FORM 10-Q
UNITED STATES
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, 2006
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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 _________________
Commission file number 0-565
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ALEXANDER & BALDWIN, INC.
-------------------------
(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 9680l
822 Bishop Street, Honolulu, Hawaii 96813
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(Address of principal executive offices) (Zip Code)
(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 [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of accelerated
filer and large accelerated filer in Rule 12b-2 of the Exchange Act.
(Check one): Large accelerated filer [X] Accelerated filer [ ]
Non-accelerated filer [ ]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Number of shares of common stock outstanding as of
September 30, 2006: 42,729,658
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(In millions, except per-share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
Revenue:
Operating revenue $ 422.9 $ 450.8 $ 1,201.0 $ 1,205.7
------------ ------------ ----------- -----------
Costs and Expenses:
Costs of goods sold, services and rentals 342.7 361.9 983.4 947.4
Loss on investment -- 0.1 -- 2.3
Selling, general and administrative 34.4 34.3 106.5 99.8
------------ ------------ ----------- -----------
Operating costs and expenses 377.1 396.3 1,089.9 1,049.5
------------ ------------ ----------- -----------
Operating Income 45.8 54.5 111.1 156.2
Other Income and (Expense):
Gain on insurance settlement 0.5 5.2 0.5 5.2
Equity in income (loss) of real estate
affiliates (1.4) (0.8) 10.8 1.0
Interest income 1.0 1.2 5.9 3.3
Interest expense (4.0) (4.1) (10.2) (9.9)
------------ ------------ ----------- -----------
Income Before Taxes 41.9 56.0 118.1 155.8
Income taxes 15.7 21.3 44.2 59.2
------------ ------------ ----------- -----------
Income From Continuing Operations 26.2 34.7 73.9 96.6
Discontinued Operations (net of income taxes): 1.7 0.8 21.6 6.0
------------ ------------ ----------- -----------
Net Income $ 27.9 $ 35.5 $ 95.5 $ 102.6
============ ============ =========== ===========
Basic Earnings Per Share:
Continuing operations $ 0.62 $ 0.79 $ 1.70 $ 2.22
Discontinued operations 0.04 0.02 0.50 0.13
------------ ------------ ----------- -----------
Net income $ 0.66 $ 0.81 $ 2.20 $ 2.35
============ ============ =========== ===========
Diluted Earnings Per Share:
Continuing operations $ 0.61 $ 0.79 $ 1.69 $ 2.19
Discontinued operations 0.04 0.02 0.49 0.14
------------ ------------ ----------- -----------
Net income $ 0.65 $ 0.81 $ 2.18 $ 2.33
============ ============ =========== ===========
Average Number of Shares Outstanding 42.5 43.7 43.5 43.6
Average Number of Dilutive Shares Outstanding 42.8 44.2 43.8 44.0
See Notes to Condensed Consolidated Financial Statements.
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
Industry Segment Data, Net Income
(In millions)
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
---- ---- ---- ----
Revenue:
Transportation:
Ocean transportation $ 243.2 $ 227.5 $ 706.1 $ 654.7
Logistics services 113.1 108.5 337.9 311.2
Real Estate:
Leasing 25.5 23.3 74.5 66.6
Sales 5.0 61.7 65.6 122.2
Less amounts reported in discontinued
operations (3.0) (2.7) (66.1) (32.6)
Food Products 41.8 34.6 95.1 89.2
Reconciling Items (2.7) (2.1) (12.1) (5.6)
------------ ------------ -------------- --------------
Total revenue $ 422.9 $ 450.8 $ 1,201.0 $ 1,205.7
============ ============ ============== ==============
Operating Profit, Net Income:
Transportation:
Ocean transportation $ 34.2 $ 36.8 $ 76.9 $ 105.2
Logistics services 5.1 3.5 15.1 10.1
Real Estate:
Leasing 12.5 11.4 36.8 32.6
Sales 1.2 15.6 39.2 36.9
Less amounts reported in discontinued
operations (2.7) (1.2) (34.6) (9.7)
Food Products 0.6 (0.1) 10.2 9.2
------------ ------------ -------------- --------------
Total operating profit 50.9 66.0 143.6 184.3
Loss on Investment -- (0.1) -- (2.3)
Interest Expense (4.0) (4.1) (10.2) (9.9)
General Corporate Expenses (5.0) (5.8) (15.3) (16.3)
------------ ------------ -------------- --------------
Income From Continuing Operations Before
Income Taxes 41.9 56.0 118.1 155.8
Income Taxes (15.7) (21.3) (44.2) (59.2)
------------ ------------ -------------- --------------
Income From Continuing Operations 26.2 34.7 73.9 96.6
Discontinued Operations (net of income taxes) 1.7 0.8 21.6 6.0
------------ ------------ -------------- --------------
Net Income $ 27.9 $ 35.5 $ 95.5 $ 102.6
============ ============ ============== ==============
See Notes to Condensed Consolidated Financial Statements.
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In millions)
September 30, December 31,
2006 2005
---- ----
ASSETS
Current Assets:
Cash and cash equivalents $ 44 $ 57
Accounts and notes receivable, net 191 177
Inventories 22 18
Real estate held for sale 18 9
Deferred income taxes 16 16
Prepaid expenses and other assets 38 25
Accrued deposits, net to Capital Construction Fund -- 1
--------- ---------
Total current assets 329 303
--------- ---------
Investments 136 154
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Real Estate Developments 125 71
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Property, at cost 2,437 2,222
Less accumulated depreciation and amortization 966 933
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Property - net 1,471 1,289
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Capital Construction Fund 1 93
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Other Assets 169 161
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Total $ 2,231 $ 2,071
========= =========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable and current portion of long-term debt $ 78 $ 31
Accounts payable 141 134
Other 79 89
--------- ---------
Total current liabilities 298 254
--------- ---------
Long-term Liabilities:
Long-term debt 356 296
Deferred income taxes 443 415
Post-retirement benefit obligations 49 47
Other 66 45
--------- ---------
Total long-term liabilities 914 803
--------- ---------
Commitments and Contingencies
Shareholders' Equity:
Capital stock 35 36
Additional capital 175 175
Deferred compensation -- (6)
Accumulated other comprehensive loss (7) (7)
Retained earnings 827 827
Cost of treasury stock (11) (11)
--------- ---------
Total shareholders' equity 1,019 1,014
--------- ---------
Total $ 2,231 $ 2,071
========= =========
See Notes to Condensed Consolidated Financial Statements.
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In millions)
Nine Months Ended
September 30,
2006 2005
---- ----
Cash Flows from Operating Activities $ 85 $ 232
--------- ---------
Cash Flows from Investing Activities:
Capital expenditures (255) (209)
Proceeds from disposal of property and other assets 43 25
Deposits into Capital Construction Fund (62) (188)
Withdrawals from Capital Construction Fund 155 150
Reduction in Investments 43 1
Increase in Investments (29) (20)
--------- ---------
Net cash used in investing activities (105) (241)
--------- ---------
Cash Flows from Financing Activities:
Proceeds from issuances of long-term debt 140 105
Payments of long-term debt (80) (21)
Proceeds (payments) related to short-term debt, net 47 (7)
Proceeds from issuances of capital stock, including
excess tax benefit 4 10
Repurchase of capital stock (72) --
Dividends paid (32) (30)
--------- ---------
Net cash provided by financing activities 7 57
--------- ---------
Net (Decrease) Increase in Cash and Cash Equivalents $ (13) $ 48
========= =========
Other Cash Flow Information:
Interest paid, net of amounts capitalized $ (12) $ (12)
Income taxes refunded (paid) (50) 13
Other Non-cash Information:
Depreciation expense (62) (62)
Tax-deferred property sales 58 30
Tax-deferred property purchases (33) (28)
Debt assumed in real estate acquisition -- 11
See Notes to Condensed Consolidated Financial Statements.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) The Condensed Consolidated Financial Statements 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. While these statements reflect all normal recurring
adjustments that are, in the opinion of management, necessary for fair
presentation of the results of the interim period, they do not include
all of the information and footnotes required by U.S. generally
accepted accounting principles for complete financial statements.
Therefore, the interim Condensed Consolidated Financial Statements
should be read in conjunction with the Consolidated Financial
Statements and Notes thereto included in the Company's annual report
filed on Form 10-K for the year ended December 31, 2005.
(2) On July 13, 2006, the Financial Accounting Standards Board ("FASB")
issued FASB Interpretation No. 48, "Accounting for Uncertainty in
Income Taxes--an interpretation of FASB Statement No. 109" ("FIN 48").
This Interpretation prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return. This
Interpretation also provides guidance on derecognition, classification,
interest and penalties, accounting in interim periods, disclosure, and
transition. The new interpretation will be effective for fiscal years
beginning after December 15, 2006. The company will be required to
adopt this interpretation in the first quarter of 2007. At this time,
the Company has not completed its review and assessment of the impact
of adoption of FIN 48.
On September 15, 2006, the FASB issued Statement of Financial
Accounting Standards No. 157 ("SFAS No. 157"), " Fair Value
Measurements," which defines fair value, establishes guidelines for
measuring fair value, and expands disclosures regarding fair value
measurements. SFAS No. 157 does not require any new fair value
measurements but rather eliminates inconsistencies in guidance found in
various prior accounting pronouncements. SFAS No. 157 is effective for
fiscal years beginning after November 15, 2007. Earlier adoption is
encouraged. The Company is currently evaluating the impact of SFAS No.
157, but does not expect that the adoption of SFAS No. 157 will have a
material impact on the Company's consolidated financial position,
results of operations, or cash flows.
On September 29, 2006, the FASB issued Statement of Financial
Accounting Standard No. 158 ("SFAS No. 158"), "Employers' Accounting
for Defined Benefit Pension and Other Postretirement Plans." The
standard amends FASB Statements No. 87, 88, 106 and 132(R) and would
require an employer to recognize the overfunded or underfunded status
of a defined benefit postretirement plan (other than a multiemployer
plan) as an asset or liability in its statement of financial position
and to recognize changes in that funded status in the year in which the
changes occur through comprehensive income. The pension asset or
liability is the difference between the plan assets at fair value and
the projected benefit obligation as of year end. For other
postretirement benefit plans, the asset or liability is the difference
between the plan assets at fair value and the accumulated
postretirement benefit obligation as of year end. The Company is
required to adopt this standard as of December 31, 2006. The Company is
currently assessing the impact this standard will have on the Company's
financial position, results of operations, and cash flows.
On September 20, 2006, the Financial Accounting Standards Board
ratified the consensus reached in Emerging Issues Task Force issued
EITF No. 06-5, "Accounting for Purchases of Life Insurance -
Determining the Amount that Could Be Realized in Accordance with FASB
Technical Bulletin 85-4." The ratified consensus is subject to a 30-day
comment period. The consensus in EITF 06-5 concluded that a
policyholder should consider any additional amounts included in the
contractual terms of the life insurance policy in determining the
"amount that could be realized under the insurance contract." The
consensus is effective for fiscal years beginning after December 15,
2006. The Company is currently evaluating the impact of EITF 06-5, but
does not expect that the adoption of the consensus will have a material
effect on the Company's consolidated financial position, results of
operations, or cash flows.
(3) The 2006 estimated effective income tax rate of 37.5 percent differs
from the statutory rate, due primarily to a land donation, tax credits,
and non-taxable life insurance proceeds.
(4) Commitments and Contingencies: Commitments and financial arrangements
that are not recorded on the Company's balance sheet at September 30,
2006, other than operating lease obligations, included the following
(in millions):
Guarantee of HS&TC debt (a) $ --
Standby letters of credit (b) $ 20
Bonds (c) $ 8
Benefit plan withdrawal obligations (d) $ 65
These amounts are not recorded on the Company's balance sheet and it is
not expected that the Company or its subsidiaries will be called upon
to advance funds under these commitments.
(a) The Company is contingently liable for up to $21.5
million related to a $30 million Hawaiian Sugar &
Transportation Cooperative ("HS&TC") revolving credit
line. No amounts were borrowed under HS&TC's facility
at the end of the third quarter.
(b) Consists of letters of credit, totaling approximately
$20 million, which enable the Company to qualify as a
self-insurer for state and federal workers'
compensation liabilities. This balance also includes
approximately $3 million to ensure full completion of a
real estate project on Kauai.
(c) Consists of approximately $6 million in U.S. customs
bonds, approximately $1 million related to real estate
construction projects in Hawaii, and approximately $1
million related to transportation and other matters.
(d) Represents the withdrawal liabilities for multiemployer
pension plans, in which Matson is a participant. The
withdrawal liability aggregated approximately $65
million as of the most recent valuation dates.
Management has no present intention of withdrawing from
and does not anticipate termination of any of the
aforementioned plans.
Other Contingencies: On June 14, 2006, the Company, Kukui'ula
Development Company (Hawaii), LLC ("Kukui'ula"), and various DMB
entities ("DMB") entered into a General Contract of Indemnity
("Indemnity") in favor of Travelers Casualty and Surety Company of
America ("Travelers"). The Indemnity was described in the Company's
Form 8-K dated June 14, 2006 and filed with the Securities and Exchange
Commission on June 16, 2006. On September 5, 2006, the Company,
Kukui'ula, and DMB entered into a General Agreement of Indemnity
("Safeco Indemnity") in favor of Safeco Insurance Company of America
("Safeco"). The Safeco Indemnity was described in the Company's Form
8-K dated September 5, 2006 and filed with the Securities and Exchange
Commission on September 11, 2006.
The indemnities were entered into in connection with Travelers' and
Safeco's execution of separate agreements with the Kukui'ula joint
venture for the delivery of one or more bonds. The bonds are being
issued to secure final subdivision approvals, which will allow for
closing of the Kukui'ula lots to take place, and will cover various
construction activities at Kukui'ula, such as project amenities, roads,
utilities and other infrastructure, and subdivision improvements.
Under the indemnities, the Company, Kukui'ula, and DMB, jointly and
severally, agree to indemnify and exonerate Travelers and Safeco from
all loss in connection with any of the bond(s) issued. In connection
with the indemnities, the Company, Kukui'ula, and DMB have separately
entered into Mutual Indemnification Agreements under which the parties
agree that they shall each be proportionately liable (60% DMB and 40%
for the Company) for all payments required to be made under the
indemnities.
The Company accounts for guarantees in accordance with FASB
Interpretation No. 45 (" FIN 45"), "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees
of Indebtedness of Others." Under the provisions of FIN 45, the Company
recorded a liability for the indemnities based on their fair values.
The fair value of the liability recorded by the Company in connection
with the indemnities was not material.
Financing Agreement: On April 20, 2006, the Company entered into a
three-year unsecured note purchase and private shelf agreement with
Prudential Investment Management, Inc. and its affiliates
(collectively, "Prudential") under which the Company may issue notes in
an aggregate amount up to $400 million less the sum of all principal
amounts then outstanding on any notes issued by the Company or any of
its subsidiaries to Prudential and the amount of any such notes then
committed to be purchased by Prudential. The Agreement also provides
for the commitment by Prudential to purchase and, subject to a right of
cancellation by the Company, the commitment by the Company to issue
three new series of senior promissory notes totaling $125 million. The
note purchase and shelf agreement is more fully described in a Form 8-K
filed on April 21, 2006.
