FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
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OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-565
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ALEXANDER & BALDWIN, INC.
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(Exact name of registrant as specified in its charter)
HAWAII 99-0032630
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. BOX 3440, HONOLULU, HAWAII 96801
822 BISHOP STREET, HONOLULU, HAWAII 96813
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(Address of principal executive (Zip Code)
offices)
(808) 525-6611
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No / /
Number of shares of common stock outstanding as of
September 30, 2001: 40,484,055
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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The condensed financial statements and notes for the third quarter and first
nine months of 2001 are presented below, with comparative figures from the 2000
financial statements.
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
Condensed Statements of Income
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
---- ---- ---- ----
(unaudited) (unaudited)
Revenue:
Operating revenue $ 260,701 $ 280,304 $ 810,678 $ 793,688
Interest, dividends and other 3,392 5,482 23,422 13,483
--------- --------- --------- ---------
Total revenue 264,093 285,786 834,100 807,171
--------- --------- --------- ---------
Costs and Expenses:
Costs of goods sold, services and rentals 208,714 223,610 644,102 624,672
Selling, general and administrative 23,572 21,877 73,020 64,712
Interest 4,330 6,661 14,979 17,967
Income taxes 10,165 12,284 37,739 36,042
--------- --------- --------- ---------
Total costs and expenses 246,781 264,432 769,840 743,393
--------- --------- --------- ---------
Income Before Cumulative Effect of Change
in Accounting Method 17,312 21,354 64,260 63,778
Cumulative Effect of Change in Accounting
Method for Drydocking Costs (net of
income taxes of $7,668, Note d) -- -- -- 12,250
--------- --------- --------- ---------
Net Income $ 17,312 $ 21,354 $ 64,260 $ 76,028
========= ========= ========= =========
Basic Earnings Per Share:
Before cumulative effect of accounting
change $ 0.42 $ 0.53 $ 1.58 $ 1.55
Accounting change (Note d) -- -- -- 0.30
--------- --------- --------- ---------
Net income $ 0.42 $ 0.53 $ 1.58 $ 1.85
========= ========= ========= =========
Diluted Earnings Per Share:
Before cumulative effect of accounting
change $ 0.42 $ 0.52 $ 1.58 $ 1.55
Accounting change (Note d) -- -- -- 0.30
--------- --------- --------- ---------
Net income $ 0.42 $ 0.52 $ 1.58 $ 1.85
========= ========= ========= =========
Dividends Per Share $ 0.225 $ 0.225 $ 0.675 $ 0.675
Average Number of Shares Outstanding 40,567 40,439 40,548 41,095
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
Industry Segment Data, Net Income
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
---- ---- ---- ----
(unaudited) (unaudited)
Revenue:
Ocean Transportation $ 207,828 $ 220,759 $ 607,649 $ 634,568
Property Development and Management:
Leasing 18,103 15,522 52,689 45,327
Sales 5,063 14,435 77,302 42,474
Food Products 32,296 34,294 78,612 82,464
Other 803 776 17,844 2,338
--------- --------- --------- ---------
Total revenue $ 264,093 $ 285,786 $ 834,100 $ 807,171
========= ========= ========= =========
Operating Profit, Net Income:
Ocean Transportation $ 24,245 $ 26,106 $ 60,413 $ 73,913
Property Development and Management:
Leasing 8,704 7,467 26,123 22,257
Sales (405) 5,472 15,362 25,090
Food Products 1,374 2,901 7,226 2,909
Other 767 745 17,714 2,218
--------- --------- --------- ---------
Total operating profit 34,685 42,691 126,838 126,387
Interest Expense (4,330) (6,661) (14,979) (17,967)
Corporate Expenses (2,878) (2,392) (9,860) (8,600)
--------- --------- --------- ---------
Income Before Taxes and Accounting Change 27,477 33,638 101,999 99,820
Income Taxes (10,165) (12,284) (37,739) (36,042)
--------- --------- --------- ---------
Income Before Accounting Change 17,312 21,354 64,260 63,778
Cumulative Effect of Accounting Change -- -- -- 12,250
--------- --------- --------- ---------
Net Income $ 17,312 $ 21,354 $ 64,260 $ 76,028
========= ========= ========= =========
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
Condensed Balance Sheets
(In thousands)
September 30, December 31,
2001 2000
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(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 340 $ 3,451
Accounts and notes receivable, net 131,595 141,553
