Fitch: Dole's Operating Earnings Improve but Liquidity Remains a Concern

Business Wire, May 7, 2008

CHICAGO -- On May 5, 2008, Dole Food Company, Inc. (Dole) reported earnings for the first quarter ended Mar. 22, 2008. As anticipated, the company's revenue and operating income continues to benefit from improved pricing in its worldwide banana operations but higher operating costs, including fuel and EU banana tariffs, remain a drag on overall profitability. Fitch currently has an Issuer Default Rating (IDR) of 'B-' with a Negative Outlook on Dole.

Versus the prior year's period, consolidated revenue grew 13% to $1.8 billion, operating income improved 50% to $50 million and segment operating margin improved 80 basis points to 4%. The company's cash flow generation suffered from lower net income, due to a $32 million unrealized loss on a cross-currency swap, and higher working capital requirements. Cash flow used in operating activities was $63 million versus $42 million during the prior year's period. Total debt was approximately $2.5 billion, up $67 million from year end.

Dole's credit protection measures remain weak for the 'B-' rating category. For the latest twelve month (LTM) period ended Mar. 22, 2008, leverage (defined as total debt-to-operating EBITDA) was 8.1 times (x), interest coverage (defined as operating EBITDA-to-gross interest expense) was 1.6x and funds from operations fixed charge coverage was 1.3x. The company remains in compliance with its fixed charge coverage covenant of at least 1x if availability on its $350 million asset based revolver falls below $35 million or 10% of the loan commitment.

Dole has significant upcoming maturities for which its current cash flow generation and liquidity cannot adequately fund. These maturities include $350 million of 8 5/8% unsecured notes due May 1, 2009, $400 million of 7 1/4% unsecured notes due June 15, 2010 and $200 million of 8 7/8% unsecured notes due March 15, 2011. Fitch currently rates these notes 'CCC /RR5', indicating they are highly speculative with below average recovery prospects. The Rating Outlook is Negative.

Unless operating performance improves more dramatically or asset sales accelerate, liquidity will be an issue for Dole in the near-term. As of Mar. 22, 2008, the company had $95 million of cash on hand and $108 million available on its asset-based revolver. Dole has classified $116 million of assets as held-for-sale and at Dec. 29, 2007 had $99 million available under its uncommitted facilities.

The company has indicated that it is working with its bankers and advisors to assess various alternatives available for addressing the 2009 maturity. At this time, it plans to refinance the May 1, 2009 notes by issuing new debt before the end of 2008.

If the company is not able to access public debt markets, Fitch believes the company's remaining options include, among other things:

--refinancing its secured bank facility in order to fund its near term maturities;

--obtaining an intercompany loan from David H. Murdock Holdings Co., Inc. or

--completing a larger restructuring of its balance sheet.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site. The ratings above have been initiated by Fitch as a service to investors. The issuer did not participate in the rating process other than through the medium of its public disclosure.