Litigation: The Company and certain subsidiaries are parties to various
legal actions and are contingently liable in connection with claims and
contracts arising in the normal course of business, the outcome of
which, in the opinion of management after consultation with legal
counsel, will not have a material adverse effect on the Company's
financial position or results of operations.
(5) Earnings Per Share: The number of shares used to compute basic and
diluted earnings per share are as follows (in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
---- ---- ---- ----
Basic EPS - weighted average shares 42.5 43.7 43.5 43.6
Effect of dilutive securities:
Employee/director stock options and
non-vested restricted stock 0.3 0.5 0.3 0.4
----- ------ ------ ------
Diluted EPS 42.8 44.2 43.8 44.0
===== ====== ====== ======
Basic earnings per share is computed based on the weighted-average
number of common shares outstanding. Diluted earnings per share is
computed based on the weighted-average number of common shares
outstanding adjusted by the number of additional shares that would have
been outstanding had the potentially dilutive common shares been
issued. Potentially dilutive shares of common stock include
non-qualified stock options and non-vested restricted stock.
The computation of average dilutive shares outstanding excluded
non-qualified stock options to purchase 0.4 million and 0.2 million
shares of common stock for the three and nine months ended September
30, 2006, respectively. These amounts were excluded because the
options' exercise prices were greater than the average market price of
the Company's common stock for the periods presented and, therefore,
the effect would be anti-dilutive. There were no options that were
anti-dilutive for the three- and nine-month periods ended September 30,
2005.
(6) Share-Based Compensation: The Company may grant incentive and
non-qualified options to purchase shares of the Company's stock at an
exercise price equal to the fair market value at the grant date, as
determined by the Compensation Committee of the Board of Directors. The
options vest ratably over three years and, if not exercised, expire 10
years after grant. Shares issued as a result of stock option exercises
are funded with the issuance of new shares. Shares tendered to the
Company in connection with stock option exercises are retired.
The Company may also issue shares of the Company's common stock, in
connection with the stock option plans, as a reward for past service
rendered or as an incentive for future service. Service-based
restricted shares generally vest over three years. The Company may also
issue performance-based restricted shares that vest one year after
grant, with the number of shares earned based on the achievement of
annual financial targets established at the beginning of the fiscal
year.
The Company's various stock option plans are more fully described in
its most recent Form 10-K and in other filings with the Securities and
Exchange Commission. As of September 30, 2006, 1,463,588 shares have
been authorized for issuance under the equity compensation plans but
had not been granted.
On January 1, 2006, the Company adopted Statement of Financial
Accounting Standards No. 123 (revised 2004), "Share-Based Payment"
(SFAS No. 123R), which requires the measurement and recognition of
compensation expense for all share-based payment awards made to
employees and directors. Prior to January 1, 2006, the Company
accounted for share-based compensation under Accounting Principles
Board ("APB") Opinion No. 25, which required recognition of
compensation expense based on the intrinsic value of the equity
instrument awarded. Consequently, no share-based compensation expense
for stock option grants was reflected in net income since all options
granted had an exercise price equal to the market value of the
underlying common stock on the date of grant. If the Company had
applied the fair value recognition provisions of Statement of Financial
Accounting Standards No. 123, as amended by Statement of Financial
Accounting Standards No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure," the effect on net income
and earnings per share for the three and nine month periods ended
September 30, 2005 would have been as follows (in millions, except
per-share amounts):
2005
--------------------------------
Quarter Nine Months
Ended Ended
September 30 September 30
------------ ------------
Net Income:
As reported $ 35.5 $ 102.6
Stock-based compensation expense determined under
fair value based method for all awards, net of related
tax effects (0.4) (1.2)
--------- --------
Pro forma $ 35.1 $ 101.4
========= ========
Net Income Per Share:
Basic, as reported $ 0.81 $ 2.35
Basic, pro forma $ 0.80 $ 2.32
Diluted, as reported $ 0.81 $ 2.33
Diluted, pro forma $ 0.80 $ 2.30
SFAS No. 123R requires companies to estimate the fair value of
share-based payment awards on the date of grant using an option-pricing
model. The Company estimates the grant-date fair value of its stock
options using a Black-Scholes valuation model, consistent with the
provisions of SFAS No. 123R and Securities and Exchange Commission
("SEC") Staff Accounting Bulletin No. 107, "Share-Based Payment," using
the range of assumptions provided in the table below:
2006 2005
---- ----
Expected volatility 22.1%-22.7% 22.2%-22.3%
Expected term (in years) 6.3-8.1 6.4
Risk-free interest rate 4.5%-5.1% 3.9%-4.0%
Dividend yield 1.7%-2.4% 1.9%-2.2%
Fair value of options granted $10.56-$14.86 $9.70-$10.36
o Expected volatility was primarily determined using the
historical volatility of A&B common stock over a 6-year
period, but the Company may also consider future events
that it reasonably concludes marketplace participants
might consider. Accordingly, the Company believes that the
expected volatility estimate is representative of the
stock's future volatility over the expected term of its
employee share options. An increase in the expected
volatility assumption will increase stock compensation
expense.
o The expected term of the awards represents expectations of
future employee exercise and post-vesting termination
behavior and was primarily based on historical experience.
The Company analyzed various groups of employees and
considered expected or unusual trends that would likely
affect this assumption and determined that the historical
term of 6.7 years was reasonable for 2006. An increase in
the expected term assumption will increase stock
compensation expense.
o The risk free interest rate was based on U.S. Government
treasury yields for periods equal to the expected term of
the option on the grant date. An increase in the risk-free
interest rate will increase stock compensation expense.
o The expected dividend yield is based on the Company's
current and historical dividend policy. An increase in the
dividend yield will decrease stock compensation expense.
Application of alternative assumptions could produce significantly
different estimates of the fair value of stock-based compensation, and
consequently, the related amounts recognized in the Condensed
Consolidated Statements of Income.
Activity in the Company's stock option plans for the first three
quarters of 2006 was as follows (in thousands, except exercise price
amounts):
Employee Plans Directors' Plans
------------------------- ------------------------ Weighted
1998 1989 Average
1998 1989 Directors' Directors' Total Exercise
Plan Plan Plan Plan Shares Price
---- ---- ---------- ---------- ------ ---------
December 31, 2005 1,190.1 38.2 215.8 42.0 1,486.1 $ 31.16
Granted 174.1 -- 56.0 -- 230.1 $ 51.54
Exercised (88.0) (11.2) (6.0) (12.0) (117.2) $ 26.18
Forfeited & Expired (20.1) -- -- -- (20.1) $ 40.92
---------- --------- ------- ------- -----------
September 30, 2006 1,256.1 27.0 265.8 30.0 1,578.9 $ 34.37
========== ========== ======== ======== ===========
Exercisable 847.1 27.0 140.5 30.0 1,044.6 $ 29.31
---------- ---------- -------- -------- -----------
The following table summarizes stock option information as of September
30, 2006 (excludes restricted stock, in thousands, except exercise
price amounts):
Weighted Weighted
Options Average Weighted Options Average
Range of Outstanding Remaining Average Exercisable Price of
Exercise as of Contractual Life Exercise as of Exercisable
Prices 9/30/2006 (in Years) Price 9/30/2006 Options
-------------- --------- ---------------- -------- --------- -------
$20.00 - 24.00 86.9 3.1 $ 21.45 86.9 $ 21.45
$24.01 - 28.00 436.9 5.2 $ 26.29 436.9 $ 26.29
$28.01 - 32.00 211.5 4.0 $ 28.54 209.5 $ 28.51
$32.01 - 36.00 355.5 7.2 $ 33.48 223.0 $ 33.48
$36.01 - 40.00 0.2 4.9 $ 37.98 -- --
$40.01 - 44.00 74.8 7.2 $ 40.46 24.0 $ 40.38
$44.01 - 48.00 191.2 8.3 $ 44.45 64.3 $ 44.45
$48.01 - 53.00 221.9 9.4 $ 51.59 -- --
------- -------
$20.00 - 53.00 1,578.9 6.4 $ 34.37 1,044.6 $ 29.31
======= =======
A summary of the compensation cost and other measures related to
share-based payments is as follows (in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2006 2005 2006 2005
---- ---- ---- ----
Share-based expense (net of
estimated forfeitures):
Stock options $ 0.7 $ -- $ 2.1 $ --
Restricted stock 1.5 0.6 4.1 1.6
---------- ---------- ----------- -----------
Total share-based expense 2.2 0.6 6.2 1.6
Total recognized tax benefit (0.5) (0.2) (1.5) (0.4)
---------- ---------- ----------- -----------
Share-based expense (net of tax) $ 1.7 $ 0.4 $ 4.7 $ 1.2
========== ========== =========== ===========
Cash received upon option exercise $ 0.6 $ 1.5 $ 3.1 $ 9.5
Intrinsic value of options exercised $ 0.5 $ 1.3 $ 2.5 $ 7.2
Tax benefit realized upon option
exercise $ 0.1 $ 0.2 $ 0.9 $ 2.4
Fair value of stock vested $ -- $ -- $ 3.0 $ 0.6
As of September 30, 2006, there was $4.2 million of total unrecognized
compensation cost related to unvested stock options. That cost is
expected to be recognized over a weighted average period of
approximately 1.5 years.
The following table summarizes restricted stock information as of
September 30, 2006 (in thousands, except weighted-average, grant-date
fair value amounts):
Weighted
Restricted Average
Stock Grant-Date
Shares Fair Value
---------- ----------
December 31, 2005 184.3 $ 41.38
Granted 128.4 $ 52.37
Vested (57.1) $ 41.97
Forfeited (8.0) $ 49.18
--------
September 30, 2006 247.6 $ 46.69
========
As of September 30, 2006, unrecognized compensation cost related to
unvested restricted stock was $7.7 million. That cost is expected to be
recognized over a weighted average period of 1.4 years.
(7) Accounting for and Classification of Discontinued Operations: As
required by Statement of Financial Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS
No. 144"), the sales of certain income-producing assets are classified
as discontinued operations if (i) the operations and cash flows of the
assets can be clearly distinguished from the remaining assets of the
Company, (ii) the cash flows that are specific to the assets sold have
been, or will be, eliminated from the ongoing operations of the
Company, (iii) the Company will not have a significant continuing
involvement in the operations of the assets sold, and (iv) the amount
is considered material. Certain assets that are "held for sale," based
on the likelihood and intention of selling the property within 12
months, are also treated as discontinued operations. Depreciation on
these assets is discontinued upon reclassification. Sales of land,
residential houses, and office condominium units are generally
considered inventory and are not included in discontinued operations.
Discontinued operations were as follows (in millions):
Quarter Ended Nine Months Ended
September 30, September 30,
------------- -------------
2006 2005 2006 2005
---- ---- ---- ----
Discontinued Operations (net of tax)
Sales of Assets 1.5 -- $ 20.2 $ 2.1
Leasing Operations 0.2 $ 0.8 1.4 3.9
-------- -------- -------- --------
Total $ 1.7 $ 0.8 $ 21.6 $ 6.0
======== ======== ======== ========
(8) Other Comprehensive Income for the three and nine months ended
September 30, 2006 and 2005 was as follows (in millions):
Quarter Ended Nine Months Ended
September 30, September 30,
------------- -------------
2006 2005 2006 2005
---- ---- ---- ----
Net Income $ 27.9 $ 35.5 $ 95.5 $ 102.6
Company's share of investee's
minimum pension liability
adjustment (0.1) -- -- (0.4)
Change in valuation of derivative 0.3 -- 0.2 0.1
---------- ---------- --------- ---------
Comprehensive Income $ 28.1 $ 35.5 $ 95.7 $ 102.3
========== ========== ========= =========
(9) Pension and Post-retirement Plans: The Company has defined benefit
pension plans that cover substantially all non-bargaining unit and
certain bargaining unit employees. The Company also has unfunded
non-qualified plans that provide benefits in excess of the amounts
permitted to be paid under the provisions of the tax law to
participants in qualified plans. The assumptions related to discount
rates, expected long-term rates of return on invested plan assets,
salary increases, age, mortality and health care cost trend rates,
along with other factors, are used in determining the assets,
liabilities and expenses associated with pension benefits. Management
reviews the assumptions annually with its independent actuaries, taking
into consideration existing and future economic conditions and the
Company's intentions with respect to these plans. Management believes
that its assumptions and estimates for 2006 are reasonable. Different
assumptions, however, could result in material changes to the assets,
obligations and costs associated with benefit plans.
The Components of Net Periodic Benefit Cost for the third quarters of
2006 and 2005 were as follows (in millions):
Pension Benefits Post-retirement Benefits
---------------- ------------------------
2006 2005 2006 2005
---- ---- ---- ----
Service Cost $ 1.9 $ 1.6 $ 0.2 $ 0.2
Interest Cost 4.2 4.0 0.8 0.8
Expected Return on Plan Assets (6.6) (6.1) -- --
Amortization of Prior Service Cost 0.1 0.1 -- --
Amortization of Net (Gain) Loss 0.4 0.4 0.3 0.3
-------- -------- -------- --------
Net Periodic Benefit Cost $ -- $ -- $ 1.3 $ 1.3
======== ======== ======== ========
The Components of Net Periodic Benefit Cost for the first nine months
of 2006 and 2005 were as follows (in millions):
Pension Benefits Post-retirement Benefits
---------------- ------------------------
2006 2005 2006 2005
---- ---- ---- ----
Service Cost $ 5.6 $ 4.8 $ 0.7 $ 0.7
Interest Cost 12.4 12.0 2.4 2.4
Expected Return on Plan Assets (19.6) (18.3) -- --
Amortization of Prior Service Cost 0.3 0.3 -- --
Amortization of Net (Gain) Loss 1.2 1.2 0.8 0.9
-------- -------- -------- --------
Net Periodic Benefit Cost $ (0.1) $ -- $ 3.9 $ 4.0
======== ======== ======== ========
The 2006 return on plan assets is expected to be nearly the same as the
sum of the service cost, interest cost and amortization components,
resulting in an expected net periodic pension credit of approximately
$0.2 million for 2006. No contributions to the Company's pension plans
are expected to be required during 2006.
(10) Accelerated Share Repurchase Program: On December 9, 2004, A&B's Board
of Directors authorized A&B to repurchase up to two million shares of
its common stock through December 31, 2006. In June 2006, A&B purchased
200,000 shares on the open market at an average price of $42.35.
Additionally, the Company also entered into an accelerated share
repurchase agreement ("ASR") with Goldman, Sachs & Co. on June 27, 2006
to repurchase shares of A&B's common stock for an aggregate purchase
price of approximately $63 million, which is more fully described in a
Form 8-K filed on July 11, 2006. The maximum average price per share
that will be paid under the ASR is $46.83, which is based on 984,000
and 361,342 shares delivered on June 30 and July 12, 2006,
respectively. The average price per share paid to date under the ASR is
not expected to be representative of the final average repurchase price
per share because A&B expects to receive additional shares for no
additional consideration. Under the terms of the ASR, the Company may
receive up to an additional 184,099 shares upon termination of the
agreement in a third installment based on the volume weighted average
price of A&B's common stock from July 8, 2006 through to the end of the
termination period, which may be determined by Goldman in its
discretion from September 8, 2006 through November 10, 2006. A&B has no
further obligation to provide additional cash or to issue additional
shares under the agreement, and consequently, any additional shares
received would reduce the final average price paid per share. The final
average repurchase price per share under the ASR will range from $41.19
to $46.83 based on the collar established by the agreement. Through
October 30, 2006, A&B's total share repurchases totaled 1,545,342
shares for $71.5 million at an average price of $46.25 per share. Upon
completion of the ASR, A&B will have repurchased between 1,545,342 and
1,729,441 shares of its stock during 2006 and will have between 270,559
and 454,658 shares remaining under its existing share repurchase
authorization.
