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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):
January 22, 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
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(Registrant's telephone number,
including area code)
Item 12. Disclosure of Results of Operations and Financial Condition
- ---------------------------------------------------------------------
Alexander & Baldwin, Inc. issued a press release on January 22, 2004,
announcing its 2003 fourth quarter and year-end consolidated earnings. This
information, attached as Exhibit 99.1, is being furnished to the SEC pursuant
to Item 12 of Form 8-K.
(a) Exhibits
--------
99.1 Press Release announcing 2003 fourth quarter and
year-end consolidated earnings issued on January 22, 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: January 22, 2004
ALEXANDER & BALDWIN, INC.
By: /s/ James S. Andrasick
----------------------
James S. Andrasick
Executive Vice President, Chief Financial
Officer and Treasurer
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, January 22, 2004
A&B REPORTS 2003 EARNINGS OF $81.3 MILLION
------------------------------------------
Year's Earnings Per Share Up 37 Percent
Honolulu (January 22, 2004) -- Alexander & Baldwin, Inc. (NASDAQ:ALEX)
today reported fourth quarter 2003 net income of $18,800,000, or $0.44 per
share. Net income in the fourth quarter of 2002 was $17,400,000, or $0.43 per
share. Revenue in the fourth quarter of 2003 was $327,700,000, compared with
revenue of $281,600,000 in the fourth quarter of 2002.
Net income for full year 2003 was $81,300,000, or $1.95 per share. For
full year 2002, the Company reported net income of $58,200,000, or $1.42 per
share. Earnings per share increased by $0.53, or 37 percent. Revenue in 2003 was
$1,232,500,000, compared with $1,087,700,000 in 2002.
COMMENTS ON QUARTER, OUTLOOK
"The 2003 fourth quarter rounded out a good year for A&B, with
especially strong performance at both Matson and A&B Properties, the two largest
components of the company," said Allen Doane, president and chief executive
officer of A&B. "For the year, Matson's revenue exceeded $1 billion for the
first time in its history, and A&B Properties had gains in both leasing and
sales. As we anticipated, performance lagged in the food products segment, which
is far smaller than the other two segments, due to lower sugar production.
"In addition to its positive financial results, Matson successfully
began a new roll-on/roll-off auto service in the fourth quarter. Smooth
operations also continue for Matson's new containership, M.V. Manukai, which
made its inaugural voyage in the third quarter. Lastly, late in the year, Matson
Integrated Logistics acquired a truck brokerage firm, which is an attractive
segment of the intermodal business.
"A&B Properties' continued good financial performance in 2003 was
complemented by its highly successful real estate investments. Although the
development of our historic land portfolio continues, the acceleration of A&B
Properties' earnings has resulted from real estate acquisitions like the 270
acres of entitled land at the Wailea resort, a transaction that closed in
October.
"As we look toward the company's performance in 2004, improved service
levels at Matson, benefits from the new real estate investments and the
improving economic outlook for Hawaii have the prospect, in combination, to
result in continuing the growth of our earnings, although not at the pace
achieved in 2003."
TRANSPORTATION--OCEAN TRANSPORTATION
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Quarter Ended December 31
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Dollars in Millions 2003 2002 Change
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Revenue $ 199.3 $ 174.7 14%
Operating Profit $ 32.4 $ 9.2 3.5X
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Volume (Units)
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Hawaii Containers 42,200 36,800 15%
Hawaii Automobiles 36,200 28,000 29%
Operating profit in ocean transportation more than tripled in the
fourth quarter of 2003 versus the same period in 2002. In December 2003, a
Matson subsidiary joined two other marine terminal operators to form a
multiemployer pension plan (MEP). The conversion of benefit obligations and
associated assets from single-employer plans to the MEP resulted in a one-time
settlement gain of $16.7 million, which benefited operating profit in the
quarter. Excluding this one-time event, the quarter's results were marked by a
return to a more normal level of profitability in contrast to the labor
disruptions that depressed results in the fourth quarter of 2002. Also
contributing to the improvement were higher freight and automobile volumes in
the Hawaii service and rate actions taken during 2003.
