View:
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
FORM U-3A-2
STATEMENT BY HOLDING COMPANY CLAIMING EXEMPTION
UNDER RULE U-2 FROM THE PROVISIONS OF THE PUBLIC
UTILITY HOLDING COMPANY ACT OF 1935
TO BE FILED ANNUALLY PRIOR TO MARCH 1
ALEXANDER & BALDWIN, INC.
(Name of Company)
P. O. Box 3440
Honolulu, Hawaii 96801
(hereinafter called the "Claimant") and its wholly-owned subsidiary, A&B-Hawaii,
Inc., P. O. Box 3440, Honolulu, Hawaii 96801 (hereinafter called "Co-claimant"),
hereby file with the Securities and Exchange Commission, pursuant to Rule U-2,
this joint and consolidated statement claiming exemption as a holding company
from the provisions of the Public Utility Holding Company Act of 1935. This
statement is filed jointly by Claimant and Co-claimant pursuant to oral author-
ization to file on a joint and consolidated basis received from the Commission
on February 21, 1990. In support of such claim for exemption the following
information is submitted:
1. The name, jurisdiction of organization, location and nature of
business of Claimant and Co-claimant, and every subsidiary thereof, other than
any exempt wholesale generator (EWG) or foreign utility company in which
Claimant or Co-claimant directly or indirectly hold an interest, as at
January 31, 1996 (indirect subsidiaries are indicated by indentation).
Jurisdiction
Name: of Organization Location Nature of Business
Alexander & Baldwin, Inc. Hawaii Honolulu, Ocean carriage of goods,
Hawaii real property management
and development, invest-
ments
Subsidiaries:
A&B Inc. Hawaii Honolulu, Inactive
Hawaii
A&B-Hawaii, Inc. Hawaii Honolulu, Agriculture/food (includ-
Hawaii ing sugar cane and coffee
plantations), real property
management and development,
general freight and petro-
leum hauling and
self-storage services
A&B Development California Honolulu, Ownership, manage-
Company Hawaii ment and development of
(California) real property in California
A&B Properties, Hawaii Kahului, Ownership, management,
Inc. Hawaii development and selling of
real property
California and Hawaii Crockett, Refining raw sugar and
Hawaiian Sugar California marketing of refined
Company, Inc. sugar products and
molasses
MLM Corporation California Crockett, Marketing of refined
California sugar products
East Maui Irrigation Hawaii Puunene, Collection and
Company, Limited Hawaii distribution of
irrigation water on
island of Maui
Kahului Trucking & Hawaii Kahului, Motor carriage of goods,
Storage, Inc. Hawaii self-storage services and
stevedoring on island of
Maui
Kauai Commercial Hawaii Lihue, Motor carriage of goods
Company, Hawaii and self-storage services
Incorporated on island of Kauai
Kukui'ula Hawaii Koloa, Ownership, management
Development Hawaii and development of real
Company, Inc. property on island of Kauai
McBryde Sugar Hawaii Eleele, Sugar cane and coffee
Company, Limited Hawaii plantations
Island Coffee Hawaii Eleele, Grow,process and sell
Company, Inc. Hawaii coffee
Ohanui Corporation Hawaii Puunene, Collection and distribution
Hawaii of domestic water on island
of Maui
South Shore Hawaii Koloa, Development and
Community Hawaii operation of sewer trans-
Services, Inc. mission and treatment
system on island of Kauai
South Shore Hawaii Koloa, Development and
Resources, Inc. Hawaii operation of water
source and delivery system
on island of Kauai
WDCI, INC. Hawaii Honolulu, Ownership, management
Hawaii and development of property
Hawaiian Sugar & Hawaii Crockett, Ocean carriage of sugar
Transportation California from Hawaii
Cooperative
Matson Navigation Hawaii San Ocean carriage of goods
Company, Inc. Francisco, between West Coast of
California United States and Hawaii,
Western Pacific and Asian
ports
Matson Intermodal Hawaii San Broker, shipper's agent
System, Inc. Francisco, and freight forwarder for
California overland cargo services of
ocean carriers
Matson Leasing Hawaii San Formerly container leasing;
Company, Inc. Francisco, in process of winding-down
California following the sale of its
net assets in June 1995
Matson Services Hawaii San Tugboat services
Company, Inc. Francisco,
California
Matson Terminals, Hawaii San Stevedoring and terminal
Inc. Francisco, services
California
The Matson California San Inactive
Company Francisco,
California
The Oceanic California San Inactive
Steamship Francisco,
Company California
2. A brief description of the properties of Claimant and Co-claimant,
and each of their subsidiary public utility companies, used for the generation,
transmission and distribution of electric energy for sale, or for the
production, transmission and distribution of natural or manufactured gas:
Claimant: None
Co-Claimant: 4 steam-driven generators with rated capacities of 1
of 12,000 KW, 2 of 10,000 KW, and 1 of 20,000 KW; 5
hydroelectric plants with rated capacities of 1 of
1,000 KW, 3 of 1,500 KW and 1 of 500 KW; about 80
miles of transmission lines; all located on the
island of Maui, State of Hawaii
McBryde Sugar Company, 2 steam-driven generators with rated capacities of
Limited ("McBryde") 7,500 KW; 2 hydroelectric plants with rated
(Note 1) capacities of 1 of 1,000 KW and 1 of 3,600 KW; about
70 miles of transmission lines; all located on the
island of Kauai, State of Hawaii
3. Information for the calendar year 1995 with respect to Claimant and
Co-claimant, and each of their subsidiary public utility companies:
(a)(1) Number of kwh of electric energy sold (all sales were at
wholesale):
Claimant None
Co-claimant 98,031,000 kwh
McBryde 19,625,000 kwh
_______________
Note 1. McBryde Sugar Company, Limited has filed with the Securities and
Exchange Commission an application for an order declaring that it is
not an electric utility company.
