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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): July 28, 2006
ALEXANDER & BALDWIN, INC.
(Exact name of registrant as specified in its charter)
Hawaii 0-565 99-0032630
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
- ---------------------------- ------------------------ ----------------
of incorporation) Identification No.)
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822 Bishop Street, P. O. Box 3440
Honolulu, Hawaii 96801
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(Address of principal executive office and zip code)
(808) 525-6611
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(Registrant's telephone number, including area code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
_
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
_
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
_
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
_
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition
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Alexander & Baldwin, Inc. issued a press release on July 28, 2006,
announcing its 2006 second 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.
Item 9.01 Financial Statements and Exhibits
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(d) Exhibits
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99.1 Press Release announcing 2006 second quarter
consolidated earnings issued on July 28, 2006.
SIGNATURE
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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 hereunto duly authorized.
Date: July 28, 2006
ALEXANDER & BALDWIN, INC.
/s/ Christopher J. Benjamin
--------------------------------
Christopher J. Benjamin
Senior Vice President,
Chief Financial Officer and Treasurer
For further information, contact:
Christopher J. Benjamin, SVP, Chief Financial Officer & Treasurer
Phone 808-525-8405
E-mail: cbenjamin@abinc.com
HOLD FOR RELEASE:
8:00 A.M. EASTERN DAYLIGHT TIME
Friday, July 28, 2006
A&B REPORTS 2nd QUARTER 2006 NET INCOME OF $30.2 MILLION
Strong Financial and Operating Results
Honolulu (July 28, 2006)--Alexander & Baldwin, Inc. (NASDAQ:ALEX) today
reported that net income for the second quarter of 2006 was $30,200,000, or
$0.68 per fully diluted share. Net income in the second quarter of 2005 was
$29,400,000, or $0.66 per fully diluted share. Revenue in the second quarter of
2006 was $418,200,000, compared with revenue of $391,200,000 in the second
quarter of 2005.
Net income for the first half of 2006 was $67,600,000, or $1.53 per
fully diluted share. Net income in the first half of 2005 was $67,100,000, or
$1.52 per fully diluted share. Revenue in the first half of 2006 was
$779,500,000, compared with revenue of $755,000,000 in the first half of 2005.
COMMENTS ON QUARTER & OUTLOOK
"A&B performed well during the second quarter as measured by financial
results and by progress on major initiatives," said Allen Doane,
chairman and chief executive officer of A&B. "Improved results in our Real
Estate, Logistics and Food Products segments more than offset lower operating
profit in our Ocean Transportation segment, where results, as expected,
reflected the transition from Matson's APL Alliance to the newly launched Guam
and China services. We are on track for a very good 2006, and remain confident
that progress on major real estate development projects and Matson's
trans-Pacific expansion will position the Company for even stronger performance
in the years to come.
"At Matson, second quarter operating profit in the Ocean Transportation
segment was down significantly from last year's exceptional quarter, with
operating profit declining by $14.3 million. However, first half 2006 results
were in line with our annual operating plan and we anticipate comparisons in the
second half of 2006 to be much more favorable, with second half earnings to
approach or perhaps match second half 2005. The logistics segment produced an
outstanding quarter, with positive year-over-year comparisons forecast for the
remainder of 2006.
"In real estate, our commercial property segment recorded a Company
record 98% occupancy across our Hawaii and Mainland US properties. The sales
segment benefited from gains on the sale of two Phoenix area retail centers.
Altogether, real estate quarterly operating profit of $23.1 million was $7.8
million above 2005. We anticipate full-year profitability in our real estate
business will meet or exceed our stated long-term objective of 13-15 percent
annual growth.
"The food products segment performed well in the second quarter, but
profitability is forecasted to be modest for the remainder of the year.
"Two key investment initiatives, Matson's China service and Kukui'ula,
are progressing well. China container volumes have been ramping up nicely,
offsetting lower than planned rates. Service levels from China to Long Beach
have been superior. At Kukui'ula, we remain on schedule for initial sale
closings in the fourth quarter - cash from these sales will help fund
construction of project infrastructure, but the margin on these sales in 2006
will be nominal due to the percentage of completion accounting method.
