Attached files

file filename
8-K/A - FORM 8-K, AMENDMENT NO. 1 - DOLE FOOD CO INCd268539d8ka.htm
EX-99.1 - AUDITED CONSOLIDATED BALANCE SHEET OF SUNNYRIDGE - DOLE FOOD CO INCd268539dex991.htm
EX-23.2 - ACKNOWLEDGEMENT LETTER OF BKHM, P.A., INDEPENDENT ACCOUNTANTS OF HCE CORPORATION - DOLE FOOD CO INCd268539dex232.htm
EX-99.2 - CONSOLIDATED BALANCE SHEETS OF SUNNYRIDGE - DOLE FOOD CO INCd268539dex992.htm
EX-23.1 - CONSENT OF BKHM, P.A., INDEPENDENT ACCOUNTANTS OF HCE CORPORATION - DOLE FOOD CO INCd268539dex231.htm

EXHIBIT 99.3

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

On October 11, 2011, Dole Food Company, Inc. (“Dole”) completed the acquisition of 100% of the capital stock of HCE Corporation and its subsidiaries (“SunnyRidge”) in accordance with the Agreement and Plan of Merger (“the Agreement”), dated October 11, 2011 (“the Acquisition”). Pursuant to the terms of the Agreement, Dole purchased SunnyRidge for cash consideration of $91.5 million, plus an earn-out payable in 2015 that will be between $0 and $15 million. Dole paid the purchase price, less certain escrowed amounts, primarily from cash on hand, some of which was attributable to Dole’s third quarter 2011 refinancing transactions.

SunnyRidge is a grower and distributor of fresh berries to the wholesale and food service markets in North America. In addition to its own berry farms, SunnyRidge packages and distributes blueberries, blackberries, raspberries and strawberries for various independent growers located in North America and Latin America.

The following unaudited pro forma condensed consolidated financial information (“pro forma financial information”) is based on the historical consolidated financial statements of and the accompanying notes of Dole and SunnyRidge and has been prepared to illustrate the effects of Dole’s acquisition of SunnyRidge. Certain amounts in the SunnyRidge consolidated financial statements have been reclassified to conform them to Dole’s basis of presentation.

Dole and SunnyRidge had different fiscal year ends, accordingly, the unaudited pro forma condensed consolidated statement of operations for the three quarters ended October 8, 2011 combines Dole’s historical unaudited condensed consolidated statement of operations for the three quarters ended October 8, 2011 with SunnyRidge’s historical unaudited consolidated statement of operations based on the nine month period ended September 30, 2011. The unaudited pro forma condensed consolidated statement of operations for the year ended January 1, 2011 combines Dole’s historical audited condensed consolidated statement of operations for the year ended January 1, 2011 with SunnyRidge’s historical audited consolidated statement of operations for the year ended December 31, 2010. The unaudited pro forma condensed consolidated statements of operations are presented as if the Acquisition had occurred on January 3, 2010. The unaudited pro forma condensed consolidated balance sheet combines Dole’s historical unaudited condensed consolidated balance sheet as of October 8, 2011 with SunnyRidge’s historical unaudited consolidated balance sheet as of September 30, 2011. The unaudited pro forma condensed consolidated balance sheet as of October 8, 2011 is presented as if the Acquisition occurred on October 8, 2011.

The pro forma financial information has been prepared for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have actually occurred had the acquisition been completed at or as of the dates indicated, nor is it indicative of the future operating results or financial position of the combined company. The pro forma financial information does not reflect future nonrecurring


charges resulting from the acquisition. The unaudited condensed consolidated pro forma statements of operations do not reflect future events that may occur after the Acquisition of SunnyRidge, including the potential realization of operating cost savings (synergies) or other costs related to the planned integration.

The accompanying pro forma financial information should be read in conjunction with Dole’s historical consolidated financial statements and the accompanying notes included in the 2010 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 14, 2011, and the Quarterly Report on Form 10-Q for the quarter ended October 8, 2011 filed with the SEC on November 17, 2011, as well as the historical consolidated financial statements and accompanying notes of SunnyRidge, which are included as Exhibit 99.1 and Exhibit 99.2 in this Current Report on Form 8-K/A.