_______________
(2) Number of Mcf of natural or manufactured gas distributed at
retail:
None. Neither Claimant nor Co-claimant, nor any of their
subsidiary public utility companies, distributes any natural or manufactured gas
at retail.
(b) Number of kwh of electric energy and Mcf of natural or
manufactured gas distributed at retail outside the State in which each such
company is organized:
None. Neither Claimant nor Co-claimant, nor any of their
subsidiary public utility companies, distributes any electric energy or natural
or manufactured gas at retail outside the State in which each such company is
organized.
(c) Number of kwh of electric energy and Mcf of natural or
manufactured gas sold at wholesale outside the State in which each such company
is organized, or at the State line:
None. Neither Claimant nor Co-claimant, nor any of their
subsidiary public utility companies, sells electric energy or natural or
manufactured gas at wholesale (or otherwise) outside the State in which each
such company is organized, or at the State line.
(d) Number of kwh of electric energy and Mcf of natural or
manufactured gas purchased outside the State in which each such company is
organized, or at the State line:
None. Neither Claimant nor Co-claimant, nor any of their
subsidiary public utility companies, purchases any electric energy or natural or
manufactured gas outside the State in which each such company is organized, or
at the State line.
4. The following information for the reporting period with respect to
Claimant and Co-claimant and each interest they hold directly or indirectly in
an EWG or a foreign utility company, stating monetary amounts in United States
dollars:
(a) Name, location, business address and description of the
facilities used by the EWG or foreign utility company for the generation,
transmission and distribution of electric energy for sale or for the
distribution at retail of natural or manufactured gas.
Not applicable. Neither Claimant nor Co-claimant holds any
interest, directly or indirectly, in an EWG or a foreign utility company.
(b) Name of each system company that holds an interest in such EWG
or foreign utility company; and description of the interest held.
No applicable (see 4(a) above).
(c) Type and amount of capital invested, directly or indirectly, by
the holding company claiming exemption; any direct or indirect guarantee of the
security of the EWG or foreign utility company by the holding company claiming
exemption; and any debt or other financial obligation for which there is
recourse, directly or indirectly, to the holding company claiming exemption or
another system company, other than the EWG or foreign utility company.
Not applicable (see 4(a) above).
(d) Capitalization and earnings of the EWG or foreign utility
company during the reporting period.
Not applicable (see 4(a) above).
(e) Identify any service, sales or construction contract(s) between
the EWG or foreign utility company and a system company, and describe the
services to be rendered or goods sold and fees or revenues under such
agreement(s).
Not applicable (see 4(a) above).
EXHIBIT A
Consolidating statements of income and retained earnings of Claimant and
Co-claimant, and their subsidiary companies, for the last calendar year,
together with a consolidating balance sheet of Claimant and Co-claimant, and
their subsidiary companies, as of the close of such calendar year, are attached
hereto.
EXHIBIT B
FINANCIAL DATA SCHEDULE
The registrant is required to submit this report and any amendments
thereto electronically via EDGAR. Attached hereto is a Financial Data Schedule
that sets forth the financial and other data specified below that are applicable
to the registrant on a consolidated basis:
ITEM NO. CAPTION HEADING
1 Total Assets
2 Total Operating Revenues
3 Net Income
EXHIBIT C
An organizational chart showing the relationship of each EWG or foreign
utility company to associate companies in the holding-company system.
Not applicable. Neither Claimant nor Co-claimant holds any interest,
directly or indirectly, in an EWG or a foreign utility company.
The above-named Claimant and Co-claimant have caused this joint and
consolidated statement to be duly executed on their behalf by their authorized
officers this 26th day of February, 1996.
ALEXANDER & BALDWIN, INC. A&B-HAWAII, INC.
(Name of Claimant) (Name of Co-Claimant)
By: /s/ Glenn R. Rogers By: /s/ Glenn R. Rogers
Glenn R. Rogers Glenn R. Rogers
Vice President Senior Vice President
(Corporate Seal) (Corporate Seal)
Attest: Attest:
/s/ Alyson J. Nakamura /s/ Alyson J. Nakamura
Asst. Secretary Secretary
Name, title and address of Officer to whom notices and correspondence
concerning this statement should be addressed:
If to Claimant
Alexander & Baldwin Inc.: Michael J. Marks
Vice President, General Counsel and Secretary
Alexander & Baldwin, Inc.
P. O. Box 3440
Honolulu, Hawaii 96801
If to Co-claimant
A&B-Hawaii, Inc.: Michael J. Marks
Senior Vice President and General Counsel
A&B-Hawaii, Inc.
P. O. Box 3440
Honolulu, Hawaii 96801
EXHIBIT A ALEXANDER & BALDWIN, INC. CONSOLIDATING STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1995 ($000 omitted)
NOTES TO FINANCIAL STATEMENTS
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION: The consolidated financial statements include the
accounts of Alexander & Baldwin, Inc. and all subsidiaries, after elimination of
significant intercompany amounts.
OCEAN TRANSPORTATION: Voyage revenue and variable costs and expenses are
included in income at the time each voyage leg commences. This method of
accounting does not differ materially from other acceptable accounting methods.
Vessel depreciation, charter hire, terminal operating overhead, and general and
administrative expenses are charged to expense as incurred. Expected costs of
regularly-scheduled dry docking of vessels and planned major vessel repairs
performed during dry docking are accrued.