(11) Subsequent Events:
On October 11, 2006, the Company, MLR Golf Partners LLC ("MLR"), and
BH/JP Hawaii Holdings LLC ("Brookfield") entered into an
Indemnification Agreement (the "Agreement"). The Agreement was entered
into in connection with Brookfield's execution of an indemnity
agreement or agreements (collectively, "Indemnity Agreement") in favor
of The Guarantee Company of North America ("The Guarantee"). The
Indemnity Agreement relates to, among other things, The Guarantee's
execution of an agreement with MLR for the delivery of one or more
bonds related to the construction of units at a condominium project
(the "Project") being developed by MLR in the Mauna Lani Resort on the
island of Hawaii. MLR is a real-estate development joint venture
between the Company and Brookfield Homes, and is more fully described
in A&B's most recently filed Form 10-K. The Agreement was described in
the Company's Form 8-K dated October 11, 2006 and filed with the
Securities and Exchange Commission on October 16, 2006.
Under the Indemnity Agreement, Brookfield agrees to indemnify The
Guarantee from all loss and expense in connection with any bonds for
which it serves as surety for MLR. Under the Agreement, the parties
agree that MLR shall be responsible for 100% of all payments related to
the Project required to be made under the Indemnity Agreement, and
Brookfield and A&B shall each be proportionately liable (50% for
Brookfield and 50% for A&B) for all payments related to the Project
required to be made under the Indemnity Agreement if MLR fails to
timely pay amounts due to The Guarantee. The fair value of the
liability related to the indemnity is not expected to be material.
On October 15, 2006, a 6.7 magnitude earthquake, centered off the coast
of the island of Hawaii, struck the Hawaiian Islands. The vast majority
of the Company's operations are situated on the islands of Maui, Kauai,
and Oahu, where damage was much lower than that experienced on the
island of Hawaii. The Company has evaluated its properties, reservoirs,
and operations and identified no significant damage. The State of
Hawaii and the U.S. Army Corps of Engineers have announced that they
will be conducting follow-up inspections of all reservoirs in Hawaii.
Accordingly, the Company currently does not anticipate that the
earthquake will have a material effect on its consolidated financial
position, results of operations, or cash flows.
On October 26, 2006, the Company's board of directors authorized the
repurchase of up to 2 million of its common stock in the open market,
in privately-negotiated transactions or by other means. The new
authorization will expire on December 31, 2008 and augments an existing
share repurchase authorization that will expire on December 31, 2006.
As of September 30, 2006, under the existing share repurchase
authorization, 1,545,342 shares have been repurchased through open
market transactions and under an accelerated share repurchase
agreement (more fully described in Note 10), and 454,658 shares remain
available for repurchase under the existing authorization.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ------------------------------------------------
The following analysis of the consolidated financial condition and results of
operations of Alexander & Baldwin, Inc. and its subsidiaries (collectively, the
"Company") should be read in conjunction with the condensed consolidated
financial statements and related notes thereto included in Item 1 of this Form
10-Q.
FORWARD-LOOKING STATEMENTS
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. These statements are "forward-looking" statements as that
term is defined in the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements may be contained in, among other things, Securities
and Exchange Commission ("SEC") filings, such as the Forms 10-K, 10-Q, and 8-K,
press releases made by the Company, the Company's Internet Web sites (including
Web sites of its subsidiaries), 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 are not guarantees of future performance, and 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
those matters discussed in Item 1A of the Company's 2005 10-K. The Company
undertakes no obligation to update forward-looking statements to reflect events
or circumstances occurring after the date of this report.
CONSOLIDATED REVENUE & NET INCOME
Consolidated - Third quarter of 2006 compared with 2005
- --------------------------------------------------------------------------------------------
Quarter Ended September 30,
- --------------------------------------------------------------------------------------------
(dollars in millions) 2006 2005 Change
- --------------------------------------------------------------------------------------------
Revenue $ 422.9 $ 450.8 -6%
Cost of goods sold, services, and rentals $ 342.7 $ 361.9 -5%
Selling, general, and administrative $ 34.4 $ 34.3 --
Gain on insurance settlement $ 0.5 $ 5.2 -90%
Loss on investment $ -- $ 0.1 NM
Income taxes $ 15.7 $ 21.3 -26%
- --------------------------------------------------------------------------------------------
Net income $ 27.9 $ 35.5 -21%
- --------------------------------------------------------------------------------------------
Consolidated revenue for the third quarter of 2006 was $422.9 million, or 6
percent lower than the third quarter of 2005. This decrease was due principally
to $59.1 million in lower revenue from real estate sales (after excluding
revenue from discontinued operations), partially offset by $15.7 million in
higher revenue for ocean transportation, $7.2 million higher revenue for food
products, $4.6 million growth in logistics services revenue, and $4.3 million
higher revenue from real estate leasing (after excluding leasing revenue from
assets classified as discontinued operations). The reasons for the revenue
change are described below, by business segment, in the Analysis of Operating
Revenue and Profit.
Costs of goods sold, services, and rentals for the third quarter of 2006 were
$342.7 million, or 5 percent lower than the third quarter of 2005 due to $17.7
million higher costs for ocean transportation, $6.5 million in higher costs for
the food products segment (primarily as a result of higher costs per ton and
higher sugar sales volume), $2.5 million in higher purchased transportation
costs at the Matson Integrated Logistics business, partially offset by $48.1
million lower cost of real estate sales (after excluding real estate sales
classified as discontinued operations).
Selling, general, and administrative costs for the third quarter of 2006 of
$34.4 million approximated the costs for the third quarter of 2005.
During the third quarter of 2005, the Company recorded a $5.2 million gain from
an insurance settlement following a fire earlier in the year at the Kahului
Shopping Center on Maui. This gain is included in proceeds from disposal of
property in the Cash Flows from Investing Activities on the Condensed
Consolidated Statement of Cash Flows. In addition, in the third quarters of 2005
and 2006, the Company received approximately $0.6 million related to business
interruption insurance and has included this benefit in operating revenue and in
Cash Flows from Operating Activities.
Income taxes were lower than the third quarter of 2005, on a percentage basis,
due to a lower effective income tax rate. The effective tax rate for 2006 of
37.5% was less than the effective tax rate of 38% in 2005 due principally to a
land donation, tax credits, and non-taxable life insurance proceeds.
Consolidated - First nine months of 2006 compared with 2005
- --------------------------------------------------------------------------------------------
Nine Months Ended September 30,
- --------------------------------------------------------------------------------------------
(dollars in millions) 2006 2005 Change
- --------------------------------------------------------------------------------------------
Revenue $ 1,201.0 $ 1,205.7 --
Cost of goods sold, services, and rentals $ 983.4 $ 947.4 4%
Selling, general, and administrative $ 106.5 $ 99.8 7%
Loss on investment $ -- $ 2.3 NM
Gain on insurance settlement $ 0.5 $ 5.2 -90%
Income taxes $ 44.2 $ 59.2 -25%
- --------------------------------------------------------------------------------------------
Net income $ 95.5 $ 102.6 -7%
- --------------------------------------------------------------------------------------------
Consolidated revenue for the first nine months of 2006 was $1,201.0 million, or
slightly lower than the results for first nine months of 2005. This decrease was
due principally to $94.1 million in lower revenue from real estate sales (after
excluding revenue from discontinued operations), partially offset by $51.4
million higher revenue for ocean transportation, $26.7 million growth in
logistics services revenue, $11.9 million higher revenue from real estate
leasing (after excluding leasing revenue from assets classified as discontinued
operations), and $5.9 million higher revenue from food products. The reasons for
the revenue change are described below, by business segment, in the Analysis of
Operating Revenue and Profit.
Costs of goods sold, services, and rentals for the first nine months of 2006
were $983.4 million, or 4 percent higher than the first nine months of 2005, due
to $73.2 million in higher costs for ocean transportation, $20.0 million in
higher purchased transportation costs for the logistics business, partially
offset by $67.1 million in lower cost of real estate sales (after excluding real
estate sales classified as discontinued operations) and a $3.3 million gain on
the sale of two surplus and obsolete vessels.
Selling, general, and administrative costs for the first nine months of 2006
were $106.5 million, or 7 percent higher than the first nine months of 2005 due
to higher personnel costs and professional fees.
The $2.3 million loss on investment in 2005 was the result of the sale of
Company's ownership interests in C&H Sugar Company. The $5.2 million gain in
2005 was described in the consolidated third quarter comparison.
Income taxes were lower than the first nine months of 2005 due primarily to the
same factors cited for the third quarter decrease.
ANALYSIS OF OPERATING REVENUE AND PROFIT
TRANSPORTATION INDUSTRY
Ocean Transportation - Third quarter of 2006 compared with 2005
- -------------------------------------------------------------------------------------
Quarter Ended September 30,
- -------------------------------------------------------------------------------------
(dollars in millions) 2006 2005 Change
- -------------------------------------------------------------------------------------
Revenue $ 243.2 $ 227.5 7%
Operating profit $ 34.2 $ 36.8 -7%
- -------------------------------------------------------------------------------------
Volume (Units)
Hawaii containers 44,600 45,400 -2%
Hawaii automobiles 27,100 32,000 -15%
Guam containers 3,700 4,300 -14%
China containers 10,200 -- NM
- -------------------------------------------------------------------------------------
Ocean Transportation revenue for the third quarter of 2006 was $243.2 million,
or 7 percent higher than the third quarter of 2005. Of this increase,
approximately $14.4 million was due to an increase in fuel surcharge revenues,
$7.8 million was due to a net increase in volumes, primarily from the
establishment of the China service, partially offset by lower volumes in the
Hawaii and Guam services, and $4.0 million was due to improved yields and cargo
mix. These increases were partially offset by $12.1 million from the loss of
vessel charter revenue, resulting from the expiration of the APL Alliance in the
first quarter of 2006. Matson's Hawaii automobile volume for the quarter was 15
percent lower than the third quarter of last year, due primarily to the impact
of reduced auto manufacturer incentives for rental car agencies (which resulted
in lower rental car turnover) and competitive pressures. Total Hawaii container
volume was down 2 percent from the third quarter of 2005, reflecting reduced
shipments in the building materials segment and non-recurring military
deployments that occurred in 2005. Guam container volume was down 14 percent
from the third quarter of 2005, primarily due to competitive pressures resulting
from the transition in vessel schedules, as well as a decline in the Saipan
garment trade.
Operating profit was $34.2 million, or 7 percent lower than the third quarter of
2005. This decrease was primarily the result of the following operating expense
changes, which offset revenue increases. Direct and indirect fuel costs
increased $14.7 million, equipment control and leasing costs increased $4.3
million, and terminal handling costs increased $3.2 million.
Ocean Transportation - First nine months of 2006 compared with 2005
- -------------------------------------------------------------------------------------
Nine Months Ended September 30,
- -------------------------------------------------------------------------------------
(dollars in millions) 2006 2005 Change
- -------------------------------------------------------------------------------------
Revenue $ 706.1 $ 654.7 8%
Operating profit $ 76.9 $ 105.2 -27%
- -------------------------------------------------------------------------------------
Volume (Units)
Hawaii containers 131,000 131,500 --
Hawaii automobiles 92,700 110,900 -16%
Guam containers 11,400 12,500 -9%
China containers 19,700 -- NM
- -------------------------------------------------------------------------------------
Ocean Transportation revenue for the first nine months of 2006 was $706.1
million, or 8 percent higher than the first nine months of 2005. Of this
increase, approximately $35.4 million was due to increases in fuel surcharge
revenues, $11.9 million was due to improved yields and cargo mix, $12.8 million
was due to volume changes in the Hawaii, Guam, and China services, and $2.3
million was due to higher government services revenue. These increases were
partially offset by $28.4 million in lower vessel charter revenue, resulting
from the expiration of the APL Alliance in the first quarter of 2006. Total
Hawaii automobile and Guam container volumes were down 16 percent and 9 percent
from 2005, respectively, for the same reasons cited for the quarter.
Operating profit was $76.9 million, or 27 percent lower than the first nine
months of 2005. This decrease was primarily the result of the following
operating expense changes, which offset revenue increases. Direct and indirect
fuel costs increased $46.7 million, terminal handling costs increased $13.3
million, and equipment control, leasing, and repair costs increased $9.4
million. Additionally, G&A expense increased $3.8 million and Matson's SSAT
joint venture contributed $3.5 million less in 2006, due primarily to a
favorable adjustment made during the first nine months of 2005. Earnings from
this venture are not included in revenue, but are included in operating profit.
These increases were partially offset by a $3.3 million gain on the sale of two
surplus and obsolete vessels.
The Company realized container volume in the China trade that exceeded its
original expectations. However, while the service is profitable, performance
did not reach planned levels as favorable container volumes were more than
offset by lower container rates and higher fuel and intermodal rail costs. The
China container rate environment is expected to remain challenging; however,
the Company anticipates that its service advantages will translate into improved
rates over time. In Hawaii and Guam, softening market conditions led to lower
than expected volume, while yields have been favorable. Matson has initiated a
number of operating measures to respond to changes in market conditions.
Logistics Services - Third quarter of 2006 compared with 2005
- -------------------------------------------------------------------------------------
Quarter Ended September 30,
- -------------------------------------------------------------------------------------
(dollars in millions) 2006 2005 Change
- -------------------------------------------------------------------------------------
Revenue $ 113.1 $ 108.5 4%
Operating profit $ 5.1 $ 3.5 46%
- -------------------------------------------------------------------------------------
Integrated logistics revenue was $113.1 million, or 4 percent higher than the
third quarter of 2005. This growth was the result of continued improvements in
mix of business and yields, partially offset by a 12% decrease in volumes for
domestic and international intermodal services.
Integrated logistics operating profit was $5.1 million, or 46 percent higher
than the third quarter of 2005. The increased operating profit was the result of
higher yields in all service categories.
The revenue for integrated logistics services includes the total amount billed
to customers for transportation services. The primary costs include purchased
transportation services. As a result, the operating profit margins for this
business are narrower than other businesses of the Company. The primary
operating profit and investment risk for this business is the quality of
receivables, which is monitored closely.
Logistics Services - First nine months of 2006 compared with 2005
- -------------------------------------------------------------------------------------
Nine Months Ended September 30,
- -------------------------------------------------------------------------------------
(dollars in millions) 2006 2005 Change
- -------------------------------------------------------------------------------------
Revenue $ 337.9 $ 311.2 9%
Operating profit $ 15.1 $ 10.1 50%
- -------------------------------------------------------------------------------------
Integrated logistics revenue was $337.9 million, or 9 percent higher than the
first nine months of 2005. This growth was the result of continued improvements
in mix of business and rates, and a 10 percent increase in highway and
less-than-truckload volumes, partially offset by a 13 percent decrease in
intermodal volume.
