43 9/16

Year $ 49 5/8 $ 33 3/8



Management’s Discussion and Analysis of Results ofOperations and Financial Position

Overview

In 1998, the Company’s results were negatively impacted bythe effects of the El Niño weather pattern, Hurricane Mitch andthe California citrus freeze. Additionally, economic turmoil inAsia, Eastern Europe and Latin America undermined thefinancial condition of emerging markets and impacted the fruitbusiness worldwide. Also in 1998, the Company expanded itsproduct offering to include fresh-cut flowers, increased its pro-ductive capacity in the growing pre-cut salad category andextended its European distribution network into Scandinavia.

During 1998, the Company’s fruit operations were impactedby the following weather-related events:

•The El Niño weather pattern reduced industry banana vol-umes from Ecuador by 18%, impacted production opera-tions in California and reduced banana volumes from thePhilippines and pineapple volumes from the Philippinesand Thailand. Production volumes from these areas areanticipated to begin returning to normal during 1999.

•Hurricane Mitch impacted over 30,000 acres of agricultur-al plantings and caused severe damage to the Company’sgeneral agricultural infrastructure at both its Honduranbanana and beverage operations. During the fourth quarterof 1998, the Company recorded a $100 million charge, netof insurance proceeds received, for losses sustained fromHurricane Mitch. Production in the impacted areas is notexpected to fully recover in 1999. However, due to pricesensitivity in worldwide banana markets, the impact onfuture operating results is not currently determinable. TheCompany has started to rehabilitate selected parts of theaffected areas and will incur additional rehabilitationexpenses in the future. The Company also continues topursue recovery under various insurance policies for lossessustained. Future rehabilitation costs and insurance recov-eries will be reported on a separate line in the Consolidat-ed Statements of Income.

•Following severe freezing temperatures in California’s SanJoaquin Valley from December 21 to December 24, 1998, theCompany recorded a $20 million charge in its citrus opera-tions. The charge primarily related to write-downs of deferredcrop costs, property, plant and equipment and grower receiv-ables in the freeze areas. The charge also included write-downs of grower receivables in other locations due to therecognition of changes in industry economics. In addition tothe charge taken in 1998, the Company currently estimatesthat the freeze damage will negatively impact its 1999 operat-ing results by approximately $10 million to $15 million.

The Company has substantial sales outside of the UnitedStates which had been expanding rapidly as personal incomesin developing countries rose. The economic crises in Asia, thecollapse of the Russian economy and economic slowdowns inLatin America have affected the international fruit businessand slowed its growth.

During 1998, the Company entered the fresh-cut flowerbusiness in North America, which is relatively fragmented, andcontinued expanding its European fresh produce distributionnetwork. Acquisitions during the second half of 1998 addedapproximately $150 million to 1998 revenue, and the Company

anticipates they will add an additional $550 million to 1999 rev-enue when included for the full year. These businesses addedapproximately $2 million to net income in 1998. In 1999, cate-gory growth, efficiencies in production and distributionmethodologies, and improved marketing leverage are expectedto further strengthen the performance of these businesses. European Union Quota: The European Union (“E.U.”) bananaregulations, which impose quotas and tariffs on bananas,remained in full effect in 1998 and continue in effect withsome modifications as of the date of these financial statements.The World Trade Organization (“WTO”) issued a ruling dur-ing 1997, on the complaint made by the United States,Ecuador, Guatemala, Honduras, Panama and Mexico, that theEuropean banana trade regime violated basic General Agree-ment on Tariffs and Trade (“GATT”) principles. The WTOfound certain aspects of the regime discriminatory and askedthe E.U. to modify the regime to eliminate these discriminato-ry aspects. In June 1998, E.U. farm ministers responded withcertain modifications to the regime. The United States doesnot consider the changes sufficient to regulate banana salesconsistent with the WTO ruling and has imposed tariffs on avariety of E.U. goods. Trade negotiations and discussions con-tinue between the E.U., the United States and the individualbanana exporting countries. These trade negotiations couldlead to further changes in the regulations governing bananaexports to the E.U. The net impact of these changing regula-tions on the Company’s future results of operations is notdeterminable at this time.Foreign Currencies: The Company distributes its products inmore than 90 countries throughout the world. Its internation-al sales are usually transacted in U.S. dollars and major Euro-pean and Asian currencies. Certain costs are incurred in cur-rencies different from those that are received from the sale ofproducts. While results of operations may be affected by fluc-tuations in currency exchange rates in both the sourcing andselling locations, the Company has historically followed a pol-icy, with certain exceptions, of not attempting to hedge theseexposures. Additionally, the 1999 adoption of the Euro currency by the E.U. is not expected to materially impact theCompany’s results of operations or financial position.New Accounting Pronouncements: In June 1998, the FinancialAccounting Standards Board issued Statement of FinancialAccounting Standards No. 133 (“SFAS 133”), “Accounting forDerivative Instruments and Hedging Activities”. The Compa-ny is assessing the impact of accounting for derivative instru-ments in accordance with SFAS 133. The Company’s deriva-tive transactions are currently limited to hedging certain for-eign currency denominated purchase commitments. TheCompany will adopt the statement during the first quarter of2000. Such adoption is not expected to have a material impacton the Company’s financial condition or results of operations.Year 2000: The Company has assessed the effect of Year 2000issues on its information technology, including computer hard-ware, software and embedded chip technology. Remediationhas been completed at the majority of the Company’s operat-ing units with most of the remaining operating units currentlyundergoing tests of remediated systems and software. TheCompany has now identified certain specific upgrade projects