PROPERTY DEVELOPMENT AND MANAGEMENT: Sales are recorded when the risks and
benefits of ownership have passed to the buyers (generally at closing dates),
adequate down payments have been received and collection of remaining balances
is reasonably assured.
Expenditures for real estate developments are capitalized during construction
and are classified as Real Estate Developments on the balance sheet. When
construction is complete, the costs are reclassified either as Property or as
Real Estate Held For Sale, based upon the Company's intent to sell the completed
asset or to hold it as an investment. Cash flows related to real estate
developments are classified as operating or investing activities, based upon the
Company's intention either to sell the property or to retain ownership of the
property as an investment following completion of construction.
FOOD PRODUCTS: Revenue is recorded when refined sugar products and coffee are
sold to third parties.
Costs of growing sugar cane are charged to the cost of production in the year
incurred and to cost of sales as refined products are sold. The cost of raw
cane sugar purchased from third parties is recorded as inventory at the purchase
price.
Costs of developing coffee are capitalized during the development period and
depreciated over the estimated productive lives of the orchards. Costs of
growing coffee are charged to inventory in the year incurred and to cost of
sales as coffee is sold.
CASH AND CASH EQUIVALENTS: The Company considers highly liquid investments
purchased with original maturities of three months or less, which have no
significant risk of change in value, to be cash equivalents.
INVENTORIES: Sugar inventory, consisting of raw and refined sugar and coffee
inventory, are stated at the lower of cost (first-in, first-out basis) or
market. Other inventories, composed principally of materials and supplies, are
stated at the lower of cost (principally average cost) or market.
PROPERTY: Property is stated at cost. Major renewals and betterments are
capitalized. Replacements, maintenance and repairs which do not improve or
extend asset lives are charged to expense as incurred. Assets held under
capital leases are included with property owned. Gains or losses from property
disposals are included in income.
CAPITALIZED INTEREST: Interest costs incurred in connection with significant
expenditures for real estate developments or the construction of assets are
capitalized.
DEPRECIATION: Depreciation is computed using the straight-line method.
Depreciation expense includes amortization of assets under capital leases and
vessel spare parts.
Estimated useful lives of property are as follows:
Buildings 10 to 50 years
Vessels 14 to 40 years
Marine containers 15 years
Machinery and equipment 3 to 35 years
Utility systems and other depreciable property 5 to 60 years
OTHER NON-CURRENT ASSETS: Other non-current assets consist principally of
supply contracts and intangible assets. These assets are being amortized using
the straight-line method over periods not exceeding 30 years.
OTHER LONG-TERM LIABILITIES: Other long-term liabilities include the Company's
estimate of the liability for uninsured claims and self insurance, and reserves
for dry-docking, pensions and other liabilities not expected to be paid within
the next year.
PENSION PLANS: Certain ocean transportation subsidiaries are members of the
Pacific Maritime Association (PMA), the Maritime Service Committee or the Hawaii
Stevedore Committee, which negotiate multi-employer pension plans covering
certain seagoing and shoreside bargaining unit personnel. The subsidiaries
negotiate multi-employer pension plans covering other bargaining-unit personnel.
Pension costs are accrued in accordance with contribution rates established by
the PMA, the parties to a plan or the trustees of a plan. Several trusteed,
noncontributory, single-employer defined benefit plans cover substantially all
other employees.
INCOME TAXES: Current income tax expense is based on revenue and expenses in
the Statements of Income. Deferred income tax liabilities and assets are
computed at current tax rates for temporary differences between the financial
statement and income tax bases of assets and liabilities.
FAIR VALUES: The carrying values of current assets (other than inventories,
real estate held for sale, deferred income taxes and prepaid and other assets)
and of debt instruments are reasonable estimates of their fair values. Real
estate is carried at the lower of cost or net realizable value. Net realizable
values are generally determined using the expected market value for the property
less sales costs. For residential units and lots held for sale, market value is
determined by reference to the sales of similar property, market studies, tax
assessments and discounted cash flows. For commercial property, market value is
determined using recent comparable sales, tax assessments and cash flow
analysis. A large portion of the Company's real estate is undeveloped land
located in Hawaii. This land has a cost basis which averages $145 per acre, a
value which is much lower than market values.
FUTURES CONTRACTS: Realized and unrealized gains and losses on commodity
futures contracts are deferred and recorded in inventory in the period in which
the related inventory purchases occur. These amounts are not significant.
ENVIRONMENTAL COSTS: Environmental expenditures that relate to current
operations are expensed or capitalized as appropriate. Expenditures that relate
to an existing condition caused by past operations or events, and which do not
contribute to current or future revenue generation, are charged to expense.
Liabilities are recorded when environmental assessments or remedial efforts are
probable and the costs can be reasonably estimated.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Future actual amounts could differ from those estimates.
RECLASSIFICATIONS: Certain amounts in the 1994 and 1993 financial statements
have been reclassified to conform with the 1995 presentation.
RESTATEMENTS: The financial statements for all periods presented have been
restated to reflect the sale of certain net assets of the Company's container
leasing segment as described in Note 4.
2. EMPLOYEE BENEFIT PLANS
Total contributions to the multi-employer pension plans covering personnel in
shoreside and seagoing bargaining units were $5,903,000 in 1995, $8,216,000 in
1994 and $8,626,000 in 1993. Union collective bargaining agreements provide
that total employer contributions during the terms of the agreements be
sufficient to meet the normal costs and amortization payments required to be
funded during those periods. Contributions are generally based on union labor
used or cargo handled or carried. A portion of such contributions is for
unfunded accrued actuarial liabilities of the plans being funded over periods of
25 to 40 years, which began between 1967 and 1976.