"With Hawaii residential market conditions in transition, sales volumes
have declined and residential prices appear to be plateauing. Commercial real
estate conditions remain robust. On a broader basis, Hawaii's economy is
forecast to be healthy with continued growth for the rest of the year."
TRANSPORTATION--OCEAN TRANSPORTATION
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Quarter Ended June 30
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Dollars in Millions 2006 2005 Change
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Revenue $ 243.6 $ 221.0 10%
Operating Profit $ 24.4 $ 38.7 -37%
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Volume (Units)
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Hawaii Containers 44,600 44,700 --
Hawaii Automobiles 33,800 43,300 -22%
Guam Containers 3,900 4,200 -7%
China Containers 7,500 - NM
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For the second quarter of 2006, Ocean Transportation revenue of $243.6
million was $22.6 million, or 10 percent, higher than the second quarter of
2005. This increase was due to increases in total service volumes, fuel
surcharge revenues, and improved yields and cargo mix, partially offset by the
loss of charter revenue due to the expiration of the APL Alliance, and lower
volumes in the Hawaii and Guam services. Total Hawaii container volume
was down slightly from the second quarter of 2005, reflecting primarily a
reduction in eastbound volumes, including lower shipments of agricultural
products and lower military-related household good movements. Total Hawaii
automobile volume was down 22 percent for the quarter due primarily to the
impact of reduced auto manufacturer incentives for rental car agencies, which
resulted in lower rental car turnover, as well as competitive pressures.
Operating profit of $24.4 million was $14.3 million, or 37 percent,
lower than in the second quarter of 2005. This reduction was caused by expense
increases that more than offset revenue gains, primarily an increase in vessel
operating and overhead expenses due to higher fuel costs and the China service
startup, and increased terminal handling costs due to higher rates.
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Six Months Ended June 30
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Dollars in Millions 2006 2005 Change
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Revenue $ 462.9 $ 427.2 8%
Operating Profit $ 42.7 $ 68.4 -38%
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Volume (Units)
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Hawaii Containers 86,400 86,100 --
Hawaii Automobiles 65,600 78,900 -17%
Guam Containers 7,700 8,200 -6%
China Containers 9,500 - NM
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For the first half of 2006, Ocean Transportation revenue increased to
$462.9 million, an 8 percent or $35.7 million improvement over the first half of
2005. The increase was primarily due to increased total container volumes,
increases in the fuel surcharge and improvements in yields, offset partially by
the loss of charter revenue. Total Hawaii automobile volume was 17 percent
lower, due primarily to competitive pressures and reduced shipments to rental
agencies as noted above. Guam container volume was 6 percent lower than in the
first half of 2005, due primarily to changes in vessel schedules.
Operating profit of $42.7 million was $25.7 million, or 38 percent,
lower than the first half of 2005. This decrease was primarily the result of
increases in vessel operating and overhead expenses due to higher fuel costs and
the China service startup, along with increased terminal handling costs due to
higher rates. Earnings from Matson's SSAT joint venture were $3.6 million lower
than the first half of 2005, due primarily to a favorable adjustment made during
the first half of 2005. Earnings from this venture are not included in revenue,
but are included in operating profit.
TRANSPORTATION--LOGISTICS SERVICES
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Quarter Ended June 30
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Dollars in Millions 2006 2005 Change
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Revenue $ 116.4 $ 106.6 9%
Operating Profit $ 5.3 $ 3.6 47%
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Logistics services revenue of $116.4 million was $9.8 million, or 9
percent, higher than the second quarter of 2005. The increase was due primarily
to higher volumes in the highway and expedited lines of business and improved
pricing in all lines, partially offset by moderate volume reductions in the
domestic and international intermodal lines.
Operating profit of $5.3 million was $1.7 million or 47 percent higher
than in the comparable period last year. The improvement was due primarily to
growth in higher margin lines of business, improved yields across all lines, and
lower overhead costs as a percentage of revenue.
The operating profit margin for the logistics services business was 4.6
percent in the second quarter of 2006, compared with 4.3 percent in the first
quarter of 2006 and 3.4 percent for the second quarter of 2005. Margin
improvement was due to expansion in the higher-margin highway brokerage
business, improved yield management, and economies of scale.