Inventories 19,023 17,137
Real estate held for sale 8,665 19,324
Deferred income taxes 12,865 13,186
Prepaid expenses and other assets 12,602 18,736
Accrued deposits to Capital Construction Fund (900) (4,520)
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Total current assets 184,190 208,867
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Investments 181,770 183,141
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Real Estate Developments 67,348 62,628
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Property, at cost 1,896,070 1,808,194
Less accumulated depreciation and amortization 897,944 853,502
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Property - net 998,126 954,692
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Capital Construction Fund 152,985 150,405
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Other Assets 110,464 106,279
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Total $1,694,883 $1,666,012
========== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable and current portion of long-term
debt $ 23,000 $ 30,500
Accounts payable 59,200 63,075
Other 66,465 59,431
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Total current liabilities 148,665 153,006
Long-term Liabilities: ---------- ----------
Long-term debt 313,830 330,766
Post-retirement benefit obligations 43,958 44,752
Other 55,248 56,698
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Total long-term liabilities 413,036 432,216
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Deferred Income Taxes 391,937 387,139
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Shareholders' Equity:
Capital stock 33,304 33,248
Additional capital 65,154 58,007
Unrealized holding gains on securities 69,369 61,937
Retained earnings 585,353 552,637
Cost of treasury stock (11,935) (12,178)
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Total shareholders' equity 741,245 693,651
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Total $1,694,883 $1,666,012
========== ==========
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
Condensed Statements of Cash Flows
(In thousands)
Nine Months Ended
September 30,
2001 2000
---- ----
(unaudited)
Cash Flows from Operating Activities $ 107,431 $ 75,431
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Cash Flows from Investing Activities:
Capital expenditures (81,430) (68,607)
Proceeds from sale of investments 16,217 --
Capital Construction Fund, net (1,983) (797)
Other 2,770 3,118
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Net cash used in investing activities (64,426) (66,286)
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Cash Flows from Financing Activities:
Proceeds from issuances of long-term debt 6,000 78,500
Payments of debt, net (30,500) (9,000)
Proceeds from issuances of capital stock 3,409 313
Repurchases of capital stock (2,270) (43,294)
Dividends paid (27,382) (27,722)
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Net cash used in financing activities (50,743) (1,203)
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Net Increase (Decrease) in Cash and Cash Equivalents $ (7,738)* $ 7,942
========== ==========
Other Cash Flow Information:
Interest paid, net of amounts capitalized $ (17,539) $ (18,196)
Income taxes paid, net of refunds (19,855) (17,567)
Other Non-cash Information:
Accrued withdrawals from Capital Construction Fund, net (3,620) (1,573)
Depreciation expense (56,041) (52,411)
Tax-deferred property sales 30,843 35,923
Tax-deferred property purchases (42,257) (23,134)
Change in unrealized holding gains 7,432 (2,182)
*Includes $4.6 million of checks issued but not yet cleared. This is included
with "Accounts payable" in the Condensed Balance Sheet for September 30, 2001.
Financial Notes
(Unaudited)
(a) The Condensed Balance Sheet as of September 30, 2001, the Condensed
Statements of Income for the three months and nine months ended September
30, 2001 and 2000, and the Condensed Statements of Cash Flows for the nine
months ended September 30, 2001 and 2000 are unaudited. Because of the
nature of the Company's operations, the results for interim periods are
not necessarily indicative of results to be expected for the year, but
in the opinion of management, all material adjustments necessary for the
fair presentation of interim period results have been included in the
interim financial statements.
(b) Estimated effective annual income tax rates differ from statutory rates,
primarily due to the dividends-received deduction, various tax credits and
the charitable donation of appreciated stock (See Note e).
