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 24, 2008
ALEXANDER & BALDWIN, INC.
(Exact name of registrant as specified in its charter)
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Hawaii |
000-00565 |
99-0032630 |
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(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
822 Bishop Street, P. O. Box 3440
Honolulu, Hawaii 96801
(Address of principal executive office and zip code)
(808) 525-6611
(Registrant’s telephone number, including area code)
Not Applicable
(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.):
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o |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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o |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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o |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 8.01. Other Events
On October 24, 2008, Alexander & Baldwin, Inc. (the “Company”) will conduct an analyst meeting, which will include a discussion of operating, strategic, and financial matters. The presentation materials, which are attached as an exhibit to this Form 8-K, are being filed prior to the meeting. Additionally, the presentation materials are available on the Company’s website at www.alexanderbaldwin.com prior to the meeting and will be available for approximately one week following the meeting.
The Company believes that the information contained in the presentation materials may be of continuing interest to shareholders. Accordingly, the presentation materials are being furnished as an exhibit to this Form 8-K. The information set forth in these materials speaks only as of October 24, 2008.
Statements in this Form 8-K and the attached exhibit 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. Factors that could cause actual results to differ materially from those contemplated in the statements include, without limitation, those described on pages 16-23 of the Form 10-K in the Company’s 2007 annual report. These forward-looking statements are not guarantees of future performance.
Item 9.01. Financial Statements and Exhibits
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(d) |
Exhibits |
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99.1 |
Presentation Materials, October 24, 2008 |
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 hereunto duly authorized.
Date: October 24, 2008
ALEXANDER & BALDWIN, INC.
/s/ Christopher J. Benjamin
Christopher J. Benjamin
Senior Vice President,
Chief Financial Officer and Treasurer
1
New Ways & New Places
Analyst & Investor Day
New York City
October 24, 2008
2
Disclosure
“Statements in this presentation that set forth expectations or
predictions are based on facts and situations that are known
to us as of today, October 24, 2008.
“Actual results may differ materially, due to risks and uncertainties,
such as those described on pages 16-23 of the Form 10-K in our
2007 annual report and our other subsequent filings
with the SEC.
Statements in this presentation are not guarantees of
future performance.”
3
Contact Information/Participants
Mr. Allen Doane, Chairman and CEO
Mr. Stan Kuriyama, President
skuriyama@abinc.com
Mr. Chris Benjamin, SVP
Chief Financial Officer & Treasurer
cbenjamin@abinc.com
Mr. Kevin L. Halloran, Vice President,
Corporate Development & IR
khalloran@abinc.com
Matson Navigation Company
A&B Properties, Inc.
Mr. Norb Buelsing, President
nbuelsing@abprop.com
Alexander & Baldwin, Inc.
Mr. Jim Andrasick, Chairman
jandrasick@matson.com
Mr. Matt Cox, President
mcox@matson.com
4
Agenda
“Roundtable” lunch sessions
12:00 – 1:00 p.m.
Value Creation
11:30 – 12:00 p.m.
Inside the Supply Chain
Transportation & Logistics
11:00 – 11:30 a.m.
Targeted Investment & Capital
Real Estate Development & Leasing
10:30 – 11:00 a.m.
Introduction & Consolidated Overview
10:00 – 10:30 a.m .