The multi-employer plans are subject to the plan termination insurance
provisions of the Employee Retirement Income Security Act of 1974, as amended,
and are paying premiums to the Pension Benefit Guarantee Corporation (PBGC).
The statutes provide that an employer which withdraws from or significantly
reduces its contribution obligation to a multi-employer plan generally will be
required to continue funding its proportional share of the plan's unfunded
vested benefits.
Under special rules approved by the PBGC and adopted by the longshore plan in
1984, the Company could cease Pacific Coast cargo-handling operations
permanently and stop contributing to the plan without any withdrawal liability,
provided that the plan meets certain funding obligations as defined in the plan.
The estimated withdrawal liabilities under the Hawaii longshore plan and the
seagoing plans aggregated approximately $6,437,000 for various plan years ended
December 1995 and 1994, and July 1995, based on estimates by plan actuaries.
Management has no present intention of withdrawing from and does not anticipate
termination of any of the aforementioned plans.
The net pension cost (benefit) and components for 1995, 1994 and 1993, of
single-employer defined benefit pension plans, which cover substantially all
other employees, were as follows:
1995 1994 1993
(In thousands)
Service cost--benefits earned during the year $6,210 $ 7,317 $ 5,907
Interest cost on projected benefit obligation 21,785 20,542 17,584
Actual return on plan assets (26,361) (24,122) (18,776)
Net amortization and deferral (2,054) (1,221) (2,514)
Curtailments and terminations (1,761) 1,300 2,117
Net pension cost (benefit) $(2,181) $3,816 $4,318
The funded status of the single-employer plans at December 31, 1995 and 1994
was as follows:
1995 1994
Assets Assets Accumulated
Exceed Exceed Benefits
Accumulated Accumulated Exceed
Benefits Benefits Assets
(In thousands)
Actuarial present value
of benefit obligation:
Vested benefits $ 241,422 $ 122,153 $ 112,925
Non-vested benefits 9,881 3,830 4,297
Accumulated benefit
obligation 251,303 125,983 117,222
Additional amounts
related to projected
compensation levels 34,276 22,927 11,277
Projected benefit
obligation 285,579 148,910 128,499
Plan assets at fair value 348,208 178,118 104,867
Deficiency (Excess) of
plan assets over
projected benefit obligation (62,629) (29,208) 23,632
Prior service costs to be
recognized in future
years (3,739) (2,121) (1,656)
Unrecognized actuarial
net gain (loss) 75,759 27,468 (1,227)
Unrecognized net asset at
January 1, 1987 (being
amortized overperiods
of 4 to 15 years) 3,954 4,660 385
Accrued pension liability $ 13,345 $ 799 $ 21,134
For 1995 and 1994, the projected benefit obligation was determined using a
discount rate of 8% and assumed increases in future compensation levels of 5%.
The expected long-term rate of return on assets was 9% for 1995 and 8 1/4% for
1994. The assets of the plans consist principally of listed stocks and bonds.
Contributions are determined annually for each plan by the Company's pension
administrative committee, based upon the actuarially determined minimum required
contribution under ERISA and the maximum deductible contribution allowed for tax
purposes. For the plans covering employees who are members of collective
bargaining units, the benefit formulas are determined according to the
collective bargaining agreements, either using career average pay as the base or
a flat dollar amount per year of service. The benefit formulas for the
remaining defined benefit plans are based on final average pay.
The Company has non-qualified supplemental pension plans covering certain
employees and retirees, which provide for incremental pension payments from the
Company's general funds, so that total pension benefits would be substantially
equal to amounts that would have been payable from the Company's qualified
pension plans if it were not for limitations imposed by income tax regulations.
The projected benefit obligation, included with other non-current liabilities,
relating to these unfunded plans, totaled $8,680,000 and $7,661,000 at December
31, 1995 and 1994, respectively.
3. LEASES
THE COMPANY AS LESSEE: Various subsidiaries of the Company lease a vessel and
certain land, buildings and equipment under both capital and operating leases.
Capital leases include one vessel leased for a term of 25 years ending in 1998;
containers, machinery and equipment for terms of 5 to 12 years expiring through
1997; and a wastewater treatment facility in California, the title to which will
revert to a subsidiary in 2002. Principal operating leases cover office and
terminal facilities for periods which expire between 1996 and 2026. Management
expects that in the normal course of business, most operating leases will be
renewed or replaced by other similar leases.
Rental expense under operating leases totaled $46,680,000, $48,169,000, and
$43,270,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
Contingent rents and income from sublease rents were not significant.
Assets recorded under capital lease obligations and included in property at
December 31, 1995 and 1994 were as follows:
1995 1994
(In thousands)
Vessel $ 55,253 $ 55,253
Machinery and equipment 42,688 42,870
Total 97,941 98,123
Less accumulated amortization 84,813 74,674
Property under capital leases--net $ 13,128 $ 23,449
Future minimum payments under all leases and the present value of minimum
capital lease payments as of December 31, 1995 were as follows:
Capital Operating
Leases Leases
(In thousands)
1996 $ 14,759 $ 15,960
1997 15,026 14,590
1998 10,703 14,837
1999 609 14,834
2000 576 12,868
Thereafter 1,063 114,072
Total minimum lease payments 42,736 $ 187,161
Less amount representing interest 7,489
Present value of future minimum payments 35,247
Less current portion 11,061
Long-term obligations at December 31, 1995 $ 24,186
A subsidiary is obligated to pay terminal facility rent equal to the principal
and interest on Special Facility Revenue Bonds issued by the Department of
Transportation of the State of Hawaii. Interest on the bonds is payable semi-
annually and principal, in the amount of $16,500,000 is due in 2013. An accrued
liability of $7,170,000 and $6,626,000 at December 31, 1995 and 1994,
respectively, included in other long-term liabilities, provides for a pro-rata
portion of the principal due on these bonds.