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Six Months Ended June 30
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Dollars in Millions 2006 2005 Change
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Revenue $ 224.8 $ 202.7 11%
Operating Profit $ 10.0 $ 6.6 52%
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Logistics services revenue of $224.8 million was $22.1 million, or 11
percent, higher than the first half of 2005 for the same reasons cited for the
second quarter. Operating profit of $10.0 million was $3.4 million, or 52
percent, higher for the same reasons as cited for the quarter.
REAL ESTATE--LEASING
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Quarter Ended June 30
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Dollars in Millions 2006 2005 Change
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Revenue $ 24.4 $ 21.3 15%
Operating Profit $ 12.2 $ 10.5 16%
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Occupancy Rates
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Mainland 98% 95% 3%
Hawaii 98% 92% 6%
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Leasable Space (Million sq. ft.)
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Mainland 3.7 3.5 6%
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Hawaii 1.5 1.7 -12%
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Real estate leasing revenue for the second quarter of 2006, measured
before removing amounts treated as discontinued operations, was $24.4 million,
an increase of $3.1 million or 15 percent over the second quarter of 2005.
Operating profit of $12.2 million was $1.7 million or 16 percent higher. The
increases are due primarily to net additions of leased property after the second
quarter of 2005 and improved occupancy rates.
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Six Months Ended June 30
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Dollars in Millions 2006 2005 Change
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Revenue $ 49.0 $ 43.2 13%
Operating Profit $ 24.3 $ 21.2 15%
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Occupancy Rates
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Mainland 97% 95% 2%
Hawaii 98% 91% 7%
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Real estate leasing revenue for the first half of 2006 (before removing
amounts treated as discontinued operations) of $49.0 million was $5.8 million,
or 13 percent, higher than the first half of 2005, while operating profit of
$24.3 million was $3.1 million, or 15 percent, higher. As with quarterly
results, the improved revenue and operating profit resulted primarily from net
property additions and occupancy improvements.
REAL ESTATE--SALES
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Quarter Ended June 30
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Dollars in Millions 2006 2005 Change
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Revenue $ 36.8 $ 14.6 2.5x
Operating Profit $ 10.9 $ 4.8 2.3x
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Real estate sales revenue in the second quarter of 2006 of $36.8
million was $22.2 million, or more than twice the revenue in the second quarter
of 2005. Operating profit of $10.9 million was $6.1 million, or more than twice
the operating profit in the second quarter of 2005. The results reflect the sale
of two Phoenix area retail centers, Carefree Marketplace and Mesa South, for a
combined $35.6 million, and the sale of one commercial parcel on Maui.
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Six Months Ended June 30
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Dollars in Millions 2006 2005 Change
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Revenue $ 60.6 $ 60.5 --
Operating Profit $ 38.0 $ 21.3 78%
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Real estate sales revenue in the first half of 2006 of $60.6 million
was slightly higher than the first half of 2005, while operating profit of $38.0
million was $16.7 million, or 78 percent, higher. First half results reflect
income from investments in joint ventures, primarily the proceeds from the sale
of all 247 residential units at Hokua, which are included in operating profit
but not in revenue. Hokua is a joint venture high-rise residential development
in Honolulu. Other sales during the first half of 2006 consisted primarily of
two Phoenix area retail centers, four commercial parcels, and one office
building on Maui.
Discontinued operations in the first half of 2006 included the sales of
two retail centers in the Phoenix area, an office building on Maui, and several
commercial parcels in Hawaii. In addition, a commercial parcel on Maui has been
classified as a discontinued operation because of A&B's plan to sell the
property. The amounts reported as continuing and discontinued operations in
prior quarters are restated each time a property is designated as discontinued.
FOOD PRODUCTS
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Quarter Ended June 30
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Dollars in Millions 2006 2005 Change
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Revenue $ 37.8 $ 32.2 17%
Operating Profit $ 3.1 $ 0.3 10.3x
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Tons Sugar Produced 61,400 58,400 5%
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Food Products revenue in the second quarter of 2006 of $37.8 million
was $5.6 million, or 17 percent, higher than in the second quarter of 2005,
while operating profit of $3.1 million was $2.8 million, or approximately ten
times higher. Revenue benefited from favorable pricing and volumes on the sales
of both electricity and raw sugar. The improvement in operating profit was
driven primarily by increased pricing and volumes of electricity sales.