5
A&B Overview
Allen Doane
Challenging Environment
Deteriorating economic conditions
Impacted by recent high energy prices
Weak residential real estate market
Weakening consumer demand/consumption
Much lower auto sales
Slowing consumption
Credit availability/deleveraging and negative effect
on asset prices
Significantly fewer Hawaii tourists
Opportunistic/distressed investments
6
Economic Environment
Real Estate
7
Contraction in residential markets
Adverse impact on residential sales
through 2009, perhaps longer
Good environment for deeply discounted investments
Commercial properties mixed
Turnover of commercial property sales might slow
Better, but challenging, environment for long-term investments
Stable in Hawaii, less so on U.S. Mainland
Modest impact on short/mid-term performance
Entitlement environment may be improving
Economic Environment
Transportation
8
Volume contraction continuing
Adverse impact on Hawaii performance through 2009
Negligible impact on Guam/China performance
Consumer demand slackened in all trades
Rate structure
“Premium” China service/rates maintained
China peak season surcharge unlikely
Hawaii and Guam rates steady
Bunker fuel price volatility
Effective recovery in Hawaii and Guam markets
Recent trends favorable in China service
Strengthening the Core
Managing Through the Challenge
Corporate (company-wide)
Significant reduction in capital spending except for
strategic/opportunistic investments
Continuing, increased focus on cost containment
Transportation
Reconfigured ship deployments to decrease voyage days
to match volume
System-wide review of empty positioning costs
Reduced, deferred or eliminate non-essential
equipment purchases
25 other “gap” initiatives across all operations
9
Strengthening the Core
Managing Through the Challenge
Agribusiness
Some cost reductions realized but overwhelmed
by low production due to extraordinary drought
Properties
Accelerate opportunistic investments
Capture embedded value of commercial portfolio through sales
Defer construction in early developments until pre-sale
thresholds are met
10
11
Key Drivers/Outlook
Transportation
Transportation
Sharp YOY Hawaii volume declines
expected to moderate in 2009
Somewhat stable conditions expected in
Guam, China trades
Additional cost takeouts in progress
Growth expected at MIL as expansion initiatives kick in
Capital minimized except for strategic investment
12
Key Drivers/Outlook
Real Estate/Agribusiness
Agribusiness
Do not expect materially improved results in sugar
Committed to improving financial performance
Real Estate
Residential real estate on holiday in 2009
Some weakening in commercial conditions but it will be mixed
Ongoing land monetization
Capital for developments reduced to essential needs
Window open for opportunistic investments
13
Targeted Real Estate
Stan Kuriyama
Norb Buelsing
Preservation & Creation of Value
Preservation
Strict investment discipline maintained
Bulk of residential closings before market fall – Keola Lai, Kai Malu
Limited standing inventory & open construction
Generation
Entitlement progress – MBP II, others initiated
Continued success with 1031 program
Position projects for market recovery
Active search for new investments
Competitive advantage
Deep understanding of local economy, politics, markets, community
Successful track-record; highly-regarded reputation
Access to capital
14
Entitle & Develop Historic Landholdings
15
Preliminary Planning
Urban Potential
1,000-2,000
Various
Entitlement
600 Unit Residential
100
Kihei
Entitlement
3,000 Unit Residential, Public
800
Waiale
Permitting/water source
Light Industrial
180
Maui Business Park
Permitting/water source
168 Unit Residential
63
Haliimaile
Permitting/Construction
103 Unit Residential
3
Kane Condos
225k s.f. GLA
Permitting/Construction
440 Unit Residential
25
Kahului Town Center
Grand opening
90,000 s.f. Commercial
10
Kukui’ula Village JV
Construction/Closings
1,200 Unit Resort
1,000
Kukui’ula JV
2009 Target
Description
Acres
Project
Acquire & Develop Anywhere In Hawaii
16
Oahu
Mill Town
1998
Maui
Vintage
1999
Maui
Fairway Shops
2000
Maui
Summit
2000
Hawaii
HoloHolo Ku
2001
Oahu
Kai Lani
2001
Oahu
Lanikea at Waikiki
2001
Oahu
Kunia Commercial
2002
15 Development
Oahu
Alakea Corporate Tower
2003
Oahu
Hokua
2003
Maui
Wailea
2003
Maui
Kai Malu
2004
Hawaii
Ka Milo at Mauna Lani
2004
Oahu
Keola La’i
2004
Oahu
Waiawa
2006
Oahu
Hawaii Business Park
1999
Oahu
Haseko
1999
Oahu
Ocean View
1999
Oahu
Judd Building
2000
Oahu
Kaneohe Bay Shopping Ctr.
