dole 1997 annual

PMS 186

Dole Food Company, Inc .1 9 9 7 A n n u a l R e p o r t

R2/Dole cover TO PRINT 11/10/98 1:19 PM Page 2

PMS 288 #1 PMS 288 #2

The Company

Founded in Hawaii in 1851, DoleFood Company, Inc. is the largestproducer and marketer of fresh fruitand vegetables, and markets a grow-ing line of packaged foods. TheCompany does business in more than90 countries and employs approxi-mately 44,000 full-time people.

Corporate Headquarters

31365 Oak Crest Drive

Westlake Villiage, CA 91361

(818) 879-6600

Auditors

Arthur Andersen LLP

633 West Fifth Street

Los Angeles, CA 90071

Securities Transfer and DividendDisbursement Agent

Boston EquiServe L.P.

P.O. Box 644

Boston, MA 02102

(800) 733-5001

Internet Address:

www.equiserve.com

Dividend Information

A cash dividend of $0.10 per com-mon share was declared in eachquarter of 1997 for a total annualdividend of $0.40 per share. DoleFood Company, Inc. does not have adividend reinvestment plan.

Investment Industry Inquiries

Members of the investment industryshould direct inquiries to:

Office of the Treasurer

Dole Food Company, Inc.


Westlake Village, CA 91361

(818) 879-6600

Additional Information Requests

For Annual Reports and Forms

10-K, please contact:

Office of the Corporate Secretary




Telephone (818) 879-6814

Facsimile (818) 879-6615

Dole’s Annual Report is available onthe internet at http://www.dole.com

Internet Address:

srelation%[email protected]

Stock Exchange

Dole Food Company, Inc.’s common

stock (DOL) is traded on the NewYork and Pacific Stock Exchanges.

Internet Address:

http://www.dole.com

http://www.dole5aday.com

Dole® is a registered trademark of DoleFood Company, Inc.

©1998 Dole Food Company, Inc. Allrights reserved.

C o m p a n y a n d S h a r e h o l d e r I n f o r m a t i o n

Dole Food Company’s worldwide

team of growers, packers, processors, shippers and

employees is committed to consistently providing

safe, high quality fruit, vegetables and food products

while protecting the environment in which its

products are grown and processed. Dole’s dedication

to quality is a commitment solidly backed by:

scientific pest management programs, stringent

quality control measures, state-of-the-art production

and transportation technologies, continuous

improvement through research and innovation,

and dedication to the safety of our employees,

communities and the environment.


93 94 95 96 97

Revenue(in millions)

93 94 95 96 97

Stock Pr ice(year-end)

93 94 95 96 97

Return on Equity **(in percent)

$26.

75

$23.

00

$35.

00

$34.

00

$45.

75

7.6

%

6.4

%

16.0

%

24.6

%

26.3

%

3,10

8 3,49

9 3,80

4

3,84

0 4,33

6

93 94 95 96 97

EBITDA*(in millions)

■ Depreciation & Amortization ■ EBIT

273

265

308

338

372

*NOTE: Before restructuring charges and 1995 net gain on asset dispositions

**NOTE: Before 1996 restructuring charge and 1995 asset impairment

G r o w t h C a s h F l o w R e t u r n Va l u e

D o l e F i n a n c i a l H i g h l i g h t s

(in millions, except per share data) 1997 1996 1995 1994 1993

Revenue $4,336 $3,840 $3,804 $3,499 $3,108

Income from continuing operations $ 160 $ 89 $ 120 $ 58 $ 62

Income from discontinued operations – – (97) 10 16

Net income $ 160 $ 89 $ 23 $ 68 $ 78

Diluted earnings per common share

Continuing operations $ 2.65 $ 1.47 $ 2.00 $ 0.98 $ 1.04

Discontinued operations – – (1.61) 0.16 0.26

Net Income $ 2.65 $ 1.47 $ 0.39 $ 1.14 $ 1.30

Diluted average common shares outstanding 60 60 60 60 60

Total Assets $2,464 $2,487 $2,442 $3,685 $3,159

Capitalization

Short-term debt $ 14 $ 22 $ 24 $ 54 $ 79

Long-term debt 755 904 896 1,555 1,111

Minority interests 38 30 26 25 39

Common shareholders’ equity 666 550 508 1,081 1,052

Total $1,473 $1,506 $1,454 $2,715 $2,281

Book value per common share $11.10 $ 9.18 $ 8.49 $18.17 $17.70

Common stock price at year-end $ 453⁄4 $ 341⁄2 $ 351⁄2 $ 231⁄2 $ 263⁄4

Market price range

High $ 49 5⁄8 $ 431⁄2 $ 381⁄2 $ 351⁄2 $ 37 7⁄8

Low $ 333⁄8 $ 327⁄8 $ 241⁄2 $ 221⁄2 $ 257⁄8

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

Note: Income from continuing operations for 1996 and 1993 includes pre-tax restructuring charges of $50 million and $43 million, respectively. Income from continuing operations for 1995 includes a pre-tax gain of $62 million on assets sold or held for disposal. The real estate and resorts business distributed to shareholders in 1995 has been presented throughout this report as a discontinued operation.

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T o O u r S h a r e h o l d e r s

dD

1997 was an excellent year for the Dole Food Company.

■ Revenues grew to $4.3 billion, an increase of 13% over prior year.

■ Cash flow from operations (EBITDA) grew to $372 million, an increase of 10% over prior year.

■ Net income after taxes grew to $160.2 million ($2.65 per share), an increase of 23% over prior

year, excluding the extraordinary charge taken in 1996.

■ Net debt was reduced by $154 million, from $891 million to $737 million.

■ Shareholder equity increased by $116 million, from $550 million to $666 million, and improved

debt to equity ratio from 62% to 53%.

These achievements were the result of the combined contribution of all of our business units which

are focused on earning higher returns on investments.

G R O W T H 1997 was a year of solid growth for our core business units. Dole’s array of

wholesome, fresh, nourishing products continues to benefit from the worldwide trend toward a healthier

lifestyle. This trend, combined with Dole’s quality and service achieved by its unique global production

and distribution infrastructure, will allow Dole to grow at this accelerated pace well into the future.

Dole’s volume growth came from all areas of our business:

■ Increasing demand for fresh fruit and vegetables in the developed markets of the United States,

Europe and Japan.

■ Growing demand for fresh fruits and vegetables in the developing economies in Latin America,

Eastern Europe, Russia and the former Soviet Republics, and China.

■ Increasing demand for Dole’s convenient, ready-to-eat prepared salad mixes, both domestically and

internationally.

■ New product line extensions in both the fresh salad, fresh cut fruit, and the packaged food areas.

■ Growth and expansion of Dole’s unique distribution network throughout Europe and Japan.

■ Continued expansion of Dole’s global sourcing network, including growth at its Spanish citrus and veg-

etable subsidiary, Pascual Hermanos, and growth from joint venture relationships in Africa with tropical

fruits from Cameroon and Ivory Coast, and citrus and deciduous fruits from South Africa.

While Dole’s volume growth was fueled by all of the above factors, its revenue growth was impacted

in 1997 due to adverse foreign currency movements, which were compounded in the marketplace by

the Asian financial crisis. It was gratifying to see that the strong demand for Dole products offset

adverse market conditions.

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(Seated - Right to Left):

David H. Murdock, David

A. DeLorenzo, Mike Curb

and Elaine L. Chao

(Standing - Right to Left):

Richard M. Ferry, Zoltan

Merszei and James F. Gary

C R E A T I N G V A L U E Our foremost interest is in expanding cash flow through

company ownership of depreciable assets. It is our belief that the primary value to stockholders is

considerable cash flow in excess of earnings.

As the Dole brand continues to grow and become more visible around the globe, management has

also focused on downsizing or liquidating businesses or assets that have not provided adequate return.

In 1997 Dole successfully liquidated its dried fruit business in the United States, as well as continued

its orderly sale of certain agricultural lands in North America. The cash flow from these liquidations

has been used to pay down debt.

As a result of the significant debt reduction in 1997, Dole’s current debt consists almost entirely of

its long term bonds. Based on the strong cash flow generated during the year, Dole also reduced its

available five year revolving credit facility from $600 million to $400 million. Agents in the facility are

Chase Manhattan Bank, Bank of America and Citibank.

In January 1998, Dole announced plans to move to a new headquarters facility in Westlake Village,

California. Construction of the complex is anticipated to begin in 1998 and Dole plans to occupy

these facilities during 1999.

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N U T R I T I O N A N D F O O D S A F E T Y As the largest grower, shipper and

marketer of fresh fruits and vegetables in the world, Dole remains committed to nutrition education,

and to providing leadership in the area of food safety.

Dole’s nutrition department, in combination with nutrition experts at the Mayo Clinic and the

University of California, Los Angeles, are in the process of compiling a nutrition encyclopedia for pub-

lication within the year. The encyclopedia will focus on the value of eating fresh fruits, vegetables, nuts

and protein products. This undertaking will enhance the quality of life for the benefit of all people

around the globe.

Dole’s nutrition education CD-ROM for children continues to provide elementary school teachers

with the tools needed to teach proper nutrition to children and is now in use in more than 35,000

schools. Our popular 5 A Day web site also provides educational materials for people of all ages and

all nations, and has gained widespread popularity.

O U T L O O K In 1985, when I became chairman of Dole Food Company, it was predomi-

nately a banana and pineapple company, with major real estate holdings. Over the years, Dole has

evolved into a highly focused internationally diversified food processing company with operations in

more than 90 countries.

Dole is a financially sound company with excellent prospects for further growth. Dole is positioning

its expertise and technology in the industry to take advantage of developing opportunities in Asia,

which could conceivably be the emerging continent in the next century. We continue to expand our

distribution system, which will assure growth and market penetration of Dole’s quality brand of pack-

aged and fresh fruit and vegetable products throughout Asia and Europe.

Dole has a clear and strategic vision, an efficient cost base, a dynamic brand and a first rate team of

employees. It is this dedicated group of women and men who embody the intellect, integrity, creative

imagination and skills that enable Dole to be a leader in the industry.

We wish to express our appreciation and gratitude to our employees, shareholders and customers for

their continued support and confidence.

