UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 28, 2004
ALEXANDER & BALDWIN, INC.
(Exact name of registrant as specified in its charter)
Hawaii 0-565 99-0032630
------ ----- ----------
(State or other (Commission (I.R.S. Employer Identification No.)
jurisdiction of File Number)
incorporation)
822 Bishop Street, P. O. Box 3440
Honolulu, Hawaii 96801
----------------------
(Address of principal executive offices and zip code)
(808) 525-6611
--------------
(Registrant's telephone number,
including area code)
Item 2.02. Disclosure of Results of Operations and Financial Condition
- ---------------------------------------------------------------------
Alexander & Baldwin, Inc. issued a press release on October 28, 2004,
announcing its 2004 third quarter consolidated earnings. This information,
attached as Exhibit 99.1, is being furnished to the SEC pursuant to Item 2.02 of
Form 8-K.
(a) Exhibits
--------
99.1 Press Release announcing 2004 third quarter
consolidated earnings issued on October 28, 2004.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Date: October 28, 2004
ALEXANDER & BALDWIN, INC.
By: /s/ Christopher J. Benjamin
---------------------------
Christopher J. Benjamin
Vice President and Chief Financial Officer
For further information, contact:
John B. Kelley, Vice President
Phone 808-525-8422
E-mail: invrel@abinc.com
HOLD FOR RELEASE:
6:30 P.M. EASTERN TIME
Thursday, October 28, 2004
A&B REPORTS 3RD QUARTER 2004 EARNINGS OF $24.8 MILLION
------------------------------------------------------
3rd Quarter Net Income Up 14 Percent
Honolulu (October 28, 2004) -- Alexander & Baldwin, Inc. (NASDAQ:ALEX)
today reported third quarter 2004 net income of $24,800,000, or $0.58 per fully
diluted share. Net income in the third quarter of 2003 was $21,700,000, or $0.52
per fully diluted share. Revenue in the third quarter of 2004 was $384,200,000,
compared with revenue of $316,300,000 in the third quarter of 2003.
Net income for the first nine months of 2004 was $82,000,000, or $1.91
per fully diluted share. For the first nine months of 2003, the Company reported
net income of $62,500,000, or $1.50 per fully diluted share. Revenue in the
first nine months of 2004 was $1,105,000,000, compared with $903,500,000 in the
first nine months of 2003.
COMMENTS ON 3RD QUARTER, OUTLOOK
"Having earned $82 million over the first three quarters of 2004, we
already have surpassed the $81.3 million achieved in all of 2003. Alexander &
Baldwin is having an outstanding year," said Allen Doane, president and chief
executive officer of A&B. "Matson and A&B Properties are achieving results that
have exceeded our expectations. Matson had a particularly strong third quarter,
in spite of rapidly increasing fuel prices and operational difficulties
associated with the widely reported labor shortage problems in Southern
California.
"Although it still is a small part of our transportation business, our
logistics service company, Matson Integrated Logistics, had a more than 50
percent increase in quarterly profitability. The real estate business is doing
quite well, with the commercial leasing portfolio up and property sales about
where we expected them in the quarter. As noted in the second quarter A&B
report, most of the property sales expected to close this year took place in the
first half.
"Several additional comments will provide perspective on the Company's
current and expected performance. First, Matson's results always should be
considered in light of the substantial amount of capital we have committed to
that business. With the addition of two new ships to the Matson fleet in the
past year, our net property committed to the shipping business increased by 40
percent. Although recent results are quite favorable, the capital invested to
achieve those results has grown significantly.
"Matson will be experiencing increased challenges as we decide how best
to provide service to Guam, where our current alliance agreement with APL
expires in early 2006, and in preparing for the entry of an auto carrier
competitor in Hawaii sometime in 2005.
"We cannot predict the level of our future investment in new real
estate projects, though our results over the last few years have been
outstanding. Hawaii's real estate market has recovered in dramatic fashion, but
the resulting demand and competition for Hawaii real estate have made it more
difficult for us to find attractive investments. We were pleased to make two key
investment commitments in the third quarter--to buy a high-rise condominium site
near downtown Honolulu and to increase our equity investment and ownership in
the Kukui'ula project on Kauai, a thousand-acre master planned residential
resort community.
"Hawaii's economy is growing at a healthy rate, which appears
sustainable for the next several years. You can rest assured that the Company
will do all it can to continue to improve and provide value to our customers,
community and to our shareholders."