Integrated logistics operating profit was $15.1 million, or 50 percent higher
than the first nine months of 2005. The operating profit improvement was the
result of higher yields in all service categories.
The logistics services businesses has benefited from the launch of the Company's
China services. Matson Integrated Logistics remains poised for continued growth,
though margins may moderate somewhat from the high levels experienced
year-to-date.
REAL ESTATE INDUSTRY
Real estate leasing and sales revenue and operating profit are analyzed before
subtracting amounts related to discontinued operations. This is consistent with
how the Company's management evaluates and makes decisions for the Company's
real estate businesses. A discussion of discontinued operations for the real
estate business is included separately.
Real Estate Leasing - Third quarter of 2006 compared with 2005
- -----------------------------------------------------------------------------------------
Quarter Ended September 30,
- -----------------------------------------------------------------------------------------
(dollars in millions) 2006 2005 Change
- -----------------------------------------------------------------------------------------
Revenue $ 25.5 $ 23.3 9%
Operating profit $ 12.5 $ 11.4 10%
- -----------------------------------------------------------------------------------------
Occupancy Rates:
Mainland 97% 94% 3%
Hawaii 98% 93% 5%
- -----------------------------------------------------------------------------------------
Leasable Space (million sq. ft.):
Mainland 3.7 3.5 6%
Hawaii 1.6 1.7 -6%
- -----------------------------------------------------------------------------------------
Real estate leasing revenue and operating profit for the third quarter of 2006
were 9 percent and 10 percent higher, respectively, than the amounts reported
for the third quarter of 2005.
These increases were due principally to $1.9 million of revenue and $0.7 million
of contribution margin from four properties acquired during or subsequent to the
third quarter of 2005 and the results from the completion of Kunia Shopping
Center, a new Oahu commercial development in the second half of 2005. Higher
occupancies and lease rates were the primary remaining factors for the
quarter-over-quarter change. These increases were partially offset by sales,
during, or subsequent to, the third quarter of 2005, of two retail centers in
Phoenix, Arizona, a Maui office building, and a commercial property on Oahu.
Real Estate Leasing - First nine months of 2006 compared with 2005
- -------------------------------------------------------------------------------------
Nine Months Ended September 30,
- -------------------------------------------------------------------------------------
(dollars in millions) 2006 2005 Change
- -------------------------------------------------------------------------------------
Revenue $ 74.5 $ 66.6 12%
Operating profit $ 36.8 $ 32.6 13%
- -------------------------------------------------------------------------------------
Occupancy Rates:
Mainland 97% 95% 2%
Hawaii 98% 92% 6%
- -------------------------------------------------------------------------------------
Real estate leasing revenue and operating profit for the first nine months of
2006 were 12 percent and 13 percent higher, respectively, than the amounts
reported for the first nine months of 2005.
In addition to the factors cited for the third quarter increase, these increases
were also due to the acquisition of a two-story office building in Arizona and a
commercial property in Honolulu.
Real Estate Sales - Third quarter and first nine months of 2006 compared with 2005
- -------------------------------------------------------------------------------------
Quarter Ended September 30,
- -------------------------------------------------------------------------------------
(dollars in millions) 2006 2005 Change
- -------------------------------------------------------------------------------------
Revenue $ 5.0 $ 61.7 -92%
Operating profit $ 1.2 $ 15.6 -92%
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Nine Months Ended September 30,
- -------------------------------------------------------------------------------------
(dollars in millions) 2006 2005 Change
- -------------------------------------------------------------------------------------
Revenue $ 65.6 $ 122.2 -46%
Operating profit $ 39.2 $ 36.9 6%
- -------------------------------------------------------------------------------------
The lower third quarter and nine months revenue and operating profit results
were due to the mix and timing of real estate sales in 2006 compared with 2005.
The composition of these sales is described below.
2006 - Three Months Ended September 30: Real estate sales revenue, before
subtracting amounts treated as discontinued operations, was $5.0 million and
consisted of the sale of several commercial parcels and one agricultural parcel
in Hawaii. Operating profit for the third quarter of 2006 included a loss of
$1.4 million, primarily related to the Company's share of marketing and other
operating expenses of its real estate joint ventures.
2006 - Nine Months Ended September 30: Real estate sales revenue for the nine
months ended September 30, 2006 included first half revenue of $60.6 million,
generated principally by the sale of two retail centers in Phoenix, Arizona, a
Maui office building, several commercial parcels on Maui, a commercial property
on Oahu, and a vacant parcel on Kauai. Operating profit for the nine months
ended September 30, 2006 was significantly higher as a percentage of real estate
sales revenue compared to 2005 because operating profit also included $10.8
million for the Company's earnings from its real estate joint ventures (which
are not included in revenue for the segment). The joint venture earnings
principally relate to a portion of the Company's earnings from its Hokua joint
venture, which completed sales of all 247 residential condominium units in the
first quarter.
2005 - Three Months Ended September 30: Real estate sales revenue for the third
quarter of 2005, before subtracting amounts treated as discontinued operations,
was primarily due to the sale of 100 units at the Company's Lanikea residential
high-rise project in Waikiki for $59 million and a Maui property for $2.5
million. A gain of $5.2 million was recognized in operating profit during the
third quarter for a partial property damage insurance settlement related to the
Kahului Shopping Center fire. The Company is currently in the process of
redeveloping the property. Operating Profit also included a loss of $0.8 million
for the Company's share of earnings in its joint ventures.
2005 - Nine Months Ended September 30: Real estate sales revenue of $122.2
million for the nine months ended September 30, 2005, before subtracting amounts
treated as discontinued operations, also included first half sales revenue from
the sale of a warehouse/distribution complex in Ontario, California, seven
commercial properties on Maui and Oahu, a residential development parcel and
three residential properties, a service center/warehouse complex comprised of
three buildings in San Antonio, Texas, 5.5 office condominium floors, and the
receipt of the final 80-percent installment payment of $14.1 million for a
30-acre development parcel at Wailea. In addition to the profit contribution
from these sales, operating profit for the nine months ended September 30, 2005
included approximately $1.0 million for the Company's share of earnings from its
real estate joint ventures.
Sales, construction, and permitting progress continue in the Company's
diversified real estate pipeline, while a more challenging residential real
estate environment in Hawaii will, in varying degrees, affect certain projects.
The first units at Kukui'ula have now begun to close. Although sales activity
for the last quarter of 2006 will not meet original expectations, the prospects
for the development remain favorable. Progress at other key residential
developments, Kai Malu at Wailea and Keola La'i in Honolulu, continues to
be positive.
The mix of real estate 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 in Hawaii
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, real estate 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. Additionally, the operating profit reported in each quarter
does not necessarily follow a percentage of sales trends because the cost basis
of property sold can differ significantly between transactions. The reporting of
real estate sales is also affected by the classification of certain real estate
sales as discontinued operations. Finally, real estate sales segment revenue
does not include earnings from joint venture investments, but are included in
operating profit.
Real Estate Discontinued Operations - 2006 compared with 2005
The revenue and operating profit on real estate discontinued operations for the
third quarter and first nine months of 2006 and 2005 were as follows:
- -------------------------------------------------------------------------------------------------------------
Quarter Ended September 30, Nine Months Ended September 30,
- -------------------------------------------------------------------------------------------------------------
(dollars in millions, before tax) 2006 2005 2006 2005
- -------------------------------------------------------------------------------------------------------------
Sales revenue $ 2.4 $ 0 $ 62.1 $ 24.6
Leasing revenue $ 0.6 $ 2.7 $ 4.0 $ 8.0
Sales operating profit $ 2.4 $ 0 $ 32.3 $ 6.3
Leasing operating profit $ 0.3 $ 1.2 $ 2.3 $ 3.4
- -------------------------------------------------------------------------------------------------------------
2006: The revenue and operating profit of two retail centers in Phoenix,
Arizona, an office building on Maui, and several commercial parcels in Hawaii
were included in discontinued operations.
2005: The revenue and operating profit of two office buildings in Downtown
Honolulu, one warehouse/distribution complex in Ontario, California, one service
center/warehouse complex consisting of three buildings in San Antonio, Texas, an
office building in Wailuku, Maui, and the fee interest in a parcel in Maui were
included in discontinued operations.
The leasing revenue and operating profit noted above includes the results for
properties that were sold through September 30, 2006 and the operating results
of a commercial parcel on the island of Hawaii that the Company intends to sell
within the next 12 months. The leasing revenue and operating profit for the
three and nine months ended September 30, 2005 have been restated to reflect
property that was classified as discontinued operations subsequent to September
30, 2005.
FOOD PRODUCTS INDUSTRY
Food Products - Third quarter of 2006 compared with 2005
- -------------------------------------------------------------------------------------
Quarter Ended September 30,
- -------------------------------------------------------------------------------------
(dollars in millions) 2006 2005 Change
- -------------------------------------------------------------------------------------
Revenue $ 41.8 $ 34.6 21%
Operating profit (loss) $ 0.6 $ (0.1) NM
- -------------------------------------------------------------------------------------
Tons sugar produced 68,500 62,500 10%
- -------------------------------------------------------------------------------------
Food products revenue was $41.8 million, or 21 percent higher than the third
quarter of 2005 due mainly to $3.1 million higher bulk raw sugar sales stemming
from higher sugar prices and increased sales volume, $1.8 million from higher
power sales prices and volume, and $1.6 million higher equipment rentals, repair
services, trucking, and molasses sales.
Operating profit increased $0.7 million from the third quarter of 2005 due
principally to $1.8 million in higher power sales, the non-recurrence of a $1.0
million coffee crop writedown in 2005, and $0.8 million in higher molasses
sales, equipment rentals, and trucking services. These increases were partially
offset by $2.9 million from lower bulk raw sugar margins.
Due to lower crop yields in the quarter, as more fully discussed in the
year-to-date results, the Company reduced its full-year production estimate by
7,500 tons, which impacted cost of sales by approximately $2 million for the
quarter.
Food Products - First nine months of 2006 compared with 2005
- -------------------------------------------------------------------------------------
Nine Months Ended September 30,
- -------------------------------------------------------------------------------------
(dollars in millions) 2006 2005 Change
- -------------------------------------------------------------------------------------
Revenue $ 95.1 $ 89.2 7%
Operating profit $ 10.2 $ 9.2 11%
- -------------------------------------------------------------------------------------
Tons sugar produced 130,700 140,300 -7%
- -------------------------------------------------------------------------------------
Food products revenue was $95.1 million, or 7 percent, higher than the first
nine months of 2005. Excluding the $5.5 million disaster relief payment received
in 2005, revenue increased 14 percent due mainly to $4.7 million from higher
power sales, $3.3 million in higher repair services and trucking revenue, $1.9
million in higher specialty sugar and molasses sales, and $1.9 million in higher
equipment rentals and soil sales. Lower revenue of $1.1 million from lower bulk
raw sugar sales volumes partially offset the previously noted increases.
Operating profit was 11 percent higher than the first nine months of 2005.
However, excluding the $5.5 million disaster relief payment received in 2005,
operating profit improved more than 175 percent, primarily due to $4.7 million
in higher power sales, $2.6 million in higher equipment rentals, soil sales,
repair services and trucking, the non-recurrence of a $1.0 million coffee crop
writedown in 2005, and $0.8 million in higher molasses sales. These increases
were partially offset by $2.3 million from lower sugar margins.
Sugar production was 7 percent lower in 2006 than in 2005 because of low yields.
The year-to-date crop yield of 11.1 tons sugar per acre (TSA) was 0.7 TSA below
last year, primarily because of dry-weather conditions during growing months,
less-than-optimal fertilizer applications last year, and a lower crop age. With
70% of the 2006 crop harvested, the Company does not anticipate a significant
improvement in the 2006 crop yield. As a result, the forecasted sugar production
was reduced by 7,500 tons. Any future impacts to the harvesting schedule, or
impacts to yields, could affect total year production.
As reported by national media early in the year, the island of Kauai experienced
the heaviest rainfall in its recent history during March. Preliminary
inspections of Company-owned reservoirs by both the Company and the State of
Hawaii found the facilities sound, although certain repair work will be
required. Costs required in 2006 and 2007 to repair and maintain the Kauai
reservoirs are projected to range from $3 to $4 million. The Company is
currently evaluating the Maui reservoirs for any necessary follow-up action.
Accordingly, the Company believes that food products operating results in the
fourth quarter of 2006 and throughout 2007 will be negatively impacted by
anticipated expenditures for work on reservoirs located on Kauai and Maui.
2006 OUTLOOK
While the Hawaii economy remains healthy, the growth rate has moderated, which
has affected, and may continue to impact, shipping volumes. Similarly, Hawaii's
real estate market indicators point to a more challenging residential market.
However, unemployment is low and housing prices remain at or near historically
high levels. The Company, therefore, anticipates the impact of changing economic
factors on its businesses to be moderate for the balance of 2006.
On a consolidated basis, the Company remains on track to complete 2006 with good
financial performance and expects that full year 2006 operating profit will be
greater than originally anticipated.
FINANCIAL CONDITION, LIQUIDITY, FINANCING ARRANGEMENTS AND CASH FLOWS
Liquid Resources: The Company's principal liquid resources, comprising cash and
cash equivalents, receivables, sugar and coffee inventories and unused borrowing
capacity on revolving credit and private placement shelf facilities, less
accrued deposits to the CCF, totaled approximately $597 million at September 30,
2006, a decrease of $22 million from December 31, 2005. The decrease was due
primarily to higher borrowings on revolving credit facilities and $13 million in
lower cash balances, partially offset by $14 million in higher receivables
balances and $4 million in higher sugar and coffee inventories.
Balance Sheet: Working capital was $31 million at September 30, 2006, a decrease
of $18 million from the balance carried at the end of 2005. The decrease in
working capital was due primarily to higher balances on short-term borrowings
and trade payables and lower cash balances. These factors were partially offset
by higher inventories, higher income tax receivable balances, and higher
accounts receivable balances.
Cash and cash equivalents totaled $44 million at the end of the third quarter
compared with $57 million at the beginning of the year. The lower balance is due
principally to share repurchases, dividends, income tax payments, and capital
expenditures, partially offset by increased borrowings and cash generated from
operations.
Long-term Debt, including current portion, and short-term facilities, totaled
$434 million at September 30, 2006 compared with a balance of $327 million at
December 31, 2005. This $107 million increase was due mainly to capital
expenditure financing and share repurchases.
The Company's net deferred tax obligation was $427 million at September 30, 2006
compared with $399 million at December 31, 2005. This $28 million increase was
due principally to CCF deposits, and to a lesser extent, tax-deferred real
estate sales.
Cash Flows and Capital Expenditures: Cash Flows from Operating Activities
totaled $85 million for the first nine months of 2006, compared with $232
million for the first nine months of 2005. This decrease was principally the
result of higher year-to-date income tax payments, higher 2005 proceeds from the
sale of units in the Company's Lanikea residential high-rise project in Waikiki
and lower 2006 Matson earnings, partially offset by proceeds received from the
Company's Hokua joint venture in 2006.