Sincerely,

David H. Murdock

Chairman and Chief Executive Officer

D o l e W o r l d w i d e O p e r a t i o n s

EUROPE AND AFRICA

BelgiumCameroonCanary IslandsFranceGermanyGhanaGreeceItalyIvory CoastNetherlandsSouth AfricaSpainTunisiaTurkeyUnited Kingdom

LATIN AMERICA AND

CARIBBEAN

ArgentinaChileColombiaCosta RicaEcuadorGuadeloupeGuatemalaHondurasJamaicaMartiniqueMexicoNicaraguaPanamaPeruVenezuela

Windward Islands

ASIA

AustraliaChinaJapanNew ZealandPhilippinesThailand

NORTH AMERICA

CanadaUnited States

ArizonaCaliforniaFloridaHawaiiOhioWashington

EUROPE AND

MIDDLE EAST

AlbaniaAlgeriaAustriaAzerbaijanBahrianBelarussiaBelgiumBosniaBulgariaCroatiaCzech RepublicDenmarkEstoniaEgyptFinlandFranceGeorgiaGermanyGreeceHungaryIcelandIndiaIrelandIsraelItalyJordanKazakhstanKuwaitLatviaLebanonLithuaniaLuxembourg

MaltaMoroccoNetherlandsNorwayOmanPolandPortugalQatarRomaniaRussiaSaudia ArabiaSenegalSlovakiaSomaliaSpainSwedenSwitzerlandSyriaTaijikistanTunisiaTurkeyUkraineUnited Arab EmiratesUnited KingdomUzbekistan

LATIN AMERICA AND

CARIBBEAN

ArgentinaBahamasBarbadosBermudaBrazilChile

ColombiaCosta RicaDominican RepublicEcuadorGuadeloupeGuatemalaHondurasJamaicaMartiniqueMexicoNetherlands-AntillesPanamaPeruTrinidad & TobagoUruguayVenezuela

ASIA

AustraliaChinaHong KongIndonesiaJapanMalaysiaNew ZealandPhilippinesSingaporeSouth KoreaTaiwanThailand

NORTH AMERICA

CanadaUnited States

■ Sourcing

▲ Ripening/Distribution

● Markets

★ Corporate

FOOD OPERATING DIVISIONS AND LOCATIONS FOOD MARKETING DIVISIONS AND LOCATIONS

★

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dD

Dole’s North American operation achieved its highest revenue in company history in

1997 by growing approximately 13 percent versus 1996. In North America, Dole has

the broadest product mix of any region in the world. Dole continues to be the leading

supplier of fresh produce and related products to the region. With efforts to maintain

the highest quality and to promote the benefits of healthy eating, Dole is well

positioned to continue market growth within North America.

P A C K A G E D Growth, both in earnings and market share, was the key to success for Dole

packaged foods in 1997. Record sales and earnings growth were fueled by new product introductions,

roll out of existing products to new geographic areas, and volume increases in base businesses. Dole’s

share of the canned pineapple business grew to 44.4 percent, the only major brand to show volume

gains. Cost reductions in the distribution and marketing areas contributed significantly to earnings.

As the number of meals eaten away from home increases, the foodservice area

becomes increasingly important. Pineapple as a pizza topping continues to gain in popularity. Dole

pizza-cut tidbits distribution has been expanded nationally. Dole “Easy Open” pineapple chunks and

tropical fruit salad have provided vending machine operators with convenient and healthy snack alter-

natives. New packaging forms, such as pouches, have been developed for pineapple in response to

restaurant operators’ requests for convenience.

F R E S H V E G E T A B L E S The fresh cut salad category continues to exhibit double

digit growth, with a 17 percent dollar increase in 1997, growing to nearly $1.6 billion in sales. Dole’s growth

outpaced the category, and Dole salads are now a familiar item in nearly 60 percent of supermarkets.

Iceberg salad continues to be the largest segment within fresh cut salads. Fifty percent

of American households buy iceberg salads, more than any other salad segment. Following extensive

D o l e

N o r t h A m e r i c a

Innovative field

harvesting delivers

fresh packed produce

direct to the market.

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consumer research, in early 1998 Dole will introduce a new, iceberg-based salad, “Greener Selection,”

which incorporates romaine and iceberg lettuce, carrots and cabbage.

E X P A N D E D D I S T R I B U T I O N N E T W O R K Dole has built a new

$30 million, 150,000 square foot fresh vegetable manufacturing and distribution facility in Springfield,

Ohio. Situated on 40 acres, the facility will be operational during the first quarter of 1998. The plant

will incorporate the same advanced technology that won Dole’s Soledad, California facility Food

Engineering’s “Plant of the Year” award. This facility dramatically expands and improves Dole’s ability

to service retail customers. A sophisticated logistics system will connect the Springfield plant with four

local delivery points: Chicago, Atlanta, Wilkes-Barre and New York. This will provide customers in the

Midwestern and Eastern United States more frequent deliveries and service within 24 hours.

A third facility in Yuma, Arizona completes Dole’s value added facilities. In the five

years since the pre-cut salad category exploded in the marketplace, Dole has built more than 600,000

square feet of manufacturing space to take advantage of this demand.

F R U I T Dole continues to be the market leader of imported fresh tropical fruit. Products

include bananas, pineapples, mangoes, papayas and melons. Annual sales for these products increased

more than 10 percent during 1997. Dole is the only fully refrigerated, containerized fresh produce

importer in North America, which enables it to maintain the highest quality standards in delivering

product to the marketplace.

In 1997, a record quality navel orange crop allowed Dole’s sales group to increase

market penetration and to solidify its position as the second highest market share in the navel orange

industry. High quality crops and Dole’s brand strength in the marketplace resulted in one of the

highest returns in the industry for lemons.

Dole is the leading importer of fresh fruit from Chile, generating sales of approximately

$200 million. Dole’s high quality winter season table grapes, kiwi, deciduous and stone fruit sourced from

Chile contributed to increased market penetration in these product categories in 1997. Momentum from

early season sales of Chilean sourced products carried through the year, allowing a record volume of California

sourced table grapes to be marketed. Dole continues to be the continent’s leading supplier of grapes.

Product Diversification

Consumers select from

over 170 products with

the Dole brand from

nearly every aisle of

the supermarket.

©

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dD

1997 marked a record year for Dole production, despite severe flooding throughout

Central America at the end of 1996 and in the Spring of 1997. Dole Latin America

experienced a 12 percent increase in export volume over 1996. Dole supplements its

own production with a selective network of 1,300 independent growers. Over 21,000

employees on the Dole Latin America team provide the highest quality, safest fresh

produce possible.

Dole is reducing its overall cost structure in its shipping program. Due to continued strong brand

growth in North America and Europe, Dole has ordered two refrigerated container vessels from

HDW in Kiel, Germany, which will reduce Dole’s reliance on costly short-term charters while

expanding company-owned and managed shipping capacity in late 1999.

Dole constantly strives to incorporate the latest technology in its operations to

improve quality. The company converted nine vessels in its Northern European service to carry fruit

under controlled atmosphere conditions, which extends product shelf life and ensures that fruit

arrives to the consumer in peak condition year-round. In addition, Dole has expanded its fleet of

refrigerated containers by ten percent and undertaken a long term container modernization program.

Dole Latin America will continue to focus on profitable growth of its core products

and markets as well as opportunities to build earnings and expand the Dole brand name throughout

Latin and South America. The strategy is to integrate forward and open distribution centers from

which Dole products will be delivered directly to retailers.

Dole is the largest exporter of deciduous fruits in Chile. Expansion through joint

ventures further enables Dole to distribute products directly to retail supermarkets in the Santiago area.

D o l e

L a t i n A m e r i c a

The world’s largest

dedicated refrigerated

containerized ship-

ping fleet distributes

to global markets.

©

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Dole has also acquired additional grape farms in Northern Chile and entered into several long term

land rental agreements for production of deciduous fruit.

A significant portion of Dole production is purchased from independent growers.

Dole assists over 640 farmers to successfully grow and pack quality bananas. A team of highly skilled

agronomists and technical staff educate growers to ensure Dole’s recommended agricultural practices,

quality guidelines, and environmental procedures and standards are implemented.

In 1997, Dole completed the installation of the most technically advanced sorting

and sizing equipment at its apple packing plant in Chile. In order to continue to lead the industry in

productivity and quality, Dole has invested in state-of-the-art technology which has been applied to its

pre-sizer equipment. Dole now has the most modern packing facility in Central and South America.

H O N D U R A N B E V E R A G E O P E R A T I O N Dole’s majority-owned

beverage operation continues as the dominant beverage supplier in Honduras. The operation leads

the Honduran market commanding market shares of approximately 75 percent in soft drinks and

99 percent in beer. The operation exclusively represents Coca-Cola® and Canada Dry® products as

well as controlling its own brand of fruit-flavored soft drinks. The division produces and/or distributes

four leading domestic brands of beer, along with the internationally recognized brands of Holsten®

and Budweiser®. Vertical operations include a sugar mill, a plastic case and bottle business, and bottle

cap manufacturing. It also operates an edible oil and soap operation with well-established local brands.

The division has initiated an upgrade of its production facilities, starting with the

recent purchase of one of the most modern soft drink bottling lines in Latin America. These and

other plant upgrades are being made to fulfill projected growth in product demand.

B E V E R A G E D I S T R I B U T I O N Sales and service levels have improved

significantly due to efforts made in 1997 to expand direct control over product distribution in

Honduras’ rural regions. New routes are continuously being added in both rural and urban areas to

deliver beverages to more customers. The operation has also initiated the modernization of its sales

information system by implementing a hand-held computer-based order retrieval system.

Nutritious food for

a healthy active

lifestyle enjoyed by

families worldwide.

©

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dD

Sales in Asia increased to approximately $1.04 billion, a 6.6 percent improvement

from 1996. Despite the economic crisis in Asia, Dole quickly adapted to the changes

in the economy. Sales in Japan, Dole’s flagship market, increased 16 percent in local

currency due to increased marketing efforts and the strength of the Dole brand,

which is recognized by 92 percent of the consumers.

P R O D U C T I O N Production facilities in the Philippines and Thailand experienced an

excellent year of quality and production. Dole Philippines, located in the southern most island of

Mindanao, celebrated its 35th year of operation and produced more than 490,000 tons of fresh and

processed pineapple in 1997. Its sister operation in Thailand celebrated a milestone 25th anniversary

at its facilities in Hua Hin located on the Gulf of Thailand. When combined with Dole’s second

cannery in Champorn, located 400 miles south of Bangkok, these plants comprise the largest produc-

tion operations in Thailand, producing 231,000 tons of pineapple in 1997.

More than 95 percent of the Dole pineapple produced in Thailand is sourced from

independent growers, reducing overall cost structure. The devaluation of the currencies in the

Philippines and Thailand contributed favorably to reducing cost in these two divisions. Targeted capi-

tal spending programs aimed at introducing new technology to enhance plants and equipment also

served to increase efficiency, strengthen quality and reduce costs.