DOLE FOOD COMPANY, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Quarters Ended October 8, 2011

 

     Dole Food
Company, Inc.
    SunnyRidge     Pro Forma
Adjustments
   

Ref.

   Pro Forma
Consolidated
 
     (In thousands, except per share amounts)  

Revenues, net

   $ 5,687,861      $ 60,381      $ —           $ 5,748,242   

Cost of products sold

     (5,047,176     (42,427     (38   B(i)      (5,089,498
         143      B(ii)   
  

 

 

   

 

 

   

 

 

   

 

  

 

 

 

Gross margin

     640,685        17,954        105           658,744   

Selling, marketing and general and administrative expenses

     (415,865     (6,723     (2,579   B(i)      (425,167

Charges for restructuring and long-term receivables

     (16,579     —          —             (16,579

Gain on asset sales

     3,337        —          —             3,337   
  

 

 

   

 

 

   

 

 

   

 

  

 

 

 

Operating income

     211,578        11,231        (2,474        220,335   

Other income (expense), net

     (53,970     (352     —             (54,322

Interest income

     3,802        131        —             3,933   

Interest expense

     (111,709     (614     (1,903   B(iv)      (113,735
         491      B(iv)   
  

 

 

   

 

 

   

 

 

   

 

  

 

 

 

Income from continuing operations before income taxes and equity earnings

     49,701        10,396        (3,886        56,211   

Income taxes

     (18,781     —          (2,386   B(v)      (21,167

Earnings from equity method investments

     6,627        —          —             6,627   
  

 

 

   

 

 

   

 

 

   

 

  

 

 

 

Income from continuing operations

   $ 37,547      $ 10,396      $ (6,272      $ 41,671   
  

 

 

   

 

 

   

 

 

   

 

  

 

 

 

Earnings per share:

           

Income from continuing operations - Basic

   $ 0.43             $ 0.48   

Income from continuing operations - Diluted

   $ 0.43             $ 0.47   

Weighted-average common shares outstanding - Basic

     87,588               87,588   

Weighted-average common shares outstanding - Diluted

     88,091               88,091   

See Accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements


DOLE FOOD COMPANY, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Year Ended January 1, 2011

 

     Dole Food
Company, Inc.
    SunnyRidge     Pro Forma
Adjustments
    Ref.      Pro Forma
Consolidated
 
     (In thousands, except per share amounts)  

Revenues, net

   $ 6,892,614      $ 62,966      $ —           $ 6,955,580   

Cost of products sold

     (6,202,864     (43,665     (50     B(i)         (6,247,104
         186        B(ii)      
         (711     B(iii)      
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Gross margin

     689,750        19,301        (575        708,476   

Selling, marketing and general and administrative expenses

     (498,866     (8,319     (3,353     B(i)         (510,538

Charges for restructuring and long-term receivables

     (32,748     —          —             (32,748

Gain on legal settlements, net

     32,521        —          —             32,521   

Gain on asset sales

     3,017        —          —             3,017   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Operating income

     193,674        10,982        (3,928        200,728   

Other income (expense), net

     (63,641     226        —             (63,415

Interest income

     6,195        107        —             6,302   

Interest expense

     (163,950     (945     (3,535     B(iv)         (167,619
         811        B(iv)      
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Income (loss) from continuing operations before income taxes and equity earnings

     (27,722     10,370        (6,652        (24,004

Income taxes

     (13,394     —          (1,463     B(v)         (14,857

Earnings from equity method investments

     7,364        —          —             7,364   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Income (loss) from continuing operations

   $ (33,752   $ 10,370      $ (8,115      $ (31,497
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Earnings per share – Basic and Diluted:

           

Loss from continuing operations

   $ (0.39          $ (0.36

Weighted-average common shares outstanding -
Basic and Diluted

     87,451               87,451   

See Accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements


DOLE FOOD COMPANY, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS

As of October 8, 2011

 

