Dole Food Co. Reports Income Decline In Second Quarter 2013

Dole Food Co., Inc. announced financial and operating results for the second quarter ended June 15, 2013, and reiterated guidance for full year 2013. In addition, Dole noted previously announced events during the quarter, namely, the April 1 completion of the sale of its former worldwide packaged foods and Asia fresh businesses, reported as discontinued operations, and the June 10 receipt of an unsolicited proposal from David H. Murdock to acquire all of the outstanding shares of common stock of Dole that he does not already own for $12 per share in cash. Dole also reported that during the second quarter, on May 10 and 13, it repurchased a total of 240,000 shares of its outstanding common stock at an average price per share of $11.26 (approximately $2.7 million) under the previously announced and now suspended share repurchase program.

For its continuing operations, Dole reported second quarter 2013 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $56 million compared to $81 million in the second quarter 2012. For the first half 2013, Adjusted EBITDA was $90 million compared to $125 million in the first half 2012. Adjusted EBITDA, generally accepted accounting principles (GAAP) income from continuing operations and comparable Income from continuing operations for the first half 2013 reflected a charge of $34 million for legal provisions related to the European General Court judgment, recorded in the first quarter of 2013.

GAAP income from continuing operations for the second quarter of 2013 was $2 million, or $0.01 per share, compared to $56 million, or $0.63 per share, in the second quarter 2012. GAAP income from continuing operations for the first half 2013 was $6 million, or $0.05 per share, compared to $82 million, or $0.91in the first half 2012. GAAP income from continuing operations for the second quarter and first half 2013 included $22 million and $30 million of costs, respectively, related to the ITOCHU transaction, the associated refinancing and other restructuring activities.

Comparable income from continuing operations for the second quarter 2013 was $25 million, or $0.28 per share, compared to $61 million, or $0.69 per share, in the second quarter 2012. Comparable income from continuing operations for the first half 2013 was $36 million, or $0.40 per share, compared to $83 million, or $0.93 per share, in the first half 2012.

Compared to 2012, second quarter 2013 Adjusted EBITDA declined approximately $25 million to $56 million from $81 million. “Second quarter Adjusted EBITDA performances from our fresh vegetables line of business and our remaining fresh fruit lines of business were less than last year,” said C. Michael Carter, Dole’s president and chief operating officer, in a prepared statement. “Fresh fruit was approximately $15 million lower mainly due to North America bananas, and fresh vegetables was approximately $14 million lower mainly due to berries, offset by approximately $4 million in lower corporate expenses.”

“The variance between second quarter performance and our second quarter guidance is mainly due to lower than expected banana cost of fruit and corporate overhead, higher than expected earnings in our Chilean business due to timing of operating expenses, and higher pineapple earnings, reduced by even lower than expected earnings from our fresh vegetables line of business, due to greater losses in berries,” said Carter. “The results this quarter are reflective of the inherent volatility and unpredictability of earnings from Dole’s smaller footprint as an international commodity produce company.”

Dole reiterated full year guidance at the low end of the $150 to $170 million range, assuming no major market changes. “This is due to the continued declining trend in fresh fruit performance principally due to banana market conditions and the full-year losses in our strawberry business, and reflects regular incentive accruals, which may vary based on Dole’s 2013 performance,” said Carter.

Dole also noted two additional events. On June 21, 2013, Dole paid approximately $64.7 million in full payment of the European General Court’s judgment affirming the European Commission’s decision finding violations of the European competition antitrust laws. “We strongly believe that the European competition laws were not violated and, on May 24, 2013, Dole appealed the judgment to the EU Court of Justice,” said Carter.

On July 9, 2013, Dole executed shipbuilding contracts with Hyundai Mipo Dockyard Co., Ltd. to construct three new specialty built refrigerated container ships, with a contractual price of $54.8 million per vessel ($164.4 million in total) and a total cost of approximately $168 million, for a phased delivery in the three successive quarters beginning the fourth quarter 2015. “Updating our West Coast shipping capabilities is very important strategically to Dole’s competitive differentiation and future growth prospects,” said Carter. “Our existing West Coast vessels will be approximately 27 years old at the time of replacement. The new ships will be more fuel efficient and will be built to Dole’s exacting specifications and design, with a higher capacity up to 788 FEU (compared to the current ships with 491 FEU) and equipped with gantry cranes.”

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