and personal computer replacements that will be completedduring the first half of 1999. Remediation efforts related tocompanies acquired during 1998 and Honduran operatingunits impacted by Hurricane Mitch are scheduled to be com-pleted by June 1999. All other remediation work has beencompleted as of the December 1998 target date. The Compa-ny is also in the process of confirming Year 2000 compliancewith key vendors and service providers, including suppliers ofembedded chip technology. Once completed, the Companywill develop a contingency plan related to its key vendors andservice providers. Based on work performed to date, the Com-pany believes that the total cost to remediate will not be mater-ial to its results of operations, liquidity or capital resources.

The preceding discussion contains forward-looking state-ments regarding the Company’s timetable for solving its Year2000 issues, costs to remediate and the ultimate impact on itsfinances, which involve a number of risks and uncertainties.The potential risks and uncertainties that could cause actualresults to differ materially include: the continuing availabilityof key information technology personnel and consultants, theability of third parties to complete their own Year 2000 reme-diation on time, unforeseen responses by the public to the per-ceived situation and, if necessary, the ability of the Companyto identify and implement contingency plans.

1998 Compared with 1997

Revenue: Revenue increased 2% to $4,424.2 million in 1998from $4,336.1 million in 1997. The inclusion of the newlyacquired flower businesses and SABA Trading AB toward theend of the year increased revenue by 4% in 1998. Revenuefrom existing businesses was up slightly after considering a 2%reduction due to the closure of the Company’s Californiadried fruit facility in the second quarter of 1997 and the inclu-sion of an additional week in fiscal year 1997. While the fresh-cut salad and Honduran beverage businesses had stronggrowth rates, processed pineapple suffered from El Niñoinduced product shortages, and the North American citrus anddeciduous fruit businesses had reduced volumes and productquality due to El Niño. Revenues from bananas increased ashigher sales in the Company’s European distribution business-es, including sales from businesses acquired late in 1997,served to offset decreased import volumes due largely to theclosure of the Russian market. Selling, Marketing and Administrative Expenses: Selling, mar-keting and administrative expenses were $433.5 million or9.8% of revenue in 1998 compared to $399.8 million or 9.2%of revenue in 1997. The increase resulted from growth in busi-nesses with higher operating cost percentages such as the Hon-duran beverage, fresh-cut salad and European distributionbusinesses. At the same time, the banana import businessexperienced higher receivable write-offs related to the col-lapse of the Russian market, higher promotional costs as aresult of market supply conditions and lower total revenues. Operating Income: Operating income decreased from $244.0million in 1997 to $204.9 million before special charges in1998. The decrease was largely driven by lower earnings inthe banana import business as a result of the Company’s

inability to pass on higher El Niño related costs in the form ofhigher prices. This was partially offset by improved Europeandistribution earnings. The Company’s North American citrusand deciduous operations also had significant declines due toEl Niño related cost issues compared to very strong results in1997. Operating results improved in the Honduran beverage,processed pineapple, fresh-cut salad and European distribu-tion categories, as well as through the addition of the acquiredflower businesses and SABA Trading AB.Interest Expense, Net: Interest expense, net of interest income,increased to $59.6 million in 1998 from $56.8 million in 1997due to increased debt levels in the second half of the year tofund acquisitions.Other Income (Expense), Net: Other income (expense) - net con-sists primarily of minority interest expense and gains and loss-es on sales of property. In 1997, other income included largergains from sales of investments and fixed assets.Income Taxes: The Company’s effective tax rate increased in1998 from 18% to 30% primarily due to the Hurricane Mitchcharge, which was not fully tax benefitted.


Revenue: Revenue increased 13% to $4,336.1 million in 1997from $3,840.3 million in 1996. The increase in revenue is pri-marily attributable to higher worldwide banana volumes;increased volumes in fresh-cut salads and favorable pricing forthe fresh vegetable business; continued growth at the Hon-duran beverage operation; newly acquired businesses; and anadditional week in fiscal year 1997. The Company was able togrow revenue in spite of adverse currency movements in 1997.Selling, Marketing and Administrative Expenses: Selling, market-ing and administrative expenses were $399.8 million or 9.2% of revenue in 1997 compared to $369.7 million or 9.6% of revenue in 1996. The increased expense is due tohigher sales activity in existing product lines and the acquisi-tion of new businesses, partially offset by the closure of theCompany’s California dried fruit facility.Restructuring Charge: In 1996, the Company implemented a for-mal plan to close its dried fruit facility located in Fresno, Cali-fornia which had suffered continued losses. During the fourthquarter of 1996, a restructuring charge of $50.0 million wasrecorded related to the closure of this facility. Principal com-ponents of the charge were provisions for asset write-downs,contract terminations and severance payments. The closure ofthis facility was completed in the second quarter of 1997.Operating Income: Operating income improved to $244.0 mil-lion in 1997 from $214.3 million before the restructuringcharge in 1996. Higher earnings in 1997 were the result ofincreased volumes of fresh-cut salads, favorable pricing in thefresh vegetables business and growth in the banana business.In addition, the processed pineapple and Honduran beveragebusinesses posted higher results in 1997, and the closure of thedried fruit facility in the second quarter reduced losses.Interest Expense, Net: Interest expense, net of interest income,decreased to $56.8 million in 1997 from $60.3 million in 1996,due to lower average debt levels.