     Dole Food
Company, Inc.
     SunnyRidge      Pro Forma
Adjustments
    Ref.      Pro Forma
Consolidated
 
     (In thousands)  

ASSETS

  

Cash and cash equivalents

   $ 190,586       $ 5,807       $ (83,561     A       $ 112,832   

Restricted cash and deposits

     5,683         —           —             5,683   

Receivables, net of allowances

     700,420         10,408         —             710,828   

Inventories

     805,872         7,715         711        A         814,298   

Prepaid expenses and other assets

     67,816         1,426         —             69,242   

Deferred income tax assets

     43,835         —           —             43,835   

Assets held-for-sale

     120,845         —           —             120,845   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total current assets

     1,935,057         25,356         (82,850        1,877,563   

Investments

     97,170         —           —             97,170   

Property, plant and equipment, net

     894,078         29,396         (4,542     A         918,932   

Goodwill

     407,247         —           13,621        A         420,868   

Intangible assets, net

     698,106         —           37,000        A         735,106   

Other assets, net

     217,048         299         —             217,347   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total assets

   $ 4,248,706       $ 55,051       $ (36,771      $ 4,266,986   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

LIABILITIES AND EQUITY

             

Accounts payable

   $ 486,561       $ 2,533       $ —           $ 489,094   

Liabilities related to assets held-for-sale

     19,951         —           —             19,951   

Accrued liabilities

     533,771         1,691         186        A         543,623   
           7,975        A      

Current portion of long-term debt, net

     9,411         1,932         (1,534     A         9,809   

Notes payable

     28,040         535         20        A         28,595   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total current liabilities

     1,077,734         6,691         6,647           1,091,072   

Long-term debt, net

     1,575,559         12,471         (10,419     A         1,577,611   

Deferred income tax liabilities

     248,838         —           —             248,838   

Other long-term liabilities

     515,640         —           1,774        A         517,414   

Equity attributable to shareholders of Dole Food Company, Inc.

     805,215         35,715         (35,715     A         805,215   

Equity attributable to noncontrolling interests

     25,720         174         942        A         26,836   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total equity

     830,935         35,889         (34,773        832,051   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total liabilities and equity

   $ 4,248,706       $ 55,051       $ (36,771      $ 4,266,986   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

See Accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements


NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note A – Preliminary Purchase Price Allocation

The unaudited pro forma condensed consolidated financial statements have been prepared to illustrate the financial impact of Dole’s acquisition of SunnyRidge, which was accounted for under the acquisition method of accounting. The aggregate amount of consideration paid by Dole to acquire SunnyRidge was $91.5 million in cash. $83.6 million of cash was paid on the acquisition date, and an $8 million accrual was recorded which will be paid during fiscal 2012.

In addition, contingent payments of up to $15 million may be payable to the selling shareholders during 2015 upon attaining earnings before interest expense, income taxes, depreciation and amortization (“EBITDA”) targets for certain SunnyRidge farming businesses during the years 2012 through 2014, as well as the satisfaction of certain management employment contingencies. As these payments are contingent on continued employment, they will be treated as compensation expense in Dole’s consolidated financial statements and will be recorded when payment becomes probable and estimable. No adjustments have been made to the pro forma condensed consolidated financial statements for these contingent payments because the probability of achieving the required earnings targets is currently unknown.

