- -----------------------------

The condensed financial statements and notes for the first quarter of 1997 are
presented below.

                         CONDENSED STATEMENTS OF INCOME
                    (In thousands except per share amounts)

Three Months Ended March 31 1997 1996 -------- -------- (unaudited) Revenue: Net sales, revenue from services and rentals $271,192 $253,719 Interest, dividends and other 25,060 5,257 -------- -------- Total revenue 296,252 258,976 -------- -------- Costs and Expenses: Costs of goods sold, services and rentals 227,791 211,529 Selling, general and administrative 26,555 27,313 Interest 7,942 8,810 Income taxes 12,739 4,133 -------- -------- Total costs and expenses 275,027 251,785 -------- -------- Net Income $ 21,225 $ 7,191 ======== ======== Earnings Per Share $ 0.47 $ 0.16 Dividends Per Share $ 0.22 $ 0.22 Average Number of Shares Outstanding 45,311 45,305
Three Months Ended March 31 1997 1996 -------- -------- (unaudited) Revenue: Ocean Transportation $181,120 $152,222 Property Development and Management: Leasing 9,116 8,888 Sales 4,111 2,161 Food Products 101,188 95,040 Other 717 665 -------- -------- Total $296,252 $258,976 ======== ======== Operating Profit: (1) Ocean Transportation $ 34,050 $ 17,613 Property Development and Management: Leasing 6,234 5,942 Sales 1,580 232 Food Products 2,119 (888) Other 663 613 -------- -------- Total $ 44,646 $ 23,512 ======== ======== (1) Before interest expense, corporate expenses and income taxes
March 31 December 31 1997 1996 -------- ----------- (unaudited) ASSETS Current Assets: Cash and cash equivalents $ 55,859 $ 23,824 Accounts and notes receivable, net 155,708 172,266 Inventories 142,319 102,722 Real estate held for sale 16,550 17,383 Deferred income taxes 17,548 17,708 Prepaid expenses and other 11,591 12,114 Accrued deposits to Capital Construction Fund (21,559) (1,656) ---------- ---------- Total current assets 378,016 344,361 ---------- ---------- Investments 87,632 91,602 ---------- ---------- Real Estate Developments 66,612 70,144 ---------- ---------- Property, at cost 1,947,706 1,927,058 Less accumulated depreciation and amortization 884,957 864,002 ---------- ---------- Property - net 1,062,749 1,063,056 ---------- ---------- Capital Construction Fund 201,427 178,616 ---------- ---------- Other Assets 46,850 52,843 ---------- ---------- Total $1,843,286 $1,800,622 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 44,994 $ 44,082 Short-term commercial paper borrowings 71,000 62,000 Accounts payable 53,644 50,496 Other 85,943 86,352 ---------- ---------- Total current liabilities 255,581 242,930 ---------- ---------- Long-term Liabilities: Long-term debt 367,170 345,618 Capital lease obligations 7,488 12,039 Post-retirement benefit obligations 116,522 116,047 Other 51,875 48,747 ---------- ---------- Total long-term liabilities 543,055 522,451 ---------- ---------- Deferred Income Taxes 354,825 350,913 ---------- ---------- Shareholders' Equity: Capital stock 37,065 37,150 Additional capital 46,041 43,377 Unrealized holding gains on securities 44,386 48,205 Retained earnings 575,230 568,969 Cost of treasury stock (12,897) (13,373) ---------- ---------- Total shareholders' equity 689,825 684,328 ---------- ---------- Total $1,843,286 $1,800,622 ========== ==========
Three Months Ended March 31 1997 1996 -------- -------- (unaudited) Cash Flows from Operating Activities $ 30,650 $ 5,635 -------- -------- Cash Flows from Investing Activities: Capital expenditures (8,044) (166,347) Proceeds from disposal of property, investments and other assets 86 2,129 Deposits into Capital Construction Fund (2,908) (2,796) Withdrawals from Capital Construction Fund - 145,500 Increase in investments (1,797) - -------- -------- Net cash used in investing activities (12,663) (21,514) -------- -------- Cash Flows from Financing Activities: Proceeds from issuances of long-term debt 34,500 26,000 Payments of long-term debt (16,672) (13,244) Proceeds of short-term commercial paper borrowings - net 9,000 - Proceeds from issuances of capital stock 363 117 Repurchases of capital stock (3,169) - Dividends paid (9,974) (9,970) -------- -------- Net cash provided by financing activities 14,048 2,903 -------- -------- Net Increase (Decrease) in Cash and Cash Equivalents $ 32,035 $(12,976) ======== ======== Other Cash Flow Information: Interest paid, net of amounts capitalized $ 7,892 $ 8,529 Income taxes paid, net of refunds 1,076 2,501 Other Non-Cash Information: Net accrued deposits to Capital Construction Fund 19,903 37 Depreciation 22,729 21,745 Tax-deferred property exchanges 1,558 - Decrease in unrealized holding gains (3,819) (2,324)