Management’s Discussion and Analysis of Results ofOperations and Financial Position

Overview

In 1998, the Company’s results were negatively impacted bythe effects of the El Niño weather pattern, Hurricane Mitch andthe California citrus freeze. Additionally, economic turmoil inAsia, Eastern Europe and Latin America undermined thefinancial condition of emerging markets and impacted the fruitbusiness worldwide. Also in 1998, the Company expanded itsproduct offering to include fresh-cut flowers, increased its pro-ductive capacity in the growing pre-cut salad category andextended its European distribution network into Scandinavia.

During 1998, the Company’s fruit operations were impactedby the following weather-related events:

•The El Niño weather pattern reduced industry banana vol-umes from Ecuador by 18%, impacted production opera-tions in California and reduced banana volumes from thePhilippines and pineapple volumes from the Philippinesand Thailand. Production volumes from these areas areanticipated to begin returning to normal during 1999.

•Hurricane Mitch impacted over 30,000 acres of agricultur-al plantings and caused severe damage to the Company’sgeneral agricultural infrastructure at both its Honduranbanana and beverage operations. During the fourth quarterof 1998, the Company recorded a $100 million charge, netof insurance proceeds received, for losses sustained fromHurricane Mitch. Production in the impacted areas is notexpected to fully recover in 1999. However, due to pricesensitivity in worldwide banana markets, the impact onfuture operating results is not currently determinable. TheCompany has started to rehabilitate selected parts of theaffected areas and will incur additional rehabilitationexpenses in the future. The Company also continues topursue recovery under various insurance policies for lossessustained. Future rehabilitation costs and insurance recov-eries will be reported on a separate line in the Consolidat-ed Statements of Income.

•Following severe freezing temperatures in California’s SanJoaquin Valley from December 21 to December 24, 1998, theCompany recorded a $20 million charge in its citrus opera-tions. The charge primarily related to write-downs of deferredcrop costs, property, plant and equipment and grower receiv-ables in the freeze areas. The charge also included write-downs of grower receivables in other locations due to therecognition of changes in industry economics. In addition tothe charge taken in 1998, the Company currently estimatesthat the freeze damage will negatively impact its 1999 operat-ing results by approximately $10 million to $15 million.

The Company has substantial sales outside of the UnitedStates which had been expanding rapidly as personal incomesin developing countries rose. The economic crises in Asia, thecollapse of the Russian economy and economic slowdowns inLatin America have affected the international fruit businessand slowed its growth.

During 1998, the Company entered the fresh-cut flowerbusiness in North America, which is relatively fragmented, andcontinued expanding its European fresh produce distributionnetwork. Acquisitions during the second half of 1998 addedapproximately $150 million to 1998 revenue, and the Company

anticipates they will add an additional $550 million to 1999 rev-enue when included for the full year. These businesses addedapproximately $2 million to net income in 1998. In 1999, cate-gory growth, efficiencies in production and distributionmethodologies, and improved marketing leverage are expectedto further strengthen the performance of these businesses. European Union Quota: The European Union (“E.U.”) bananaregulations, which impose quotas and tariffs on bananas,remained in full effect in 1998 and continue in effect withsome modifications as of the date of these financial statements.The World Trade Organization (“WTO”) issued a ruling dur-ing 1997, on the complaint made by the United States,Ecuador, Guatemala, Honduras, Panama and Mexico, that theEuropean banana trade regime violated basic General Agree-ment on Tariffs and Trade (“GATT”) principles. The WTOfound certain aspects of the regime discriminatory and askedthe E.U. to modify the regime to eliminate these discriminato-ry aspects. In June 1998, E.U. farm ministers responded withcertain modifications to the regime. The United States doesnot consider the changes sufficient to regulate banana salesconsistent with the WTO ruling and has imposed tariffs on avariety of E.U. goods. Trade negotiations and discussions con-tinue between the E.U., the United States and the individualbanana exporting countries. These trade negotiations couldlead to further changes in the regulations governing bananaexports to the E.U. The net impact of these changing regula-tions on the Company’s future results of operations is notdeterminable at this time.Foreign Currencies: The Company distributes its products inmore than 90 countries throughout the world. Its internation-al sales are usually transacted in U.S. dollars and major Euro-pean and Asian currencies. Certain costs are incurred in cur-rencies different from those that are received from the sale ofproducts. While results of operations may be affected by fluc-tuations in currency exchange rates in both the sourcing andselling locations, the Company has historically followed a pol-icy, with certain exceptions, of not attempting to hedge theseexposures. Additionally, the 1999 adoption of the Euro currency by the E.U. is not expected to materially impact theCompany’s results of operations or financial position.New Accounting Pronouncements: In June 1998, the FinancialAccounting Standards Board issued Statement of FinancialAccounting Standards No. 133 (“SFAS 133”), “Accounting forDerivative Instruments and Hedging Activities”. The Compa-ny is assessing the impact of accounting for derivative instru-ments in accordance with SFAS 133. The Company’s deriva-tive transactions are currently limited to hedging certain for-eign currency denominated purchase commitments. TheCompany will adopt the statement during the first quarter of2000. Such adoption is not expected to have a material impacton the Company’s financial condition or results of operations.Year 2000: The Company has assessed the effect of Year 2000issues on its information technology, including computer hard-ware, software and embedded chip technology. Remediationhas been completed at the majority of the Company’s operat-ing units with most of the remaining operating units currentlyundergoing tests of remediated systems and software. TheCompany has now identified certain specific upgrade projects

