PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
The condensed financial statements and notes for the first quarter of 1996 are
presented below.
CONDENSED STATEMENTS OF INCOME
(In thousands except per share amounts)
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
Three Months Ended
March 31
1996 1995
------ ------
(unaudited)
Revenue:
Net sales, revenue from services and rentals $253,719 $239,541
Interest, dividends and other 5,257 6,181
-------- --------
Total revenue 258,976 245,722
-------- --------
Costs and Expenses:
Costs of goods sold, services and rentals 211,529 200,233
Selling, general and administrative 27,313 28,812
Interest 9,110 8,517
Interest capitalized (300) (1,065)
Income taxes 4,133 3,271
-------- --------
Total costs and expenses 251,785 239,768
-------- --------
Income from Continuing Operations 7,191 5,954
Income from Discontinued Operations of Matson
Leasing Co. (net of interest and applicable
income taxes) (Note e) - 2,606
-------- --------
Net Income $ 7,191 $ 8,560
======== ========
Earnings Per Share
Continuing Operations $ 0.16 $ 0.13
Discontinued Operations - 0.06
-------- --------
Total $ 0.16 $ 0.19
======== ========
Dividends Per Share $ 0.22 $ 0.22
Average Number of Shares Outstanding 45,305 45,643
INDUSTRY SEGMENT DATA
(In thousands)
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
Three Months Ended
March 31
1996 1995
------ ------
(unaudited)
Revenue:
Ocean Transportation $152,222 $145,042
Property Development and Management:
Leasing 8,888 8,081
Sales 2,161 4,121
Food Products 95,040 87,797
Other 665 681
-------- --------
Total $258,976 $245,722
======== ========
Operating Profit: (1)
Ocean Transportation $ 17,613 $ 17,102
Property Development and Management:
Leasing 5,942 5,474
Sales 232 1,696
Food Product (888) (3,842)
Other 613 613
-------- --------
Total $ 23,512 $ 21,043
======== ========
(1) Before interest expense, corporate expenses and income taxes
CONDENSED BALANCE SHEETS
(In thousands)
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
March 31 December 31
1996 1995
-------- -----------
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 19,174 $ 32,150
Accounts and notes receivable, net 155,143 146,767
Inventories 94,928 86,106
Real estate held for sale 26,885 23,550
Deferred income taxes 11,439 11,439
Prepaid expenses and other 21,981 13,413
Accrued deposits to Capital Construction Fund (6,270) (6,233)
---------- ----------
Total current assets 323,280 307,192
---------- ----------
Investments 76,449 82,246
---------- ----------
Real Estate Developments 57,315 56,104
---------- ----------
Property, at cost 1,919,413 1,753,906
Less accumulated depreciation and amortization 803,161 780,392
---------- ----------
Property - net 1,116,252 973,514
---------- ----------
Capital Construction Fund 174,545 317,212
---------- ----------
Other Assets 46,647 46,491
---------- ----------
Total $1,794,488 $1,782,759
========== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 36,785 $ 35,855
Short-term commercial paper borrowing 83,000 83,000
Accounts payable 34,123 30,916
Other 72,269 73,022
---------- ----------
Total current liabilities 226,177 222,793
---------- ----------
Long-term Liabilities:
Long-term debt 396,048 380,389
Capital lease obligations 20,576 24,186
Post-retirement benefit obligations 119,205 118,472
Other 55,757 56,862
---------- ----------
Total long-term liabilities 591,586 579,909
---------- ----------
Deferred Income Taxes 331,187 330,379
---------- ----------
Shareholders' Equity:
Capital stock 37,137 37,133
Additional capital 40,657 40,138
Unrealized holding gains on securities 37,506 39,830
Retained earnings 543,611 546,394
Cost of treasury stock (13,373) (13,817)
---------- ----------
Total shareholders' equity 645,538 649,678
---------- ----------
Total $1,794,488 $1,782,759
========== ==========
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
Three Months Ended
March 31
1996 1995
------ ------
(unaudited)
Cash Flows from Continuing Operating Activities $ 5,635 $ 7,613
--------- ---------
Cash Flows from Continuing Investing Activities:
Capital expenditures (166,347) (14,328)
Proceeds from disposal of property,
investments and other assets 2,129 69