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Six Months Ended June 30
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Dollars in Millions 2006 2005 Change
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Revenue $ 53.3 $ 54.6 -2%
Operating Profit $ 9.6 $ 9.3 3%
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Tons Sugar Produced 62,200 77,900 -20%
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Food Products revenue in the first half of 2006 of $53.3 million was
$1.3 million, or 2 percent, lower than in 2005. However, excluding the one-time
$5.5 million federal relief payment received in the first quarter of 2005,
revenue increased $4.2 million or 9 percent. The variance was due, among other
factors, to higher electricity sales, sugar prices and specialty sugar sales,
offset partially by lower raw sugar sales volumes. Operating profit of $9.6
million exceeded 2005 by $0.3 million or 3 percent due principally to favorable
pricing and volumes on the sales of electricity. Excluding the one-time federal
relief payment in the first quarter of 2005, operating profit in the first half
of 2006 was $5.8 million, or more than 150 percent, higher than 2005.
CORPORATE EXPENSE, OTHER
For the second quarter of 2006 and the six months ended June 30, 2006,
corporate expenses were slightly below the amounts for the corresponding periods
in 2005.
A&B expects that its effective corporate tax rate for 2006 will be 37.5
percent, half a percentage point lower than previously estimated.
BALANCE SHEET, CASH FLOW COMMENTS
Working capital at June 30, 2006 was $20 million lower than December
31, 2005, primarily attributable to a lower balance for real estate held for
sale, lower cash balances, and higher balances on revolving credit facilities,
partially offset by higher accounts receivable and inventory balances. Cash
decreased by $23 million since year-end 2005, primarily due to share
repurchases, net deposits into the CCF, and capital expenditures. Total debt,
including current portion, increased by $80 million from December 31, 2005,
primarily due to capital expenditure financing and share repurchases. The ratio
of debt to debt plus equity has increased to 29.2 percent at June 30, 2006 from
24.4 percent at December 31, 2005. As previously announced, the Company has
repurchased $71.5 million of its common stock through open market purchases and
in connection with an accelerated share repurchase program executed through an
agreement with Goldman, Sachs & Co. The net decrease in shareholder's equity
during 2006 is attributable to this share repurchase program. Because the
associated shares were retired late in the second quarter and early in the
third quarter, there was a negligible impact on earnings per share in the
second quarter. For the third quarter, average outstanding shares are expected
to be reduced by roughly 3.5 percent.
Despite comparable earnings, cash flows from operating activities in
the first half of 2006 declined by $89 million when compared to the first half
of 2005, due principally to the composition of earnings in the first half of
2006, which included a larger proportion of gains on the sale of properties that
are classified as investing cash flows, distributions from the Hokua joint
venture that also are classified as investing cash flows, and changes in current
and deferred income tax and accounts receivable balances. Capital expenditures
for the first half of 2006 decreased $87 million from the same period in 2005,
due primarily to the $144 million purchase of the MV Manulani in the prior year
period.
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 real estate,
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.