TRANSPORTATION--OCEAN TRANSPORTATION
- ---------------------------------------------------------------------------
Quarter Ended September 30
- ---------------------------------------------------------------------------
Dollars in Millions 2004 2003 Change
- ---------------------------------------------------------------------------
Revenue $ 215.0 $ 191.6 12%
Operating Profit $ 33.0 $ 25.1 31%
- ---------------------------------------------------------------------------
Volume (Units)
- ---------------------------------------------------------------------------
Hawaii Containers 43,600 41,300 6%
Hawaii Automobiles 32,400 29,900 8%
Guam Containers 4,400 4,700 -6%
- ---------------------------------------------------------------------------
Ocean Transportation revenue of $215.0 million for the third quarter of
2004 was $23.4 million, or 12 percent, higher than the third quarter of 2003.
This increase was due to higher Hawaii container and auto volume, improved
yields and cargo mix, and increases in the bunker fuel surcharge. Total Hawaii
container volume was six percent higher than the third quarter of 2003. Total
Hawaii automobile volume was eight percent higher, the first positive quarterly
comparison of the year. Cargo growth reflects Hawaii's stronger economic growth
and, especially, the continuing high level of construction activity.
Operating profit of $33.0 million was $7.9 million, or 31 percent,
higher than the third quarter of 2003. This improvement was primarily the result
of the factors that increased revenue, plus the absence of an excise tax accrual
that took place in 2003, a gain on the sale of a minority interest in a Puerto
Rico shipping investment, and lower administrative and employee benefit costs.
These positive factors were partially offset by higher fuel costs, higher vessel
operating expenses and higher vessel depreciation due to the two new ship
additions to the Matson fleet. Matson operated one additional ship for most of
the quarter and a second additional ship for part of September to help offset
the effect of shoreside labor shortages in Southern California.
- ------------------------------------------------------------------------------
Nine Months Ended September 30
- ------------------------------------------------------------------------------
Dollars in Millions 2004 2003 Change
- ------------------------------------------------------------------------------
Revenue $ 619.6 $ 577.0 7%
Operating Profit $ 83.0 $ 60.4 37%
- ------------------------------------------------------------------------------
Volume (Units)
- ------------------------------------------------------------------------------
Hawaii Containers 123,700 120,200 3%
Hawaii Automobiles 110,300 109,000 1%
Guam Containers 13,200 13,700 -4%
- ------------------------------------------------------------------------------
Ocean Transportation revenue of $619.6 million for the first nine
months of 2004 was $42.6 million, or seven percent, higher than the first nine
months of 2003. This increase was due to improved yields and cargo mix, higher
Hawaii cargo volume, increases in the fuel surcharge and vessel charters. Hawaii
container cargo rose three percent and automobiles by one percent in the first
nine months of 2004 compared with the first nine months of 2003.
Operating profit of $83.0 million was $22.6 million, or 37 percent,
higher than the first nine months of 2003. This improvement was primarily the
result of the factors that increased revenue, plus the absence of the excise tax
accrual that took place in 2003, lower administrative and employee benefit
costs, and the gain on sale of a minority interest in a Puerto Rico shipping
investment. All of these factors were partially offset by higher fuel costs,
added vessel operating expenses, higher cargo handling costs and depreciation.
TRANSPORTATION--LOGISTICS SERVICES
- ------------------------------------------------------------------------------
Quarter Ended September 30
- ------------------------------------------------------------------------------
Dollars in Millions 2004 2003 Change
- ------------------------------------------------------------------------------
Revenue $ 99.5 $ 60.8 64%
Operating Profit $ 2.2 $ 1.4 57%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Nine Months Ended September 30
- ------------------------------------------------------------------------------
Dollars in Million 2004 2003 Change
- ------------------------------------------------------------------------------
Revenue $ 267.1 $ 169.2 58%
Operating Profit $ 5.8 $ 3.3 76%
- ------------------------------------------------------------------------------
Strong growth in revenue and operating profit for the third quarter and
first nine months of 2004 in the logistics services business was mainly the
result of increased customer volume. That increase was due both to an
acquisition in late 2003 and unit growth in virtually all parts of the
business--domestic, international, highway and airfreight.