Deposits into Capital Construction Fund (2,796) (2,361)
Withdrawals from Capital Construction Fund 145,500 -
Increase in investments - (1,560)
--------- ---------
Net cash used in continuing investing activities (21,514) (18,180)
--------- ---------
Cash Flows from Continuing Financing Activities:
Proceeds from issuances of long-term debt 26,000 33,000
Payments of long-term debt (13,244) (8,176)
Proceeds from issuances of short-term
commercial paper - 20,884
Proceeds from issuances of capital stock 117 -
Repurchases of capital stock - (5,337)
Dividends paid (9,970) (10,046)
------- ---------
Net cash provided by continuing financing
activities 2,903 30,325
------- ---------
Net Increase (Decrease) in Cash and Cash
Equivalents from Continuing Operations ($12,976) $ 19,758
======== =========
Net Decrease in Cash and Cash
Equivalents from Discontinued Operations - ($ 7,488)
======== =========
Other Cash Flow Information - Continuing Operations:
Interest paid, net of amounts capitalized $ 8,529 $ 7,191
Income taxes paid, net of refunds 2,501 730
Other Non-Cash Information - Continuing Operations:
Accrued deposits to Capital Construction
Fund, net of accrued withdrawals 37 175
Depreciation 21,745 21,136
FINANCIAL NOTES
(Unaudited)
(a) The condensed balance sheet as of March 31, 1996 and the condensed
statements of income and the condensed statements of cash flows for the
three months ended March 31, 1996 and 1995 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. In the
opinion of management, all material adjustments necessary for the fair
presentation of interim period results have been included in the interim
financial statements.
(b) Estimated effective annual income tax rates differ from statutory rates,
primarily due to the dividends-received deductions and various tax
credits.
(c) Certain amounts have been reclassified to conform with current year
presentation.
(d) In June 1995, the Company announced the closure of sugar production at its
McBryde Sugar Company, Limited subsidiary on Kauai. The closure costs of
$8.1 million were recognized in June 1995. Additional discussion of this
matter is included in Item 2 of the current Form 10-Q.
(e) In June 1995, the Company sold the net assets of its container leasing
subsidiary, Matson Leasing Company, Inc., for approximately $361.7 million
in cash, and recognized an after-tax gain of $18 million. Specifically
excluded from the sale were long-term debt and U. S. tax obligations of
the business. Accordingly, the consolidated financial statements for 1995
have been restated to report separately the operating results and cash
flows of the container leasing segment as a discontinued operation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
- ---------------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ------------------------------------------------
FIRST QUARTER EVENTS:
OPERATING RESULTS: Net income for the first quarter of 1996 was $7,191,000, or
$0.16 per share. The net income for the comparable period of 1995 was
$8,560,000, or $0.19 per share. The 1995 first quarter, however, included
$2,606,000, or $0.06 per share, from the operations of Matson Leasing Company,
Inc., the net assets of which were sold in June 1995 (see note `e'' to the
interim condensed financial statements.) Excluding these 1995 earnings, income
from continuing operations in the 1996 first quarter rose 21 percent compared
with the first quarter of 1995.
PACIFIC ALLIANCE SERVICE: As part of its newly formed alliance with American
President Lines, Ltd. (APL), Matson Navigation Company, Inc. (Matson) purchased
one vessel from APL in December 1995 and five vessels from APL in January 1996.
In February 1996, Matson's Guam-Micronesia service was inaugurated.
FOOD PRODUCTS CONCERNS: Cost control initiatives that began during the second
half of 1995 have made a positive contribution to the first quarter 1996
results. Staff reductions and process improvements at the Company's sub-
sidiary, California and Hawaiian Sugar Company, Inc. (C&H), contributed to that
business' first quarter operating profit. Improved demand for refined sugar
products also contributed favorably to the segment's first quarter results.