Dole’s new line of fruits packed in clear plastic cups is enjoying a successful intro-

duction in Europe and Asia. Utilizing new packaging technology, these convenient cups provide an

excellent alternative to conventional canned packaging and provide added convenience for consumers

on the go. Manufactured in Dole’s Philippine and Thailand operations, new fruit varieties have been

added to the product line. Testing in selected markets in North America is scheduled in 1998.

Dole canneries

shipped over 721,000

tons of fresh and

packaged pineapple

in 1997.

D o l e

A s i a

©

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Dole enjoys a 92%

brand recognition by

Japanese consumers.

D I S T R I B U T I O N The tremendous demand for the Dole brand in Japan resulted in

the opening of a second distribution center in Tokyo and the expansion of the Dole center in Kobe.

By year end, Dole had six distribution centers in Japan operating at or near capacity. This forward

integration has allowed Dole greater efficiency and quality control of products distributed directly to

the supermarket shelf. Dole is by far the largest importer of fresh fruits and vegetables and in 1997

expanded its product offerings by marketing more domestically grown product.

To provide the Japanese consumers with convenient meal solutions, Dole established

fresh-cut fruit and vegetable centers in Japan. These centers enhance product line offerings, which

help meet requirements of the retail and foodservice market segments, and expand consumer aware-

ness of the Dole brand.

The new distribution and fresh-cut centers are allowing Dole to expand category

management efforts in the retail market. With an efficient distribution network, a wide array of

both domestic and imported fruits and vegetables, and a growing line of pre-cut fruits, vegetables and

salads, Dole is uniquely positioned to supply the increasing needs of Japan’s supermarkets.

Expanded distribution systems throughout the world, materially enhance the recognition of

Dole’s unique emblem. Dole’s goal is to have the industry’s finest distribution system deliver

the highest quality product at the most efficient cost structure.

Recent deregulation in Japan allowed Dole to introduce the concept of con-

tract growing and create evolutionary change in the country’s traditional agribusiness

structure. Dole is now sourcing domestically grown products from a newly

established network of over 1,200 Japanese farmers. Contracted in

1997, growers are producing broccoli, tomatoes,

cabbage, radishes, carrots, lettuce, cherry tomatoes

and melons for distribution in Dole centers

throughout the country.

Sapporo

Sendai

TokyoNagoya

Kobe

Fukuoka

Niigata

★

● ■ ▲

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★

● ■ ▲

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■ ▲

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● Dole Center■ Fruit Packing Plant▲ Future Vegetable Packing Plant★ Future Dole Center, Fruit and

Vegetable Packing Plant

©

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dD

During 1997, Dole Europe increased sales by 13 percent to $1.2 billion and continued

to invest in the expansion of its European distribution network. This closely links Dole’s

extensive worldwide production and sourcing network to retail distribution, distinguish-

ing Dole as the largest and broadest producer and distributor of fresh fruits and vegeta-

bles in Europe. The Dole brand increasingly signifies a dedication to consistently pro-

viding retail customers with high quality products on a timely basis, as well as product

innovation and an assurance of agricultural and distribution practices that meet the

highest criteria of food safety and environmental protection.

Dole added to its European distribution network by acquiring distribution centers from its French

joint venture partner, Compagnie Fruitiere. These centers, eight in France, four in Spain and one in

the United Kingdom, were merged with Dole’s existing distribution network, providing unsurpassed

breadth of distribution to retailers in these countries.

Dole increased its participation in the Compagnie Fruitiere joint venture. The joint

venture focused on the development of banana and pineapple production in West Africa and French

Antilles. During 1997, the joint venture acquired the largest banana and pineapple producer and

exporter in the Ivory Coast, SCB, providing additional volume to Dole’s distribution to European

retailers. The combination of unequaled distribution coverage and premium African sourcing has cre-

ated a unique market position for Dole and further reduces the cost base on Dole’s shipping service to

the European Union markets in France, Italy, North Europe and the United Kingdom.

In the Italian market, Dole continued to capitalize on investments in both ripening

and distribution. As the supermarket channel continues to grow in importance in Italy, Dole is ideally

D o l e

E u r o p e

Packing, shipping

and distribution are

the keys to delivering

the Dole brand

throughout the world.

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positioned to be the premier supplier of fresh fruit and vegetable products in this marketplace.

The benefits in 1997 of controlling distribution and production were a large part of Dole’s financial

success in Europe.

Dole continues to develop its Spanish production base for European produced fruits

and vegetables. Dole views European production as essential to developing long-term relationships

with retailers. European retailers stock over 50 percent of their produce departments with domestically

grown produce year-round. Through its continued growth and integration of Pascual Hermanos,

Dole is working to achieve a full complement of European produce to offer retailers through Dole’s

distribution network.

In its new Pascual Hermanos subsidiary, Dole acquired 326 acres of climatic controlled

growing facilities, sixty-five percent of which are being improved to make Dole the industry’s best and

most resourceful supplier of fruits and vegetables in Spain.

During 1997, Dole introduced Pascual Hermanos to field packing of iceberg lettuce.

Automated field harvest and packing machines, developed in conjunction with Dole fresh vegetables

in Salinas, California, bring the packing lines to the field. This produces savings in time, handling,

transport and labor, and most importantly, provides a substantially higher quality produce to cus-

tomers. This is a superb example of leveraging Dole’s worldwide capabilities.

Dole secured a substantial cost advantage in 1997 while continuing to penetrate new

markets by consolidating its Black Sea shipping service. This operation serves Romania, Bulgaria, Ukraine

and Russia. A new market, Georgia, was added during 1997, as well as a trucking service from Dole’s

Istanbul distribution facility that reaches the new markets of Kazakhstan, Uzbekistan and Taijikistan.

Dole recognizes its responsibility to promote sustainable agriculture and protect

the environment and employees. Dole is aggressively implementing ISO 14000, the international

environmental standard. Dole believes a key success factor in the European marketplace is an

unquestioned commitment to environmental responsibility and employee welfare. Dole intends to

lead the industry in both.

Dole’s convenient

ready-to-eat salads

are gaining recogni-

tion in Europe.

PAGES2 TO 24 11/9/98 9:17 PM Page 21

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

DOLE FRESH VEGETABLESDole ArtichokesDole AsparagusDole Bell PeppersDole BroccoliDole Brussels SproutsDole CarrotsDole CauliflowerDole CeleryDole Green Leaf LettuceDole Iceberg LettuceDole Butter LettuceDole Red Leaf LettuceDole Romaine LettuceDole Green OnionsDole Sugar PeasDole Idaho PotatoesDole Radishes

DOLE FRESH-CUT VEGETABLESDole Peeled-Mini CarrotsDole Shredded CarrotsDole Cole SlawDole Chopped Romaine Salad

Dole Classic Romaine SaladDole Shredded LettuceDole Shredded Red CabbageDole Classic Iceberg SaladDole Greener SelectionTM Salad Dole American Special Blend SaladDole European Special Blend SaladDole French Special Blend SaladDole Italian Special Blend SaladDole Romaine Special Blend SaladDole Spring Mix Special Blend SaladDole Mediterranean Special Blend Salad Dole Verona Special Blend Salad Dole Tuscany Special Blend Salad Dole Complete Caesar SaladDole Complete Spinach Bacon SaladDole Complete Oriental SaladDole Complete Sunflower Ranch SaladDole Complete Romano SaladDole Complete Caesar Salad with Fat Free DressingDole Complete Herb Ranch Salad with Fat Free

DressingDole Complete Raspberry Romaine Salad with Fat Free

DressingDole Complete Zesty Italian Salad with Fat Free

DressingDole Caesar Lunch For OneTM

Dole Classic Ranch Lunch For OneTM

Dole Caesar with Fat Free Dressing Lunch For OneTM

Dole Italian with Fat Free Dressing Lunch For OneTM

DOLE DRIED FRUIT & NUTS Dole Blanched Slivered Almonds in Reclosable BagsDole Blanched Whole Almonds in Reclosable BagsDole Chopped Natural Almonds in Reclosable BagsDole Sliced Natural Almonds in Reclosable BagsDole Whole Natural Almonds in Reclosable BagsDole Golden Seedless RaisinsDole Seedless Raisins CanisterDole Seedless Raisins CartonDole Seedless Raisins Mini SnacksDole Seedless Raisins Six PacksDole Seedless Raisins in Reclosable BagsDole Chopped Dates CartonDole Pitted Dates CartonDole Pitted Prunes CanisterDole Pitted Prunes CartonDole Pitted Prunes in Reclosable Bags

SAMANGuyennoise Prunor Pitted PrunesGuyennoise Prunor Whole PrunesJA Whole DatesJA Whole PrunesWhole Deglet Nour DatesSoelia Dried ApricotsSoelia Dried FigsSoelia Blanched Whole AlmondsSoelia Sliced Thin AlmondsSoelia Whole PeanutsSoelia PistachiosSoelia Pitted PrunesSoelia Whole Prunes

DOLE PACKAGED FOODSDole Apricots in Juice or SyrupDole Apricot HalvesDole Apricot Snack CupDole Aloe Vera (Solid)Dole Cherry Flavored Mixed Fruit Dole Diced Peaches Dole Fruit Bowls – Diced PeachesDole Fruit Bowls – Mixed FruitDole Fruit Bowls – Tropical FruitDole Fruit Bowls – Pineapple TidbitsDole Fruit Cocktail Dole Fruit Mix, Easy OpenDole Fruit Festival Snack CupDole Guava HalvesDole Ketchup (Regular and Hot Spice) Dole Orange Fruit Jelly CupsDole Peach HalvesDole Peach Snack CupDole Pear Snack CupDole Pineapple Cubes in SyrupDole Pineapple ConcentrateDole Pineapple Fun Shapes – CosmicDole Pineapple Fun Shapes – Sea CreaturesDole Pineapple Tidbits for PizzaDole Pineapple Slices in Juice or SyrupDole Pineapple Chunks in Juice or SyrupDole Pineapple Snack CupDole Pineapple Snack Wedges, Easy OpenDole Pineapple Tidbits in Juice or SyrupDole Crushed Pineapple in Juice or SyrupDole Pineapple & Peach CupsDole Pineapple & Papaya Fruit Jelly CupsDole Tropical Fruit Juice BoxDole Pineapple JuiceDole Pineapple Orange JuiceDole Pine–Orange Banana JuiceDole Pine–Orange Guava JuiceDole Pine–Passion Banana JuiceDole Pineapple Orange Juice BoxDole Pineapple Orange Banana Juice BoxDole Pineapple Orange Raspberry Juice BoxDole Pineapple Juice DrinkDole Pineapple Grapefruit Juice Dole Pineapple Pink Grapefruit DrinkDole Pineapple Lychee Juice DrinkDole Pineapple Orange Juice DrinkDole Pineapple Strawberry Juice DrinkDole Mandarin Orange SegmentsDole Mandarin Orange Segments, Easy OpenDole Mandarin Orange Fruit CupsDole MushroomDole Papaya in SyrupDole Yellow Papaya ChunksDole Red Papaya Chunks in Light SyrupDole Pears in Juice and SyrupDole Peaches in Juice and SyrupDole Deciduous Fruit Cocktail in Juice and SyrupDole Sliced Peaches, Easy OpenDole Tropical Fruit Salad in Juice or SyrupDole Tropical Fruit Salad, Easy OpenDole White AsparagusSeasons Tropical Fruit Mix

D o l e F o o d P r o d u c t s W o r l d w i d e

PAGES2 TO 24 11/9/98 9:17 PM Page 22


David H. Murdock, Peter

M. Nolan, Andrew Biles

and Juergen Schumacher


Lawrence A. Kern,

William F. Feeney,

Paul Cuyegkeng and

David A DeLorenzo

(Not pictured:

Gregory L. Costley and

Roberto Zacarias)

Officers:


Thomas J. Pernice,

David H. Murdock,

James A. Dykstra,

Roberta Wieman and

David A. DeLorenzo


Edward A. Lang III,

David A. Cohen, John W.