(c) The Company's total non-owner changes in shareholders' equity consist of
net income, adjusted for unrealized holding gains (losses) on securities
(other comprehensive income). On this basis, comprehensive income for the
three months ended September 30, 2001 and 2000 was $18.4 million and $29.5
million, respectively. Comprehensive income for the nine months ended
September 30, 2001 and 2000 was $71.7 million and $73.8 million,
respectively.
(d) The cumulative effect of an accounting change in the first quarter of 2000
related to the treatment of vessel drydocking costs. The Company changed
its method of accounting for these costs from the accrual method to the
deferral method. Drydocking costs had been accrued as a liability and an
expense on an estimated basis, in advance of the next scheduled
drydocking. Under the deferral method, actual drydocking costs are
capitalized when incurred and amortized over the period benefited. This
change was made to conform with prevailing industry accounting practices.
The cumulative effect of this accounting change, as of January 1, 2000,
is shown separately in the Condensed Statements of Income and resulted in
income of $12,250,000 (net of income tax expense of $7,668,000), or $0.30
per share.
The effect of this change in accounting method as of January 1, 2000, on
the Condensed Balance Sheets, was to increase Other Assets by $4,765,000,
eliminate drydocking reserves of $15,153,000, increase deferred taxes by
$7,668,000, and increase total shareholders' equity by $12,250,000. The
pro-forma effect of the change on 2000 net income is the same as the
reported amount of $63,778,000.
(e) Investments: During the first half of 2001, the Company divested its
holdings in Pacific Century Financial Corporation ("Pacific Century")
(NYSE:BOH). This was completed through the sales, in the second quarter,
of 749,000 shares of the stock for $16,200,000 and the donations, in the
first quarter, of 360,000 shares to the Company's charitable foundation.
The fair value of the donated stock was $7.5 million and the historical
cost basis of the donated shares was approximately $500,000. The net
expense related to this contribution of $500,000 is included in the 2001
first quarter financial statements (Selling, general and administrative
expense in the Condensed Statements of Income, and in Corporate Expenses,
in the Industry Segment Data.) The after-tax gain on the sale of the
Pacific Century stock was approximately $9.4 million, or $0.23 per share.
This gain is included in the Company's 2001 second quarter financial
results in the Condensed Statements of Income under "Interest, dividends
and other" and in the Industry Segment Data under "Other."
In May 2001, BNP Paribas SA, France's largest bank, announced that,
subject to regulatory, shareholder and other approvals, it would purchase
the remaining 55 percent of BancWest Corporation ("BancWest") (NYSE:BWE)
which it did not already own. This offer was 40 percent higher than the
market price of BancWest's stock at the time of the offer. The
transaction is expected to close during the fourth quarter of 2001.
The sale of the Company's holdings in BancWest, at $35 per share, would
result in an after-tax realized gain of approximately $68 million, or
$1.69 per share.
(f) Certain amounts have been reclassified to conform with the current year's
presentation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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THIRD QUARTER AND FIRST NINE MONTH EVENTS:
Operating Results: Net income for the third quarter of 2001 was $17,312,000,
or $0.42 per basic share. Net income for the comparable period of 2000 was
$21,354,000, or $0.53 per basic share. Revenue in the third quarter of 2001
was $264,093,000, compared with revenue of $285,786,000 in the third quarter
of 2000.
Net income for the first nine months of 2001 was $64,260,000, or $1.58 per
basic share, compared with $76,028,000, or $1.85 per basic share in the first
nine months of 2000. The 2000 net income includes a change in accounting for
vessel drydocking costs that resulted in a one-time non-cash increase of
$12,250,000 in net income ($0.30 per basic share). This change is described
in Note (d) to the third quarter 2001 financial statements. Excluding the
change in accounting, net income rose by $482,000, compared with the first
nine months of 2000.
In the third quarter of 2001, operating profit was $34,685,000. This was
$8,006,000, or 19-percent, lower than the $42,691,000 in the third quarter of
2000. For the first nine months of this year, operating profit was
$126,838,000, an increase of $451,000, versus $126,387,000 in the first nine
months of 2000.
Interest expense in both periods of 2001 was lower than in the comparable
periods in 2000, reflecting both lower rates and decreased debt balances.