PROPERTY DEVELOPMENT & MANAGEMENT--LEASING
- ------------------------------------------------------------------------------
Quarter Ended September 30
- ------------------------------------------------------------------------------
Dollars in Millions 2004 2003 Change
- ------------------------------------------------------------------------------
Revenue $ 20.9 $ 20.3 3%
Operating Profit $ 10.1 $ 9.1 11%
- ------------------------------------------------------------------------------
Occupancy Rates
- ------------------------------------------------------------------------------
Mainland 95% 96% -1%
Hawaii 90% 90% --
- ------------------------------------------------------------------------------
Before removing amounts treated as discontinued operations, property
leasing revenue for the third quarter of 2004 was $600,000, or three percent,
higher than in the third quarter of 2003. Operating profit was $1 million, or 11
percent, higher. Slightly lower occupancies in the Mainland commercial leasing
portfolio were more than offset by higher contributions from replacement
properties and higher rental rates for certain Hawaii properties. Higher
operating profit also was due to those factors, plus higher royalties for
sand-quarry activities on leased acreage and a repair cost incurred in 2003 for
a Honolulu office building.
- ------------------------------------------------------------------------------
Nine Months Ended September 30
- ------------------------------------------------------------------------------
Dollars in Millions 2004 2003 Change
- ------------------------------------------------------------------------------
Revenue $ 62.1 $ 60.0 4%
Operating Profit $ 28.8 $ 27.2 6%
- ------------------------------------------------------------------------------
Occupancy Rates
- ------------------------------------------------------------------------------
Mainland 94% 93% 1%
Hawaii 90% 90% --
- ------------------------------------------------------------------------------
Before removing amounts treated as discontinued operations, growth in
property leasing revenue and operating profit in the first nine months of 2004
reflected higher occupancies in the Mainland commercial leasing portfolio,
higher rental rates and quarry royalties, higher contributions from replacement
properties and the 2003 repair cost mentioned above.
PROPERTY DEVELOPMENT & MANAGEMENT--SALES
- -----------------------------------------------------------------------------
Quarter Ended September 30
- -----------------------------------------------------------------------------
Dollars in Millions 2004 2003 Change
- -----------------------------------------------------------------------------
Revenue $ 11.6 $ 10.4 12%
Operating Profit $ 2.5 $ 2.6 -4%
- -----------------------------------------------------------------------------
As anticipated, sales in the third quarter were below the pace of
2004's first and second quarters. A significant portion of the sales expected
during 2004 took place in the first half of the year.
Sales during the third quarter of 2004 included seven floors of an
office condominium for $7.6 million and three Maui and Oahu commercial lots for
a total of $2.8 million. By comparison, sales during the third quarter of 2003
included the sales of 15 resort residential lots on Maui for $5.6 million and
six commercial lots on Oahu for $3.0 million. Operating profit for 2003 also
included the Company's share of earnings in two real estate joint ventures.
- ------------------------------------------------------------------------------
Nine Months Ended September 30
- ------------------------------------------------------------------------------
Dollars in Millions 2004 2003 Change
- ------------------------------------------------------------------------------
Revenue $ 80.0 $ 53.5 50%
Operating Profit $ 34.9 $ 21.1 65%
- ------------------------------------------------------------------------------
Sales during the first nine months of 2004 included 33 Maui and Oahu
commercial properties for $24 million, three residential development parcels for
$13.8 million, 15-1/2 office condominium floors for $17.4 million and 28
residential properties for $23.2 million. Operating profit for 2004 also
included the Company's share of earnings in three real estate joint ventures.
By comparison, sales during the first nine months of 2003 included a
shopping center in Nevada for $23.5 million, 16 Maui and Oahu commercial
properties for $18.3 million, and 23 residential properties for $9.2 million.
Operating profit for 2003 also included the Company's share of earnings in two
real estate joint ventures.
Few property sales are expected during the fourth quarter of 2004.
Although sales activities for inventoried and income-producing property are
ongoing, nearly all of the sales expected to close during 2004 have taken place
already.
There were no sales of property during the third quarter of 2004 or
2003 that resulted in discontinued operations. Leasing revenue and operating
profit for the two quarters included one commercial property in California that
the Company intends to sell.
Discontinued operations for the first nine months of 2004 included the
sale, for $1.0 million, of a Maui property and the leasing income from the
above-mentioned commercial property in California. Sales in 2003 that were
classified as discontinued operations included the sales of the Nevada property
and five commercial properties on Maui.
FOOD PRODUCTS
- ------------------------------------------------------------------------------
Quarter Ended September 30
- ------------------------------------------------------------------------------
Dollars in Millions 2004 2003 Change
- ------------------------------------------------------------------------------
Revenue $ 38.3 $ 33.6 14%
Operating Profit $ 0.6 $ 0.4 50%
- ------------------------------------------------------------------------------
Tons Sugar Produced 77,500 68,600 13%
- ------------------------------------------------------------------------------
Food Products revenue rose $4.7 million, or 14 percent, in the third
quarter of 2004 compared with 2003, due mainly to higher raw sugar production
and sales, and continued higher power sales. In an effort to recover from the
production shortfall of 22,700 tons in the first half of the year, about 8,900
more tons of raw sugar were harvested in this year's third quarter. The benefit
of greater sugar sales volume was offset, in part, by sugar prices that were
about seven percent below 2003.