Tate, George R. Horne,

David W. Perrigo and

J. Brett Tibbitts

(Not Pictured:

Patrick A. Nielson)

PAGES2 TO 24 11/9/98 9:17 PM Page 23

93 94 95 96 97

Common Shareholders’Equity

(in millions)

1,05

2

1,08

1

508 55

0

666

93 94 95 96 97

Net Debt(in millions)

1,15

5

1,56

3

847 89

1

737

North Latin Asia EuropeAmerica America

Revenue Growth by Region1987 to 1997

(in millions)

93 94 95 96 97

Capita l Expenditures(in millions)

174

212

90

110

129

$873

75%

$149

95%

$588

235%

$981

577%

93 94 95 96 97

Net Debt toNet Debt and Equity Rat io

(in percent)

52.3

% 59.1

%

62.5

%

61.9

%

52.5

%

*NOTE: Before restructuring charges and 1995 net gain on asset dispositions

C a p i t a l i z a t i o n

C a s h F l o w

G r o w t h

93 94 95 96 97

EBITDA*(in millions)

273

265

308

338

372

D o l e F i n a n c i a l H i g h l i g h t s

■ Depreciation & Amortization ■ EBIT

PAGES2 TO 24 11/9/98 9:17 PM Page 24

C o n s o l i d a t e d S t a t e m e n t s o f I n c o m e

(in thousands, except per share data) 1997 1996 1995

Revenue $4,336,120 $3,840,303 $3,803,846

Cost of products sold 3,692,277 3,256,345 3,217,869

Gross margin 643,843 583,958 585,977

Selling, marketing and administrative expenses 399,800 369,675 392,694

Restructuring charge – 50,000 –

Operating income 244,043 164,283 193,283

Interest income 7,776 8,412 7,501

Net gain on assets sold or held for disposal – – 61,655

Other income (expense) – net 8,034 4,535 (5,429)

Earnings before interest and taxes 259,853 177,230 257,010

Interest expense (64,589) (68,699) (81,186)

Income from continuing operations before income taxes 195,264 108,531 175,824

Income taxes (35,100) (19,500) (56,000)

Income from continuing operations 160,164 89,031 119,824

Loss from discontinued operations, net of income taxes – – (96,493)

Net income $ 160,164 $ 89,031 $ 23,331

Earnings per common share

Basic – continuing operations $ 2.67 $ 1.48 $ 2.01

Diluted – continuing operations 2.65 1.47 2.00

Basic – net income (after discontinued operations) $ 0.39

Diluted – net income (after discontinued operations) 0.39

See Notes to Consolidated Financial Statements

DOLE FOOD COMPANY, INC.

R4/Dole 1997 Financials 11/10/98 1:00 PM Page 25

C o n s o l i d a t e d B a l a n c e S h e e t s

(in thousands) 1997 1996

Current assets

Cash and short-term investments $ 31,202 $ 34,342

Receivables – net 534,844 518,266

Inventories 468,692 526,052

Prepaid expenses 48,438 47,164

Total current assets 1,083,176 1,125,824

Investments 69,248 72,930

Property, plant and equipment – net 1,024,247 1,024,135

Long-term receivables – net 63,482 69,861

Other assets 223,742 194,057

Total assets $2,463,895 $2,486,807

Current liabilities

Notes payable $ 11,290 $ 20,478

Current portion of long-term debt 2,326 1,497

Accounts payable 230,143 185,747

Accrued liabilities 432,680 454,208

Total current liabilities 676,439 661,930

Long-term debt 754,849 903,807

Deferred income taxes and other long-term liabilities 328,293 341,798

Minority interests 37,842 29,712

Commitments and contingencies

Common shareholders’ equity 666,472 549,560

Total liabilities and equity $2,463,895 $2,486,807




C o n s o l i d a t e d S t a t e m e n t s o f C a s h F l o w

(in thousands) 1997 1996 1995

Operating activitiesIncome from continuing operations $ 160,164 $ 89,031 $ 119,824Adjustments to continuing operations

Depreciation and amortization 112,081 111,073 113,325 Equity earnings net of distributions 373 (2,875) (6,533)Net gain on assets sold or held for disposal – – (61,655)Provision for deferred income taxes 11,575 (1,741) 30,429 Restructuring charge – 50,000 –Other (23,005) (8,203) 41Change in operating assets and liabilities, net of effects from acquisitions

Receivables – net (10,438) (89,176) 53,142Inventories 72,066 27,222 (57,588)Prepaid expenses and other assets (1,167) (8,846) (18,800)Accounts payable and accrued liabilities (7,487) (34,270) 30,842Other (23,126) (37,262) 31,592

Cash flow provided by operating activities of continuing operations 291,036 94,953 234,619Cash flow used in operating activities of discontinued operations – – (11,467)

Cash flow provided by operating activities 291,036 94,953 223,152Investing activities

Proceeds from sales of businesses and assets 39,200 58,417 432,746Capital additions (129,171) (109,686) (90,276)Purchases of investments and acquisitions, net of cash acquired (40,010) (58,775) (35,251)Other (500) 438 998

Cash flow provided by (used in) investing activities of continuing operations (130,481) (109,606) 308,217

Cash flow used in investing activities of discontinued operations – – (15,144)

Cash flow provided by (used in) investing activities (130,481) (109,606) 293,073 Financing activities

Short-term borrowings 28,414 19,694 29,348Repayments of short-term debt (40,887) (20,449) (62,944)Long-term borrowings 35,232 168,060 12,384 Repayments of long-term debt (169,110) (163,799) (675,098)Proceeds from distribution of real estate and resorts business – – 235,186 Cash dividends paid (23,988) (24,020) (23,861)Issuance of common stock 6,644 11,232 5,101 Repurchase of common stock – (13,874) –

Cash flow used in financing activities of continuing operations (163,695) (23,156) (479,884)Cash flow used in financing activities of discontinued operations – – (9,352)

Cash flow used in financing activities (163,695) (23,156) (489,236)Increase (decrease) in cash and short-term investments (3,140) (37,809) 26,989 Cash and short-term investments at beginning of year 34,342 72,151 45,162

Cash and short-term investments at end of year $ 31,202 $ 34,342 $ 72,151




N o t e s t o C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s

Note 1 – Nature of Operations

Dole Food Company, Inc. and its consolidatedsubsidiaries (“the Company”) are engaged in the world-wide sourcing, processing, distributing and marketing of high quality, branded food products including freshfruits and vegetables. Operations are conducted through-out North America, Latin America, Europe (includingeastern European countries), and Asia (primarily inJapan and the Philippines). The Company is also engagedin beverage operations in Honduras.

The Company’s principal products are produced onboth Company-owned and leased land and are alsoacquired through associated producer and independentgrower arrangements. The Company’s products are primarily packed and processed by the Company andare sold to retail and institutional customers and otherfood product companies.

Note 2 – Summary of Accounting Policies

Principles of Consolidation – The consolidated financialstatements include the accounts of all significant majority-owned subsidiaries. All significant intercompany accountsand transactions have been eliminated in consolidation.

Annual Closing Date – The Company’s fiscal year endson the Saturday closest to December 31. Fiscal year1997 ended January 3, 1998 and included 53 weeks,while fiscal years 1996 and 1995 contained 52 weeks.

Cash and Short-Term Investments – Cash and short-terminvestments include cash on hand and time depositswith maturities of three months or less.

Inventories – Inventories are valued at the lower of costor market. Cost is determined principally on a first-in,first-out basis. Specific identification and average costmethods are also used for certain packing materials andoperating supplies.

Recurring Agricultural Costs – The costs of growingbananas and pineapples are charged to operations asincurred. Growing costs related to other crops are recognized when the crops are harvested and sold.

Investments – Investments in affiliates and joint ven-tures with ownership of 20% to 50% are generallyrecorded on the equity method. Other investments aregenerally accounted for using the cost method.

Property, Plant and Equipment – Property, plant andequipment are stated at cost, less accumulated depre-ciation. Depreciation is computed principally by thestraight-line method over the estimated useful lives of the assets.

Goodwill and Other Intangible Assets – Goodwill andother intangible assets, generally representing the excessof the cost over the net asset value of acquired businesses,

are stated at cost and are amortized, principally on astraight-line basis, over the estimated future periods to bebenefited (not exceeding 40 years). The Company peri-odically reviews the recoverability of these assets based onanalyses of undiscounted expected future cash flows.

Foreign Exchange – For subsidiaries in which thefunctional currency is the United States dollar, netforeign exchange transaction gains or losses are includedin determining net income. These resulted in net lossesof $5.0 million, $2.1 million, and $2.4 million for 1997,1996 and 1995, respectively. Net foreign exchange gainsor losses resulting from the translation of assets andliabilities of foreign subsidiaries whose local currency isthe functional currency are accumulated as a separatecomponent of common shareholders’ equity.

Income Taxes – Deferred income taxes are recognized for the tax consequences of temporary differences byapplying enacted statutory tax rates to the differencesbetween financial statement carrying amounts and thetax bases of assets and liabilities. The income taxes whichwould be due upon the distribution of foreign subsidiaryearnings have not been provided where the undistrib-uted earnings are considered permanently invested.

Earnings Per Common Share – In accordance withStatement of Financial Accounting Standards No. 128,basic earnings per common share are calculated usingthe weighted average number of common shares out-standing during the period without consideration ofthe dilutive effect of stock options. The basic weightedaverage number of common shares outstanding was60.0 million, 60.0 million and 59.7 million for 1997,1996 and 1995, respectively. Diluted earnings per com-mon share are calculated using the weighted averagenumber of common shares outstanding during theperiod after consideration of the dilutive effect of stockoptions. The diluted weighted average number of com-mon shares and equivalents outstanding was 60.4 mil-lion, 60.4 million and 59.8 million for 1997, 1996 and1995, respectively.