and personal computer replacements that will be completedduring the first half of 1999. Remediation efforts related tocompanies acquired during 1998 and Honduran operatingunits impacted by Hurricane Mitch are scheduled to be com-pleted by June 1999. All other remediation work has beencompleted as of the December 1998 target date. The Compa-ny is also in the process of confirming Year 2000 compliancewith key vendors and service providers, including suppliers ofembedded chip technology. Once completed, the Companywill develop a contingency plan related to its key vendors andservice providers. Based on work performed to date, the Com-pany believes that the total cost to remediate will not be mater-ial to its results of operations, liquidity or capital resources.

The preceding discussion contains forward-looking state-ments regarding the Company’s timetable for solving its Year2000 issues, costs to remediate and the ultimate impact on itsfinances, which involve a number of risks and uncertainties.The potential risks and uncertainties that could cause actualresults to differ materially include: the continuing availabilityof key information technology personnel and consultants, theability of third parties to complete their own Year 2000 reme-diation on time, unforeseen responses by the public to the per-ceived situation and, if necessary, the ability of the Companyto identify and implement contingency plans.


Revenue: Revenue increased 2% to $4,424.2 million in 1998from $4,336.1 million in 1997. The inclusion of the newlyacquired flower businesses and SABA Trading AB toward theend of the year increased revenue by 4% in 1998. Revenuefrom existing businesses was up slightly after considering a 2%reduction due to the closure of the Company’s Californiadried fruit facility in the second quarter of 1997 and the inclu-sion of an additional week in fiscal year 1997. While the fresh-cut salad and Honduran beverage businesses had stronggrowth rates, processed pineapple suffered from El Niñoinduced product shortages, and the North American citrus anddeciduous fruit businesses had reduced volumes and productquality due to El Niño. Revenues from bananas increased ashigher sales in the Company’s European distribution business-es, including sales from businesses acquired late in 1997,served to offset decreased import volumes due largely to theclosure of the Russian market. Selling, Marketing and Administrative Expenses: Selling, mar-keting and administrative expenses were $433.5 million or9.8% of revenue in 1998 compared to $399.8 million or 9.2%of revenue in 1997. The increase resulted from growth in busi-nesses with higher operating cost percentages such as the Hon-duran beverage, fresh-cut salad and European distributionbusinesses. At the same time, the banana import businessexperienced higher receivable write-offs related to the col-lapse of the Russian market, higher promotional costs as aresult of market supply conditions and lower total revenues. Operating Income: Operating income decreased from $244.0million in 1997 to $204.9 million before special charges in1998. The decrease was largely driven by lower earnings inthe banana import business as a result of the Company’s

inability to pass on higher El Niño related costs in the form ofhigher prices. This was partially offset by improved Europeandistribution earnings. The Company’s North American citrusand deciduous operations also had significant declines due toEl Niño related cost issues compared to very strong results in1997. Operating results improved in the Honduran beverage,processed pineapple, fresh-cut salad and European distribu-tion categories, as well as through the addition of the acquiredflower businesses and SABA Trading AB.Interest Expense, Net: Interest expense, net of interest income,increased to $59.6 million in 1998 from $56.8 million in 1997due to increased debt levels in the second half of the year tofund acquisitions.Other Income (Expense), Net: Other income (expense) - net con-sists primarily of minority interest expense and gains and loss-es on sales of property. In 1997, other income included largergains from sales of investments and fixed assets.Income Taxes: The Company’s effective tax rate increased in1998 from 18% to 30% primarily due to the Hurricane Mitchcharge, which was not fully tax benefitted.


Revenue: Revenue increased 13% to $4,336.1 million in 1997from $3,840.3 million in 1996. The increase in revenue is pri-marily attributable to higher worldwide banana volumes;increased volumes in fresh-cut salads and favorable pricing forthe fresh vegetable business; continued growth at the Hon-duran beverage operation; newly acquired businesses; and anadditional week in fiscal year 1997. The Company was able togrow revenue in spite of adverse currency movements in 1997.Selling, Marketing and Administrative Expenses: Selling, market-ing and administrative expenses were $399.8 million or 9.2% of revenue in 1997 compared to $369.7 million or 9.6% of revenue in 1996. The increased expense is due tohigher sales activity in existing product lines and the acquisi-tion of new businesses, partially offset by the closure of theCompany’s California dried fruit facility.Restructuring Charge: In 1996, the Company implemented a for-mal plan to close its dried fruit facility located in Fresno, Cali-fornia which had suffered continued losses. During the fourthquarter of 1996, a restructuring charge of $50.0 million wasrecorded related to the closure of this facility. Principal com-ponents of the charge were provisions for asset write-downs,contract terminations and severance payments. The closure ofthis facility was completed in the second quarter of 1997.Operating Income: Operating income improved to $244.0 mil-lion in 1997 from $214.3 million before the restructuringcharge in 1996. Higher earnings in 1997 were the result ofincreased volumes of fresh-cut salads, favorable pricing in thefresh vegetables business and growth in the banana business.In addition, the processed pineapple and Honduran beveragebusinesses posted higher results in 1997, and the closure of thedried fruit facility in the second quarter reduced losses.Interest Expense, Net: Interest expense, net of interest income,decreased to $56.8 million in 1997 from $60.3 million in 1996,due to lower average debt levels.