FINANCIAL CONDITION AND LIQUIDITY
The Company's principal liquid resources, comprising cash and cash equivalents,
receivables, sugar and coffee inventories and unused lines of credit, less
accrued deposits to the Capital Construction Fund, totaled $398,933,000 at
September 30, 2001, an increase of $153,861,000 from December 31, 2000. This
net increase was due primarily to $140,000,000 for new debt facilities, a
$45,000,000 increase in the Company's multi-bank revolving credit facility,
$7,500,000 lower drawn balances on variable rate facilities, and agricultural
inventories which were $1,600,000 higher than at year-end 2000 (due to
seasonality of production cycles), partially offset by the expiration and
non-renewal of a $25,000,000 uncommitted short-term facility, and lower
receivables and cash balances.
Working capital was $35,525,000 at September 30, 2001, a decrease of
$20,336,000 from the amount at the end of 2000. The lower working capital
was due primarily to lower trade receivables, a lower inventory of residential
units, higher income taxes payable, and lower cash balances, partially offset
by higher agricultural products inventory. The lower inventory of residential
units was due to active sales of residential units on Maui. The remaining
factors are the result of normal seasonality.
RESULTS OF SEGMENT OPERATIONS -
THIRD QUARTER 2001 COMPARED WITH THE THIRD QUARTER 2000
Ocean Transportation revenue of $207,828,000 for the third quarter of 2001
decreased six-percent from the $220,759,000 reported in the third quarter of
2000. Operating profit of $24,245,000 decreased seven percent from the
$26,106,000 reported in the third quarter of 2000. The lower revenue was due
mainly to the discontinuation in 2000 of the Company's Pacific Coast shuttle
service and lower intermodal revenue. These two revenue reduction factors,
however, had little impact on the lower operating profit. The decrease in
operating profit resulted primarily from modestly lower cargo volume, slower-
than-expected improvement in productivity resulting from a terminal improvement
project, and the Company's share of lower results from investments in a
shipping operation in Puerto Rico and a stevedoring joint venture. These were
offset, in part, by the benefits of contract carriage for a competitor, the
sale of a small subsidiary and higher shipping rates. Third quarter 2001
Hawaii service container volume was four-percent lower than in the 2000 third
quarter, and automobile volume was 11-percent lower.
Property Development and Management - Leasing revenue of $18,103,000 and
operating profit of $8,704,000 for the third quarter of 2001 were both 17
percent higher than in the third quarter of 2000. These increases were due
primarily to additions to the property portfolio in late 2000 and early 2001,
and higher Hawaii occupancy levels. Third quarter 2001 occupancy levels for
Mainland properties averaged 93 percent, versus 96 percent in the third quarter
of 2000. Occupancy levels for Hawaii properties averaged 90 percent in the
third quarter of 2001, versus 85 percent a year earlier. Mainland occupancy
declined, due to lease expirations for several large industrial tenants. The
increase in Hawaii occupancy was due primarily to higher tenancy in retail and
warehouse properties.
Property Development and Management - Sales revenue of $5,063,000 for the third
quarter of 2001 compared with $14,435,000 in the third quarter of 2000. A
small operating loss of $405,000 occurred in the third quarter of 2001, versus
an operating profit of $5,472,000 in the 2000 third quarter. This decrease in
revenue and operating profit was due primarily to the non-recurrence in 2001 of
a major property sale on Maui in 2000. Sales in the third quarter of 2000
included the sales of a 13-acre parcel at Maui Business Park to Home Depot, two
business parcels and six residential properties. This variability in sales and
operating profit is an inherent characteristic of property sales activity. The
third-quarter loss resulted from overhead and administrative costs in excess of
income from property sales.
Food Products revenue of $32,296,000 for the third quarter of 2001 was six-
percent lower than the $34,294,000 reported in the third quarter of 2000.