Fair Value of Financial Instruments – The historical carrying amount is a reasonable estimate of fair value for short-term financial instruments. Fair values for long-term financial instruments not readily marketable wereestimated based upon discounted future cash flows at prevailing market interest rates. Based on these assump-tions, management believes the fair market values of theCompany’s financial instruments, other than certain debtinstruments (see Note 7), are not materially differentfrom their recorded amounts as of January 3, 1998.

Stock Based Compensation – Statement of FinancialAccounting Standards No. 123 (“SFAS 123”) defines a fair value method of accounting for employee stock



compensation plans but allows for the continuation ofthe intrinsic value method of accounting to measurecompensation cost prescribed by Accounting PrinciplesBoard Opinion No. 25 (“APB 25”). In accordance withSFAS 123, the Company has elected to continue utiliz-ing the accounting method prescribed by APB 25 andhas adopted the disclosure requirements of SFAS 123(see Note 9).

Use of Estimates –The preparation of financial statementsrequires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilitiesand disclosures of contingent assets and liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reportingperiod. Actual results could differ from these estimates.

Reclassifications – Certain prior year amounts have beenreclassified to conform with the 1997 presentation.

Note 3 – Acquisitions and Dispositions

During 1997 and 1996, the Company acquired andinvested in production and distribution operations inEurope, Latin America and Asia. Each of the acquisitionswas accounted for as a purchase and, accordingly, thepurchase price was allocated to the net assets acquiredbased upon their estimated fair values as of the date ofacquisition. The fair values of assets and investmentsacquired, and liabilities assumed were approximately $79million and $39 million in 1997 and approximately $106million and $48 million in 1996. Results of acquiredoperations were not significant in 1997 or 1996.

In 1996, the Company implemented a formal plan toclose its dried fruit facility located in Fresno, Californiawhich had suffered continued losses. During the fourthquarter of 1996, a restructuring charge of $50.0 millionwas recorded related to the closure of this facility. Theprincipal component of the charge was a provision forasset write-downs of $38.5 million. The closure of thisfacility was essentially completed in the second quarterof 1997. During 1997, $30.0 million for asset write-downs, $2.2 million for contract terminations and$2.6 million for severance payments were chargedagainst this provision. The remaining balance relatesprimarily to write-downs of assets still held for disposal.In total, 466 employees were terminated as a result ofthe closure of this facility.

During 1995, the Company completed the sale of its juice business, resulting in net proceeds of approxi-mately $270 million and a pretax gain of approximately$145 million. In addition, during 1995 the Companybegan to implement its plan to sell certain of its agricul-tural properties and other assets which had generated lowreturns. The book value of the assets to be sold exceeded

the estimated fair value less costs to sell, resulting in anadjustment of $83.3 million. The above dispositionsresulted in a net pretax gain of $61.7 million.

Note 4 – Discontinued Operations

On December 28, 1995, the Company completed theseparation of its real estate and resorts business [Castle& Cooke, Inc. (“Castle”)] from its food business in a nontaxable distribution to its shareholders. Under the plan of distribution, each Company shareholder of record on December 20, 1995 received a dividend of one share of Castle common stock for every threeshares of the Company’s common stock. Approximately$1.0 billion of net assets were transferred to Castle, andin partial consideration thereof the Company receivedcash proceeds of approximately $235 million and a $10 million note receivable from Castle which bearsinterest at the rate of 7% per annum and is due December 8, 2000. As a result, the Company’s commonshareholders’ equity was reduced by approximately$582 million (see Note 10).

In connection with the distribution, the operatingresults of the real estate and resorts business have beenaccounted for as a discontinued operation. Revenuesfrom discontinued operations for 1995 were approxi-mately $349 million. Basic losses per common sharefrom discontinued operations were $1.62 and dilutedlosses per common share from discontinued operationswere $1.61, in 1995. The 1995 loss from discontinuedoperations includes an allocation of the Company’soverall interest costs (based on the cash proceeds andthe interest bearing note received by the Company atdistribution) of $7.3 million after tax.

During the third quarter of 1995, the Company reviewedcertain of its real estate and resort properties to determinewhether expected future cash flows (undiscounted andwithout interest charges) from each property wouldresult in the recovery of the carrying amount of suchproperty. Certain adverse developments in 1995 affect-ing the Lana’i resort and certain other properties causedmanagement to substantially lower its estimates of futurecash flow and led to a determination that the propertieswere impaired in accordance with generally acceptedaccounting principles and accordingly, an impairmentloss of $103.8 million after tax was recorded as part ofdiscontinued operations in the accompanying 1995statement of income.

Note 5 – Current Assets And Liabilities

Short-term investments of $1.8 million and $7.5 mil-lion as of January 3, 1998 and December 28, 1996,respectively, consisted principally of time deposits.



Outstanding checks which are funded as presented forpayment totaled $22.1 million and $48.8 million as ofJanuary 3, 1998 and December 28, 1996, respectively,and were included in accounts payable.

Details of certain current assets were as follows:


Receivables

Trade $434,781 $428,186

Notes and other 142,820 138,577

Affiliated operations 17,342 13,257

594,943 580,020

Allowance for doubtful accounts (60,099) (61,754)

$534,844 $518,266

Inventories

Finished products $149,933 $169,280

Raw material and work in progress 142,623 198,306

Growing crop costs 46,207 46,887

Packing materials 24,803 23,213

Operating supplies and other 105,126 88,366

$468,692 $526,052

Accrued liabilities as of January 3, 1998 and December 28,1996 included approximately $86 million and $101 mil-lion, 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 $ 444,686 $ 391,561

Buildings and improvements 264,494 277,984

Machinery and equipment 864,431 910,785

Construction in progress 84,954 54,728

1,658,565 1,635,058

Accumulated depreciation (634,318) (610,923)

$1,024,247 $1,024,135

Depreciation expense for 1997, 1996 and 1995 totaled$101.9 million, $102.5 million and $106.2 million,respectively.

Note 7 – Debt

Notes payable consisted primarily of short-term borrow-ings required to fund certain foreign operations andtotaled $11.3 million with a weighted average interestrate of 19.3% as of January 3, 1998 and $20.5 millionwith a weighted average interest rate of 15.7% as ofDecember 28, 1996.

Long-term debt consisted of:


Unsecured debt

Notes payable to banks at an

average interest rate of 6.2%

(5.9% – 1996) $ 14,600 $172,300

6.75% notes due 2000 225,000 225,000

7% notes due 2003 300,000 300,000

7.875% debentures due 2013 175,000 175,000

Various other notes due 1998-

2014 at an average interest rate

of 7.8% (5.2% – 1996) 36,102 23,808

Secured debt

Mortgages, contracts and notes due

1998-2012, at an average interest

rate of 9.2% (9.7% – 1996) 8,525 11,594

Unamortized debt discount and

issue costs (2,052) (2,398)

757,175 905,304

Current maturities (2,326) (1,497)

$754,849 $903,807

The Company estimates the fair value of its fixed inter-est rate unsecured debt based on current quoted marketprices. The estimated fair value of unsecured noncallablenotes (face value $700 million) was approximately $716million at January 3,1998. At December 28, 1996, theestimated fair value approximated book value.

In July 1996, the Company replaced its existing $1 bil-lion, 5-year revolving credit facility with a $600 million,5-year revolving credit facility (the “Facility”). In July1997, the Company extended the Facility to 2002 and in November 1997, reduced it to $400 million. At theCompany’s option, borrowings under the Facility bearinterest at a certain percentage over the agent’s prime rate or the London Interbank Offered Rate (“LIBOR”).Provisions under the Facility require the Company tocomply with certain financial covenants which include a maximum permitted ratio of consolidated debt to networth and a minimum required fixed charge coverageratio. At January 3, 1998, there were no borrowings out-standing under the Facility. Net borrowings outstandingunder the Facility at December 28, 1996 totaled $90.0million. The Company may also borrow under uncom-mitted lines of credit at rates offered from time to time byvarious banks that may not be lenders under the Facility.Net borrowings outstanding under the uncommittedlines of credit totaled $14.6 million and $82.3 million atJanuary 3, 1998 and December 28, 1996, respectively.

Sinking fund requirements and maturities with respectto long-term debt as of January 3, 1998 were as follows(in millions): 1998 – $2.3; 1999 – $10.4; 2000 – $229.8;2001 – $4.7; 2002 – $19.4; and thereafter $490.5.



Interest payments totaled $66.2 million, $68.4 million and$86.4 million, during 1997, 1996 and 1995, respectively.

Note 8 – Employee Benefit Plans

The Company has qualified and non-qualified definedbenefit pension plans covering certain full-time employees.Benefits under these plans are generally based on eachemployee’s eligible compensation and years of serviceexcept for certain hourly plans which are based onnegotiated benefits.

For U.S. plans, the Company’s policy is to fund the net periodic pension cost plus a 15-year amortization ofthe unfunded liability. The plans covering internationalemployees are generally not funded.

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

U.S. Plans ( in thousands) 1997 1996

Actuarial present value of

accumulated benefit obligation

Vested $249,843 $231,999

Non-vested 2,196 3,480

$252,039 $235,479


projected benefit obligation $276,767 $248,676

Plan assets at fair value, primarily

stocks and bonds 281,944 250,154

Plan assets in excess of projected

benefit obligation 5,177 1,478

Unrecognized net transition asset (650) (774)

Unrecognized prior service cost 2,099 2,078

Unrecognized net gain (2,967) (4,969)

Additional minimum liability (1,704) (720)

Prepaid (accrued) pension cost $ 1,955 $ (2,907)

International Plans (in thousands) 1997 1996


accumulated benefit obligation

Vested $ 10,113 $ 9,099

Non-vested 3,105 5,036

$ 13,218 $ 14,135


projected benefit obligation $ 30,535 $ 30,776

Plan assets at fair value, primarily

stocks and bonds 1,737 2,473

Projected benefit obligation in

excess of plan assets (28,798) (28,303)

Unrecognized net transition obligation 1,677 2,892


Unrecognized net loss 2,588 108

Additional minimum liability (140) (583)

Accrued pension cost $ (20,858) $ (21,267)

For U.S. plans, the projected benefit obligation wasdetermined using assumed discount rates of 7.25% in1997 and 7.75% in 1996 and assumed rates of increasein future compensation levels of 4.5% in 1997 and1996. The expected long-term rate of return on assetswas 9.25% in 1997 and 9.0% in 1996. For internationalplans, the projected benefit obligation was determinedusing assumed discount rates of 7.25% to 20.0% in1997 and 7.75% to 20.0% in 1996 and assumed rates ofincrease in future compensation levels of 4.5% to17.5% in 1997 and 1996. The expected long-term rateof return on assets for international plans was 9.25% to20.0% in 1997 and 9.0% to 20.0% in 1996.