In June 1995, the Company began the process of winding down the
unprofitable sugar-growing operations at its Kauai plantation. The final
sugarcane harvest has begun and is expected to be completed in September 1996.
An estimated closure cost of $8.1 million was recognized in the second quarter
of 1995. The principal components of this amount were the write-off of the
sugar factory and other sugar-related fixed assets, the write-off of materials
and supplies inventories, severance costs, and increases in self-insurance
medical and workers' compensation accruals. These charges are partially offset
by pension and post-retirement plan curtailment gains. Approximately 200
employees will be laid off during the closure process.
Efforts are continuing to improve the profitability of the Company's
sugar-growing operations on Maui. The 1995 yield decline, which is believed to
have resulted primarily from water and fertilizer deficiencies, is continuing
to impact the 1996 sugarcane harvest. These matters are being addressed, but
the impacts will continue to be felt through the current year's production.
LEGISLATION: Late in the first quarter of 1996, the U.S. Congress passed and,
in April, the President signed, new agricultural legislation called the Federal
Agricultural Improvement and Reform Act. Along with provisions affecting many
crops for the next seven years, the new law made changes to the sugar price-
support mechanisms. These changes included eliminating market allocation
mechanisms, lowering the sugar support by providing for government recourse
loans when imports of raw sugar are below a defined threshold and establishing
a minimum level of raw sugar imports. Although some of these changes will be
beneficial, they fell short of the relief sought by the Company and the cane
sugar refining industry.
The administration of sugar legislation is a critical factor affecting raw
sugar costs for C&H. Since November 1995, the U.S. Department of Agriculture
has raised the sugar import quota three times. The most recent change, on
April 1, 1996, added 220,000 tons, increasing the quota to 2,165,000 tons.
Actual deliveries will depend on the ability of foreign producers to supply the
tonnage. These increases have, however, already resulted in modestly reduced
domestic raw sugar prices, as measured by the No. 14 futures price. Although
lower raw sugar prices negatively impact sugar growers, the potential for
improved sugar refinery margins is very important to the Company's results and
to the future of the Hawaii sugar industry, since C&H is the sole purchaser of
Hawaii-produced raw sugar.
PROFIT IMPROVEMENT INITIATIVES: Also contributing to the first quarter
improvements were the late-1995 staff reductions at the Company's headquarters
and its real-estate business, the freezing of executive salaries, the
elimination of Company-owned executive automobiles and the 1995 relocation of
Matson's customer service operations to Phoenix, Arizona. The planned sale of
the Company's airplane has not yet occurred, but it is being marketed actively.
ECONOMIC CONDITIONS: The outlook for Hawaii's economy remains modestly
encouraging, amid forecasts of slow, but steady, growth. Hawaii's visitor
industry continues to improve, with visitor arrivals at near all-time highs and
hotel occupancy rates up slightly from 1995. Important segments within the
construction industry, however, continue to be depressed, holding economic
growth down and slowing overall recovery. Automobile purchases are down
considerably from previous years, although projections of per capita personal
income anticipates small increases for 1996. The Company does not expect the
Hawaii economy to provide a significant boost to earnings for 1996.
FINANCIAL CONDITION AND LIQUIDITY
The Company's principal liquid resources, comprised of cash and cash
equivalents, trade receivables, sugar inventories and unused lines of credit,
less accrued deposits to the Capital Construction Fund (CCF), totaled $385.4
million at March 31, 1996, a decrease of $17.9 million from December 31, 1995.
The decrease was due primarily to lower amounts available under lines of credit
and lower cash balances, partially offset by higher receivables and increased
sugar inventories. Accounts receivable increased $8.4 million, due primarily
to the commencement of the previously discussed Guam-Micronesia service. Sugar
inventories increased $7.8 million, due to seasonal production at the Company's
Maui plantation, partially offset by a reduction in refined sugar tonnage
carried in inventory at C&H. The $13 million decrease in cash and cash
equivalents was primarily the result of first quarter capital expenditures.