Operating profit of $1,374,000 for the third quarter of 2001 compared with
$2,901,000 in the third quarter of 2000. The primary reasons for the declines
in revenue and operating profit were A&B's share of losses in its investment in
C&H Sugar Company, Inc., losses related to the Company's startup panelboard
plant and higher cane sugar production costs resulting from the continuing
drought conditions on Maui. Partially offsetting these factors were higher
domestic raw sugar prices and lower operating costs which resulted from the
2000 closure of the Company's Paia sugar mill. For 2001, the Company forward
priced 80 percent of its sugar production at approximately $21/cwt. Drought
conditions on Maui continue to affect sugar production and costs adversely.
Higher California energy costs were the driving factor for the lower results
at C&H. The Company is currently evaluating marketing and operating
alternatives for its panelboard manufacturing business. Production has been
suspended pending the results of this evaluation.
RESULTS OF SEGMENT OPERATIONS -
FIRST NINE MONTHS OF 2001 COMPARED WITH THE FIRST NINE MONTHS OF 2000
Ocean Transportation revenue of $607,649,000 for the first nine months of 2001
was four-percent lower than the $634,568,000 reported in the first three
quarters of 2000. Operating profit of $60,413,000 declined 18 percent from
$73,913,000 in the first nine months of 2000. The lower revenue was due to the
same factors cited in the third quarter comparisons. The decline in operating
profit resulted primarily from slower-than-expected improvement in productivity
resulting from a terminal improvement project, and lower results from
investments in a shipping operation in Puerto Rico and a stevedoring joint
venture. These were offset, in part, by the benefits of contract carriage for
a competitor, the sale of a small subsidiary and higher shipping rates.
Matson's Hawaii service container volume in the first nine months of 2001 was
two-percent lower than in the first nine months of 2000, and automobile volume
was three-percent lower.
Property Development and Management - Leasing revenue of $52,689,000 for the
first nine months of 2001 was 16-percent higher than the $45,327,000 in the
first nine months of 2000. Operating profit of $26,123,000 for the first nine
months of 2001 was 17-percent higher than the $22,257,000 earned in the first
nine months of 2000. These increases were due primarily to additions to the
property portfolio in the latter part of 2000 and in early 2001. Year-to-date
2001 occupancy levels for Mainland properties averaged 93 percent, versus 96
percent in the first nine months of 2000. Year-to-date 2001 occupancy levels
for Hawaii properties improved to 90 percent, versus 85 percent in the
comparable period of 2000. The fluctuations in occupancy rates were due to the
same factors cited for the third quarter.
Property Development and Management - Sales revenue of $77,302,000 and
operating profit of $15,362,000 in the first nine months of 2001 were primarily
the result of sales of an industrial lot to Wal-Mart, three commercial
properties in Bainbridge, Washington, a four-acre parcel on Maui, 75
residential properties and four business parcels. Sales revenue of $42,474,000
and operating profit of $25,090,000 in the first nine months of 2000 included
the sale of a ground lease under a Costco store, a 13-acre parcel at Maui
Business Park to Home Depot, 14 business parcels, and 18 residential
properties.
Food Products revenue of $78,612,000 for the first nine months of 2001 was
five-percent lower than the $82,464,000 reported for the comparable period of
2000. Operating profit for the first nine months of 2001 was $7,226,000
compared with $2,909,000 in the first nine months of 2000. The improvement
in operating profit was due primarily to a one-time cash distribution from the
sugar marketing and transportation cooperative that handles Hawaii sugar
growers' production, higher domestic raw sugar prices and reduced costs
attributable to the closure of the Paia Mill, partially offset by losses from
A&B's investment in C&H Sugar Company, Inc. and losses related to the
Company's startup panelboard manufacturing business.
Other operating profit for the first nine months of 2001 included the gain from
the sale of the Company's investment in Pacific Century. (See Note (e) to the
Company's condensed financial statements.)
OTHER MATTERS
Property Sales and Trends: The mix of property sales in any year or quarter
can be diverse. Sales can include developed residential real estate,
commercial properties, developable subdivision lots, undeveloped land and
property sold under threat of condemnation. The sale of undeveloped land and
vacant parcels generally provides a greater contribution to earnings than does
the sale of developed and commercial property, due to the low historical-cost
basis of the Company's Hawaii land. Consequently, property sales revenue
trends, cash flows from the sales of real estate and the amount of real estate
held for sale on the balance sheets do not necessarily indicate future
profitability trends for this segment.