THE COMPANY AS LESSOR: Various Company subsidiaries lease land, buildings and
land improvements under operating leases. The historical cost of and
accumulated depreciation on leased property at December 31, 1995 and 1994 were
as follows:
1995 1994
(In thousands)
Leased property $ 246,609 $210,217
Less accumulated amortization 37,555 32,567
Property under operating leases--net $ 209,054 $177,650
Total rental income under these operating leases for the three years ended
December 31, 1995 was as follows:
1995 1994 1993
(In thousands)
Minimum rentals $ 28,164 $ 31,792 $ 30,968
Contingent rentals
(based on sales volume) 880 1,515 1,111
Total $ 29,044 $ 33,307 $ 32,079
Future minimum rental income on non-cancelable leases at December 31, 1995 was
as follows:
Operating
Leases
(In thousands)
1996 $ 31,551
1997 26,689
1998 18,930
1999 15,169
2000 12,324
Thereafter 159,912
Total $ 264,575
4. DISCONTINUED OPERATIONS
In June 1995, the Company sold the net assets of its container leasing
subsidiary, Matson Leasing Company, Inc., for $361.7 million in cash, and
realized an after-tax gain of $18 million. Specifically excluded from the sale
were long-term debt and U. S. tax obligations of the business.
Summary operating results of discontinued operations, excluding the above gain,
were as follows:
1995 1994 1993
(In thousands)
Net sales $ 35,251 $ 63,060 $ 55,544
Gross profit $ 14,762 $ 24,499 $ 20,500
Earnings before income taxes $ 8,564 $ 16,604 $ 13,047
Income taxes 3,228 5,975 4,794
Net earnings from discontinued
operations $ 5,336 $10,629 $ 8,253
The components of net assets of discontinued operations included in the
Consolidated Balance Sheet at December 31, 1994 were as follows (in
thousands):
Current assets $ 14,829
Containers and equipment, net 305,874
Current liabilities (1,505)
Other long-term liabilities (5,508)
Net assets $ 313,690
5. INCOME TAXES
The income tax expense for the three years ended December 31, 1995 consisted of
the following:
1995 1994 1993
(In thousands)
Current:
Federal $ (23,833) $ 29,796 $ 23,894
State 403 1,444 2,830
Total (23,430) 31,240 26,724
Deferred 42,965 1,412 14,662
Income tax expense $ 19,535 $ 32,652 $ 41,386
Total income tax expense for the three years ended December 31, 1995 differs
from amounts computed by applying the statutory Federal rate to pre-tax income,
for the following reasons:
1995 1994 1993
(In thousands)
Computed income tax expense $ 18,184 $ 33,821 $ 35,043
Increase (decrease) resulting from:
Tax rate increases - - 6,963
State tax on income, less
applicable Federal tax 326 1,332 1,999
Fair market value over cost
of donations - (2,138) -
Low-income housing credits (1,224) (1,219) (1,214)
Other-net 2,249 856 (1,405)
Income tax expense $ 19,535 $ 32,652 $ 41,386
The tax effects of temporary differences that give rise to significant portions
of the net deferred tax liability at December 31, 1995 and 1994 were as follows:
1995 1994
(In thousands)
Deposits to the CCF $ 252,348 $ 201,963
Tax-deferred gains on real
estate transactions 69,317 68,488
Accelerated depreciation 44,136 111,253
Unrealized holding gains on securities 23,664 17,273
Post-retirement benefits (47,813) (45,209)
Alternative minimum tax benefits (14,264) (6,531)
Insurance reserves (6,766) (1,759)
Capitalized leases (957) 2,409
Other-net (725) (13,292)
Total $ 318,940 $ 334,595
The Internal Revenue Service (IRS) has completed its audits of the Company's tax
returns through 1988 and, with one exception, has settled all issues raised
during such audits. No settlement had a material effect on the Company's
financial position or results of operations. The Company is contesting the
remaining issue, which relates to the timing of a deduction for tax purposes.
The IRS has commenced an audit of the tax returns for 1989 through 1991.
Management believes that the ultimate resolution of any adjustment resulting
from the 1987, 1988 and the current audits will not have a material effect on
the Company's financial position or results of operations.
6. POST-RETIREMENT BENEFIT PLANS
The Company has plans that provide certain retiree health care and life
insurance benefits to substantially all salaried and to certain hourly
employees. Employees are generally eligible for such benefits upon retirement
and completion of a specified number of years of credited service. The Company
does not pre-fund these benefits and has the right to modify or terminate
certain of these plans in the future. Certain groups of retirees pay a portion
of the benefit costs.