Cash Flows from Investing Activities related to capital expenditures for the
first nine months of 2006 totaled $255 million, compared with $209 million for
the first nine months of 2005. The expenditures for the first nine months of
2006 relate primarily to the purchase of the MV Maunalei for $147 million,
equipment purchases for the ocean transportation segment, $105 million in
expenditures related to property development activities, and $9 million related
to specialty sugar expansion activities and routine asset replacements for
agricultural operations. The amounts reported in Capital Expenditures on the
Statement of Cash Flows exclude $33 million of tax-deferred purchases since the
Company did not actually take control of the cash during the exchange period.
Capital expenditures for 2005 included $144 million for the purchase of the MV
Manulani, $18 million for other transportation-related assets, $37 million for
real estate related acquisitions, development and property improvements, and $8
million of routine asset replacements for agricultural operations.
Tax-Deferred Real Estate Exchanges: Sales - During the first nine months of
2006, sales and condemnation proceeds which qualified for potential tax-deferral
treatment under the Internal Revenue Code Sections 1031 and 1033 totaled
approximately $60 million. The proceeds consisted primarily of the sales of two
retail centers in Phoenix, Arizona, a Maui office building, several commercial
parcels on Maui and Oahu, and two parcels on Kauai.
Purchases - During the first nine months of 2006, the Company acquired, using
the proceeds from tax-deferred sales (including reverse 1031 transactions),
property totaling approximately $66 million. The properties acquired with
tax-deferred proceeds principally included a two-building office property in
Salt Lake City, Utah, a two-building office complex in Plano, Texas, and a
two-story office building in Sacramento, California.
The proceeds from 1031 tax-deferred sales are held in escrow pending future use
to purchase new real estate assets. The proceeds from 1033 condemnations are
held by the Company until the funds are redeployed. As of September 30, 2006,
$14 million of proceeds from tax-deferred sales had not been reinvested.
The funds related to 1031 transactions are not included in the Statement of Cash
Flows but are included as non-cash information below the Statement. For "reverse
1031" transactions, the Company purchases a property in anticipation of
receiving funds in a future property sale. Funds used for reverse 1031 purchases
are included as capital expenditures on the Statement of Cash Flows and the
related sales of property, for which the proceeds are linked, are included as
property sales in the Statement.
Commitments, Contingencies and Environmental Matters: A description of
commitments and contingencies at September 30, 2006 is described in Note 4 to
the financial statements of Item 1.
OTHER MATTERS
Investments: The Company's joint ventures are described in Item 8 of the
Company's most recently filed Form 10-K.
Dividends: The Company's third quarter dividend to shareholders was paid on
September 7, 2006 to shareholders of record on August 3, 2006. On October 26,
2006, the Company's Board of Directors declared a fourth quarter dividend of 25
cents per share payable on December 7, 2006 to shareholders of record as of
November 9, 2006.
Significant Accounting Policies: The Company's significant accounting policies
are described in Note 1 of the consolidated financial statements included in
Item 8 of the Company's most recently filed Form 10-K.
Critical Accounting Estimates: The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America, upon which the Management's Discussion and Analysis is based, requires
that Management exercise judgment when making estimates and assumptions about
future events that affect the amounts reported in the financial statements and
accompanying notes. Future events and their effects cannot be determined with
absolute certainty and actual results will, inevitably, differ from those
estimates. These differences could be material. The most significant accounting
estimates inherent in the preparation of A&B's financial statements were
described in Item 7 of the Company's 2005 Form 10-K.
New and Proposed Accounting Standards: New and proposed accounting standards are
discussed in Note 2 of the Notes to the Condensed Consolidated Financial
Statements contained herein.
Information about the impacts of other newly issued accounting standards are
discussed in the Item 8 of the Company's most recently filed Form 10-K.
Economic Conditions: Two primary sources of periodic economic forecasts for the
state are the University of Hawaii Economic Research Organization (UHERO) and
the state's Department of Business, Economic Development & Tourism (DBEDT). For
more information please go to the websites of these organizations at
www.uhero.hawaii.edu and www.hawaii.gov/dbedt/info/economic, respectively.
Management Change: The following management change occurred subsequent to the
third quarter.
Kevin L. Halloran was named director of corporate finance and investor
relations of A&B, effective October 11, 2006.
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, 2005. There
has been no material change in the quantitative and qualitative disclosure about
market risk since December 31, 2005.
ITEM 4. CONTROLS AND PROCEDURES
- --------------------------------
(a) Disclosure Controls and Procedures. The Company's management,
with the participation of the Company's Chief Executive Officer and
Chief Financial Officer, has evaluated the effectiveness of the
Company's disclosure controls and procedures (as such term is
defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) as of the end
of the period covered by this report. Based on such evaluation, the
Company's Chief Executive Officer and Chief Financial Officer have
concluded that, as of the end of such period, the Company's
disclosure controls and procedures are effective in recording,
processing, summarizing and reporting, on a timely basis,
information required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act.
(b) Internal Control Over Financial Reporting. There have not been any
changes in the Company's internal control over financial reporting
(as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the fiscal quarter to which this report relates
that have materially affected, or are reasonably likely to materially
affect, the Company's internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
- --------------------------------------------------------------------
Issuer Purchases of Equity Securities
- -------------------------------------------------------------------------------------------------------------
Total Number of Maximum Number
Shares Purchased as of Shares that
Part of Publicly May Yet Be Purchased
Total Number of Average Price Announced Plans Under the Plans
Period Shares Purchased Paid per Share or Programs or Programs
- -------------------------------------------------------------------------------------------------------------
Jul 1 - 31, 2006 362,534 (1)(2) $46.83 (1)(2) 1,545,342 454,658
- -------------------------------------------------------------------------------------------------------------
Aug 1 - 31, 2006 -- -- -- --
- -------------------------------------------------------------------------------------------------------------
Sep 1 - 30, 2006 -- -- -- --
- -------------------------------------------------------------------------------------------------------------
(1) On June 27, 2006, the Company entered into an accelerated share
repurchase agreement ("ASR") with Goldman, Sachs & Co. ("Goldman") to
repurchase shares of A&B's common stock for an aggregate purchase price
of approximately $63 million. The maximum average price paid per share
that will be paid under the ASR is $46.83, which is based on 984,000
and 361,342 shares that were delivered on June 30, 2006 and July 12,
2006, respectively. The average price per share paid to date under the
ASR is not expected to be representative of the final average
repurchase price per share because A&B expects to receive additional
shares for no additional consideration. Under the terms of the ASR, the
Company may receive up to an additional 184,099 shares upon termination
of the agreement in a third installment based on the volume weighted
average price of A&B's common stock from July 8, 2006 through to the
end of the termination period, which may be determined by Goldman in
its discretion from September 8, 2006 through November 10, 2006. A&B
has no further obligation to provide additional cash or to issue
additional shares under the agreement, and consequently, any additional
shares received would reduce the final average price paid per share.
The final average repurchase price per share under the ASR is expected
to range from $41.19 to $46.83. Through October 30, 2006, the Company's
total share repurchases totaled 1,545,342 shares for $71.5 million at
an average price of $46.25 per share.
(2) Includes 1,192 shares of restricted common stock repurchased for
$56,420 pursuant to the Company's repurchase right provided under the
Alexander & Baldwin, Inc. Restricted Stock Bonus Plan.
ITEM 6. EXHIBITS
- -----------------
3.b. Revised Bylaws of Alexander & Baldwin, Inc. (as amended through
October 26, 2006).
10.b.1.(vi) Amendment No. 5 to the Alexander & Baldwin, Inc. 1989 Stock
Option/Stock Incentive Plan.
10.b.1.(xi) Amendment No. 4 to the Alexander & Baldwin, Inc. 1989
Non-Employee Director Stock Option Plan.
10.b.1.(xvii) Amendment No. 5 to the Alexander & Baldwin, Inc. 1998
Stock Option/Stock Incentive Plan.
10.b.1.(xxv) Amendment No. 4 to the Alexander & Baldwin, Inc. 1998
Non-Employee Director Stock Option Plan.
31.1 Certification of Chief Executive Officer, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32 Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALEXANDER & BALDWIN, INC.
-------------------------------------
(Registrant)
Date: October 27, 2006 /s/ Christopher J. Benjamin
--------------------------------------
Christopher J. Benjamin
Senior Vice President,
Chief Financial Officer and
Treasurer
Date: October 27, 2006 /s/ Paul K. Ito
---------------------------------------
Paul K. Ito
Controller
EXHIBIT INDEX
3.b. Revised Bylaws of Alexander & Baldwin, Inc. (as amended through
October 26, 2006).
10.b.1.(vi) Amendment No. 5 to the Alexander & Baldwin, Inc. 1989 Stock
Option/Stock Incentive Plan.
10.b.1.(xi) Amendment No. 4 to the Alexander & Baldwin, Inc. 1989
Non-Employee Director Stock Option Plan.
10.b.1.(xvii) Amendment No. 5 to the Alexander & Baldwin, Inc. 1998
Stock Option/Stock Incentive Plan.
10.b.1.(xxv) Amendment No. 4 to the Alexander & Baldwin, Inc. 1998
Non-Employee Director Stock Option Plan.
31.1 Certification of Chief Executive Officer, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32 Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
REVISED BYLAWS OF
ALEXANDER & BALDWIN, INC.
(As Amended Effective February 22, 2001)
ARTICLE I
PRINCIPAL OFFICE, SEAL
SECTION 1. Principal Office. The principal office of the Corporation shall be in
----------------
Honolulu, Hawaii; there may be such subordinate or branch offices in such place
or places within Hawaii or elsewhere as may be considered necessary or requisite
by the Board of Directors to transact the business of the Corporation.
SECTION 2. Seal. The Corporation shall have a corporate seal (and one or more
----
duplicates thereof) of such form and device as the Board of Directors shall
determine.
ARTICLE II
STOCKHOLDERS
SECTION 1. Annual Meetings. The annual meeting of the stockholders of the
---------------
Corporation shall be held on such date and at such time and place as shall be
designated from time to time by the Board of Directors or the President. The
annual meeting shall be a general meeting and at such meeting any business
within the powers of the Corporation may be transacted without special notice of
such business, except as may be required by law, by the Articles of Association,
or by these Bylaws.
SECTION 2. Special Meetings. Special meetings of the stockholders may be held at
----------------
any time. Such meetings shall be held upon the call of the Chairman of the
Board, if appointed, the President or a majority of the directors then in office
and shall not be held upon the call of any other person or persons except as
provided by Section 416-73, Hawaii Revised Statutes.
SECTION 3. Notices of Meetings. Notices of every meeting of stockholders,
-------------------
whether annual or special, shall state the place, day, and hour of the meeting,
whether it is annual or special, and in the case of any special meeting, shall
state briefly the business proposed to be transacted thereat. Such notice shall
be given by mailing a written or printed copy thereof, postage prepaid, not less
than ten nor more than seventy days before the date assigned for the meeting, to
each stockholder entitled to vote at such meeting at his address as it appears
on the transfer books of the Corporation. Upon notice being given in accordance
with the provisions hereof, the failure of any stockholder to receive actual
notice of any meeting shall not, in any way, invalidate the meeting or the
proceedings thereat.
SECTION 4. Quorum. At all meetings of stockholders the presence in person or by
------
proxy of stockholders owning a majority of all of the shares of stock issued and
outstanding and entitled to vote at said meeting shall constitute a quorum, and
the action of the holders of a majority of the shares of stock present or
represented at any meeting at which a quorum is present, shall be valid and
binding upon the Corporation and its stockholders, except as otherwise provided
by law, by the Articles of Association, or by these Bylaws.
SECTION 5. Voting, Proxies. At any meeting of the stockholders, each
---------------
stockholder, except where otherwise provided by the clauses and terms applicable
to the stock held by such stockholder, shall be entitled to vote in person or by
proxy appointed by an instrument in writing subscribed by such stockholder or
his duly authorized attorney and filed with the Secretary, and shall have one
vote for each share of voting stock registered in his name at the close of
business on such record date as may be fixed by the Board of Directors. In the
case of an adjourned meeting, unless otherwise provided by the Board of
Directors, the record date for the purpose of voting at such adjourned meeting
shall be the same as the original record date fixed for the original meeting.
When voting stock is transferred into the name of a pledgee under a pledge
agreement, the pledgor shall have the right to vote such stock unless prior to
the meeting the pledgee or his authorized representative shall file with the
Secretary written authorization from the pledgor authorizing such pledgee to
vote such stock. An executor, administrator, guardian, or trustee may vote stock
of the Corporation held by him in such capacity at all meetings, in person or by
proxy, whether or not such stock shall have been transferred into his name on
the books of the Corporation, but if such stock shall have not been so
transferred, he shall, if requested as a prerequisite to so voting, file with
the Secretary a certified copy of his letters as such executor, administrator or
guardian or evidence of his appointment or authority as such trustee. If there
be two or more executors, administrators, guardians, or trustees, any one of
them may vote the stock in person or by proxy. The instrument appointing a proxy
shall be signed by the appointer, or if such appointer is a corporation, by the
proper officers thereof, provided that minor variations between such signature
and the name of the appointer as it appears upon the stock books of the
Corporation, or in the case of a corporation, failure to affix the corporate
seal, shall not invalidate the proxy and, provided further, that if a proxy is
appointed by telecopy, telex, datagram, cable or radiogram, the typewritten
signature of the appointer shall be sufficient. Unless expressly limited by its
terms, every instrument appointing a proxy shall continue in full force and
effect until a written revocation thereof shall be filed with the Secretary. It
is expressly provided that the provisions of Section 416-77 of the Corporation
Law of Hawaii, Title 23 of Hawaii Revised Statutes, shall not be applicable to
any annual or special meeting of stockholders of the Corporation.
SECTION 6. Election of Directors. Unless otherwise specifically required by law
---------------------
(upon the demand of one or more shareholders or otherwise) or by the
Corporation's Articles of Association, there shall be no cumulative voting in
the election of directors.
SECTION 7. Action at Meetings of Stockholders. No business may be transacted at
----------------------------------
an annual meeting of stockholders, other than business that is either (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (b) otherwise properly brought before
the annual meeting by or at the direction of the Board of Directors or (c)
otherwise properly brought before the annual meeting by any stockholder of the
Corporation (i) who is a stockholder of record on the date of the giving of the
notice provided for in this Section 7 and on the record date for the
determination of stockholders entitled to vote at such annual meeting and (ii)
who complies with the notice procedures set forth in this Section 7.
In addition to any other applicable requirements, for business properly to be
brought before an annual meeting by a stockholder, such stockholder must have
given timely notice thereof in proper written form to the Chairman of the Board,
if any, the President, or the Secretary of the Corporation.