New Accounting Standards: Statement of Financial Accounting Standards (SFAS)
No. 133, "Accounting for Derivative Instruments and Hedging Activities," as
amended, was adopted by the Company in January 2001 with no impact on the
financial statements. SFAS No. 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities," was adopted in 2001 with
no significant changes to the Company's accounting practices.
SFAS No. 141 "Business Combinations" was issued in June 2001 and became
effective in July 2001. This statement requires the purchase method of
accounting for business combinations. This standard will affect how the
Company accounts for new business combinations.
SFAS No. 142 "Goodwill and Other Intangible Assets" was issued in June 2001 and
is effective in January 2002. This statement addresses how intangible assets,
including goodwill, should be accounted for in the financial statements. The
Company currently has approximately $1 million of recorded intangibles.
Consequently, the new statement will not have a material effect on the balance
sheet or income statement.
SFAS No. 143 "Accounting for Asset Retirement Obligations" was issued in June
2001 and becomes effective in January 2003. This statement addresses
accounting and reporting for obligations and costs which will occur when
long-term assets are retired. Among other things, the statement requires that
the present value of the liability associated with future asset retirements be
recorded on the balance sheet when an obligation has been incurred and when it
can be measured. The amortization of the capitalized cost and increases in the
present value of the obligation which result from the passage of time, are
recorded as a charge to earnings. The possible financial impacts of this
standard are not yet known, but are being assessed.
SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets"
was issued in August 2001 and becomes effective in January 2002. This
statement replaces previous accounting standards related to asset impairments
and provides guidance concerning the recognition and measurement of impairment
losses for certain types of long-term assets. The statement recommends the
use of probability-weighted cash flow estimations, precludes accruing future
operating losses prior to asset disposal, expands the scope of "discontinued
operations" to include a component of an entity, and eliminates the current
exemption to consolidation when control over a subsidiary is likely to be
temporary. The statement will change how the company analyzes and accounts
for asset impairments and discontinued operations, but, upon adoption, will
have no immediate financial impacts.
Accounting Change: In January 2000, the Company changed its method of
accounting for vessel drydocking costs from the accrual method to the deferral
method. The cumulative effect of this accounting change increased first
quarter 2000 net income by $12,250,000. (See Note (d) to the Company's
condensed financial statements.)
Tax-Deferred Real Estate Exchanges: During the first nine months of 2001, the
Company recorded tax-deferred sales of $30,843,000. These sales plus the
unreinvested balance of tax-deferred sales that occurred in 2000 enabled the
Company to purchase, on a tax-deferred basis, $42,257,000 in new real estate
assets. These amounts are not included in "cash flows from operating
activities" and "capital expenditures," but are reported under the caption of
"Other Non-cash Information" in the Condensed Statements of Cash Flows.
Environmental Matters: As with most industrial and land-development companies
of its size, the Company's operations have certain risks, which could result in
expenditures for environmental remediation. The Company believes that it is
in compliance, in all material respects, with applicable environmental laws and
regulations, and works proactively to identify potential environmental
concerns. Management believes that appropriate liabilities have been accrued
for environmental matters.
Investments: During the first half of 2001, the Company divested its holdings
in Pacific Century. This was completed through the donation of 360,000 shares
to the Company's charitable foundation and the sale of the remaining 749,000
shares. In May 2001, BNP Paribas SA, announced that, subject to regulatory,
shareholder and other approvals, it would purchase the remaining 55 percent of
BancWest Corporation ("BancWest") (NYSE:BWE) that it did not already own. The
Company currently owns 3,385,788 shares of BancWest stock. This sale is
expected to close during the fourth quarter. (See Note (e) to the Company's
condensed financial statements).
Economic Conditions: Although none of the Company's operations were directly
affected by the East Coast terrorist attacks of September 11th, the events have
compounded pre-existing concerns about the outlook for Hawaii's economy. They
also created unprecedented uncertainty about how to assess the extent, pace and
duration of the decline that is now expected. Local economists are struggling
to draw inferences from the rapid economic decline and steady recovery that
accompanied the Gulf War, but many of the present circumstances are
significantly different. Most economists have concluded that, in the absence
of better data, forecasts simply are not practical at this time.