Pension expense for the U.S. and international plansconsisted of the following components:

(in thousands) 1997 1996 1995

Service cost – benefits

earned during the year $ 5,911 $ 9,143 $ 8,114

Interest cost on projected

benefit obligation 22,055 21,968 21,270

Actual return on

plan assets (46,282) (32,823) (46,944)

Net amortization

and deferral 25,817 13,885 28,337

Net periodic pension cost $ 7,501 $ 12,173 $ 10,777

The Company recognized net curtailment losses of$1.3 million in 1996 for the domestic plans and $2.4 mil-lion in 1997 and $3.6 million in 1995 for the interna-tional plans. These losses were due to additional benefitpayments resulting from reductions in workforce.

The Company offers two 401(k) plans generally coveringall full-time U.S. employees. Eligible employees maydefer a percentage of their annual compensation up toa maximum allowable amount under federal incometax law to supplement their retirement income. Theseplans provide for Company contributions based on acertain percentage of each participant’s contribution.Total Company contributions to these plans in 1997,1996 and 1995 were $3.2 million, $3.8 million and$4.4 million, respectively.

The Company is also a party to various industry-widecollective bargaining agreements which provide pensionbenefits. Total contributions to these plans plus directpayments to pensioners in 1997, 1996 and 1995 were$0.8, $1.2 million and $0.8 million, respectively.

In addition to providing pension benefits, the Companyprovides certain health care and life insurance benefitsfor eligible retired employees. Certain employees maybecome eligible for such benefits if they fulfill estab-lished requirements upon reaching retirement age.



The status of the postretirement benefit plans was as follows:


Accumulated postretirement

benefit obligation (APBO)

Retirees $63,353 $62,991

Fully eligible actives 4,943 5,746

Other actives 3,211 4,439

71,507 73,176


Unrecognized net gain 15,968 13,034

Accrued postretirement

benefit liability $89,215 $88,290

Postretirement benefit expense included the followingcomponents:

(in thousands) 1997 1996 1995

Service cost – benefits

earned during the year $ 212 $ 237 $ 449

Interest cost on APBO 5,423 5,482 7,258

Net amortization and

deferral (333) (481) (342)

Curtailment gain (600) (577) –

Net periodic

postretirement

benefit cost $4,702 $4,661 $7,365

An annual rate of increase in the per capita cost of covered health care benefits of 9.0% for 1998 decreas-ing to 5.0% in 2006 and thereafter was assumed indetermining the APBO for the U.S. and internationalplans in 1997, and 9.5% for 1997 decreasing to 5.0%in 2006 and thereafter was assumed in determining theAPBO for the U.S. and international plans in 1996.Increasing the assumed health care cost trend rate byone percentage point in each year would have resultedin an increase in the Company’s APBO as of January 3,1998 of $8.7 million and the aggregate of the serviceand interest cost components of postretirement benefitexpense for 1997 of $0.7 million. The weighted averagediscount rate used in determining the APBO was7.25% for the U.S. and international plans in 1997 and7.75% for the U.S. and international plans in 1996.The plans are not funded.

Note 9 – Stock Options and Awards

Under the 1991 and 1982 Stock Option and AwardPlans (“the Option Plans”), the Company can grantincentive stock options, non-qualified stock options,stock appreciation rights, restricted stock awards andperformance share awards to officers and key employeesof the Company. Stock options vest over time or basedon stock price appreciation and may be exercised for up to 10 years from the date of grant, as determined bythe committee of the Company’s Board of Directorsadministering the Option Plans. No stock appreciationrights, restricted stock awards or performance shareawards were outstanding at January 3, 1998.

Under the 1995 Non-Employee Directors Stock OptionPlan (the “Directors Plan”), each active non-employeedirector receives a grant of 1,500 non-qualified stockoptions (the “Options”) on February 15th (or the firsttrading day thereafter) of each year. The Options vestover three years and expire 10 years after the date of thegrant or upon early termination as defined by the planagreement.

Changes in outstanding stock options were as follows:

WeightedAverageExercise

Shares Price

Outstanding, December 31, 1994 2,055,764 $29.43

Granted 563,000 27.21

Exercised (371,989) 13.73

Canceled (294,513) 31.30

Adjustment for distribution of real

estate and resorts business 8,158


Granted 711,000 38.52

Exercised (373,952) 30.04

Canceled (103,661) 33.39


Granted 449,630 38.65

Exercised (249,365) 28.36

Canceled (25,288) 36.78

Outstanding, January 3, 1998 2,368,784 $33.51

Exercisable, January 3, 1998 1,284,866 $29.78

The number and exercise price of all options outstandingwere adjusted to reflect the impact of the distribution ofthe real estate and resorts business in December 1995(see Note 4).

Of the 2,368,784 options outstanding at January 3,1998, 750,140 have exercise prices between $17.50 and$27.07 with a weighted-average exercise price of$26.05 and a weighted-average remaining term of 6years (697,135 exercisable at a weighted-average exer-cise price of $26.09), 539,933 have exercise prices



between $30.92 and $36.99 with a weighted-averageexercise price of $33.75 and a weighted-average remain-ing term of 4 years (539,933 exercisable at a weighted-average exercise price of $33.75), and 1,078,711 haveexercise prices between $38.50 and $44.25 with aweighted-average exercise price of $38.58 and aweighted-average remaining term of 9 years (47,798exercisable at a weighted-average exercise price of$38.60).

The fair value of each option grant was estimated onthe date of grant using the Black-Scholes option pricingmodel with the following weighted-average assumptionsfor grants in 1997, 1996 and 1995, respectively: dividendyields of 1.0%, 1.0% and 1.5%, expected volatility of29.0%, 30.0% and 30.0%, risk-free interest rates of6.5%, 5.8% and 7.4% and expected lives of 9 years, 9years and 7 years. The weighted-average fair value ofoptions granted during 1997, 1996 and 1995 was $17.29,$15.08 and $11.23, respectively. The Company accountsfor the Option Plans under APB 25 and, accordingly,no compensation costs have been recognized in theaccompanying statements of income for 1997, 1996 or1995. Had compensation costs for the Option Plansbeen determined under SFAS 123, pro forma netincome would have been $156.8 million, $86.0 million

and $22.2 million, respectively, for 1997, 1996 and1995. Pro forma basic and diluted earnings per sharewould have been $2.61 and $2.59, respectively, for 1997,$1.43 and $1.42, respectively, for 1996 and $0.37 forboth basic and diluted earnings per share in 1995. SinceSFAS 123 was only applied to options granted subse-quent to December 31, 1994, the resulting pro formacompensation cost may not be representative of that tobe expected in future years.

Note 10 – Shareholders’ Equity

Authorized capital at January 3, 1998 consisted of 80 million shares of no par value common stock and30 million shares of no par value preferred stock,issuable in series. At January 3, 1998, approximately5.1 million shares and 53,024 shares of common stockwere reserved for issuance under the Option Plans andthe Directors Plan, respectively. There was no preferredstock outstanding.

The Company’s policy is to pay quarterly dividends oncommon 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.As of January 3, 1998 the Company had repurchased395,400 shares at a cost of $13.9 million.


Changes in shareholders’ equity were as follows:Cumulative

Additional Foreign Total Common CommonCommon Paid-in Retained Currency Shareholders’ Shares

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

Balance, December 31, 1994 $320,121 $165,541 $ 634,717 $ (39,738) $1,080,641 59,478,108

Net income – – 23,331 – 23,331 –

Cash dividends declared ($.30 per share) – – (17,913) – (17,913) –

Translation adjustments – – – (859) (859) –

Distribution of real estate and resorts business – – (581,866) – (581,866) –

Issuance of common stock 376 4,725 – – 5,101 376,631

Balance, December 30, 1995 320,497 170,266 58,269 (40,597) 508,435 59,854,739

Net Income – – 89,031 – 89,031 –


Translation adjustments – – – (21,244) (21,244) –


Repurchase of common stock (395) (13,479) – – (13,874) (395,400)

Balance, December 28, 1996 320,476 167,645 123,280 (61,841) 549,560 59,833,291

Net Income – – 160,164 – 160,164 –


Translation adjustments – – – (25,908) (25,908) –


Balance, January 3, 1998 $320,707 $174,058 $ 259,456 $ (87,749) $ 666,472 60,064,447


Note 11 – Contingencies

At January 3, 1998, the Company was guarantor ofapproximately $98 million of indebtedness of certainkey fruit suppliers and other entities integral to theCompany’s operations.

The Company has ordered two refrigerated containervessels from HDW in Kiel, Germany, which are sched-uled for delivery in late 1999. The cost per ship isapproximately DM 100 million.

The Company is involved from time to time in variousclaims and legal actions incident to its operations, bothas plaintiff and defendant. In the opinion of manage-ment, after consultation with legal counsel, none of suchclaims is expected to have a material adverse effect on theCompany’s financial position or results of operations.

Note 12 – Lease Commitments

The Company has obligations under noncancelableoperating leases, primarily for ship charters and con-tainers, and certain equipment and office facilities.Lease terms are for less than the economic life of theproperty. Certain agricultural land leases provide forincreases in minimum rentals based on production. Totalrental expense was $182.2 million, $158.7 million and$147.3 million (net of sublease income of $10.6 million,$12.4 million and $9.4 million) for 1997, 1996 and1995, respectively.

During 1995, the Company entered into an agreementwith a bank syndicate for the sale and seven year lease-back of certain vessels. This transaction generated netproceeds of approximately $133 million.

At January 3, 1998, the Company’s aggregate minimumrental commitments, before sublease income, were as fol-lows (in millions): 1998 – $147.9; 1999 – $124.6; 2000– $81.9; 2001 – $50.3; 2002 – $151.8 and thereafter –$65.4. Total future sublease income is $27.6 million.

Note 13 – Income Taxes

Income tax expense (benefit) was as follows:

(in thousands) 1997 1996 1995

Current

Federal, state and local $ 2,810 $ 1,882 $ 2,292

Foreign 20,715 19,359 23,279

23,525 21,241 25,571

Deferred

Federal, state and local 12,285 (444) 30,656

Foreign (710) (1,297) (227)

11,575 (1,741) 30,429

$35,100 $19,500 $56,000

Pretax earnings attributable to foreign operations wereapproximately $147 million, $173 million and $181million for 1997, 1996 and 1995, respectively.Undistributed earnings of foreign subsidiaries, whichhave been or are intended to be permanently invested,aggregated $1.3 billion at January 3, 1998.