FINANCIAL NOTES (Unaudited) (a) The condensed balance sheet as of March 31, 1997 and the condensed statements of income and the condensed statements of cash flows for the three months ended March 31, 1997 and 1996 are unaudited. Because of the nature of the Company's operations, the results for interim periods are not necessarily indicative of results to be expected for the year, but in the opinion of management, all material adjustments necessary for the fair presentation of interim period results have been included in the interim financial statements. (b) Estimated effective annual income tax rates differ from statutory rates, primarily due to the dividends-received deduction and various tax credits. (c) Statement of Financial Accounting Standards No. 128, "Earnings Per Share," is effective for financial statements for both interim and annual periods ending after December 15, 1997. The Statement will not have a material impact on the Company's computation and presentation of earnings per share. (d) Certain amounts have been reclassified to conform with current year presentation. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS - --------------------------------------------- OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ------------------------------------------------ OPERATING RESULTS Net income for the first quarter of 1997 was $21,225,000, or $0.47 per share. Net income for the comparable period of 1996 was $7,191,000, or $0.16 per share. Net income in the first quarter of 1997 included a net benefit of $12,361,000, or $0.27 per share, resulting from the settlement of a long-standing litigated insurance matter. Excluding this settlement, after-tax income rose 23 percent compared with the first quarter of 1996. FINANCIAL CONDITION AND LIQUIDITY The Company's principal liquid resources, which consist of cash and cash equivalents, receivables, sugar and coffee inventories and unused lines of credit, less accrued deposits to the Capital Construction Fund (CCF), totaled $510,410,000 at March 31, 1997, a decrease of $2,564,000 from December 31, 1996. The decrease was due primarily to lower amounts available under lines of credit, an increase in accrued deposits to the CCF and lower receivables, nearly offset by increased sugar and coffee inventories and higher cash balances. Amounts available under lines of credit decreased $36,001,000, primarily due to increased borrowing for plantation off-season repairs and the purchase of sugar inventory and as a result of fewer subdivision sales. Accrued deposits to the CCF increased $19,903,000. Receivables decreased $16,558,000, due principally to Matson Navigation Company, Inc.'s (Matson) receipt of the insurance proceeds, a portion of which had been accrued in 1996. Sugar and coffee inventories increased $37,863,000, due principally to the timing of raw sugar purchases and the inventorying of sugar production costs in the first quarter of 1997. Cash and cash equivalents increased by $32,035,000, due primarily to Matson's receipt of the insurance-litigation proceeds. Working capital was $122,435,000 at March 31, 1997, an increase of $21,004,000 from the amount at the end of 1996. This increase was due primarily to the previously described increases in sugar inventories and cash, partially offset by the increase in accrued deposits to the CCF and lower receivables. RESULTS OF SEGMENT OPERATIONS - FIRST QUARTER 1997 COMPARED WITH THE FIRST QUARTER 1996 OCEAN TRANSPORTATION revenue of $181,120,000 for the first quarter of 1997 was 19 percent higher than the 1996 first-quarter revenue. Taking into account one-time events, operating profit in the first quarter of 1997 of $34,050,000 was nearly double that of the first quarter of 1996. This year, the settlement of litigation, arising from earthquake damage in 1989 to Matson's Oakland terminal, contributed $19,937,000, net of repair expenses and litigation costs, to operating profit. Last year, interim bareboat chartering of vessels to APL Limited, prior to the commencement of Matson's Guam service, contributed $5,634,000 to first-quarter operating profit. This one-time payment compensated the Company for the delays in its obtaining physical possession of certain vessels. Excluding both of these one-time events, ocean transportation operating profit in the first quarter of 1997 increased by 18 percent over the first quarter of 1996. This increase was primarily the result of benefitting from three full months of the Guam