The visitor industry is Hawaii's largest single business activity. In the
near-term,lower demand has prompted both international and domestic air
carriers to reduce the number of flights they offer. Hotels and visitor-
related businesses also acted quickly to adjust capacity. As a result, local
unemployment filings have risen sharply. The Hawaii State legislature
conducted a special session to consider economic incentives to help offset the
decline. It is too early to determine how the measures considered at this
special session will benefit Hawaii's economy.
In the absence of other major external events, the Company anticipates that the
significant decline in the visitor industry will persist during the 4th quarter
of 2001, with improvement taking place gradually during the first half of 2002.
In this scenario, the effects of the decline should be felt primarily at
Matson, in the form of lower shipments of visitor-related cargo and household
goods associated with now-curtailed military transfers. It is likely that
effects on real estate activities would be much less and that there would be
little or no effect on food products activities.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Company, from time to time, may make or may have made certain forward-
looking statements, whether orally or in writing, such as forecasts and
projections of the Company's future performance or statements of management's
plans and objectives. Such forward-looking statements may be contained in,
among other things, Securities and Exchange Commission (SEC) filings, such as
the Forms 10-Q, press releases made by the Company and oral statements made by
the officers of the Company. Except for historical information contained in
these written or oral communications, such communications contain forward-
looking statements. These forward-looking statements involve a number of risks
and uncertainties that could cause actual results to differ materially from
those projected in the statements, including, but not limited to: (1) impact of
the events of September 11, 2001; (2) economic conditions in Hawaii and
elsewhere; (3) market demand; (4) competitive factors and pricing pressures in
the Company's primary markets; (5) legislative and regulatory environments at
the federal, state and local levels, such as government rate regulations, land-
use regulations, government administration of the U.S. sugar program, and
modifications to or retention of cabotage laws; (6) dependence on third-party
suppliers; (7) fuel prices; (8) raw sugar prices; (9) labor relations; (10)
risks associated with current or future litigation; and (11) other risk factors
described elsewhere in such communications and from time to time in the
Company's filings with the SEC.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------
Information concerning market risk is incorporated herein by reference to Item
7A of the Company's Form 10-K for the fiscal year ended December 31, 2000.
There has been no material change in the quantitative and qualitative
disclosure about market risk since December 31, 2000.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits
11. Statement re Computation of Per Share Earnings.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of l934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALEXANDER & BALDWIN, INC.
-------------------------------
(Registrant)
Date: November 13, 2001 /s/ James S. Andrasick
-------------------------------
James S. Andrasick
Sr. Vice President, Chief
Financial Officer and Treasurer
Date: November 13, 2001 /s/ Thomas A. Wellman
-------------------------
Thomas A. Wellman
Controller
EXHIBIT INDEX
-------------
11. Statement re Computation of Per Share Earnings.
EXHIBIT 11
ALEXANDER & BALDWIN, INC.
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
- --------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
---- ---- ---- ----
Basic Earnings Per Share
- ------------------------
Net income $ 17,312 $ 21,354 $ 64,260 $ 76,028
======== ======== ======== ========
Average number of shares outstanding 40,567 40,439 40,548 41,095
======== ======== ======== ========
Basic earnings per share $ 0.42 $ 0.53 $ 1.58 $ 1.85
======== ======== ======== ========
Diluted Earnings Per Share
- --------------------------
Net income $ 17,312 $ 21,354 $ 64,260 $ 76,028
======== ======== ======== ========
Average number of shares outstanding 40,567 40,439 40,548 41,095
Effect of assumed exercise of
outstanding stock options 208 262 198 70
-------- -------- -------- --------
Average number of shares outstanding
after assumed exercise of
outstanding stock options 40,775 40,701 40,746 41,165
======== ======== ======== ========
Diluted earnings per share $ 0.42 $ 0.52 $ 1.58 $ 1.85
======== ======== ======== ========