To be timely, a stockholder's notice must be delivered to or mailed and received
at the principal executive offices of the Corporation not less than ninety (90)
days nor more than one hundred twenty (120) days prior to the anniversary date
of the immediately preceding annual meeting of stockholders; provided, however,
-------- -------
that in the event that the annual meeting is called for a date that is not
within thirty (30) days before or after such anniversary date, notice by the
stockholder in order to be timely must be so received not later than the close
of business on the tenth (10th) day following the day on which such notice of
the date of the annual meeting was mailed or such public disclosure of the date
of the annual meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice must set forth as to each
matter such stockholder proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and record address of such stockholder, (iii) the class or series and number of
shares of capital stock of the Corporation which are owned beneficially or of
record by such stockholder, (iv) a description of all arrangements or
understandings between such stockholder and any other person or persons
(including their names) in connection with the proposal of such business by such
stockholder and any material interest of such stockholder in such business and
(v) a representation that such stockholder intends to appear in person or by
proxy at the annual meeting to bring such business before the meeting.
No business shall be conducted at the annual meeting of stockholders except
business brought before the annual meeting in accordance with the procedures set
forth in this Section 7, provided, however, that, once business has been brought
-------- -------
properly before the annual meeting in accordance with such procedures, nothing
in this Section 7 shall be deemed to preclude discussion by any stockholder of
any such business. If the Chairman of an annual meeting determines that business
was not brought properly before the annual meeting in accordance with the
foregoing procedures, the Chairman shall declare to the meeting that the
business was not brought properly before the meeting and such business shall not
be transacted.
The business transacted at any special meeting of stockholders called in the
manner set forth in Article II, Section 2 hereof shall be confined to the
business stated in the notice of meeting, as determined by the person or persons
calling such meeting.
SECTION 8. Adjournment. Any meeting of stockholders, whether annual or special,
-----------
and whether a quorum be present or not, may be adjourned from time to time by
the Chairman thereof, with the consent of the holders of a majority of all of
the shares of stock present or represented at such meeting, and entitled to vote
thereat, without notice other than the announcement at such meeting. At any such
adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the original meeting as
originally called and noticed.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. Number and Term of Office. The Board of Directors shall consist of
-------------------------
not less than five directors, the exact number of directors to be determined
from time to time by resolution adopted by the affirmative vote of a majority of
the directors then in office. The Directors, except as otherwise in these Bylaws
provided, shall hold office until the annual meeting held next after their
election and until their respective successors, if any, shall have been elected.
The number of directors constituting the Board may be increased by the Board of
Directors from time to time during the period between annual meetings.
No person shall be elected as a director at any annual meeting or special
meeting who has achieved the age of seventy-two years prior to such annual or
special meeting; provided, however, that this provision shall not be applicable
to any person who, prior to such annual or special meeting, has served as Chief
Executive Officer of the Corporation for a period of not less than five years.
Only persons who are nominated in accordance with the following procedures shall
be eligible for election as directors of the Corporation. Nominations of persons
for election to the Board of Directors may be made at any annual meeting of
stockholders, or at any special meeting of stockholders called in the manner set
forth in Article II, Section 2 hereof for the purpose of electing directors, (a)
by or on behalf of the Board of Directors or (b) by any stockholder of the
Corporation (i) who is a stockholder of record on the date of the giving of the
notice provided for in this Section 1 and on the record date for the
determination of stockholders entitled to vote at such meeting and (ii) who
complies with the notice procedures set forth in this Section 1.
In addition to any other applicable requirements, for a nomination to be made by
a stockholder, such stockholder must have given timely notice thereof in proper
written form to the Chairman of the Board, if any, the President, or the
Secretary of the Corporation.
To be timely, a stockholder's notice must be delivered to or mailed and received
at the principal executive offices of the Corporation (a) in the case of an
annual meeting, not less than sixty (60) days nor more than ninety (90) days
prior to the anniversary date of the immediately preceding annual meeting of
stockholders; provided, however, that in the event that the annual meeting is
-------- -------
called for a date that is not within thirty (30) days before or after such
anniversary date, notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth (10th) day following
the day on which such notice of the date of the annual meeting was mailed or
such public disclosure of the date of the annual meeting was made, whichever
first occurs; and (b) in the case of a special meeting of stockholders called in
the manner set forth in Article II, Section 2 hereof for the purpose of electing
directors, not later than the close of business on the tenth (10th) day
following the day on which notice of the date of the special meeting was mailed
or public disclosure of the date of the special meeting was made, whichever
first occurs.
To be in proper written form, a stockholder's notice must set forth (a) as to
each person whom the stockholder proposes to nominate for election as a director
(i) the name, age, business address and residence address of the person, (ii)
the principal occupation or employment of the person, (iii) the class or series
and number of shares of capital stock of the Corporation which are owned
beneficially or of record by the person and (iv) any other information relating
to the person that would be required to be disclosed in a proxy statement or
other filings required to be made in connection with solicitations of proxies
for election of directors pursuant to Section 14 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the rules and regulations
promulgated thereunder; and (b) as to the stockholder giving the notice (i) the
name and record address of such stockholder, (ii) the class or series and number
of shares of capital stock of the Corporation which are owned beneficially or of
record by such stockholder, (iii) a description of all arrangements or
understandings between such stockholder and each proposed nominee and any other
person or persons (including their names) pursuant to which the nomination(s)
are to be made by such stockholder, (iv) a representation that such stockholder
intends to appear in person or by proxy at the meeting to nominate the persons
named in its notice and (v) any other information relating to such stockholder
that would be required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder. Such notice must be accompanied by a written
consent of each proposed nominee to being named as a nominee and to serve as a
director if elected.
No person shall be eligible for election as a director of the Corporation unless
nominated in accordance with the procedures set forth in this Section 1. If the
Chairman of the meeting determines that a nomination was not made in accordance
with the foregoing procedures, the Chairman shall declare to the meeting that
the nomination was defective and such defective nomination shall be disregarded.
The directors may, at any time upon the affirmative vote of a majority of the
directors then in office, be divided into two or three classes, designated Class
I, Class II and, if any, Class III. The aggregate number of directors to be
divided into classes shall be fixed by the affirmative vote of a majority of the
directors then in office, but shall not be less than five directors, or such
higher or lower number as may be permitted by the Articles of Association. Each
class shall consist, as nearly as may be possible, of one-half or one-third, as
the case may be, of the total number of directors constituting the entire Board.
Each initial director in Class I shall hold office until the first annual
meeting of stockholders following the director's election; each initial director
in Class II shall hold office until the second annual meeting of stockholders
following the director's election; and each initial director in Class III, if
any, shall hold office until the third annual meeting of stockholders following
the director's election. At each succeeding annual meeting of stockholders,
successors to the class of directors whose term expires at that annual meeting
shall be elected for a two- or three-year term, as the case may be. If the
number of directors is changed, any increase or decrease shall be apportioned
among the classes so as to maintain the number of directors in each class as
nearly equal as possible, and any additional director of any class elected to
fill a vacancy resulting from an increase in such class shall hold office for a
term that shall coincide with the remaining term of that class, but in no case
will a decrease in the number of directors shorten the term of any incumbent
director. A director shall hold office until the annual meeting for the year in
which the director's term expires and until the director's successor shall be
elected, subject, however, to prior death, resignation, retirement,
disqualification or removal from office. Any vacancy on the Board of Directors
shall be filled by resolution adopted by a majority of the directors then in
office. Any director elected to fill a vacancy not resulting from an increase in
the number of directors shall have the same remaining term as that of the
director's predecessor.
Notwithstanding the foregoing, whenever the holders of any one or more classes
or series of preferred stock issued by the Corporation shall have the right,
voting separately by class or series, to elect directors at an annual or special
meeting of stockholders, the election, term of office, filling of vacancies and
other features of such directorship shall be governed by the terms of the
Articles of Association applicable thereto, and such directors so elected shall
not be divided into classes pursuant to this Section unless expressly provided
by such terms.
SECTION 2. Removal of Directors. At any annual meeting or any special meeting of
--------------------
stockholders duly called in accordance with these Bylaws for the purpose, any
director may be removed from office only for cause by the affirmative vote of
the holders of a majority of all of the shares of capital stock of the
Corporation outstanding and entitled to vote, and another person may be elected
in his place to serve for the remainder of his term. In case any vacancy so
created shall not be filled by the stockholders at such meeting, such vacancy
may be filled by the Board of Directors.
In addition, any director may be removed for cause at any time by the
affirmative vote of a majority of the other directors then in office. Any
vacancy in the Board of Directors created pursuant to the preceding sentence may
be filled by the remaining directors as provided in Section 6 of this Article
III.
SECTION 3. Registration, Meetings, Notice.
------------------------------
(a) Each director shall, upon election to such office, register with the
Corporation his mailing address.
(b) The Board of Directors shall, without any notice being given, hold a
meeting for the purpose of organization as soon as may be after each
annual meeting of stockholders.
(c) The Board of Directors may, in its discretion, schedule regular
meetings of the Board to be held at a stated time and place and no
notice, written or otherwise, of such meetings shall be required. The
Board of Directors may, in its discretion, alter the time and place for
such regular meetings from time to time.
(d) Special meetings of the Board of Directors may be called by the
Chairman of the Board of Directors, or in the absence of the Chairman,
or if no Chairman shall have been appointed, at the call of the
President, and in any case, at the call of any two Directors.
(e) The Secretary shall give notice of every special meeting of the Board
of Directors orally or by mailing or delivering a copy of the same to
each Director at his registered mailing address, not less than
twenty-four hours prior to any such meeting. Such notice shall
constitute full legal notice of any special meeting, whether actually
received or not. No special meeting and no business transacted at any
such meeting shall be invalidated or in any way affected by the failure
of the Secretary to give notice of such meeting to any director, or of
any director to receive such notice, if a quorum of the directors shall
be present at such meeting.
SECTION 4. Quorum, Voting, Adjournment. A majority of the Board of Directors in
---------------------------
office from time to time shall constitute a quorum for the transaction of any
business. The act of a majority of the directors present at a meeting at which
a quorum is present shall be the act of the Board of Directors, except as
otherwise provided in these Bylaws. In the absence of a quorum, the Chairman or
a majority of the Directors present may adjourn the meeting from time to time
without further notice until a quorum shall be had.
SECTION 5. Action Without a Meeting. Any action required or permitted to be
------------------------
taken by the Board of Directors or any committee thereof may be taken without a
meeting if all of the members of the Board of Directors or all of the members
of the committee, as the case may be, shall consent in writing to the action
taken or to be taken at any time before or after the intended effective date of
such action. Such consent shall be filed with the minutes of the meetings of the
Board of Directors or committee, as the case may be, and shall have the same
effect as a unanimous vote.
SECTION 6. Permanent Vacancies. If any permanent vacancy shall occur in the
-------------------
Board of Directors through death, resignation, removal or other cause, the
remaining directors, by the affirmative vote of a majority of directors then in
office, may elect a successor director to hold office for the unexpired portion
of the term of the director whose place shall be vacant.
SECTION 7. Temporary Vacancies, Substitute Directors. If any temporary vacancy
-----------------------------------------
shall occur in the Board of Directors through the absence, sickness or
disability of any director, the remaining directors, whether constituting a
majority or a minority of the whole Board, may by the affirmative vote of a
majority of such remaining directors appoint some person as a substitute
director, who shall be a director during such absence, sickness or disability
and until such director shall return to duty or the office of such director
shall become permanently vacant. The determination of the Board of Directors,
as shown on the minutes, of the fact of such absence, sickness or disability
shall be conclusive as to all persons and to the Corporation.
SECTION 8. Expenses and Fees. By resolution of the Board of Directors, such
-----------------
compensation, fees and expenses as the Board may from time to time determine
shall be allowed and paid to directors for services on the Board of any
Committee created by the Board, provided that nothing herein contained shall be
construed to preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
SECTION 9. Committees. The Board of Directors may create such committees
----------
(including an executive committee or committees) consisting of such members of
the Board of Directors as the Board of Directors may designate from time to
time. The authorities and powers of each committee shall be as prescribed from
time to time by the Board of Directors. Each committee may make its own rules
of procedure unless otherwise prescribed by the Board of Directors.
SECTION 10. Election of Persons to Fill Directorships Established During the
----------------------------------------------------------------
Period Between Annual Meetings. The election of persons to fill directorships
- ------------------------------
established by the Board of Directors by an increase in the size of the Board
shall be either by (a) the affirmative vote of a majority of the directors then
in office or (b) a vote of stockholders at a special meeting of stockholders
called for such purpose. Persons elected to newly-established directorships
shall hold office until the annual meeting of stockholders held next after their
election and until their respective successors, if any, shall have been elected.
SECTION 11. Limitations on Number of Directors. The only limitation on the power
----------------------------------
and authority of the Board of Directors to determine the number of directors is
that there shall be not less than five directors. There shall be no other
limitations, whether numerical, based on percentage increase or decrease in the
number of directors, or otherwise, on the power and authority of the Board of
Directors to determine the number of directors.
ARTICLE IV
OFFICERS, MANAGEMENT AND AUDITOR
SECTION 1. Appointment, Term, Removal. The officers of the Corporation shall be
--------------------------
the President, one or more vice presidents, the Secretary, the Treasurer, the
Controller and in addition thereto, in the discretion of the Board of Directors,
a Chairman of the Board, one or more assistant secretaries, one or more
assistant treasurers, and such other officers, with such duties, as the Board of
Directors shall from time to time determine. All officers shall be appointed
annually by the Board of Directors and, subject to removal as hereinafter
provided, shall serve until their respective successors shall have been
appointed. Any officer shall be subject to removal at any time, with or without
cause, by the affirmative vote of the majority of the whole Board. One person
may hold more than one office. The Board of Directors may, in its discretion,
appoint acting or temporary officers, and may appoint officers to fill vacancies
occurring for any reason whatsoever, and may, in its discretion, from time to
time limit or enlarge the duties and powers of any officer appointed by it.
SECTION 2. Chairman of the Board. The Chairman of the Board, if appointed, shall
---------------------
preside at all meetings of the stockholders and the Board of Directors unless
otherwise prescribed by the Board. He shall also exercise such powers and
perform such other duties as may be assigned to him by the Articles of
Association or these Bylaws or by resolution of the Board of Directors.
SECTION 3. The President. The President (in the absence of the Chairman of the
-------------
Board, if appointed) shall preside at all of the meetings of the stockholders
and Board of Directors. He shall be responsible for the general management and
supervision of the operations and affairs of the corporation unless otherwise
prescribed by the Board of Directors. He shall also exercise such powers and
perform such other duties as may be assigned to him by the Articles of
Association or these Bylaws or by resolution by the Board of Directors.
SECTION 4. The Vice President or Vice Presidents. The Vice President or Vice
-------------------------------------
Presidents shall, in such order as the Board of Directors shall determine,
perform all the duties and exercise all of the powers of the President provided
by these Bylaws or otherwise, during the absence or disability of the President
or whenever the office of President shall be vacant, and shall perform all other
duties assigned to him or them by the Board of Directors.
SECTION 5. The Secretary. The Secretary shall attend all meetings of the
-------------
stockholders, the Board of Directors, and, if created, the Executive Committee,
and shall have responsibility for preparation and custody of the minutes of such
meetings and for authenticating records of the Corporation. He shall give
notice, in conformity with these Bylaws, of meetings of stockholders and, where
required, of the Board of Directors. In the absence of the Chairman of the Board
of Directors and of the President and the Vice President or vice presidents, if
more than one, he shall have power to call such meetings and shall preside
thereat until a president pro tempore shall be chosen.