The net periodic cost for post-retirement health care and life insurance
benefits during 1995, 1994 and 1993 included the following:
1995 1994 1993
(In thousands)
Service cost $ 1,512 $ 2,149 $ 1,524
Interest cost 7,031 7,825 4,742
Net amortization (1,524) (216) -
Curtailment gain (2,045) - -
Post-retirement benefit cost $ 4,974 $ 9,758 $ 6,266
The unfunded accumulated post-retirement benefit obligation at December 31, 1995
and 1994 is summarized below:
1995 1994
(In thousands)
Accumulated post-retirement benefit obligation:
Retirees $ 56,606 $ 64,619
Fully-eligible active plan
participants 9,073 10,577
Other active plan participants 25,373 30,359
Unrecognized prior service cost 5,676 3,215
Unrecognized net gain 26,862 14,422
Total 123,590 123,192
Current obligation 5,118 6,582
Non-current obligation $ 118,472 $ 116,610
For 1995 and 1994, the weighted average discount rate used in determining the
accumulated post-retirement benefit obligation was 8%, and the assumed health
care cost trend rate used in measuring the accumulated post-retirement benefit
obligation was 10% through 2001, decreasing to 5% thereafter. If the assumed
health care cost trend rate were increased by one percentage point, the
accumulated post-retirement benefit obligation as of December 31, 1995 and 1994
would have increased by approximately $10,405,000 and $12,235,000, respectively,
and the net periodic post-retirement benefit cost for 1995 and 1994 would have
increased by approximately $1,190,000 and $2,153,000, respectively.
7. INVESTMENTS
At December 31, 1995 and 1994, investments principally consisted of marketable
equity securities, limited partnership interests and purchase-money mortgages.
Effective January 1, 1994, the Company adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." The marketable equity
securities are classified as "available for sale" and are stated at quoted
market values. The unrealized holding gain on these securities, net of
deferred income taxes, has been recorded as a separate component of
shareholders' equity.
The components of the net unrealized holding gains at December 31, 1995 and 1994
were as follows:
1995 1994
(In thousands)
Market value $ 73,460 $ 56,312
Less historical cost 9,966 9,966
Unrealized holding gain 63,494 46,346
Less deferred income taxes 23,664 17,273
Net unrealized holding gain $ 39,830 $ 29,073
The investments in limited partnership interests and purchase money mortgages
are recorded at cost, which approximated market values, of $8,786,000 and
$8,601,000 at December 31, 1995 and 1994, respectively. The purchase money
mortgages are intended to be held to maturity. The value of the underlying
investments of the limited partnership interests are assessed annually and are
approximately equal to the original cost.
See Note 11 for a discussion of market values of investments in the Capital
Construction Fund.
8. LONG-TERM DEBT, CREDIT AGREEMENTS
At December 31, 1995 and 1994, long-term debt consisted of the following:
1995 1994
(In thousands)
Commercial paper,
5.83% - 6.19% due 1996 $ 246,437 $ 304,301
Bank revolving credit loans
(1995 high 6.88%, low 5.99%)
due after 1995 40,000 52,500
Term loans:
7.19%, payable through 2007 75,000 75,000
8%, payable through 2000 . 47,500 50,000
9.05%, payable through 1999 27,201 32,611
9%, payable through 1999 .. 21,176 50,000
9.8%, payable through 2004 18,750 20,833
7.65%, payable through 2001 10,000 10,000
11.78%, payable through 1997 1,269 1,848
Mortgage loans, collateralized by land and buildings:
11%, repaid in 1995 - 3,046
12.5%, repaid in 1995 - 2,724
Other, repaid in 1995 - 281
Limited partnership subscription
notes, no interest,
payable through 1996 850 1,700
Total 488,183 604,844
Less current portion 24,794 27,239
Commercial paper classified
as current 83,000 58,000
Long-term debt $ 380,389 $ 519,605
REVOLVING CREDIT FACILITIES: The Company and a subsidiary have a revolving
credit and term loan agreement with five commercial banks, whereby they may
borrow up to $155,000,000, under revolving loans to November 30, 1997, at
varying rates of interest. Any revolving loan outstanding on that date may be
converted into a term loan, which would be payable in 16 equal quarterly
installments. The agreement contains certain restrictive covenants, the most
significant of which requires the maintenance of an interest coverage ratio of
2:1. At December 31, 1995 and 1994, $10,000,000 and $20,000,000, respectively,
were outstanding under this agreement.
The Company and a subsidiary have an uncommitted $45,000,000 short-term
revolving credit agreement with a commercial bank. The agreement extends to
November 30, 1996, but may be canceled by the bank at any time. At December 31,
1995 and 1994, $17,000,000 and $12,500,000, respectively, were outstanding under
this agreement.
In 1994, the Company and a subsidiary entered into an uncommitted $25,000,000
revolving credit agreement with a commercial bank. The agreement extends to
July 18, 1997. At December 31, 1995 and 1994, $13,000,000 and $20,000,000,
respectively, were outstanding under this agreement.
During 1995, a subsidiary entered into a $50,000,000 one-year Revolving Credit
Agreement to replace two previous credit facilities. Up to $25,000,000 of this
agreement serves as a commercial paper liquidity back-up line, with the balance
available for general corporate funds. At December 31, 1995, there were no
amounts outstanding under this agreement.
COMMERCIAL PAPER: At December 31, 1995 there were two commercial paper
programs. The first program was used by a subsidiary to finance the
construction of a vessel, which was delivered in 1992. At December 31, 1995,
$149,437,000 of commercial paper notes was outstanding under this program.
Maturities ranged from 4 to 39 days. The borrowings outstanding under this
program are classified as long-term, because the subsidiary intends to continue
the program indefinitely and eventually to repay the program with qualified
withdrawals from the Capital Construction Fund.
The second commercial paper program is used by a subsidiary to fund the
purchases of sugar inventory from Hawaii sugar growers and to provide working
capital for sugar refining and marketing operations. At December 31, 1995,
$97,000,000 of commercial paper notes was outstanding under this program.