Revenue $ 4,424 $ 4,336 $ 3,840 $ 3,804 $ 3,499Cost of products sold 3,786 3,692 3,256 3,218 2,966

Gross margin 638 644 584 586 533

Selling, marketing, and administrative expenses 433 400 370 393 395

Hurricane Mitch charge 100 — — — —

Citrus charge 20 — — — —Dried Fruit restructuring charge — – 50 – –

Operating income 85 244 164 193 138Interest expense – net (60) (57) (60) (74) (67)

Net gain on assets sold or held for disposal — – – 62 –Other income (expense) – net (8) 8 5 (5) (3)

Income from continuing operations

before income taxes 17 195 109 176 68Income taxes (5) (35) (20) (56) (10)

Net income from continuing operations 12 160 89 120 58Net income (loss) from discontinued operations — – – (97) 10

Net income $ 12 $ 160 $ 89 $ 23 $ 68


Continuing operations $ 0.20 $ 2.65 $ 1.47 $ 2.00 $ 0.98Discontinued operations — – – (1.61) 0.16

Net income $ 0.20 $ 2.65 $ 1.47 $ 0.39 $ 1.14

Other statistics

Working capital $ 366 $ 407 $ 464 $ 480 $ 495Total assets 2,915 2,464 2,487 2,442 3,685

Long-term debt 1,116 755 904 896 1,555

Total debt 1,153 768 926 920 1,609

Common shareholders’ equity 622 666 550 508 1,081Annual cash dividends per common share 0.40 0.40 0.40 0.40 0.40

Capital additions for continuing operations 150 129 110 90 212

Depreciation and amortization from

continuing operations 122 112 111 113 120

Results of Operations and Selected Financial Data

Other Income (Expense): Other income for 1997 increased $3.5million from 1996 primarily due to the gain on sales of certaininvestments and fixed assets.Income Taxes: The Company’s effective income tax rate was18% in 1997 and 1996.

Liquidity and Capital Resources

The Company’s operations and capital expenditures werefinanced primarily by funds generated internally during 1998.The Company pursued an aggressive growth strategy of acqui-sitions in the fresh-cut flower industry and in its European product distribution network. In addition, the Companyrepurchased 1,165,200 of its common shares for $42.1 million.The acquisitions and stock repurchases were substantiallyfunded by debt. The Hurricane Mitch and citrus fourth quar-ter special charges decreased equity. This resulted in a year-to-year increase in the net debt to net debt and equity percentagefrom 53% to 64%. During 1997, the Company used its cashflow from operations to reduce this ratio from 62% in 1996 to53% in 1997. Cash and short-term investments increased from $31.2 million at January 3, 1998 to $35.4 million at January 2, 1999.

Operating activities generated cash flow of $157.1 millionin 1998 compared to $291.0 million in 1997. The decrease isprimarily due to lower net earnings, a payment to the InternalRevenue Service related to prior years’ audits and the 1997closure of the Company’s California dried fruit facility. TheCompany is currently pursuing a refund of the payment to theInternal Revenue Service. During 1997, the Company experi-enced a decrease in its working capital requirements as a resultof the closure of its California dried fruit facility. The liquida-tion of inventory and other operating and fixed assets relatedto this closed facility provided approximately $70 million ofcash flow in 1997.

Capital expenditures for the acquisition and improvementof productive assets increased to $150.2 million in 1998 from$129.2 million in 1997 and were funded largely by operatingcash flow. The Company expects the capital expenditure levelto continue growing next year due to the Hurricane Mitchrehabilitation effort and acquisitions during 1998.

The Company acquired a series of businesses in the fresh-cutflower industry during 1998 to form a new flower division. Inaddition, the Company acquired 60% of Saba Trading AB, aScandinavian distributor of fresh fruits, vegetables and flowers,to complement its growing distribution network in Europe. Theaggregate cash purchase price of these businesses and smalleracquisitions in 1998 was approximately $332 million.

The Company is scheduled to take delivery of two newrefrigerated container vessels in late 1999. The vessels arebeing manufactured by HDW in Kiel, Germany, and the costper ship is approximately DM 100 million. In order to facili-tate payment for these ships, the Company has contracted to purchase German marks at a weighted-average exchangerate of DM 1.78 to $1.00 for a total notional value of $98.3

million. These fixed rate contracts will be settled in the fourthquarter of 1999, and their fair value was approximately $105.8million as of January 2, 1999.

In January 1998, the Company announced plans to moveto a new headquarters facility in Westlake Village, California.Construction of the complex is anticipated to be completed inlate 1999, at which time the Company plans to occupy theseleased facilities.