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

(in thousands) 1997 1996 1995

Expense computed at

U.S. federal statutory

income tax rate $ 68,341 $ 37,986 $ 61,538

Foreign income taxed

at different rates (36,437) (21,656) (16,366)

Dividends from

subsidiaries 456 618 -

State and local income

tax, net of federal

income tax benefit 602 1,100 4,293

Other 2,138 1,452 6,535

Reported income tax

expense $ 35,100 $ 19,500 $ 56,000

Total income tax payments (net of refunds) were $17.3 mil-lion, $(1.6) million and $51.3 million for 1997, 1996and 1995, respectively.

Deferred tax assets (liabilities) were comprised of thefollowing:

(in thousands) 1997 1996 1995

Operating reserves $ 24,892 $ 45,246 $ 36,840

Accelerated depreciation (25,290) (21,717) (37,868)

Inventory valuation

methods 3,024 3,670 3,690

Effect of differences

between book values

assigned in prior

acquisitions and

historical tax values (33,100) (36,941) (37,927)

Postretirement benefits 34,278 33,946 31,263

Tax credit carryforward 1,263 4,987 39,310

Net operating loss

carryforward 86,670 77,685 79,616

Other, net (11,729) (18,677) (22,308)

$ 80,008 $ 88,199 $ 92,616



The Company has recorded deferred tax assets of $86.7 million reflecting the benefit of approximately$229 million in federal and state net operating loss carry-overs which will, if unused, begin to expire in 2009.

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

Total deferred tax assets and deferred tax liabilities wereas follows:

(in thousands) 1997 1996 1995

Deferred tax assets $ 226,028 $ 253,831 $ 281,392

Deferred tax liabilities (146,020) (165,632) (188,776)

$ 80,008 $ 88,199 $ 92,616

The Company remains contingently liable with respectto certain tax credits sold with recourse by Flexi-VanCorporation (“Flexi-Van”), the Company’s former trans-portation equipment leasing business, to a third partyin 1981. These credits, which have been contested bythe Internal Revenue Service, continue to be litigatedby Flexi-Van. Flexi-Van, which separated from theCompany in 1987 and was subsequently acquired byDavid H. Murdock, has indemnified the Companyagainst obligations that might result from the resolutionof this matter.

Note 14 – Geographic Area Segment Information

The Company’s only significant segment of business isfood products. Product transfers between geographic areasare accounted for based on the estimated fair marketvalue of the products. Revenue, operating income andidentifiable assets pertaining to the geographic areas inwhich the Company operates are presented as follows:

(in millions) 1997 1996 1995

Revenue

North America $2,091 $1,843 $1,959

Latin America 909 801 771

Asia 1,038 974 914

Europe 1,180 1,040 959

Intercompany

elimination (882) (818) (799)

$4,336 $3,840 $3,804

Operating income (loss)

North America $ 126 $ 76 $ 72


Asia 24 17 14

Europe (9) - 3

Corporate (34) (78) (34)

$ 244 $ 164 $ 193

Identifiable assets

North America $ 891 $ 980 $ 973


Asia 235 289 327

Europe 477 446 339

Corporate 67 77 105

$2,464 $2,487 $2,442

Notes: Revenue includes inter-area transfers from Latin America to NorthAmerica, Asia and Europe of $603 million, $542 million and $514 millionin 1997, 1996 and 1995, respectively; from Asia to North America andEurope of $200 million, $170 million and $184 million in 1997, 1996and 1995, respectively; from North America to Asia and Europe of $50 mil-lion, $78 million and $72 million in 1997, 1996 and 1995, respectively;and from Europe to North America, Asia and Latin America of $29 million,$28 million and $29 million in 1997, 1996 and 1995, respectively.

Corporate operating loss for 1996 includes the restructuring charge of $50 million.



Note 15 – Quarterly Financial Information (Unaudited)

The following table presents summarized quarterly results.

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

1997

Revenue $964,992 $1,107,804 $1,178,301 $1,085,023 $4,336,120

Gross margin 151,738 191,006 156,157 144,942 643,843

Net income 42,043 70,429 24,443 23,249 160,164

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

1996

Revenue $814,438 $1,041,191 $1,093,586 $ 891,088 $3,840,303

Gross margin 126,990 179,592 155,961 121,415 583,958

Net income (loss) 30,009 63,580 22,966 (27,524) 89,031

Net income (loss) per diluted common share $ 0.50 $ 1.05 $ 0.38 $ (0.46) $ 1.47

The net loss for the fourth quarter of 1996 includes a charge of $50 million, before tax, related to the restructuring of the Company’s dried fruit business.

All quarters have twelve weeks, except the fourth quarter of 1997 which has thirteen weeks and the third quarters of both years which have sixteen weeks.

Note 16 – Common Stock Data (Unaudited)

The following table shows the market price range of

the Company’s common stock for each quarter in

1997 and 1996.

High Low

1997

First Quarter $401⁄4 $333⁄8

Second Quarter 433⁄8 373⁄4

Third Quarter 4615⁄16 391⁄16

Fourth Quarter 495⁄8 439⁄16

Year $495⁄8 $333⁄8

1996

First Quarter $423⁄4 $341⁄8

Second Quarter 43 371⁄4

Third Quarter 431⁄2 387⁄8

Fourth Quarter 401⁄4 327⁄8

Year $431⁄2 $327⁄8



R e p o r t o f I n d e p e n d e n t P u b l i c A c c o u n t a n t s

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

We have audited the accompanying consolidatedbalance sheets of Dole Food Company, Inc., (a Hawaiicorporation) and subsidiaries as of January 3, 1998 and December 28, 1996, and the related consolidatedstatements of income and cash flow for the years ended January 3, 1998, December 28, 1996, andDecember 30, 1995. These financial statements are theresponsibility of the Company’s management. Ourresponsibility is to express an opinion on these financialstatements based on our audits.

We conducted our audits in accordance with generallyaccepted auditing standards. Those standards requirethat we plan and perform the audit to obtain reasonableassurance about whether the financial statements arefree of material misstatement. An audit includes exam-ining, on a test basis, evidence supporting the amountsand disclosures in the financial statements. An auditalso includes assessing the accounting principles usedand significant estimates made by management, as wellas evaluating the overall financial statement presentation.We believe that our audits provide a reasonable basisfor our opinion.

In our opinion, the consolidated financial statementsreferred to above present fairly, in all material respects,the financial position of Dole Food Company, Inc. andsubsidiaries as of January 3, 1998 and December 28, 1996and the results of their operations and their cash flowfor the years ended January 3, 1998, December 28,1996, and December 30, 1995, in conformity withgenerally accepted accounting principles.

Los Angeles, California

February 6, 1998



M a n a g e m e n t ’ s D i s c u s s i o n a n d A n a l y s i s o f R e s u l t s o f

O p e r a t i o n s a n d F i n a n c i a l P o s i t i o n

1997 Compared with 1996

Revenue – Revenue increased 13% to $4,336.1 millionin 1997 from $3,840.3 million in 1996. The increasein revenue is primarily attributable to higher worldwidebanana volumes; increased volumes in fresh cut saladsand favorable pricing for the fresh vegetable business;continued growth at the Honduran beverage operation;newly acquired businesses; and an additional week infiscal year 1997. The Company was able to grow rev-enue in spite of adverse currency movements in 1997.

Selling, Marketing and Administrative Expenses – Selling,marketing and administrative expenses were $399.8 mil-lion or only 9.2% of revenue in 1997 compared to$369.7 million or 9.6% of revenue in 1996. Theincreased expense is due to higher sales activity in existingproduct lines and the acquisition of new businesses, par-tially offset by the closure of the dried fruit facility.

Operating Income – Operating income improved to$244.0 million in 1997 from $214.3 million before therestructuring charge in 1996. Higher earnings in 1997were the result of increased volumes of fresh cut saladsand favorable pricing in the fresh vegetables business,and growth in the banana business. In addition, theprocessed pineapple and Honduran beverage businessesposted higher results in 1997, and the closure of thedried fruit facility in the second quarter reduced losses.

The European Union (“E.U.”) banana regulationswhich impose quotas and tariffs on bananas remainedin full effect in 1997, and continue in effect in 1998.The World Trade Organization upheld in a report dur-ing 1997, a complaint from the United States, Ecuador,Mexico, Honduras, and Guatemala, that the E.U. hadinstalled a “protectionist and discriminatory” bananatrade regime by favoring imports from former Euro-pean colonies in Africa and the Caribbean. Trade nego-tiations and discussions continue between the E.U., the United States and the individual banana exportingcountries. These trade negotiations could lead to fur-ther changes in the regulations governing banana

exports to the E.U. The net impact of these changingregulations on the Company’s future results of opera-tions is not determinable at this time.

The Company distributes its products in more than 90 countries throughout the world. Its internationalsales are usually transacted in U.S. dollars and majorEuropean and Asian currencies. Certain costs areincurred in currencies different from those that arereceived from the sale of the product. While results ofoperations may be affected by fluctuations in currencyexchange rates in both the sourcing and selling loca-tions, the Company has historically followed a policy of not attempting to hedge these exposures.

Interest Expense, net – Interest expense, net of interestincome, decreased to $56.8 million in 1997 from$60.3 million in 1996, due to lower average debt levels.

Other Income (Expense) – Other income for 1997increased $3.5 million from 1996 primarily due to thegain on sale of certain investments and fixed assets.

Income Taxes – The Company’s effective income tax ratewas 18% in 1997 and 1996.

Year 2000 – The Company has made an assessment ofyear 2000 impacts on its computer software and hard-ware. Remediation has been completed in certain of the operating units. Normal software version upgradesand hardware replacements will solve a large part of theremaining issues by the Company’s internal target dateof December 1998. All remaining remediation workalso has a targeted completion date of December 1998, and the total cost to remediate will not be material tothe Company’s results of operations, liquidity or capital resources.

New Accounting Pronouncements – In June 1997, theFinancial Accounting Standards Board issued Statementof Financial Accounting Standards No. 130, “ReportingComprehensive Income” (“SFAS 130”) and Statement



of Financial Accounting Standards No. 131, “Disclosuresabout Segments of an Enterprise and Related Informa-tion” (“SFAS 131”). The Company will adopt SFAS 130and SFAS 131 in 1998. In accordance with SFAS 131,the Company is currently evaluating the additionalbusiness segments to be reported in 1998. Since SFAS130 and SFAS 131 require additional disclosure only,they will have no effect on the financial condition orresults of operations of the Company.