Operating profit for the third quarter of 2004 was low, but it exceeded
the third quarter of 2003. The margin on 2004 raw sugar sales is very low, due
to unit costs that anticipate low full-year production and increasing costs.
- -------------------------------------------------------------------------------
Nine Months Ended September 30
- -------------------------------------------------------------------------------
Dollars in Millions 2004 2003 Change
- -------------------------------------------------------------------------------
Revenue $ 80.6 $ 83.6 -4%
Operating Profit $ 3.5 $ 4.6 -24%
- -------------------------------------------------------------------------------
Tons Sugar Produced 142,400 156,200 -9%
- -------------------------------------------------------------------------------
Food Products revenue and operating profit declined in first nine
months of 2004 compared with 2003, due mainly to nine-percent lower sugar
production and low sales prices. The benefits of higher electrical power sales
and prices, and stronger food-grade sugar and roasted coffee sales were more
than outweighed by the lower raw sugar production and sales prices. Sugar
production for 2004 was affected adversely early in the year by wet field
conditions and poorly burnt cane. First nine-month power sales of $10.7 million
were 56 percent higher than the first nine months of 2003.
Full-year 2004 operating profit for Food Products still is expected to
be less than the $5 million booked last year due to the lower raw sugar
production and continuing low sugar prices. 2004 production could drop about
five percent below the 206,000 tons produced in 2003.
CORPORATE EXPENSE
Corporate expenses rose by $3.3 million between the third quarter of
2003 and the comparable period of 2004, and by $4.1 million over the first nine
months of both years. The increases were due principally to expenses of
Sarbanes-Oxley compliance preparations and also to an increase in incentive
bonus accruals.
BALANCE SHEET COMMENTS
During the third quarter of 2004, Matson took delivery of a new vessel.
Subsequent and related to the delivery and financing of the ship, Matson retired
$100 million of commercial paper notes. The combination of those steps accounts
for virtually all of the $140 million reduction in the capital construction fund
balance and the $100 million reduction in long-term debt.
CASH FLOW COMMENTS
Comparing the first nine months of 2004 with that of 2003, operating
cash flows increased by $9 million. The net $140 million withdrawn from the
capital construction fund and the net $78 million decrease in debt also reflect
the ship delivery, financing and the retirement of commercial paper.
Alexander & Baldwin, Inc., headquartered in Honolulu, is engaged in ocean
transportation and intermodal services, through its subsidiaries, Matson
Navigation Company, Inc. and Matson Integrated Logistics, Inc.; in property
development and management, through A&B Properties, Inc.; and in food products,
through Hawaiian Commercial & Sugar Company and Kauai Coffee Company, Inc.
Additional information about A&B may be found at its web site:
www.alexanderbaldwin.com. Statements in this press release that are not
historical facts are "forward-looking statements," within the meaning of the
Private Securities Litigation Reform Act of 1995, that involve a number of risks
and uncertainties that could cause actual results to differ materially from
those contemplated by the relevant forward-looking statement. These
forward-looking statements are not guarantees of future performance. This
release should be read in conjunction with our Annual Report on Form 10-K and
our other filings with the SEC through the date of this release, which identify
important factors that could affect the forward-looking statements in this
release.
ALEXANDER & BALDWIN, INC.
-------------------------
2004 and 2003 Third-Quarter and Nine-Months Results
---------------------------------------------------
2004 2003
---- ----
Three Months Ended September 30
-------------------------------
Revenue $384,200,000 $316,300,000
Income From Continuing Operations $24,600,000 $21,500,000
Discontinued Operations: Properties1 $200,000 $200,000
Net Income $24,800,000 $21,700,000
Basic Share Earnings
Continuing Operations $0.58 $0.52
Net Income $0.58 $0.52
Diluted Share Earnings
Continuing Operations $0.58 $0.52
Net Income $0.58 $0.52
Average Shares Outstanding 42,500,000 41,600,000
Diluted Average Shares Outstanding 43,000,000 41,900,000
Nine Months Ended September 30:
------------------------------
Revenue $1,105,000,000 $903,500,000
Income From Continuing Operations $80,600,000 $50,700,000
Discontinued Operations: Properties1 $1,400,000 $11,800,000
Net Income $82,000,000 $62,500,000
Basic Share Earnings
Continuing Operations $1.90 $1.22
Net Income $1.93 $1.51
Diluted Share Earnings
Continuing Operations $1.88 $1.22
Net Income $1.91 $1.50
Average Shares Outstanding 42,500,000 41,500,000
Diluted Average Shares Outstanding 43,000,000 41,700,000
1 "Discontinued Operations: Properties" consists of sales, or intended sales,
of certain lands and buildings that are material and have separately
identifiable earnings and cash flows.