The Company has in place a $400 million 5-year revolvingcredit facility (the “Facility”) which matures in 2003. Provi-sions under the Facility require the Company to comply withcertain financial covenants which include a maximum permit-ted ratio of consolidated debt to net worth and a minimumrequired fixed charge coverage ratio. At January 2, 1999, noborrowings were outstanding under the Facility. The Compa-ny may also borrow under uncommitted lines of credit at ratesoffered from time to time by various banks that may not belenders under the Facility. Net borrowings outstanding underthe uncommitted lines of credit totaled $63.5 million at January 2, 1999.

On October 6, 1998, the Company issued $300 million of 7-year 6.375% unsecured notes in a public offering forwhich it received cash proceeds of $297.2 million. The Com-pany used a portion of the cash proceeds for acquisitions dur-ing the fourth quarter and the remainder to repay amounts out-standing under the Facility. Such credit facility borrowingswere primarily incurred to fund business acquisitions madeearlier in the year.

In December 1998, the Board of Directors authorized an increase in the Company’s stock repurchase program to 4.5 million shares. In February 1999, the Board of Directorsincreased this authorization to 8.3 million shares. During1998, the Company repurchased 1,165,200 of its commonshares at a cost of $42.1 million. During January and February1999, the Company repurchased an additional 2,271,000of its common shares for $67.6 million. Approximately 4.5 mil-lion shares remain authorized for repurchase under the Company’s stock repurchase program after these transactions.

The Company paid four quarterly dividends of 10 centsper share on its common stock totaling $24.0 million in 1998.

The Company believes that cash from operations and itscash position and revolving credit facility will enable it to meetits capital expenditure, debt maturity, common stock repur-chase, dividend payment and other funding requirements.

This Annual Report contains forward-looking statementsbased on current expectations that involve a number of risksand uncertainties. The potential risks and uncertainties thatcould cause the Company’s actual results to differ materiallyfrom those expressed or implied herein include weather relat-ed phenomena; market responses to industry volume pres-sures; economic crises in developing countries; quotas, tariffsand other governmental actions; changes in currencyexchange rates; product supply and pricing; and computerconversion and Year 2000 issues.




Revenue $ 4,424 $ 4,336 $ 3,840 $ 3,804 $ 3,499Cost of products sold 3,786 3,692 3,256 3,218 2,966

Gross margin 638 644 584 586 533

Selling, marketing, and administrative expenses 433 400 370 393 395

Hurricane Mitch charge 100 — — — —

Citrus charge 20 — — — —Dried Fruit restructuring charge — – 50 – –

Operating income 85 244 164 193 138Interest expense – net (60) (57) (60) (74) (67)

Net gain on assets sold or held for disposal — – – 62 –Other income (expense) – net (8) 8 5 (5) (3)

Income from continuing operations

before income taxes 17 195 109 176 68Income taxes (5) (35) (20) (56) (10)

Net income from continuing operations 12 160 89 120 58Net income (loss) from discontinued operations — – – (97) 10

Net income $ 12 $ 160 $ 89 $ 23 $ 68


Continuing operations $ 0.20 $ 2.65 $ 1.47 $ 2.00 $ 0.98Discontinued operations — – – (1.61) 0.16

Net income $ 0.20 $ 2.65 $ 1.47 $ 0.39 $ 1.14

Other statistics

Working capital $ 366 $ 407 $ 464 $ 480 $ 495Total assets 2,915 2,464 2,487 2,442 3,685

Long-term debt 1,116 755 904 896 1,555

Total debt 1,153 768 926 920 1,609

Common shareholders’ equity 622 666 550 508 1,081Annual cash dividends per common share 0.40 0.40 0.40 0.40 0.40

Capital additions for continuing operations 150 129 110 90 212

Depreciation and amortization from

continuing operations 122 112 111 113 120

Results of Operations and Selected Financial Data

Other Income (Expense): Other income for 1997 increased $3.5million from 1996 primarily due to the gain on sales of certaininvestments and fixed assets.Income Taxes: The Company’s effective income tax rate was18% in 1997 and 1996.

Liquidity and Capital Resources

The Company’s operations and capital expenditures werefinanced primarily by funds generated internally during 1998.The Company pursued an aggressive growth strategy of acqui-sitions in the fresh-cut flower industry and in its European product distribution network. In addition, the Companyrepurchased 1,165,200 of its common shares for $42.1 million.The acquisitions and stock repurchases were substantiallyfunded by debt. The Hurricane Mitch and citrus fourth quar-ter special charges decreased equity. This resulted in a year-to-year increase in the net debt to net debt and equity percentagefrom 53% to 64%. During 1997, the Company used its cashflow from operations to reduce this ratio from 62% in 1996 to53% in 1997. Cash and short-term investments increased from $31.2 million at January 3, 1998 to $35.4 million at January 2, 1999.

Operating activities generated cash flow of $157.1 millionin 1998 compared to $291.0 million in 1997. The decrease isprimarily due to lower net earnings, a payment to the InternalRevenue Service related to prior years’ audits and the 1997closure of the Company’s California dried fruit facility. TheCompany is currently pursuing a refund of the payment to theInternal Revenue Service. During 1997, the Company experi-enced a decrease in its working capital requirements as a resultof the closure of its California dried fruit facility. The liquida-tion of inventory and other operating and fixed assets relatedto this closed facility provided approximately $70 million ofcash flow in 1997.

