Shares of Dole Food Down Almost 15% Following Concerning Comments on Fresh Fruit Business

Dole Food Company

earlier issued a release confirming the expected closing of its sale of the worldwide packaged foods and Asia fresh business units. Also within this release the company's Michael Carter gave some concerning updates. The stock is down more than 14 percent at last check. “We are pleased to announce that we are finalizing the written commitments from four of Dole's banking partners for a new $400 million term loan and a $300 million revolving credit facility, to be implemented upon completion of the sale transaction. The $400 million term loan, together with substantially all of the proceeds from the sale transaction, will allow us to pay off our existing indebtedness of approximately $1.7 billion, and will provide needed funding for transaction-related taxes, costs and expenses, extinguishment of all or part of our long-term Japanese yen hedges, the anticipated right-sizing of the new Dole and other post-closing restructuring expenses, and possible resolution of the previously disclosed Honduras tax case, European Union Antitrust Inquiry and the DBCP cases. Upon consummation of the sale transaction, Dole's resulting net leverage ratio will be approximately 1.8x (based on the new net debt level and 2013 projected Adjusted EBITDA of the new Dole), and we will benefit from a significant reduction in interest expense.” On December 4, 2012, Typhoon Bopha, with high winds and heavy rain, struck the banana growing region in Mindanao, Philippines. The current estimated impact to the Asian banana industry is a loss of 30 million 13-kilo boxes, which is approximately 14% of the Asian banana industry on an annualized basis. “While the immediate effect has been an increase in prices in the Asian market, we have not yet seen any impact on prices in the North American and European banana markets,” said Mr. Carter. “Despite the tightening global supply, we continue to see aggressive contract negotiations in the North American banana market even though costs are higher, with some importers seeking to buy market share,” said Mr. Carter. “While right-sizing initiatives for the new Dole will partially offset these impacts, our current expectation is that pro forma 2013 Adjusted EBITDA for the new Dole, including 2013 planned cost savings in the $20 million range, will be in the $150 - $170 million range, with income from continuing operations, net of income taxes, in the $45 - $60 million range, assuming no major market changes. The fresh fruit business of the new Dole is continuing to experience declining earnings in a continued difficult economic environment.” “While the current environment in the banana market remains challenging, I remain very optimistic about the long-term future of the new Dole and its prospects,” stated David H. Murdock, Dole's Chairman. “I am excited to be returning to the position of CEO, working with Michael Carter and Dole's new management team, all of whom are committed to our right-sizing efforts and delivering synergies within Dole's remaining fresh fruit and vegetables businesses.”