1996 Compared with 1995

Revenue – Revenue increased 4% to $3,840.3 millionin 1996 from $3,694.5 million in 1995, excluding rev-enue from the juice business sold in 1995. The revenuegrowth resulted from a combination of increased salesvolumes and favorable pricing and 1996 businessacquisitions and joint ventures.

Selling, Marketing and Administrative Expenses – Selling,marketing and administrative expenses decreased 6% to $369.7 million or 9.6% of revenue in 1996 from$392.7 million or 10.3% of revenue in 1995. Of thedecrease, $17.1 million resulted from the sale of thejuice business in 1995.

Restructuring Charge – In 1996, the Company imple-mented a formal plan to close its dried fruit facilitylocated in Fresno, California which had suffered con-tinued losses. During the fourth quarter of 1996, arestructuring charge of $50.0 million ($41.0 millionafter tax or 68 cents per diluted share) was recordedrelated to the closure of this facility. Principal compo-nents of the charge were provisions for asset write-downs, contract terminations and severance payments.The closure of this facility was completed in the secondquarter of 1997.

Operating Income – Operating income before therestructuring charge improved 10.9% to $214.3 millionin 1996 compared to $193.3 million in 1995. Processedpineapple operations improved in 1996 due to favorablepricing and reduced shipping costs. Fresh pineappleoperations benefited from the closure of operations in

the Dominican Republic which historically generatednegative returns. Partially offsetting the improved resultsfrom the pineapple operations was the return to normalpricing levels for the fresh vegetable business whichbenefited from favorable pricing in 1995 due to flooding.The return to normal pricing levels was somewhatmitigated by increased volumes for the fresh cut saladbusiness.

Interest Expense, net – Interest expense, net of interestincome, decreased to $60.3 million in 1996 from $73.7 million in 1995 as a result of lower average debtlevels throughout the year.

Other Income (Expense) – Other income for 1996increased $10.0 million from 1995 primarily due to thegain on the sale of certain investments and other assetsand increased earnings from joint ventures.

Income Taxes –The Company’s effective tax rate decreasedto 18% in 1996 as a result of a change in the mix of theCompany’s foreign and domestic earnings. The 1995tax rate was significantly impacted by the sale of thejuice business.

Liquidity and Capital Resources

The Company’s operational and investing activities in1997 were financed by funds generated internally andcash on hand at December 28, 1996. Cash and short-term investments were $31.2 million at January 3, 1998compared to $34.3 million at December 28, 1996.

Operating activities generated cash flow of $291.0 mil-lion in 1997 compared to $95.0 million in 1996. Theimprovement results from higher operating income anda large decrease in working capital requirements follow-ing the closure of the dried fruit business during 1997.

In the second quarter of 1997, the Company completedthe closure of its Fresno, California dried fruit operations.



This has relieved operations of sizable losses and hasallowed for a substantial reduction in working capitalrequirements associated with this business. This initiativewas taken as part of the Company’s overall plan todispose of or liquidate assets which do not meet and arenot anticipated to meet the Company’s minimum returnon investment requirements.

Capital expenditures for the acquisition and mainte-nance of productive assets were $129.2 million in 1997.These expenditures were funded with cash provided bycurrent year operations and the proceeds from the saleof existing assets and agricultural properties. TheCompany also acquired and invested in productionoperations in Latin America and Asia and distributionoperations in Europe for an aggregate cash purchaseprice of $40.0 million.

The Company has ordered two refrigerated containervessels from HDW in Kiel, Germany. The vessels arescheduled for delivery in late 1999, and will furtherimprove the Company’s cost structure. The cost pership is approximately DM 100 million.

In January 1998, the Company announced plans tomove to a new headquarters facility in Westlake Village,California. Construction of the complex is anticipatedto begin in 1998, and the company plans to occupythese leased facilities during 1999.

During 1997 the Company used its strong cash flowfrom operations to reduce net debt by approximately$154 million. The Company’s net debt to net debt andequity ratio improved from 62% at December 28,1996to 53% at January 3, 1998. Debt is now primarilycomposed of existing long-term bonds.

In July 1997, the Company extended its $600 million,5-year revolving credit facility (the “Facility”) to 2002.In November 1997, based on its strong operating cashflow, the Company reduced this facility to $400 million.Provisions under the Facility require the Company tocomply with certain financial covenants which includea maximum permitted ratio of consolidated debt to networth and a minimum required fixed charge coverageratio. At January 3, 1998 no borrowings were outstand-ing under the Facility. The Company may also borrowunder uncommitted lines of credit at rates offered fromtime to time by various banks that may not be lendersunder the Facility. Net borrowings outstanding underthe uncommitted lines of credit totaled $14.6 millionat January 3, 1998.

During 1996, the Company announced a program torepurchase up to 5% of its outstanding common stock.As of December 28, 1996 the Company had repur-chased 395,400 shares at a cost of $13.9 million. Norepurchases were made during 1997. The Companydoes not expect the stock repurchase program to affectits ability to fund operating requirements, capital expen-ditures or acquisitions.

The Company paid four quarterly dividends of 10 centsper share on its common stock totaling $24.0 millionin 1997.

The Company believes that cash from operations andits cash position will be sufficient to enable it to meet its capital expenditure, debt maturity, common stockrepurchase, dividend payment and other fundingrequirements.



R e s u l t s o f O p e r a t i o n s a n d S e l e c t e d F i n a n c i a l D a t a

(in millions, except per share data) 1997 1996 1995 1994 1993

Revenue $4,336 $3,840 $3,804 $3,499 $3,108

Cost of products sold 3,692 3,256 3,218 2,966 2,609

Gross margin 644 584 586 533 499

Selling, marketing, and administrative expenses 400 370 393 395 333

Restructuring charge and cost reduction program – 50 – – 43

Operating income 244 164 193 138 123

Interest expense – net (57) (60) (74) (67) (48)

Net gain on assets sold or held for disposal – – 62 – –

Other income (expense) – net 8 5 (5) (3) (9)

Income from continuing operations

before income taxes 195 109 176 68 66

Income taxes (35) (20) (56) (10) (4)

Net income from continuing operations 160 89 120 58 62

Net income from discontinued operations – – (97) 10 16

Net income 160 89 23 68 78

Diluted earnings per common share

Continuing operations $ 2.65 $ 1.47 $ 2.00 $ 0.98 $ 1.04

Discontinued operations – – (1.61) 0.16 0.26

Net income $ 2.65 $ 1.47 $ 0.39 $ 1.14 $ 1.30

Other statistics

Working capital $ 407 $ 464 $ 480 $ 495 $ 391

Total assets 2,464 2,487 2,442 3,685 3,159

Long-term debt 755 904 896 1,555 1,111

Total debt 768 926 920 1,609 1,190

Common shareholders’ equity 666 550 508 1,081 1,052

Annual cash dividends per common share 0.40 0.40 0.40 0.40 0.40

Capital additions for continuing operations 129 110 90 212 174

Depreciation and amortization from

continuing operations 112 111 113 120 106





Directors

Elaine L. Chao 2Distinguished FellowThe Heritage Foundation

Mike Curb 1, 3ChairmanCurb Records, Inc.

David A. DeLorenzo President and Chief OperatingOfficerDole Food Company, Inc.

Richard M. Ferry 1, 2ChairmanKorn/Ferry International(international executive search firm)

James F. Gary 2, 3Chairman EmeritusPacific Resources, Inc.(international energy and holdingcompany)

Zoltan Merszei 3Former Chief Executive Officer,President and ChairmanThe Dow Chemical Company

David H. Murdock 1Chairman of the Board and Chief Executive OfficerDole Food Company, Inc.

1 Executive, Finance and Nominating Committee2 Audit Committee3 Compensation and Employee Benefits Committee


Officers

David H. MurdockChairman of the Board and Chief Executive Officer

David A. DeLorenzoPresident andChief Operating Officer

David A. CohenSenior Vice PresidentAcquisitions and Investments

John W. TateVice President and Chief Financial Officer

Brett TibbittsVice President - Corporate General Counsel and Corporate Secretary

Patrick A. NielsonVice President - International Legaland Regulatory Affairs

Edward A. Lang, IIIVice President and Treasurer

George R. Horne Vice President - Human Resources

Roberta WiemanVice President

Thomas J. PerniceVice President - Public Affairs

David W. PerrigoVice President - Taxes

James A. DykstraController and Chief Accounting Officer

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 AmericanFruit

Roberto ZacariasPresident - Dole Honduran Beverage

D i r e c t o r s a n d O f f i c e r s


PMS 288 #1 PMS 288 #2

The Company

Founded in Hawaii in 1851, DoleFood Company, Inc. is the largestproducer and marketer of fresh fruitand vegetables, and markets a grow-ing line of packaged foods. TheCompany does business in more than90 countries and employs approxi-mately 44,000 full-time people.

Corporate Headquarters


Westlake Villiage, CA 91361

(818) 879-6600

Auditors

Arthur Andersen LLP

633 West Fifth Street

Los Angeles, CA 90071

Securities Transfer and DividendDisbursement Agent

Boston EquiServe L.P.

P.O. Box 644

Boston, MA 02102

(800) 733-5001

Internet Address:

www.equiserve.com

Dividend Information

A cash dividend of $0.10 per com-mon share was declared in eachquarter of 1997 for a total annualdividend of $0.40 per share. DoleFood Company, Inc. does not have adividend reinvestment plan.

Investment Industry Inquiries

Members of the investment industryshould direct inquiries to:

Office of the Treasurer




(818) 879-6600

Additional Information Requests

For Annual Reports and Forms

10-K, please contact:

Office of the Corporate Secretary




Telephone (818) 879-6814

Facsimile (818) 879-6615

Dole’s Annual Report is available onthe internet at http://www.dole.com

Internet Address:

srelation%[email protected]

Stock Exchange

Dole Food Company, Inc.’s common

stock (DOL) is traded on the NewYork and Pacific Stock Exchanges.

Internet Address:

http://www.dole.com

http://www.dole5aday.com

Dole® is a registered trademark of DoleFood Company, Inc.

©1998 Dole Food Company, Inc. Allrights reserved.

C o m p a n y a n d S h a r e h o l d e r I n f o r m a t i o n

Dole Food Company’s worldwide

team of growers, packers, processors, shippers and

employees is committed to consistently providing

safe, high quality fruit, vegetables and food products

while protecting the environment in which its

products are grown and processed. Dole’s dedication

to quality is a commitment solidly backed by:

scientific pest management programs, stringent

quality control measures, state-of-the-art production

and transportation technologies, continuous

improvement through research and innovation,

and dedication to the safety of our employees,

communities and the environment.


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Dole Food Company, Inc .1 9 9 7 A n n u a l R e p o r t


dole 1997 annual

Economy & Finance