Capital expenditures for the acquisition and improvementof productive assets increased to $150.2 million in 1998 from$129.2 million in 1997 and were funded largely by operatingcash flow. The Company expects the capital expenditure levelto continue growing next year due to the Hurricane Mitchrehabilitation effort and acquisitions during 1998.

The Company acquired a series of businesses in the fresh-cutflower industry during 1998 to form a new flower division. Inaddition, the Company acquired 60% of Saba Trading AB, aScandinavian distributor of fresh fruits, vegetables and flowers,to complement its growing distribution network in Europe. Theaggregate cash purchase price of these businesses and smalleracquisitions in 1998 was approximately $332 million.

The Company is scheduled to take delivery of two newrefrigerated container vessels in late 1999. The vessels arebeing manufactured by HDW in Kiel, Germany, and the costper ship is approximately DM 100 million. In order to facili-tate payment for these ships, the Company has contracted to purchase German marks at a weighted-average exchangerate of DM 1.78 to $1.00 for a total notional value of $98.3

million. These fixed rate contracts will be settled in the fourthquarter of 1999, and their fair value was approximately $105.8million as of January 2, 1999.

In January 1998, the Company announced plans to moveto a new headquarters facility in Westlake Village, California.Construction of the complex is anticipated to be completed inlate 1999, at which time the Company plans to occupy theseleased facilities.

The Company has in place a $400 million 5-year revolvingcredit facility (the “Facility”) which matures in 2003. Provi-sions under the Facility require the Company to comply withcertain financial covenants which include a maximum permit-ted ratio of consolidated debt to net worth and a minimumrequired fixed charge coverage ratio. At January 2, 1999, noborrowings were outstanding under the Facility. The Compa-ny may also borrow under uncommitted lines of credit at ratesoffered from time to time by various banks that may not belenders under the Facility. Net borrowings outstanding underthe uncommitted lines of credit totaled $63.5 million at January 2, 1999.

On October 6, 1998, the Company issued $300 million of 7-year 6.375% unsecured notes in a public offering forwhich it received cash proceeds of $297.2 million. The Com-pany used a portion of the cash proceeds for acquisitions dur-ing the fourth quarter and the remainder to repay amounts out-standing under the Facility. Such credit facility borrowingswere primarily incurred to fund business acquisitions madeearlier in the year.

In December 1998, the Board of Directors authorized an increase in the Company’s stock repurchase program to 4.5 million shares. In February 1999, the Board of Directorsincreased this authorization to 8.3 million shares. During1998, the Company repurchased 1,165,200 of its commonshares at a cost of $42.1 million. During January and February1999, the Company repurchased an additional 2,271,000of its common shares for $67.6 million. Approximately 4.5 mil-lion shares remain authorized for repurchase under the Company’s stock repurchase program after these transactions.

The Company paid four quarterly dividends of 10 centsper share on its common stock totaling $24.0 million in 1998.

The Company believes that cash from operations and itscash position and revolving credit facility will enable it to meetits capital expenditure, debt maturity, common stock repur-chase, dividend payment and other funding requirements.

This Annual Report contains forward-looking statementsbased on current expectations that involve a number of risksand uncertainties. The potential risks and uncertainties thatcould cause the Company’s actual results to differ materiallyfrom those expressed or implied herein include weather relat-ed phenomena; market responses to industry volume pres-sures; economic crises in developing countries; quotas, tariffsand other governmental actions; changes in currencyexchange rates; product supply and pricing; and computerconversion and Year 2000 issues.



DOLE FOOD COMPANY, INC.

Directors

Elaine L. Chao 2

Distinguished FellowThe Heritage Foundation

Mike Curb 1, 3

ChairmanCurb Records, Inc.

David A. DeLorenzo President and Chief Operating OfficerDole Food Company, Inc.

Richard M. Ferry 1, 2

ChairmanKorn/Ferry International(international executive search firm)

James F. Gary 2, 3

Chairman EmeritusPacific Resources, Inc.

Zoltan Merszei 3

Former Chief Executive Officer, President and ChairmanThe Dow Chemical Company

David H. Murdock 1

Chairman of the Board and Chief Executive OfficerDole Food Company, Inc.

DOLE FOOD COMPANY, INC.

Officers

David H. MurdockChairman of the Board and Chief Executive Officer

David A. DeLorenzoPresident and Chief Operating Officer

John W. TateVice President and Chief Financial Officer

J. Brett TibbittsVice President - Corporate GeneralCounsel and Corporate Secretary

Patrick A. NielsonVice President - International Legal and Regulatory Affairs

George R. Horne Vice President - Human Resources

Roberta WiemanVice President

David W. PerrigoVice President - Taxes

James A. DykstraController and Chief Accounting Officer

Beth PotilloTreasurer

DOLE FOOD COMPANY

Operating Division Officers

Paul CuyegkengPresident – Dole Asia

William F. FeeneyPresident – Dole Europe

Juergen SchumacherPresident – Dole Latin America

Peter M. NolanPresident – Dole Packaged Foods

Lawrence A. KernPresident – Dole Fresh Vegetables

Gregory L. CostleyPresident – Dole North American Fruit

Roberto ZacariasPresident – Dole Honduran Beverage

Directors and Officers

1 Executive, Finance and Nominating Committee2 Audit Committee3 Compensation and Employee Benefits Committee

Dole 5 A Day nutrition education materials (CD-ROM, Play, Cookbook, and Chart) have been distributed free of charge to more than 35,000 schools. The nutrition education program is designed to encourage childrenbetween the ages of five to ten years, and their parents, to eat 5–9 servings of fruits and vegetables a day. Visit www.dole5aday.com for more information.