Working capital was $97.1 million at March 31, 1996, an increase of $12.7
million from the comparable amount at the end of 1995. This increase was due
primarily to the previously described increases in receivables and sugar
inventories, partially offset by the decline in cash balances. In addition,
prepaid and other expenses increased $8.6 million from December 31, 1995, due
primarily to an advance payment for the purchase and transportation of foreign
raw sugar to C&H.
RESULTS OF SEGMENT OPERATIONS -
FIRST QUARTER 1996 COMPARED WITH THE FIRST QUARTER 1995
OCEAN TRANSPORTATION revenue of $152.2 million for the first quarter of 1996
was five-percent higher than the 1995 first quarter revenue. Similarly,
operating profit of $17.6 million was three-percent higher than in the first
quarter of 1995. These increases were primarily the result of the new Guam-
Micronesia service, a rate increase for the Hawaii service, operating
improvements and better results for the Pacific Coast Shuttle service,
partially offset by lower Hawaii cargo and automobile volumes, and higher fuel
costs. Total Hawaii service container volume was seven-percent lower than the
container volume in first quarter of 1995, reflecting the continued weaknesses
in certain sectors of Hawaii's economy and the start of an eastbound service
by a competitor in the second half of 1995. Total shipments of automobiles
were 39-percent lower than in the first quarter of 1995.
PROPERTY DEVELOPMENT AND MANAGEMENT - LEASING revenue of $8.9 million for the
first quarter of 1996 was ten-percent higher than the first quarter 1995
revenue and operating profit of $5.9 million was nine-percent higher the 1995
first quarter amount. These increases were due primarily to the contributions
of properties added to the leased property portfolio at midyear in 1995. The
additional leased properties included two retail centers on the Mainland
(Greeley, Colorado and Reno, Nevada) and a Price-Costco ground lease in
Kahului, Maui. Occupancy rates for the Company's mainland United States leased
property portfolio averaged 98 percent for the first quarter of 1996, versus 97
percent for the first quarter of 1995. The Company's Hawaii occupancy rates
averaged 90 percent, versus 89 percent in the first quarter of 1995.
PROPERTY DEVELOPMENT AND MANAGEMENT - SALES revenue of $2.2 million in the
first quarter of 1996 was about $2.0 million lower than in the first quarter of
1995. Likewise, the gross margin on property sales for the first quarter of
1996 was about $1.5 million less than that of the comparable period of 1995.
The mix of property sales in any quarter can be diverse. These sales can
include property sold under threat of condemnation, developed residential real-
estate, commercial properties, developable subdivision lots and undeveloped
land. The sales of undeveloped land and subdivision lots generally provide
greater contribution margins than do the sales of developed and commercial
property, due to the low historical-cost basis of the Company's Hawaii land.
Consequently, property sales revenue trends and the amount of real estate
available for sale are not necessarily indicators of future profitability for
this segment.
During the first quarter of 1996, there were no major industrial property
sales or other large parcel sales, but there were 12 lower-margin residential
subdivision sales. First-quarter 1995 sales included three industrial lots and
ten residential subdivision lots.
FOOD PRODUCTS revenue of $95.0 million for the first quarter of 1996 was eight
percent higher than the revenue reported for the comparable period of 1995.
The first quarter operating loss of $888,000 represented a significant reduc-
tion from the $3.8 million operating loss recorded during the first quarter
of 1995. Sugar refining results improved considerably, due primarily to
increased sales volume, a favorable product sales-mix and cost savings
resulting from the late-1995 business restructuring. Hawaii agribusiness
results were worse than last year, due primarily to the timing of raw sugar
sales.
OTHER ANALYSIS
INTEREST EXPENSE: Reported interest expense for the first quarter of 1996 was
$9.1 million, compared with $8.5 million for the first quarter of 1995.
Current and non-current portions of funded debt and capital lease obligations
totaled $536,409,000 at March 31, 1996, compared with $700,561,000 a year
earlier.