------------------------
2006 and 2005 Second-Quarter and First-Half Results (Condensed)
--------------------------------------------------------------
2006 2005
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Three Months Ended June 30
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Revenue $418,200,000 $391,200,000
Income From Continuing Operations $20,500,000 $28,800,000
Discontinued Operations: Properties(1) $9,700,000 $600,000
Net Income $30,200,000 $29,400,000
Basic Share Earnings
Continuing Operations $0.47 $0.66
Net Income $0.69 $0.67
Diluted Share Earnings
Continuing Operations $0.46 $0.65
Net Income $0.68 $0.66
Average Shares Outstanding 44,000,000 43,600,000
Diluted Average Shares Outstanding 44,300,000 44,200,000
Six Months Ended June 30:
------------------------
Revenue $779,500,000 $755,000,000
Income From Continuing Operations $48,200,000 $61,900,000
Discontinued Operations: Properties(1) $19,400,000 $5,200,000
Net Income $67,600,000 $67,100,000
Basic Share Earnings
Continuing Operations $1.10 $1.42
Net Income $1.54 $1.54
Diluted Share Earnings
Continuing Operations $1.09 $1.40
Net Income $1.53 $1.52
Average Shares Outstanding 43,900,000 43,500,000
Diluted Average Shares Outstanding 44,300,000 44,100,000
(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 (Condensed)
--------------------------------------------
(In Millions, Except Per Share Amounts, Unaudited)
------------------------------------------------
Three Months Ended Six Months Ended
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June 30, June 30,
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2006 2005 2006 2005
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Revenue:
Transportation
Ocean Transportation $ 243.6 $ 221.0 $ 462.9 $ 427.2
Logistics Services 116.4 106.6 224.8 202.7
Real Estate
Leasing 24.4 21.3 49.0 43.2
Sales 36.8 14.6 60.6 60.5
Less Amounts Reported In
Discontinued Operations (37.5) (2.6) (61.7) (29.8)
Food Products 37.8 32.2 53.3 54.6
Reconciling Items (3.3) (1.9) (9.4) (3.4)
---------- ---------- ---------- ----------
Total Revenue $ 418.2 $ 391.2 $ 779.5 $ 755.0
========== ========== ========== ==========
Operating Profit, Net Income:
Transportation
Ocean Transportation $ 24.4 $ 38.7 $ 42.7 $ 68.4
Logistics Services 5.3 3.6 10.0 6.6
Real Estate
Leasing 12.2 10.5 24.3 21.2
Sales 10.9 4.8 38.0 21.3
Less Amounts Reported In
Discontinued Operations (15.6) (1.0) (31.2) (8.3)
Food Products 3.1 0.3 9.6 9.3
---------- ---------- ---------- ----------
Total Operating Profit 40.3 56.9 93.4 118.4
Loss on Investment (2.2) (2.2)
Interest Expense (3.0) (3.0) (6.2) (5.8)
General Corporate Expenses (5.1) (5.2) (10.3) (10.5)
---------- ---------- ---------- ----------
Income From Continuing Operations
Before Income Taxes 32.2 46.5 76.9 99.9
Income Taxes (11.7) (17.7) (28.7) (38.0)
---------- ---------- ---------- ----------
Income From Continuing Operations 20.5 28.8 48.2 61.9
Discontinued Operations: Properties 9.7 0.6 19.4 5.2
---------- ---------- ---------- ----------
Net Income $ 30.2 $ 29.4 $ 67.6 $ 67.1
========== ========== ========== ==========
Basic Earnings Per Share:
Continuing Operations $ 0.47 $ 0.66 $ 1.10 $ 1.42
Net Income $ 0.69 $ 0.67 $ 1.54 $ 1.54
Diluted Earnings Per Share:
Continuing Operations $ 0.46 $ 0.65 $ 1.09 $ 1.40
Net Income $ 0.68 $ 0.66 $ 1.53 $ 1.52
Average Shares 44.0 43.6 43.9 43.5
Diluted Shares 44.3 44.2 44.3 44.1
Consolidated Balance Sheets (Condensed)
--------------------------------------
(In Millions)
-------------
June 30 December 31,
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2006 2005
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(Unaudited)
ASSETS
Current Assets $ 296 $ 303
Investments 124 154
Real Estate Developments 105 71
Property, Net 1,341 1,289
Capital Construction Fund 112 93
Other Assets 179 161
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Total $ 2,157 $ 2,071
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LIABILITIES & EQUITY
Current Liabilities $ 267 $ 254
Long-Term Debt 353 296
Post-Retirement Benefit Obligs. 48 47
Other Long-Term Liabilities 64 45
Deferred Income Taxes 437 415
Shareholders' Equity 988 1,014
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Total $ 2,157 $ 2,071
=========== ===========
Consolidated Statements of Cash Flows (Condensed)
------------------------------------------------
(In Millions)
-------------
Six Months Ended
----------------
June 30,
--------
2006 2005
---- ----
(Unaudited)
Operating Cash Flows $ 40 $ 129
Capital Expenditures (87) (174)
CCF Withdrawals/(Deposits), Net (18) (12)
Proceeds From Issuance of
(Payment of) Debt, Net 80 90
Repurchase of Capital Stock (72) -
Dividends Paid (21) (20)
All Other, Net 55 14
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Increase/(Decrease) In Cash $ (23) $ 27
============ ===========
Depreciation $ (41) $ (41)
============ ============