service in 1997, versus eight weeks in 1996, higher Hawaii service freight rates and auto volumes, and increased freight volume in the Pacific Coast and Mid-Pacific services. These benefits were partially offset by higher operating costs, due to continued terminal productivity difficulties associated with a 1996 West Coast longshore labor agreement. Hawaii service freight volume was four-percent lower in the first quarter of 1997, while auto volume increased by 12 percent. PROPERTY DEVELOPMENT AND MANAGEMENT - LEASING revenue of $9,116,000 for the first quarter of 1997 was three-percent higher than the first quarter 1996 revenue, and operating profit of $6,234,000 was five-percent higher than the 1996 first-quarter amount. These increases were primarily due to the contribution from properties added to the portfolio in 1996 and early 1997, and higher occupancy in several properties. The additional leased properties included two office buildings in Hawaii (Honolulu, Oahu and Wailuku, Maui) and a retail center in Greeley, Colorado. Year-to-date occupancy rates for the U.S. mainland leased properties averaged 99 percent, versus 98 percent a year ago. Hawaii occupancy rates averaged 82 percent, versus 90 percent in the first quarter of 1996, reflecting the continued weak real estate market in Hawaii and the impact of large discount retailers. Both of these factors have limited the absorption of new and vacant space. PROPERTY DEVELOPMENT AND MANAGEMENT - SALES revenue of $4,111,000 in the first quarter of 1997 compared with $2,161,000 in the comparable period of 1996. Operating profit from property sales in the first quarter of 1997 was $1,580,000, versus $232,000 in the same period in 1996. Among the first-quarter 1997 sales was a one-acre developed lot, which contributed $1,503,000 to operating profit, plus a total of 11 residential subdivision sales. First-quarter 1996 sales consisted primarily of 12 residential subdivision sales. The proceeds from the developed lot sold in the first-quarter of 1997 will be treated as a tax-deferred exchange. No tax-deferred sales were completed in the comparable period of 1996. The mix of property sales in any year can be diverse. Sales can include property sold under threat of condemnation, developed residential real estate, commercial properties, developable subdivision lots and undeveloped land. The sale of undeveloped land and subdivision lots generally provides a greater contribution margin than does the sale of developed and commercial property, due to the low historical-cost basis of the Company's Hawaii land, which averages approximately $150 per acre. Consequently, property sales revenue trends and the amount of real estate held for sale on the condensed balance sheets are not necessarily indicative of future profitability for this segment. FOOD PRODUCTS revenue of $101,188,000 for the first quarter of 1997 was six percent higher than the revenue reported for the comparable period of 1996. Operating profit was $2,119,000 for the first quarter of 1997, versus a loss of $888,000 a year earlier. Sugar refining results improved, due to stronger selling prices, increased sales volume and reduced refining expenses. Hawaii agribusiness results were slightly lower, due primarily to lower sales of electric power. OTHER INSURANCE LITIGATION: Matson received a favorable cash settlement of $33,650,000 on February 13, 1997 for a contested insurance claim in connection with repairing port facilities damaged by a 1989 earthquake. As noted previously, this settlement resulted in additional net income of $12,361,000 in the first quarter of 1997. LEGISLATION: Under the Federal Agriculture Improvement and Reform Act, an initial import quota of 1,874,000 short tons of raw sugar was established. This tonnage will increase or decrease by specified amounts, at scheduled intervals, based upon changes in sugar supply, demand and inventories. During the first quarter of 1997, the import quota was increased by 220,000 short tons to its current level of 2,094,000 short tons. The U.S. Department of Agriculture monitors this program and may, at its discretion, alter the sugar import quota in order to ensure that adequate supplies of raw sugar are available to meet demand. TAX-DEFERRED EXCHANGES: In the first quarter of 1997, the Company sold one parcel of land on Maui for $1,558,000. The proceeds from this sale are reflected in the Condensed Statements of Cash Flows under the caption "Other Non-Cash Information" and are expected to be reinvested in 1997 on a tax- deferred basis. Also, during the quarter, the