Dole Food Reports Earnings Decline In First Quarter 2013, Sells ITOCHU Corp. For $1.685 Billion

Dole Food Co., Inc. announced financial and operating results for the first quarter ended March 23, 2013. With the completed sale to ITOCHU Corporation on April 1, 2013 for $1.685 billion in cash, Dole’s former worldwide packaged foods and Asia fresh businesses have been separated from and are no longer part of Dole, and are reported as discontinued operations. Dole continues as an international commodity produce company with inherently more volatile earnings on a smaller footprint, retaining its fresh vegetables business and remaining fresh fruit business. Dole reported the financial and operating results of its continuing fresh produce businesses, and provided updated guidance for the second quarter and fiscal year 2013. Dole also provided an update on its new capital structure.

For the first quarter of 2013, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations was $34 million (excluding the one-time charge discussed below, Adjusted EBITDA would have been $68 million) compared to $44 million in the first quarter of 2012. Comparable Income from continuing operations for the first quarter of 2013 was $11 million or $0.12 per share, compared with $22 million, or $0.24 per share in the first quarter of 2012. Income from continuing operations for the first quarter of 2013 was $4 million or $0.04 per share, compared with $26 million, or $0.29 in the first quarter of 2012.

Dole’s first quarter 2013 Adjusted EBITDA from continuing operations reflected an additional $34 million charge to fully provide for the previously announced EU General Court antitrust decision. “Compared with 2012, excluding this amount, Adjusted EBITDA improved to $68 million from $44 million for Dole’s continuing operations. Dole’s first quarter performance is in line with our full-year expectations for 2013, at the low end of the guidance range of $150–$170 million,” said C. Michael Carter, Dole’s president and chief operating officer in a prepared statement. “First quarter Adjusted EBITDA from both of our remaining lines of business exceeded last year. Earnings grew in all of our core fresh fruit product lines. Fresh vegetables performance improved largely due to a turn-around in the fresh-packed product line.”

Dole updated its guidance for the 2013 second quarter and full fiscal year. “There is volatility in earnings from both of our fresh produce businesses, as we are currently seeing in the swing from the first quarter to the second quarter this year,” said Carter. “We expect second quarter Adjusted EBITDA to approximate half of first quarter Adjusted EBITDA (excluding the $34 million charge), with lower earnings from both our fresh fruit and fresh vegetables businesses. This volatility is especially pronounced in our legacy strawberry business, where we expect earnings to be down by $15–$20 million in the first half of 2013, compared to 2012. During the last six months our strawberry growing regions in California have experienced extreme warm weather followed by unusual cold weather and now warm weather again. As for full year 2013, we expect the overall lower earnings in the bananas and berries product lines to put pressure on our expected Adjusted EBITDA at the low end of the guidance range. The impact of higher expected volumes in these product lines is more than offset by expected lower prices and higher costs.”

Dole recently completed the syndication of its new capital structure, initially implemented in connection with the April 1st sale. “Our upsized capital structure, consisting of a $675 million term loan at LIBOR plus 2.75 percent with a 1 percent LIBOR floor, and a $180 million revolver at LIBOR plus 2.75 percent, provides needed flexibility to enhance shareholder value,” said Carter. The proceeds from the April 1st sale and our new capital structure were used to pay off Dole’s previous indebtedness of approximately $1.7 billion, including the settlement in full of capital lease obligations of approximately $50 million related to two vessels. After transaction-related taxes, costs and expenses, the extinguishment of the long-term Japanese yen hedges of $25.1 million, the European Commission’s fine of 45.6 million euro, and the expected resolution of the Honduras tax case, our net debt increases to approximately $440 million, with a resulting net leverage ratio of approximately 2.9 times (based on Dole’s 2013 Adjusted EBITDA guidance).

“The new Dole is off to an extraordinary start in 2013, with the record-setting early approval from China’s Ministry of Commerce resulting in the timely completion of the sale of our worldwide packaged foods and Asia fresh businesses to ITOCHU Corporation, for $1.685 billion cash,” said Carter. “The timeliness of the cash proceeds from this large valuation transaction enabled us to take advantage of optimal credit market conditions, resulting in a more efficient, much lower-cost new capital structure. This new capital structure allows us to resolve long-standing legacy exposures discussed above, while also providing needed financial flexibility to enhance shareholder value. We are very excited and very optimistic about the long-term future of the new Dole and its prospects. Dole remains an industry leader in the sourcing, distribution and marketing of bananas, pineapples and other tropical and deciduous fruits, packaged salads, fresh-packed vegetables and fresh berries. With our now more flexible capital structure and the eventual lower cost structure from right-sizing our organization, Dole will be well positioned to pursue growth opportunities.”

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