(May 8, 4:40 p.m.) Dole Food Co. Inc. reported its net sales increased 13% to $1.8 billion in the first quarter.

The Westlake Village, Calif.-based company said in its Form 10-Q filing with the Securities and Exchange Commission that operating income increased 50% to $50.2 million.

Dole reported that fresh fruit revenues increased 18% to $1.23 billion in the quarter. European ripening and distribution sales increased $120 million because of favorable exchange rates and increased volumes in Sweden, Italy, Germany and Eastern Europe. Meanwhile, tight supplies and high demand caused banana sales to increase $57 million.

Fresh vegetables revenues dropped from $244.3 million in the year-ago period to $231 million. Dole attributed the decline to oversupply and low prices in its North American vegetables business, especially for lettuce and celery.

The decline overshadowed improved performance in the company’s packaged salad business, where the company said it benefited from higher pricing, lower distribution costs and lower production costs related to the company’s new North Carolina facility.

“We see the year-over-year improvements in packaged salads continuing during 2008 as we complete our plan to transition all spinach and spring mix production to our own facilities and maintain a singular focus on improving margins rather than increasing volume at the expense of profitability,” Dole reported in the filing.

The company’s first-quarter numbers were affected by an unrealized loss of $32.4 million related to a currency swap. The company converted $320 million of Term Loan C into Japanese yen-denominated debt in 2006, and the yen strengthened against the dollar by 12% during the quarter.

The company said the currency swap will fluctuate based on exchange rates and interest rates until maturity in 2011, “at which time it will settle in cash at the then-current exchange rate.” For the quarter, interest income and other expenses resulted in a loss of $26.9 million compared to income of $3.2 million in the first quarter of 2007.

Meanwhile, Dole said the appeals branch of the Internal Revenue Service had sided with the company in its 2006 protest of the agency’s review of Dole for the years 1995-2001. That review found a tax deficiency of $175 million plus interest and penalties. Dole said that the ruling early this year likely will reduce the company’s long-term liabilities by as much as $110 million.

The company now is under examination by the IRS for tax years 2002-05.

Dole has more than $1 billion in debt, including $350 million of unsecured notes that mature May 1, 2009. The company said it plans to replace those notes with newly issued notes by the end of the year.

Dole reported it had a cash balance of $94.9 million and available borrowings under its asset-based revolving credit facility of $108.1 million. The company also listed $115 million in assets held for sale.

“The company believes that its existing cash balance and available borrowing capacity under the ABL revolver, together with its future cash flow from operations, planned asset sales and access to capital markets, will enable it to meet its working capital, capital expenditure, debt maturity and other commitments and funding requirements during the next 12 months,” Dole reported in the filing.