Inside Back Cover: Use File Named“Dole AR 98 cover.031799”


Company and Shareholder Information

DOLE® IS A REGISTERED TRADEMARK OF DOLE FOOD COMPANY, INC. ©1998 DOLE FOOD COMPANY, INC. ALL RIGHTS RESERVED.

Corporate Officers: (Seated – Left to Right): David H. Murdock, David A. DeLorenzo(Standing – Left to Right): George R. Horne, Roberta Wieman, J. Brett Tibbitts,James A. Dykstra, Beth Potillo, Patrick A. Nielson, David W. Perrigo

(Not Shown): John W. Tate

Operating Officers:(Seated – Left to Right): David A. DeLorenzo, David H. Murdock(Standing – Left to Right): Juergen Schumacher, Paul Cuyegkeng, William F. Feeney,Peter M. Nolan, Roberto Zacarias, Gregory L. Costley, Lawrence A. Kern


SourcingRipening/DistributionMarkets

✸ Corporate

FOOD OPERATING DIVISIONS AND LOCATIONS

EUROPE AND AFRICA • Belgium • Cameroon • Canary Islands • France • Germany • Ghana • Greece • Italy

Ivory Coast • Kenya • Namibia • Netherlands • South Africa • Spain • Tunisia • Turkey • United Kingdom • Zimbabwe

LATIN AMERICA AND CARIBBEAN • Argentina • Brazil • Chile • Colombia • Costa Rica • Ecuador

Guadeloupe • Guatemala • Honduras • Jamaica • Martinique • Mexico • Nicaragua • Peru • Venezuela • Windward Islands

ASIA • Australia • China • Japan • New Zealand • Philippines • Thailand

NORTH AMERICA • Canada • United States: Arizona, California, Florida, Hawaii, Ohio, Washington

FOOD MARKETING DIVISIONS AND LOCATIONS

EUROPE AND MIDDLE EAST • Albania • Algeria • Austria • Azerbaijan • Bahrain • Belarus • Belgium

Bosnia • Bulgaria • Croatia • Czech Republic • Denmark • Estonia • Egypt • Finland • France • Georgia • Germany

Greece • Hungary • Iceland • India • Ireland • Israel • Italy • Jordan • Kazakhstan • Kuwait • Latvia • Lebanon • Lithuania

Luxembourg • Malta • Morocco • Netherlands • Norway • Oman • Poland • Portugal • Qatar • Romania • Russia

Saudia Arabia • Senegal • Slovakia • Spain • Sweden • Switzerland • Syria • Tajikistan • Tunisia • Turkey • Ukraine

United Arab Emirates • United Kingdom • Uzbekistan • LATIN AMERICA AND CARIBBEAN • Argentina • Bahamas • Barbados

Bermuda • Bolivia • Brazil • Chile • Colombia • Costa Rica • Dominican Republic • Ecuador • Guadeloupe • Guatemala

Honduras • Jamaica • Martinique • Mexico • Netherlands-Antilles • Peru • Puerto Rico • Trinidad & Tobago

Uruguay • Venezuela • ASIA • Australia • China • Cambodia • Hong Kong • Indonesia • Japan • Malaysia

New Zealand • Philippines • Singapore • South Korea • Taiwan • Thailand

NORTH AMERICA • Canada • United States

DOLE WORLDWIDE OPERATIONS

✸

Auditors

Arthur Andersen LLP633 West Fifth Street, Los Angeles, CA 90071

Securities Transfer and Dividend Disbursement Agent

EquiServe P.O. Box 8040, Boston, MA 02266-8040(800) 733-5001Internet Address: www.equiserve.com

Dividend Information

A cash dividend of $0.10 per common share was declared ineach quarter of 1998 for a total annual dividend of $0.40 pershare. Dole Food Company, Inc. does not have a dividend rein-vestment plan.

Investment Industry Inquiries

Members of the investment industry should direct inquiries to:Office of the TreasurerDole Food Company, Inc.31365 Oak Crest Drive, Westlake Village, CA 91361(818) 879-6600

Additional Information Requests

For a copy of the Annual Report and Form 10-K, please contact:Office of the Corporate SecretaryDole Food Company, Inc.31365 Oak Crest Drive, Westlake Village, CA 91361Telephone: (818) 879-6814Facsimile: (818) 879-6615

Dole’s Annual Report is available on the internet athttp://www.dole.com

E-mail Address: [email protected]

Stock Exchange

Dole Food Company, Inc.’s common stock (DOL) is traded onThe New York and Pacific Stock Exchanges

Internet Addresses

http://www.dole.comhttp://www.dole5aday.com

THE COMPANY

Founded in Hawaii in 1851, Dole Food Company, Inc. is the world’s largest producer and marketer of fresh fruit, vegetables and flowers, and markets a growing line of packaged foods. The Company does business in more than 90 countries and employs approximately53,500 full-time people.

Corporate Headquarters

31365 Oak Crest Drive, Westlake Village, CA 91361 (818) 879-6600


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