The Acquisition has been accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the total preliminary purchase price was allocated to SunnyRidge’s net tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of October 11, 2011, the Acquisition date. The excess of purchase consideration over the net tangible and intangible assets is reflected as goodwill. Management’s preliminary valuation of the fair value of tangible and intangible assets acquired and liabilities assumed are based on estimates and assumptions and are subject to change pending finalization of the valuations. The pro forma adjustments to reflect assets acquired and liabilities assumed at preliminary estimated fair values and the resulting goodwill are as follows (in thousands):

 

Total SunnyRidge Shareholders’ Equity

   $     35,715   

Fair value Adjustments:

  

Inventory

     711   

Property, plant and equipment

     (4,542

Customer relationships

     22,500   

Non-compete agreements

     2,900   

Trade name

     6,700   

In-process research and development

     4,900   

Lease adjustments to accrued liabilities and other non-current liabilities

     (1,960

Equity attributable to noncontrolling interests

     (942

Extinguishment of long-term debt by seller prior to acquisition

     11,933   

Goodwill created by the acquisition

     13,621   
  

 

 

 

Total Purchase Price

   $ 91,536   
  

 

 

 


Based on review of SunnyRidge’s summary of significant accounting policies disclosed in SunnyRidge’s 2010 financial statements, as well as preliminary discussions with SunnyRidge’s management, the nature and amount of any future adjustments to conform the two companies’ accounting policies are not expected to be significant. Further review of SunnyRidge’s accounting policies to conform accounting policies of the two companies may impact actual results.

Note B – Pro Forma Adjustments

The following is a summary of pro forma adjustments reflected in the unaudited pro forma condensed consolidated financial statements based on preliminary estimates, which may change as additional information is obtained:

(i) – Depreciation and amortization expense

The net pro forma adjustment of $4.5 million to reduce the carrying value of property, plant and equipment consisted of adjustments to both non-depreciable and depreciable assets. The impact on depreciation expense, due to fair value adjustments to depreciable assets, was immaterial, and therefore no pro forma adjustments were presented.

The estimated increase in amortization expense related to the estimated fair value of certain intangible assets acquired from SunnyRidge, primarily consisting of customer relationships, trade name, and non-compete agreements, amortized over an estimated average life of 6 to 10 years. An adjustment was made to cost of products sold (“COS”) to reflect the increased amortization of $38 thousand for the three quarters ended October 8, 2011 and $50 thousand for the year ended January 1, 2011. An adjustment to selling, marketing and general and administrative expenses to reflect increased amortization of $2.6 million for the three quarters ended October 8, 2011 and $3.4 million for the year ended January 1, 2011. Amortization expense for in-process research and development has not been reflected in the pro forma adjustments, as amortization will commence once the underlying technology has been placed in service.

(ii) – Leases

As part of the preliminary purchase accounting, various below-market leases with average lives of 8 to 12 years were recorded at fair value resulting in lease liabilities. A pro forma adjustment to COS was to reflect the amortization of the lease liabilities. Lease costs were reduced by $0.1 million for the three quarters ended October 8, 2011 and $0.2 million for the year ended January 1, 2011.

(iii) – Inventories

As part of the preliminary purchase price allocation, inventories were adjusted to fair value. The increase in inventories was charged to COS as the inventories were sold over a period of 6 months. A pro forma adjustment has been made to reflect the increase in COS related to the inventory fair value markup of $0.7 million for the year ended January 1, 2011.


(iv) – Interest expense

Dole borrowed approximately $70 million during the third quarter of 2011 to finance the Acquisition. A pro forma adjustment has been made to reflect the increase in interest expense of $1.9 million for the three quarters ended October 8, 2011 and $3.5 million for the year ended January 1, 2011 as if these borrowings had occurred on January 3, 2010.

Additionally under the Agreement, the seller repaid $11.9 million of SunnyRidge’s loans outstanding prior to the acquisition date. A pro forma adjustment has been made to reflect the decrease in interest expense of $0.5 million for the three quarters ended October 8, 2011 and $0.8 million for the year ended January 1, 2011.

(v) – Income taxes

For purposes of this pro forma information, the U.S. federal statutory tax rate of 35 percent and a state tax of approximately 1 percent have been used for all periods presented. This rate is an estimate and does not take into account any possible future tax events that may result for the ongoing combined company. Had the result of SunnyRidge’s U.S. operations been included in Dole’s U.S. federal consolidated return for the periods presented, Dole would have been able to offset SunnyRidge’s U.S taxable income against Dole’s net operating loss carryforwards.