2001
Oahu
Pacific Guardian Tower
2001
10 Income
Oahu
Mililani Shopping Center
2002
Maui
Napili Plaza
2003
Hawaii
Lanihau Shopping Center
2005
Oahu
Daiei
2005
Targeted Real Estate Investments
Development Pipeline
Ka Milo
Valencia
Brydeswood
Port Allen
Kane Street
Kahului Town Center
Maui Business Park II
2010 and Beyond
2008
2009
Waiawa
Keola La'i
Kukui'ula (Res. and Comm)
Additional Wailea
Wailea MF-7
Wailea MF-19
Wailea MF-11
Kai Malu at Wailea
Current
Status
Entitled
Under construction
Sales Commenced
17
Location: Honolulu
Property Type: Condominium
Units: 352 Residential
4 Commercial
Closed sales: 327
Revenue to date: $201 MM
Average price: $607K*
** Average sales price includes 63 reserved
(affordable) units
Major Project Update
Keola La’i
18
Kai Malu at Wailea
25 acres, 150 units
$1.3M average price
133 units closed
$34 million income
booked to date
19
Kukui`ula
1,000 acres, 1,200 units
80 units sold to date
Extended absorption
Clubhouse/golf course underway – 2010 completion
Major infrastructure components completed/underway
Phasing adjustments under consideration,
better match of capital to sales absorption
20
Kukui`ula
21
Maui Business Park Phase II
Retail, light industrial
180 acres
Zoning achieved in 2008
10 - 15 year absorption
Construction start: 2010
Sales start: 2011
22
Leased Portfolio
As of September 30, 2008
GLA
Count (M sf) NOI ($M)
Hawaii 22 1.3 33.3
Mainland 22 5.9 36.0
Total 44 7.2 69.3
Sparks Business Center
Pacific Guardian Tower
23
Leasing Margin
YTD through September 30, 2008
By Property Type
By Location
Occupancy Mainland Hawaii
2006 98% 98%
2007 97% 98%
3Q08 95% 98%
24
Growth Opportunities
Savannah Logistics Park
Savannah
1.0 million s.f. in two buildings
Lease commenced 2Q08 for 700K s.f.
Warehousing & distribution service
Key toehold in growing market
25
Agribusiness
26
Challenges
Volume-driven business
Flat raw sugar prices
Escalating costs – energy, fertilizers, labor
Declining production
Required transformation
Raw sugar-centric model not tenable over the long-run
Recent financial losses unsustainable
Committed to improving financial performance
27
Inside the Supply Chain
Jim Andrasick
Matt Cox
Market Updates
Logistics Industry Metrics
28
Highway
Earlier year slowdown recently accelerated
Carriers may exit leading to undersupply
Trucking growth 2.5% lower than historical norms
Rail
Rail off about 3% year to date
2009 Forecast for similar declines
Rebound expected in 2010
Shipping
Asian imports off at all major West Coast ports
Market Updates
MIL Performance
29
Highway
Consumer staples showing YOY growth
Housing and construction clients showing YOY declines
Certified as an EPA SmartWay Partner
Rail
Compania Sud Americana de Vapores (CSAV) LOU
Intense domestic intermodal rate competition, especially from
asset-based carriers (JBHT, HUBG, SNC)
Warehousing & Distribution
PACAM acquisition
Secured Hasbro and launched Savannah Logistics Center
MIL Strategic Evolution
Emerging from rail focus to truck to 3PL
Growth will be driven by Matson Global and Highway
Position MIL as an integrated, full-service provider
Maintain excellent brand, strong client base, key vendor
relationships, and superior customer service
In-fill domestic capabilities
Explore Asia consolidation and freight forwarding services
Expand Port / warehousing / distribution service
Value-added services: store-door delivery, home delivery, etc.