Following the sale of Matson Leasing Company, Inc.'s net assets in 1995, a
significant amount of debt was retired, using the proceeds received from the
sale. For the first quarter of 1995, approximately $3,467,000 of interest was
included as an operating expense of the container leasing business. This 1995
amount is included, net of taxes, as part of income from discontinued
operations. Consequently, the total interest expense of the Company actually
declined by 24 percent for the first quarter of 1996 compared with the first
quarter of 1995, an amount which closely correlates to the 23 percent reduction
in debt levels from March 31, 1995. Average borrowing rates were approximately
6.5 percent and 7 percent, respectively, for the 1996 and 1995 first quarters.
STOCK REPURCHASES: No stock repurchases occurred during the first quarter of
1996.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Company from time to time may make or may have made certain
forward-looking statements, whether orally or in writing, such as
forecasts and projections of the Company's future performance or
statements of management's plans and objectives. These forward-looking
statements may be contained in, among other things, SEC filings such as
this Form 10-Q, press releases made by the Company, and oral statements
made by the officers of the Company. Except for historical information
contained in this Form 10-Q or other written or oral communications,
such communications contain forward-looking statements. These
forward-looking statements involve a number of risks and uncertainties
that could cause actual results to differ materially from those
projected in the statements, including, but not limited to: (1) economic
conditions in Hawaii and elsewhere; (2) market demand; (3) competitive
factors and pricing pressures in the Company's primary markets; (4)
legislative and regulatory environment at the federal, state and local
level; (5) changes in, and manner of administration of, the federal
sugar program; (6) dependence on raw sugar suppliers and other
third-party suppliers; and (7) other risk factors described elsewhere
in this Form 10-Q and from time to time in the Company's filings with
the Securities and Exchange Commission.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------------------------------------------
(a) Exhibits
--------
11. Statement re computation of per share earnings.
27. Financial Data Schedule.
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of l934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALEXANDER & BALDWIN, INC.
---------------------------------
(Registrant)
Date: May 13, 1996 /s/ Glenn R. Rogers
---------------------------------
Glenn R. Rogers
Vice President and Chief
Financial Officer
Date: May 13, 1996 /s/ Thomas A. Wellman
---------------------------------
Thomas A. Wellman
Controller
EXHIBIT INDEX
-------------
11. Statement re computation of per share earnings.
27. Financial Data Schedule.
EXHIBIT 11
ALEXANDER & BALDWIN, INC.
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(In thousands, except per share amounts)
1996 1995
------- -------
Primary Earnings Per Share (a)
Income from continuing operations $7,191 $5,954
Income from discontinued operations - 2,606
------- -------
Net income $7,191 $8,560
======= =======
Average number of shares outstanding 45,305 45,643
Primary earnings per share from ======= =======
continuing operations 0.16 0.13
Primary earnings per share from
discontinued operations - 0.06
------- -------
Primary earnings per share $0.16 $0.19
======= =======
Fully Diluted Earnings Per Share
Income from continuing operations $7,191 $5,954
Income from discontinued operations - 2,606
------- -------
Net income $7,191 $8,560
======= =======
Average number of shares outstanding 45,305 45,643
Effect of assumed exercise of
outstanding stock options 59 9
------- -------
Average number of shares outstanding
after assumed exercise of
outstanding stock options 45,364 45,652
======= =======
Fully diluted earnings per share from
continuing operations 0.16 0.13
Fully diluted earnings per share from
discontinued operations - 0.06
======= =======
Fully diluted earnings per share $0.16 $0.19
======= =======
(a)The computations of primary earnings per share do not include the effects
of assumed exercises of employee stock options because such effects were
immaterial.
5
1,000
3-MOS
DEC-31-1996
MAR-31-1996
(206)
19380
161272
6129
121813
323280
1919413
803161
1794488
226177
396048
0
0
37137
608401
1794488
253719
258976
211529
211529
27313
0
8810
11324
4133
7191
0
0
0
7191
.16
.16