Maturities ranged from 11 to 23 days. The interest cost and certain fees on the
borrowings relating to sugar inventory advances to growers are reimbursed by the
growers. At December 31, 1995, $31,378,000 was outstanding as advances to
growers under this program. Of the total commercial paper borrowing outstanding
at December 31, 1995, $83,000,000 was classified as current. The commercial
paper is supported by a $100,000,000 backup revolving credit facility with six
commercial banks. Both the commercial paper program and the backup facility are
guaranteed by the subsidiary's parent and by the Company.
In 1995, the Company repaid the outstanding commercial paper notes of a third
program which had been used to finance container purchases of the discontinued
container leasing business.
LONG-TERM DEBT MATURITIES: At December 31, 1995, maturities and planned
prepayments of all long-term debt during the next five years totaled $24,794,000
for 1996, $31,967,000 for 1997, $24,453,000 for 1998, $32,616,000 for 1999 and
$19,584,000 for 2000.
9. CAPITAL STOCK AND STOCK OPTIONS
A&B has a stock option plan ("1989 Plan") under which key employees may be
granted stock purchase options and stock appreciation rights. A second stock
option plan for key employees terminated in 1993, but shares previously granted
under the plan are still exercisable. Under the 1989 Plan, option prices may
not be less than the fair market value of a share of the Company's common stock
on the dates of grant, and each option generally becomes exercisable in-full one
year after the date granted. Payment for options exercised, to the extent not
reduced by the application or surrender of stock appreciation rights, may be
made in cash or in shares of the Company's stock. If payment is made in shares
of the Company's stock, the option holder may receive, under a reload feature of
the 1989 Plan, a new stock option for the number of shares equal to that
surrendered, with an option price not less than at the fair market value of the
Company's stock on the date of exercise. During 1995, 527,800 new options were
granted under the 1989 Plan.
The 1989 Plan also permits issuance of shares of the Company's common stock as a
reward for past service rendered to the Company or one of its subsidiaries or as
an incentive for future service with such entities. The recipients' interest in
such shares may be fully vested upon issuance or may vest in one or more
installments, upon such terms and conditions as are determined by the committee
which administers the plan.
The Company also has a Directors' stock option plan, under which each non-
employee Director of the Company, elected at an Annual Meeting of Shareholders,
is automatically granted, on the date of each such Annual Meeting, an option to
purchase 3,000 shares of the Company's common stock at the average fair market
value of the shares for the five consecutive trading days prior to the grant
date. Each option becomes exercisable six months after the date granted. At
December 31, 1995, a total of 171,000 options have been granted under the plan,
3,000 options have been canceled and no options have been exercised.
Changes in shares under all option plans, for the three years ended December 31,
1995, were as follows:
Price Range
Shares Per Share
1993: Granted 423,200 $24.250-24.500
Exercised 23,576) 17.375-24.750
Canceled (73,400) 24.250-36.250
Outstanding, December 31 2,037,128 17.375-37.875
1994: Granted 475,200 24.700-27.000
Exercised (12,300) 17.375-24.750
Canceled (55,996) 24.250-36.250
Outstanding, December 31 2,444,032 17.375-37.875
1995: Granted 551,800 21.750-22.500
Exercised (23,550) 17.375-24.750
Canceled (385,531) 24.250-36.250
Outstanding, December 31
(2,045,051 exercisable) 2,586,751 $17.375-37.875
Options outstanding at December 31, 1995 include 60,166 shares that carry stock
appreciation rights which expire in 1997. The outstanding options do not have a
material dilutive effect in the calculation of earnings per share of common
stock.
The Company has a Shareholder Rights Plan, designed to protect the interests of
shareholders in the event an attempt is made to acquire the Company. The rights
initially will trade with the Company's outstanding common stock and will not be
exercisable absent certain acquisitions or attempted acquisitions of specified
percentages of such stock. If exercisable, the rights generally entitle
shareholders to purchase additional shares of the Company's stock or shares of
an acquiring company's stock at prices below market value.
10. RELATED PARTY TRANSACTIONS, COMMITMENTS AND CONTINGENCIES
At December 31, 1995, the Company and its subsidiaries had an unspent balance of
total appropriations for capital expenditures of approximately $216,971,000.
However, there is no contractual obligation to spend this entire amount. Of
this amount, $155,500,000 is for the planned vessels described in Note 12.
A subsidiary has arranged for standby letters of credit of approximately
$13,800,000, necessary to qualify as a self-insurer for state and federal
workers' compensation liabilities.
A subsidiary has received a favorable court judgment resulting from a contested
insurance claim. The claim was for reimbursement of certain expenses incurred
by the subsidiary in connection with repairing port facilities damaged by a 1989
earthquake. Although the award has been appealed, management and its outside
counsel believe that the ultimate outcome of this litigation will be an award at
least equal to the claim recorded in the financial statements.
A subsidiary is a party, acting as the steam host, to a Steam Purchase Agreement
with a developer which has received regulatory authority approval to construct
and operate a cogeneration facility contiguous to the subsidiary's California
refinery. The agreement provides that, during the 30-year period of the
agreement, the subsidiary will receive steam necessary for refinery operations
at a reduced price, compared to the market price of fuel which presently must be
purchased to generate its steam requirements.
A subsidiary is party to a long-term sugar supply contract with Hawaiian Sugar &
Transportation Cooperative (HSTC), a raw sugar marketing and transportation
cooperative owned by two other subsidiaries and by the other Hawaii sugar
growers. Under the terms of this contract, the subsidiary is obligated to
purchase, and HSTC is obligated to sell, all of the raw sugar delivered to HSTC
by the Hawaii sugar growers, at prices determined by the quoted domestic sugar
market. The subsidiary made purchases of raw sugar totaling $158,284,000 and
$271,212,000 under the contract during 1995 and 1994, respectively. The
contract also requires that the subsidiary provide cash advances to HSTC prior
to the physical receipt of the sugar at its refineries (see Note 8). Such
advances are determined by the estimated raw sugar market prices. Amounts due
to HSTC are credited against outstanding advances to HSTC upon delivery of raw
sugar to the subsidiary's refineries.