The Secretary shall keep, or cause to be kept, at the principal office of the
Corporation or at the office of the Corporation's stock transfer agent, a share
register, or a duplicate share register, showing the names of the stockholders
and their addresses, the number and classes of shares held by each, the number
and date of cancellation of every certificate surrendered for cancellation. The
Secretary shall perform all other duties incident to his office, or which may be
assigned to him by the Board of Directors or the President or the Bylaws.
SECTION 6. The Treasurer. The Treasurer shall have custody of all the funds,
-------------
notes, bonds and other investments of the Corporation. He shall deposit or cause
to be deposited in the name of the Corporation all monies and other valuable
effects in such banks, trust companies, or other depositories as shall from time
to time be designated by the Board of Directors. He shall make such
disbursements as the regular course of the business of the Corporation may
require or the Board of Directors may order. He shall render to the President
and Directors, whenever they request it, an account of all of the transactions
as Treasurer, and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or the President or the Bylaws.
SECTION 7. Assistant Secretary and Assistant Treasurer. The Assistant Secretary
-------------------------------------------
or assistant secretaries and the Assistant Treasurer or assistant treasurers, if
appointed, shall, in such order as the Board of Directors may determine, perform
all of the duties and exercise all of the powers of the Secretary and Treasurer,
respectively, during the absence or disability of, and in the event of a vacancy
in the office of, the Secretary or Treasurer, respectively, and shall perform
all of the duties assigned to him or them by the President, the Secretary in the
case of assistant secretaries, the Treasurer in the case of the assistant
treasurers, or the Board of Directors.
SECTION 8. Absence of Officers. In the absence or disability of the President
-------------------
and the Chairman of the Board, if appointed, and the Vice President or vice
presidents, if more than one, the duties of the President (other than the
calling of meetings of the stockholders and the Board of Directors) shall be
performed by such persons as may be designated for such purpose by the Board of
Directors. In the absence or disability of the Secretary and of the Assistant
Secretary or assistant secretaries, if more than one, or of the Treasurer and
the Assistant Treasurer or assistant treasurers, if more than one, the duties of
the Secretary or of the Treasurer, as the case may be, shall be performed by
such person or persons as may be designated for such purpose by the Board of
Directors.
SECTION 9. Auditor. The Auditor shall audit the books and accounts of the
-------
Corporation at such time or times as may be required by the Board of Directors,
but in any event not less often than annually, and shall certify his findings
and report thereon in writing to the stockholders. The Auditor shall make such
other audits, examinations and reports as the Board of Directors shall determine
from time to time.
SECTION 10. Controller. The Controller shall have custody of and supervise and
----------
control the keeping of the accounts and books of this Corporation, and shall
develop records and procedures for control of costs; maintain proper tax records
and supervise the preparation of tax returns, develop procedures for internal
auditing and maintain proper relationships with the external auditors designated
by the stockholders; administer programs relating to capital expenditure and
operating budgets, prepare the financial statements of the Company, and perform
such other duties as the President may from time to time determine.
ARTICLE V
EXECUTION OF INSTRUMENTS
SECTION 1. Proper Officers. Except as hereinafter provided, or as required by
---------------
law, all checks, drafts, notes, bonds, acceptances, deeds, leases, contracts,
bills of exchange, orders for the payment of money, licenses, endorsements,
stock powers, powers of attorney, proxies, waivers, consents, returns, reports,
applications, notices, mortgages, and other instruments or writings of any
nature which require execution on behalf of the Corporation, shall be signed or
endorsed by such person or persons and in such manner as the Board of Directors
may determine from time to time by resolution.
SECTION 2. Facsimile Signatures. The Board of Directors may, from time to time,
--------------------
by resolution provide for the execution of any corporate instrument or document,
including, but not limited to, checks, warrants, drafts, and other orders for
the payment of money, by a mechanical device or machine or by the use of
facsimile signatures under such terms and conditions as shall be set forth in
such resolution.
ARTICLE VI
VOTING OF STOCK BY THE CORPORATION
In all cases where the Corporation owns, holds, or represents under power of
attorney or by proxy or in any other representative capacity shares of capital
stock of any corporation or shares or interests in business trusts,
co-partnerships, or other associations, such shares or interest shall be
represented or voted in person or by proxy by the Chairman of the Board (if also
Chief Executive Officer) or in the absence of the Chairman of the Board (or if
such person is not also Chief Executive Officer) by the President, or in his
absence by the Vice President, or if there be more than one vice president
present, then by such vice president as the Board of Directors shall have
designated as Executive Vice President, or failing any such designation, by any
vice president, or in the absence of any vice president, by the Treasurer, or in
his absence, by the Secretary; provided, however, that any person specifically
appointed by the Board of Directors for the purpose shall have the right and
authority to represent and vote such shares or interests with precedence over
all of the above-named.
ARTICLE VII
CAPITAL STOCK
SECTION 1. Certificates of Stock. The certificates of stock of each class shall
---------------------
be in such form and of such device as the Board of Directors may, from time to
time, determine. They shall be signed by the Chairman of the Board, if
appointed, or the President or a vice president and by the Treasurer or the
Secretary or an assistant treasurer or assistant secretary and shall bear the
corporate seal, provided, however, that the Board of Directors in its discretion
may provide that any certificate which shall be signed by a transfer agent or by
a registrar may be sealed with only the facsimile seal of the Corporation and
may be signed with only the facsimile signatures of the officers above
designated. In case any officer who has signed or whose facsimile signature has
been placed upon any certificate shall have ceased to be such officer before
such certificate is issued, such certificate may, nevertheless, be issued with
the same effect as if such officer had not ceased to be such at the date of its
issue. Certificates shall not be issued for nor shall there be registered any
transfer of any fraction of a share. In the event that fractional parts of or
interests in any share shall result in any manner from any action by the
stockholders or directors of the Corporation, the Treasurer may sell the
aggregate of such fractional interests under such reasonable terms and
conditions as the Treasurer shall determine subject, however, to the control of
the Board of Directors, and distribute the proceeds thereof to the person or
persons entitled thereto.
SECTION 2. Holder of Record. The Corporation shall be entitled to treat the
----------------
person whose name appears on the stock books of the Corporation as the owner of
any share, as the absolute owner thereof for all purposes, and shall not be
under any obligation to recognize any trust or equity or equitable claim to or
interest in such share, whether or not the Corporation shall have actual or
other notice thereof.
SECTION 3. Transfer of Stock. Transfer of stock may be made in any manner
-----------------
permitted by law, but no transfer shall be valid (except between the parties
thereto) until the transfer shall have been duly recorded in the stock books of
the Corporation and a new certificate issued. No transfer shall be entered in
the stock books of the Corporation, nor shall any new certificate be issued
until the old certificate, properly endorsed, shall be surrendered and canceled.
SECTION 4. Closing of Transfer Books. The Board of Directors shall have power
-------------------------
for any corporate purpose from time to time to close the stock transfer books of
the Corporation for a period not exceeding thirty consecutive business days,
provided, however, that in lieu of closing the stock transfer books as
aforesaid, the Board of Directors may fix a record date for the payment of any
dividend or for the allotment of rights or for the effective date of any change,
conversion or exchange of capital stock or in connection with obtaining the
consent of stockholders in any matter requiring their consent or for the
determination of the stockholders entitled to notice of or to vote at any
meeting of stockholders, and in any such case, only such stockholders as shall
be stockholders of record on the record date so fixed shall be entitled to the
rights, benefits and privileges incident to ownership of the shares of stock for
which such record date has been fixed, notwithstanding any transfer of stock on
the books of the corporation after such record date.
SECTION 5. Lost Certificates. The Board of Directors may, subject to such rules
-----------------
and regulations as it may adopt from time to time, order a new certificate or
certificates of stock to be issued in the place of any certificate or
certificates of stock of the Corporation alleged to have been lost or destroyed,
but in every such case, the owner of the lost or destroyed certificate or
certificates shall be required to file with the Board of Directors or the stock
transfer agent of the Corporation sworn evidence showing the facts connected
with such loss or destruction. The Board of Directors may, in its discretion,
further require that a notice or notices shall be published not less than once
each week for three consecutive weeks or for such other length of time as the
Board of Directors may provide in any special case in one or more newspapers of
general circulation, which notice shall describe the lost or destroyed
certificate, seek its recovery and warn all persons against negotiating,
transferring or accepting the same. Unless the Board of Directors shall
otherwise direct, the owner of the lost or destroyed certificate shall be
required to give to the Corporation a bond or undertaking in such sum, in such
form, and with such surety or sureties as the Board of Directors may approve, to
indemnify the Corporation against any loss, damage, or liability that the
Corporation may incur by reason of the issuance of a new certificate or
certificates. Nothing in this section contained shall impair the right of the
Board of Directors, in its discretion, to refuse to replace any allegedly lost
or destroyed certificate, save upon the order of the court having jurisdiction
in the matter.
SECTION 6. Stock Rights and Options. The Corporation may create and issue,
------------------------
whether or not in connection with the issuance and sale of any of its shares or
other securities, rights or options entitling the holders thereof to purchase
from the Corporation shares of any class or classes. Such rights or options
shall be evidenced in such manner as the Board shall approve and, subject to the
provisions of the Articles of Association, shall set forth the terms upon which,
the time or times within which, and the price or prices at which, such shares
may be purchased from the Corporation upon the exercise of any right or option.
The documents evidencing such rights or options may include conditions on the
exercise of such rights or options, including conditions that preclude the
holder or holders, including any subsequent transferees, of at least a specified
percentage of the common stock of the Corporation from exercising such rights or
options. No approval by the stockholders of the Corporation shall be required
for the issuance of such rights or options to directors, officers or employees
of the Corporation or any subsidiary, or to the stockholders.
SECTION 7. Consideration for Shares. The Corporation may issue any share of
------------------------
stock, with or without par value, in consideration of any one or any combination
of more than one of the following: money paid; labor done; services actually
rendered; debts or securities canceled; tangible or intangible property actually
received; amounts transferred to capital from any surplus of the Corporation
upon the issue of shares as a stock dividend; and such other consideration as
may be permitted by Chapter 416, Hawaii Revised Statutes. Except as may be
prohibited by Chapter 416, nothing herein is intended to prohibit the issuance
of shares of stock held as treasury shares by the Corporation to any officer,
director or employee of the Corporation pursuant to any stock bonus plan or
plans, in consideration of future services to be performed by such officer,
director or employee for the Corporation.
SECTION 8. Voting Record. The officer or agent having charge of the
-------------
Corporation's stock transfer books shall make a complete record of the
stockholders entitled to vote at any meeting of stockholders or adjournment
thereof, in accordance with the provisions of Section 415-31, Hawaii Revised
Statutes. Such record shall be produced and kept open at the time and place of
the stockholders' meeting and shall be subject to the inspection of any
stockholder during the whole time of the meeting for the purposes thereof, and
such record shall not be produced and kept open for such inspection at any other
time and place, or for copying at any time and place, except in either case as
may be required pursuant to Section 415-52, Hawaii Revised Statutes.
ARTICLE VIII
AMENDMENT
These Bylaws may be altered, amended or repealed from time to time by the Board
of Directors, subject to repeal or change by the affirmative vote of the holders
of a majority of all of the shares of capital stock of the Corporation
outstanding and entitled to vote.
AMENDMENT TO THE
REVISED BYLAWS OF
ALEXANDER & BALDWIN, INC.
The Revised Bylaws of Alexander & Baldwin, Inc., as amended effective
February 22, 2001 ("Bylaws"), are hereby amended, effective February 24, 2005,
as follows:
Article III of the Bylaws is hereby amended by adding the following new
Section 12:
"SECTION 12. Limited One-Year Waiver of Retirement Age. The Board of
-----------------------------------------
Directors, by resolution adopted on or before March 7, 2005 by a
majority of the directors then in office, may waive, for one or more
designated persons who previously have achieved the age of seventy-two
years, any prohibition on such person or persons being elected a
director at any annual or special meeting after achieving such age;
provided, however, that no person to whom such waiver applies shall
thereafter be elected as a director at any annual or special meeting if
such person has achieved the age of seventy-three years. Subsequent to
March 7, 2005, no waivers may be granted by the Board of Directors
pursuant to this Section 12."
AMENDMENT TO THE
REVISED BYLAWS OF
ALEXANDER & BALDWIN, INC.
-------------------------
The Revised Bylaws of Alexander & Baldwin, Inc. as amended effective
February 22, 2001 ("Bylaws") are hereby amended, effective January 26, 2006, as
follows:
Article VII, Section 1 and Section 3 of the Bylaws be, and hereby are,
amended in their entireties, effective January 26, 2006, to read as follows:
"SECTION 1. Certificates of Stock. The certificates of stock of each
---------------------
class shall be in such form and of such device as the Board of
Directors may, from time to time, determine, including uncertificated
shares. The rights and obligations of the holders of uncertificated
shares and the rights and obligations of the holders of certificated
shares of the same class and series shall be identical. Every share
certificate shall be signed by the Chairman of the Board, if appointed,
or the President or a vice president and by the Treasurer or the
Secretary or an assistant treasurer or assistant secretary and shall
bear the corporate seal, provided, however, that the Board of Directors
in its discretion may provide that any certificate which shall be
signed by a transfer agent or by a registrar may be sealed with only
the facsimile seal of the Corporation and may be signed with only the
facsimile signatures of the officers above designated. In case any
officer who has signed or whose facsimile signature has been placed
upon any certificate shall have ceased to be such officer before such
certificate is issued, such certificate may, nevertheless, be issued
with the same effect as if such officer had not ceased to be such at
the date of its issue. Certificates shall not be issued for nor shall
there be registered any transfer of any fraction of a share. In the
event that fractional parts of or interests in any share shall result
in any manner from any action by the stockholders or directors of the
Corporation, the Treasurer may sell the aggregate of such fractional
interests under such reasonable terms and conditions as the Treasurer
shall determine subject, however, to the control of the Board of
Directors, and distribute the proceeds thereof to the person or persons
entitled thereto.
"SECTION 3. Transfer of Stock. "Transfer of stock may be made in any
-----------------
manner permitted by law, but no transfer shall be valid (except between
the parties thereto) until the transfer shall have been duly recorded
in the stock books of the Corporation and a new certificate or evidence
of uncertificated shares are issued. No transfer shall be entered in
the stock books of the Corporation, nor shall any new certificate be
issued until the old certificate, properly endorsed, shall be
surrendered and canceled or proper transfer instructions are received
from the holder of uncertificated shares."
AMENDMENT TO THE
REVISED BYLAWS OF
ALEXANDER & BALDWIN, INC.
The Revised Bylaws of Alexander & Baldwin, Inc., as amended effective
February 22, 2001 and as thereafter amended (the "Bylaws") be, are hereby
amended effective October 26, 2006, as follows:
Article II, Section 7 of the Bylaws, "Action at Meetings of
Stockholders," is amended by replacing the third paragraph thereof with the
following paragraph:
"To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Corporation not
less than one hundred twenty (120) days nor more than one hundred fifty
(150) days prior to the anniversary date of the immediately preceding
annual meeting of stockholders; provided, however, that in the event
-------- -------
that the annual meeting is called for a date that is not within
twenty-five (25) days before or after such anniversary date, notice by
the stockholder in order to be timely must be so received not later
than the close of business on the tenth (10th) day following the day on
which such notice of the date of the annual meeting was mailed or such
public disclosure of the date of the annual meeting was made, whichever
first occurs.