30
Market Updates
Matson Historical Hawaii Container Volume
31
Interest rate
induced recession
curbs high inflation
Long Hawaii economic
downturn following high
expansion of late 1980s
3rd Major
downturn
Market Updates
Hawaii Volume YTD through 9/08
32
Total W/B Freight Down 7.9%
Oahu Down 5.2%
Neighbor Islands Down 13.3%
Eastbound Down 8.2%
-5.2%
-13.3%
-7.9%
Total Westbound
-14.2%
-10.5%
Market Updates
China
33
Downward pressure on prices, mostly on the base rates
Fuel surcharge will fall as bunker prices fall
However, declines through August limited to $50-$60
Peak season surcharge never materialized
New 2008-2009 contract season
Average Matson Revenue
Post - contract season Average
Matson Revenue decline
Market Updates
China
34
Matson’s ships will sail effectively full
Continue to carry a higher percentage
of high-value goods
Continue to carry a relatively low mix of
intermodal freight
Matson ranked at or near top of Drewry’s
most reliable carriers list
Market Updates
Guam
35
Modest growth expected in 2008 and into 2009
Small expansion of presence of other military service
branches
Beginning phases of military contract growth
Economy is poised for stronger growth after 2010
U.S. Marines redeploy from
Okinawa
Matson/HRZ POLA Cranes
Construction will increase to
build additional housing,
facilities and infrastructure
Market Updates
SSAT
36
Matson owns 35% LLC Interest
Operating Results:
20%
20%
Matson %
$8.4
$26.2
Pretax Income ($M)
$540.9
$553.5
Revenues ($M)
1,215
1,356
Lifts (000)
3Q08 YTD
3Q08 YTD
Seattle
Oakland/
Richmond
Long Beach
Gap Savings
System-wide
37
Removing capacity to match demand – 10-ship fleet
Incorporation of fuel surcharge into China contracts
New Hawaii service business as a result of
West Oahu off-dock facility
Reduction in China intermodal containers
Sell China dry-dock return voyages
Reduced capital spending
Minimize empty positioning costs through yield management
New items to be added in 2009 to manage through the cycle
38
Value Creation
Chris Benjamin
39
A Track Record of Disciplined Value Creation
Grow core businesses
Over 16% CAGR in operating profit over last 5 years*
Disciplined, opportunistic investment of capital
More than $500 million in growth investments over last 5 years
Core businesses and adjacencies only
Particular discipline over past 12-18 months
Expand knowledge and market breadth
China/Guam, Matson Global (PACAM, Savannah Logistics)
Kukui’ula, Wailea, Southern California
* Includes discontinued operations
40
A&B Strategy
Grow with what we know – core businesses and
adjacencies
Grow with a balanced risk profile
Leverage strong asset base and competitive positions
Maintaining adequate debt capacity, cash flows
Capitalize on unique opportunities
Distressed assets
Special situations
41
How We Will Grow
Hawaii first for real estate
Weakening economy creates opportunities
Nobody knows Hawaii market better
Build on increasing international transportation
perspective and reputation
Matson brand never stronger
Pursuing “door-to-door” via logistics and RE
Exploring additional “port-to-port” strategies
Develop/pursue more opportunities on U.S. Mainland
Hawaii land monetization
42
Capital Structure & Leverage Goals
Target optimum leverage of 35-40%
Logistics acquisitions
Distressed real estate opportunities
Share repurchases
Managing capital structure for growth
Maintain access to capital
Invest for long-term shareholder value
Balance sheet remains strong
Debt to debt + equity only 31% at 3Q08
Positioned well for future investment
Access to capital secure
43
Sustainable Cash Flow
Dollars, in millions
Strong and stable cash generation
Matson Navigation, MIL, RE Leasing
RE development/sales cash highly variable,
function of project life cycle
Majority of use of cash is discretionary
About 25% of cash generated annually for
maintenance CapEx
(ex. new ship capital, RE development)
15 – 20% of cash generated annually for dividends
Ample powder for “game-changers”
Either as investment, or to service higher debt levels
44
&n
bsp; ($ millions)
Net Income &n
bsp; $986.8
Dividends &n bsp; $402.3
Dividend/Net Income 41%
Share Repurchases* $254.9
Total Cash Payout Ratio 67%
* Remaining share repurchase authorization
of 2.2 million shares.
$50 million in share repurchases YTD.
History of Strong Earnings and Cash Flow
As of 9/30/08
Cash Returned to Shareholders – 10 years
45
Shareholder Value Objectives
10 – 12% annual earnings growth – non-linear
5-yr. CAGR of 16%
Commitment to sustained dividend growth
40% increase in past three years
Opportunistic share repurchases
$155 million in past three years
Focused growth in higher-value segments
Logistics acquisitions
Opportunistic acquisitions and land monetization
46
Concluding Remarks
Allen Doane
47
Preserve Value
Defensive posture for short/mid-term
Maintain ample debt capacity, liquidity
New capital minimized – replacement/recurring needs
Continued efficiency improvements, cost takeouts essential
Prepared to make hard decisions
48
Create Value
Offensive focus for longer term
Strategic transportation investments at lower multiples
Opportunistic real estate investments at discounts
to intrinsic values
Will continue to make “game-changing”
strategic decisions