Company reinvested proceeds of $9,753,000 on a tax-deferred basis from sales completed in 1996. SHARE REPURCHASES: During the first quarter of 1997, the Company repurchased 136,000 shares of its common stock for an aggregate of $3,523,000. In December 1996, the Board of Directors authorized the repurchase of up to 3,000,000 additional shares of the Company's stock. ENVIRONMENTAL MATTERS: As with most industrial and land-development companies of its size, the Company's operations have certain risks which could result in expenditures for environmental remediation. The Company believes that it is in compliance, in all material respects, with applicable environmental laws and regulations, and works proactively to identify potential environmental concerns. Management believes that appropriate liabilities have been accrued for environmental matters. ECONOMIC CONDITIONS: The outlook for Hawaii's economy is only modestly encouraging, amid short-term forecasts of flat economic activity. The apparent recovery in Hawaii's visitor industry may have been jeopardized by the strengthening of the U.S. dollar versus the Japanese yen, which raises the cost of U.S. travel to Japanese visitors. Higher hotel room rates continue; however, this in turn may be contributing to shorter average lengths of stay. The construction industry recently has shown some improvement, with 1996 construction completed increasing for the first time since 1991. Yet, the job count in this industry continues to decline and several major construction projects are winding down. Waikiki hotel renovation and reconstruction activity is anticipated with the pending completion of the Waikiki convention center and retraction of a previous building moratorium. Still, the Company has no basis to expect that Hawaii's economy will provide a significant boost to earnings in 1997. PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 The Company, from time to time, may make or may have made certain forward- looking statements, whether orally or in writing, such as forecasts and projections of the Company's future performance or statements of management's plans and objectives. Such forward-looking statements may be contained in, among other things, Securities and Exchange Commission (SEC) filings such as the 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 these written or oral communications, such communications contain forward- looking statements. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those projected in the statements, including, but not limited to: (1) 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 levels; (5) dependence on raw sugar suppliers and other third-party suppliers; (6) fuel prices; and (7) other risk factors described elsewhere in these communications and from time time in the Company's filings with the SEC. 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, 1997 /s/ Glenn R. Rogers --------------------------------- Glenn R. Rogers Vice President and Chief Financial Officer Date: May 13, 1997 /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, 1997 AND 1996 (In thousands, except per share amounts) - --------------------------------------------------------------------- 1997 1996 ---- ---- Primary Earnings Per Share (a) - -------------------------------------------------- Net income $21,225 $ 7,191 ======= ======= Average number of shares outstanding 45,311 45,305 ======= ======= Primary earnings per share $ 0.47 $ 0.16 ======= ======= Fully Diluted Earnings Per Share - -------------------------------------------------- Net income $21,225 $ 7,191 ======= ======= Average number of shares outstanding 45,311 45,305 Effect of assumed exercise of outstanding stock options 132 59 ------- ------- Average number of shares outstanding after assumed exercise of outstanding stock options 45,443 45,364 ======= ======= Fully diluted earnings per share $ 0.47 $ 0.16 ======= ======= (a) The computations of primary earnings per share do not include the effects of assumed exercises of employee stock options because such effects are immaterial.

5 The schedule contains summary financial information extracted from the condensed balance sheet as of March 31, 1997 and the condensed statement of income for the three months ended March 31, 1997 and is qualified in its entirety by reference to such financial statements. 1000 3-MOS DEC-31-1997 MAR-31-1997 7,077 48,782 161,655 5,947 142,319 378,016 1,947,706 884,957 1,843,286 255,581 367,170 0 0 37,065 652,760 1,843,286 271,192 296,252 227,791 227,791 0 0 7,942 33,964 12,739 21,225 0 0 0 21,225 .47 .47