Article III, Section 1 of the Bylaws, "Number and Term of Office," is
amended by replacing the fifth paragraph thereof with the following paragraph:
"To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Corporation (a)
in the case of an annual meeting, not less than one hundred twenty
(120) days nor more than one hundred fifty (150) days prior to the
anniversary date of the immediately preceding annual meeting of
stockholders; provided, however, that in the event that the annual
-------- -------
meeting is called for a date that is not within twenty-five (25) days
before or after such anniversary date, notice by the stockholder in
order to be timely must be so received not later than the close of
business on the tenth (10th) day following the day on which such notice
of the date of the annual meeting was mailed or such public disclosure
of the date of the annual meeting was made, whichever first occurs; and
(b) in the case of a special meeting of stockholders called in the
manner set forth in Article II, Section 2 hereof for the purpose of
electing directors, not later than the close of business on the tenth
(10th) day following the day on which notice of the date of the special
meeting was mailed or public disclosure of the date of the special
meeting was made, whichever first occurs."
Article III, Section 12 of the Bylaws, "Limited One-Year Waiver of
Retirement Age," is amended by deleting the section in its entirety.
ALEXANDER & BALDWIN, INC.
1989 STOCK OPTION/STOCK INCENTIVE PLAN
AMENDMENT NO. 5
The Alexander & Baldwin, Inc. 1989 Stock Option/Stock Incentive Plan,
as previously amended (hereinafter the "Plan"), is hereby further amended,
effective as of October 26, 2006, as follows:
1. Subparagraph B.2.b of the "TERMS AND CONDITIONS OF OPTIONS" section
under Article II of the Plan is hereby amended in its entirety to read as
follows:
b. Each option outstanding under the Plan on October 26, 2006,
together with any stock appreciation right pertaining to such option,
is hereby amended so that such option may be assigned in whole or in
part during the Optionee's lifetime to a revocable living trust
established exclusively for the Optionee or the Optionee and his or her
spouse, to the extent such assignment is in connection with the
Optionee's estate plan. The assigned portion may only be exercised by
the person who acquires a proprietary interest in the option pursuant
to the assignment. The terms applicable to the assigned portion shall
be the same as those in effect for the option immediately prior to such
assignment and shall be set forth in such documents to be executed by
the assignee as the Committee may deem appropriate. The Optionee may
also designate one or more persons as the beneficiary or beneficiaries
of his or her outstanding options under the Plan, and those options,
together with any stock appreciation rights pertaining to such options,
shall, in accordance with such designation, automatically be
transferred to such beneficiary or beneficiaries upon the Optionee's
death while holding those options. Such beneficiary or beneficiaries
shall take the transferred options subject to all the terms and
conditions of the applicable agreement evidencing each such transferred
option, including (without limitation) the limited time period during
which the option may be exercised following the Optionee's death.
Except for the limited transferability provided by the foregoing, an
outstanding option under the Plan shall not be assignable or
transferable and shall be exercisable only by the Optionee during his
or her lifetime.
2. Subparagraph D.3.b of the "TERMS AND CONDITIONS OF OPTIONS" section
under Article III of the Plan is hereby amended in its entirety to read as
follows:
b. Each option, outstanding under the Plan on October 26,
2006, together with any stock appreciation right pertaining to such
option, is hereby amended so that such option may be assigned in whole
or in part during the Optionee's lifetime to a revocable living trust
established exclusively for the Optionee or the Optionee and his or her
spouse, to the extent such assignment is in connection with the
Optionee's estate plan. The assigned portion may only be exercised by
the person who acquires a proprietary interest in the option pursuant
to the assignment. The terms applicable to the assigned portion shall
be the same as those in effect for the option immediately prior to such
assignment and shall be set forth in such documents to be executed by
the assignee as the Committee may deem appropriate. The Optionee may
also designate one or more persons as the beneficiary or beneficiaries
of his or her outstanding options under the Plan, and those options,
together with any stock appreciation rights pertaining to such options,
shall, in accordance with such designation, automatically be
transferred to such beneficiary or beneficiaries upon the Optionee's
death while holding those options. Such beneficiary or beneficiaries
shall take the transferred options subject to all the terms and
conditions of the applicable agreement evidencing each such transferred
option, including (without limitation) the limited time period during
which the option may be exercised following the Optionee's death.
Except for the limited transferability provided by the foregoing, an
outstanding option under the Plan shall not be assignable or
transferable and shall be exercisable only by the Optionee during his
or her lifetime.
3. Except as modified by this Amendment, all the terms and provisions
of the Alexander & Baldwin, Inc. 1989 Stock Option/Stock Incentive Plan, as
previously amended, shall continue in full force and effect.
IN WITNESS WHEREOF, Alexander & Baldwin, Inc. has caused this
Amendment to be executed on its behalf by its duly-authorized officers on this
26th day of October, 2006.
ALEXANDER & BALDWIN, INC.
By /s/ Nelson N. S. Chun
Its Senior Vice President
By /s/ Alyson J. Nakamura
Its Secretary
ALEXANDER & BALDWIN, INC.
1989 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
AMENDMENT NO. 4
The Alexander & Baldwin, Inc. 1989 Non-Employee Director Stock
Option Plan, as previously amended (hereinafter the "Plan"), is hereby
further amended, effective as of October 26, 2006, as follows:
1. Paragraph A.5 of the TERM AND CONDITIONS OF GRANT section of Article
II of the Plan is hereby amended in its entirety to read as follows:
5. Limited Transferability of Options. Each option outstanding
----------------------------------
under the Plan on October 26, 2006 is hereby amended so that such
option may be assigned in whole or in part during the optionee's
lifetime to a revocable living trust established exclusively for the
optionee or the optionee and his or her spouse, to the extent such
assignment is in connection with the optionee's estate plan. The
assigned portion may only be exercised by the person who acquires a
proprietary interest in the option pursuant to the assignment. The
terms applicable to the assigned portion shall be the same as those in
effect for the option immediately prior to such assignment and shall be
set forth in such documents to be executed by the assignee as the
Corporation may deem appropriate. The optionee may also designate one
or more persons as the beneficiary or beneficiaries of his or her
outstanding options under the Plan, and those options shall, in
accordance with such designation, automatically be transferred to such
beneficiary or beneficiaries upon the optionee's death while holding
those options. Such beneficiary or beneficiaries shall take the
transferred options subject to all the terms and conditions of the
applicable agreement evidencing each such transferred option, including
(without limitation) the limited time period during which the option
may be exercised following the optionee's death. Except for the limited
transferability provided by the foregoing, an outstanding option under
the Plan shall not be assignable or transferable and shall be
exercisable only by the optionee during his or her lifetime.
2. Except as modified by this Amendment, all the terms and provisions
of the Alexander & Baldwin, Inc. 1989 Non-Employee Director Stock Option Plan,
as previously amended, shall continue in full force and effect.
IN WITNESS WHEREOF, Alexander & Baldwin, Inc. has caused this
Amendment to be executed on its behalf by its duly-authorized officers on this
26th day of October, 2006.
ALEXANDER & BALDWIN, INC.
By /s/ Nelson N. S. Chun
Its Senior Vice President
By /s/ Alyson J. Nakamura
Its Secretary
ALEXANDER & BALDWIN, INC.
1998 STOCK OPTION/STOCK INCENTIVE PLAN
AMENDMENT NO. 5
The Alexander & Baldwin, Inc. 1998 Stock Option/Stock Incentive Plan,
as previously amended (hereinafter the "Plan"), is hereby further amended,
effective as of October 26, 2006, as follows:
1. Paragraph F of Section I ("OPTION TERMS - Transferability of
Options") of Article Two of the Plan is hereby amended in its entirety to read
as follows:
F. Transferability of Options. The following transferability
--------------------------
provisions shall be applicable to (i) each option granted under the
Plan on or after October 26, 2006 and (ii) each option outstanding
under the Plan on such date, with each such outstanding option to be
hereby amended to incorporate such provisions:
(a) Each such option may be assigned in whole or in
part during the Optionee's lifetime to a revocable living trust
established exclusively for the Optionee or the Optionee and his or her
spouse, to the extent such assignment is in connection with the
Optionee's estate plan. The assigned portion may only be exercised by
the person who acquires a proprietary interest in the option pursuant
to the assignment. The terms applicable to the assigned portion shall
be the same as those in effect for the option immediately prior to such
assignment and shall be set forth in such documents to be executed by
the assignee as the Plan Administrator may deem appropriate.
(b) The Optionee may also designate one or more
persons as the beneficiary or beneficiaries of each such option, and
the option shall, in accordance with such designation, automatically be
transferred to such beneficiary or beneficiaries upon the Optionee's
death while holding that option. Such beneficiary or beneficiaries
shall take the transferred option subject to all the terms and
conditions of the applicable agreement evidencing that option,
including (without limitation) the limited time period during which the
option may be exercised following the Optionee's death.
(c) Except for the limited transferability provided
by the foregoing, an outstanding option under the Plan shall not be
assignable or transferable and shall be exercisable only by the
Optionee during his or her lifetime.
2. There is hereby added to Section I ("TERMS AND CONDITIONS OF RELOAD
OPTIONS") of Article Three of the Plan, new Paragraph C.9 as follows:
9. Transferability of Reload Options. The following
---------------------------------
transferability provisions shall be applicable to (i) each Reload
Option granted under the Plan on or after October 26, 2006 and (ii)
each Reload Option outstanding under the Plan on such date, with each
such outstanding Reload Option to be hereby amended to incorporate such
provisions:
(a) Each such Reload Option may be assigned in whole
or in part during the Optionee's lifetime to a revocable living trust
established exclusively for the Optionee or the Optionee and his or her
spouse, to the extent such assignment is in connection with the
Optionee's estate plan. The assigned portion may only be exercised by
the person who acquires a proprietary interest in the Reload Option
pursuant to the assignment. The terms applicable to the assigned
portion shall be the same as those in effect for the Reload Option
immediately prior to such assignment and shall be set forth in such
documents to be executed by the assignee as the Plan Administrator
deems appropriate.
(b) The Optionee may also designate one or more
persons as the beneficiary or beneficiaries of each such Reload Option,
and the Reload Option shall, in accordance with such designation,
automatically be transferred to such beneficiary or beneficiaries upon
the Optionee's death while holding that option. Such beneficiary or
beneficiaries shall take the transferred Reload Option subject to all
the terms and conditions of the applicable agreement evidencing that
option, including (without limitation) the limited time period during
which the Reload Option may be exercised following the Optionee's
death.
(c) Except for the limited transferability provided
by the foregoing, an outstanding Reload Option under the Plan shall not
be assignable or transferable and shall be exercisable only by the
Optionee during his or her lifetime.
3. Except as modified by this Amendment, all the terms and provisions
of the Alexander & Baldwin, Inc. 1998 Stock Option/Stock Incentive Plan, as
previously amended, shall continue in full force and effect.
IN WITNESS WHEREOF, Alexander & Baldwin, Inc. has caused this Amendment
to be executed on its behalf by its duly-authorized officers on this 26th day of
October, 2006.
ALEXANDER & BALDWIN, INC.
By /s/ Nelson N. S. Chun
Its Senior Vice President
By /s/ Alyson J. Nakamura
Its Secretary
ALEXANDER & BALDWIN, INC.
1998 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
AMENDMENT NO. 4
The Alexander & Baldwin, Inc. 1998 Non-Employee Director Stock Option
Plan, as previously amended (hereinafter the "Plan"), is hereby further
amended, effective as of October 26, 2006, as follows:
1. Paragraph A.4 of Section II ("TERMS AND CONDITIONS OF GRANT") of
Article Two of the Plan is hereby amended in its entirety to read as follows:
4. Limited Transferability of Options. The following
----------------------------------
transferability provisions shall be applicable to (i) each option
granted under the Plan on or after October 26, 2006 and (ii) each
option outstanding under the Plan on such date, with such outstanding
option to be hereby amended to incorporate such provisions:
(a) Each such option may be assigned in whole or in
part during the optionee's lifetime to a revocable living trust
established exclusively for the optionee or the optionee and his or her
spouse, to the extent such assignment is in connection with the
optionee's estate plan. The assigned portion may only be exercised by
the person who acquires a proprietary interest in the option pursuant
to the assignment. The terms applicable to the assigned portion shall
be the same as those in effect for the option immediately prior to such
assignment and shall be set forth in such documents to be executed by
the assignee as the Corporation may deem appropriate.
(b) The optionee may also designate one or more
persons as the beneficiary or beneficiaries of each such option, and
the option shall, in accordance with such designation, automatically be
transferred to such beneficiary or beneficiaries upon the optionee's
death while holding those options. Such beneficiary or beneficiaries
shall take the transferred option subject to all the terms and
conditions of the applicable agreement evidencing that option,
including (without limitation) the limited time period during which the
option may be exercised following the optionee's death.
(c) Except for the limited transferability provided
by the foregoing, an outstanding option under the Plan shall not be
assignable or transferable and shall be exercisable only by the
optionee during his or her lifetime.
2. Except as modified by this Amendment, all the terms and provisions
of the Alexander & Baldwin, Inc. 1998 Non-Employee Director Stock Option Plan,
as previously amended, shall continue in full force and effect.
IN WITNESS WHEREOF, Alexander & Baldwin, Inc. has caused this Amendment
to be executed on its behalf by its duly-authorized officers on this 26th day of
October, 2006.
ALEXANDER & BALDWIN, INC.
By /s/ Nelson N. S. Chun
Its Senior Vice President
By /s/ Alyson J. Nakamura
Its Secretary
EXHIBIT 31.1
------------
CERTIFICATION
I, W. Allen Doane, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Alexander &
Baldwin, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
(a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's
internal control over financial reporting.
By /s/ W. Allen Doane
-----------------------------------
W. Allen Doane, Chairman and
Chief Executive Officer
Date: October 27, 2006
EXHIBIT 31.2
------------
CERTIFICATION
I, Christopher J. Benjamin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Alexander &
Baldwin, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
(a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's
internal control over financial reporting.
By /s/ Christopher J. Benjamin
-----------------------------------------------
Christopher J. Benjamin, Senior Vice President,
Chief Financial Officer and Treasurer
Date: October 27, 2006
EXHIBIT 32
----------
Certification of Chief Executive Officer and
Chief Financial Officer Pursuant to
18 U.S.C. Section 1350, As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of Alexander & Baldwin,
Inc. (the "Company") for the quarterly period ended September 30, 2006, as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), W. Allen Doane, as Chairman and Chief Executive Officer of the
Company, and Christopher J. Benjamin, as Senior Vice President, Chief
Financial Officer and Treasurer of the Company, each hereby certifies,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to their knowledge:
(1) The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/ W. Allen Doane
- -----------------------------------
Name: W. Allen Doane
Title: Chairman and Chief Executive Officer
Date: October 27, 2006
/s/ Christopher J. Benjamin
- -----------------------------------
Name: Christopher J. Benjamin
Title: Senior Vice President, Chief Financial Officer and Treasurer
Date: October 27, 2006