Industry Segment Data, Net Income
---------------------------------
(In Millions, Except Per Share Amounts, Unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
September 30, September 30,
------------- -------------
2004 2003 2004 2003
---- ---- ---- ----
Revenue:
- --------
Transportation
Ocean Transportation $ 215.0 $ 191.6 $ 619.6 $ 577.0
Logistics Services 99.5 60.8 267.1 169.2
Property Development & Management
Leasing 20.9 20.3 62.1 60.0
Sales 11.6 10.4 80.0 53.5
Less Amounts Reported In
Discontinued Operations (0.4) (0.4) (2.3) (39.8)
Food Products 38.3 33.6 80.6 83.6
Inter-segment Revenue (0.7) - (2.1) -
---------- ---------- ---------- ----------
Total Revenue $ 384.2 $ 316.3 $ 1,105.0 $ 903.5
========== ========== ========== ==========
Operating Profit, Net Income:
- -----------------------------
Transportation
Ocean Transportation $ 33.0 $ 25.1 $ 83.0 $ 60.4
Logistics Services 2.2 1.4 5.8 3.3
Property Development & Management
Leasing 10.1 9.1 28.8 27.2
Sales 2.5 2.6 34.9 21.1
Less Amounts Reported In
Discontinued Operations (0.3) (0.3) (2.2) (19.0)
Food Products 0.6 0.4 3.5 4.6
---------- ---------- ---------- ----------
Total Operating Profit 48.1 38.3 153.8 97.6
Interest Expense (3.1) (3.1) (9.5) (8.1)
Corporate Expenses (5.3) (2.0) (14.3) (10.2)
---------- ---------- ---------- ----------
Income From Continuing Operations
Before Income Taxes 39.7 33.2 130.0 79.3
Income Taxes (15.1) (11.7) (49.4) (28.6)
---------- ---------- ---------- ----------
Income From Continuing Operations 24.6 21.5 80.6 50.7
Discontinued Operations: Properties 0.2 0.2 1.4 11.8
---------- ---------- ---------- ----------
Net Income $ 24.8 $ 21.7 $ 82.0 $ 62.5
========== ========== ========== ==========
Basic Earnings Per Share, Continuing Operations $ 0.58 $ 0.52 $ 1.90 $ 1.22
Basic Earnings Per Share, Net Income $ 0.58 $ 0.52 $ 1.93 $ 1.51
Diluted Earnings Per Share, Net Income $ 0.58 $ 0.52 $ 1.91 $ 1.50
Average Shares 42.5 41.6 42.5 41.5
Diluted Shares 43.0 41.9 43.0 41.7
Consolidated Balance Sheets
---------------------------
(In Millions)
September 30, December 31,
------------- ------------
2004 2003
---- ----
(Unaudited)
ASSETS
Current Assets $ 288 $ 247
Investments 100 68
Real Estate Developments 74 77
Property, Net 1,150 1,079
Capital Construction Fund 25 165
Other Assets 123 124
----------- -----------
Total $ 1,760 $ 1,760
=========== ===========
LIABILITIES & EQUITY
Current Liabilities $ 239 $ 183
Long-Term Debt 230 330
Post-Retirement Benefit Obligs. 45 44
Other Long-Term Liabilities 36 36
Deferred Income Taxes 334 356
Shareholders' Equity 876 811
----------- -----------
Total $ 1,760 $ 1,760
=========== ===========
Consolidated Statements of Cash Flows
-------------------------------------
(In Millions)
Nine Months Ended
-----------------
September 30,
-------------
2004 2003
---- ----
(Unaudited)
Operating Cash Flows $ 124 $ 115
Capital Expenditures (135) (130)
CCF Withdrawals, Net 140 38
Proceeds From Issuance of
(Payment of) Debt, Net (78) 93
Repurchases of Capital Stock (2) -
Dividends Paid (29) (28)
All Other, Net 9 (64)
----------- -----------
Increase/(Decrease) In Cash $ 29 $ 24
=========== ===========
Depreciation $ (59) $ (52)
=========== ===========