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.
11. CAPITAL CONSTRUCTION FUND
A subsidiary is party to an agreement with the United States Government which
established a Capital Construction Fund (CCF) under provisions of the Merchant
Marine Act, 1936, as amended. The agreement has program objectives for the
acquisition, construction or reconstruction of vessels and for repayment of
existing vessel indebtedness. Deposits to the CCF are limited by certain
applicable earnings. Such deposits are not subject to Federal income taxes in
the year earned, but are taxable, with interest payable from the year of
deposit, if withdrawn for general corporate purposes or other non-qualified
purposes, or upon termination of the agreement. Qualified withdrawals for
investment in vessels having adequate tax bases do not give rise to a current
tax liability, but reduce the depreciable bases of the vessels or other assets
for income tax purposes. Amounts deposited into the CCF are preference items
for inclusion in Federal alternative minimum taxable income. Deposits not
committed for qualified purposes within 25 years from December 31, 1986, or
later date of deposit, will be treated as non-qualified withdrawals. As of
December 31, 1995, the oldest CCF deposits date from 1987. Management believes
that all amounts deposited in the CCF at the end of 1995 will be used or
committed for qualified purposes prior to the expiration of the 25-year period.
Under the terms of the CCF agreement, the subsidiary may designate certain
qualified earnings as "accrued deposits" or may designate, as obligations of the
CCF, qualified withdrawals to reimburse qualified expenditures initially made
with operating funds. Such accrued deposits to and withdrawals from the CCF are
reflected on the balance sheet either as an obligation of the Company's current
assets or as a receivable from the CCF.
As discussed in Note 7, in 1994 the Company adopted the provisions of SFAS No.
115. The Company has classified its investments in the CCF as "held-to-
maturity" and, accordingly, has not reflected temporary unrealized market gains
and losses in the Balance Sheets or Statements of Income. The long-term nature
of the CCF program supports the Company's intention to hold these investments to
maturity.
At December 31, 1995 and 1994, the balances on deposit in the CCF are summarized
in Table 1.
TABLE 1 (In thousands)
1995
Amortized Fair Unrealized
Cost Value Gain(Loss)
Mortgage-backed securities $ 95,156 $ 91,132 $ (4,024)
Cash and cash equivalents 215,823 215,856 33
Treasury notes - - -
Accrued deposits 6,233 6,233 -
Total $ 317,212 $ 313,221 $ (3,991)
1994
Amortized Fair Unrealized
Cost Value Loss
Mortgage-backed securities $ 108,247 $ 96,678 (11,569)
Cash and cash equivalents 64,263 64,263 -
Treasury notes 2,984 2,984 -
Accrued deposits 550 550 -
Total $ 176,044 $ 164,475 $ (11,569)
Fair value of the mortgage-backed securities ("MBS") was determined by an
outside investment management company, based on the experience of trading
identical or substantially similar securities. No central exchange exists for
these securities; they are traded over-the-counter.
At the end of 1995, the fair value of the Company's investments in MBS is less
than amortized cost, due to interest rate sensitivity inherent in the fair value
determination of such securities. While an unrealized market loss exists, the
Company intends to hold these investments to maturity, which ranges from 1996
through 2024. The MBS have a weighted average life of approximately six years,
based on information currently available to the Company. The Company earned
$7,655,000 in 1995, $8,292,000 in 1994, and $7,218,000 in 1993 on its
investments in MBS.
Fair values of the remaining CCF investments were based on quoted market prices,
if available. If a quoted market price was not available, fair value was
estimated, using quoted market prices of similar securities and investments.
These remaining investments mature in 1996.
During 1995 and 1994, there were no sales of securities classified as "held-to-
maturity" included in the CCF.
12. SUBSEQUENT EVENT - VESSEL ACQUISITION
In January 1996, the Company purchased five container ships from American
President Lines, Ltd. (APL) for $155,500,000, of which $145,500,000 was
financed by qualified withdrawals from the CCF.
The Company intends to use four of these container ships and one existing fleet
unit in a joint service with APL, between the United States West Coast and
Hawaii, Korea, Japan and Guam. The Company will have the full reach of the
vessels on each westbound voyage from the United States West Coast to Hawaii,
Guam, Japan and Korea. APL will take each vessel on time charter in Korea and
redeliver the vessel at the end of its eastbound voyage on the United States
West Coast. APL will reimburse the Company for vessel operating costs incurred
while under time charter to APL. The Company expects to commence the joint
service with APL in February 1996.
13. INDUSTRY SEGMENTS
Industry segment information for 1995, 1994 and 1993, on page 28, is
incorporated herein by reference. Segments are:
Ocean transportation -- carrying freight between various U.S. and Canadian West
Coast, Hawaii and Western Pacific ports, and providing terminal services.
Property development and management -- developing, managing and selling
residential, commercial and industrial properties.
Food products -- growing, processing and marketing sugar, molasses and coffee,
and generating and selling electricity.
As discussed in Note 4, the net assets of the container leasing segment were
sold in 1995.
EXIBIT B
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
FINANCIAL DATA SCHEDULE
DECEMBER 31, 1995
(In thousands)
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATING BALANCE SHEET AND CONSOLIDATING INCOME
STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
Item No. Caption Heading
1 Total Assets $1,782,759
2 Total Operating Revenues $988,043
3 Net Income $55,755