During the fourth quarter of 2003, Matson initiated a significant
change in its carriage of automobiles, adding considerable roll-on/roll-off
capacity to its fleet through the operation of a chartered vessel and
modifications to another vessel. Also, marine terminals dedicated to vehicles
were established in Oakland and Honolulu. This change addresses customers'
preference for roll-on/roll-off stowage of autos. The new service improves
delivery times and includes direct calls to the island of Maui, as well as to
Oahu.
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Year Ended December 31
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Dollars in Millions 2003 2002 Change
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Revenue $ 776.3 $ 686.9 13%
Operating Profit $ 92.8 $ 42.4 2.2X
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Volume (Units)
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Hawaii Containers 162,400 152,500 6%
Hawaii Automobiles 145,200 120,500 20%
The comparison of full-year 2003 performance to that of 2002 benefited
from the one-time pension settlement gain and the impact in 2002 of labor
disruptions on the West Coast. Higher operating profit also was due to rate
actions and an improved mix of freight; higher freight and automobile volumes in
the Hawaii service; better results from improved operations of joint ventures;
and modestly improved productivity at the Sand Island container terminal in
Honolulu. Partially offsetting these factors were higher operating costs to
accommodate the greater cargo volume and higher pension expense.
TRANSPORTATION--LOGISTICS SERVICES
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Quarter Ended December 31
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Dollars in Millions 2003 2002 Change
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Revenue $ 68.5 $ 52.4 31%
Operating Profit $ 1.4 $ 0.7 2.0X
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Record revenue for Matson Integrated Logistics, Inc. (MIL) in the
fourth quarter of 2003 was due mainly to greater customer volume in all
categories: domestic, international and highway activity. At $1.4 million,
operating profit in the quarter doubled from the same period in 2002.
In December, MIL acquired TransAmerica Transportation Services,
Inc.(TTS), a third-party logistics company. TTS offers various intermodal
brokerage services and presently handles about 50,000 shipments annually.
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Year Ended December 31
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Dollars in Millions 2003 2002 Change
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Revenue $ 237.7 $ 195.1 22%
Operating Profit $ 4.7 $ 3.1 52%
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For full-year 2003, higher logistics services revenue and operating
profit also were due mainly to increased customer volume.
PROPERTY DEVELOPMENT & MANAGEMENT--LEASING
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Quarter Ended December 31
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Dollars in Millions 2003 2002 Change
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Revenue $ 20.3 $ 19.1 6%
Operating Profit $ 9.8 $ 8.4 17%
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Occupancy Rates
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Mainland 94% 94% --
Hawaii 91% 90% 1%
Growth in fourth quarter 2003 revenue and operating profit was
primarily the result of the recently acquired income-producing properties,
increased rental income on existing properties and slightly higher occupancies
for Hawaii commercial properties.
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Year Ended December 31
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Dollars in Millions 2003 2002 Change
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Revenue $ 80.3 $ 73.1 10%
Operating Profit $ 37.0 $ 32.9 12%
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Occupancy Rates
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Mainland 93% 92% 1%
Hawaii 90% 89% 1%
Similarly, growth in revenue and operating profit for 2003 (before
removing amounts treated as discontinued operations) was the result of higher
occupancies and increased rental income, and purchases of income-producing
properties both on the Mainland and in Hawaii.
PROPERTY DEVELOPMENT & MANAGEMENT--SALES
- --------------------------------------------------------------------------------
Quarter Ended December 31
- --------------------------------------------------------------------------------
Dollars in Millions 2003 2002 Change
- --------------------------------------------------------------------------------
Revenue $ 10.3 $ 31.8 - 68%
Operating Profit $ 2.7 $ 5.2 - 48%
- --------------------------------------------------------------------------------
The mix of sales activity in the fourth quarter of 2003 consisted
primarily of lots or units in residential and industrial projects, and A&B's
share of sales in joint-venture residential developments, versus sales of large
developed or undeveloped properties. Prominent among the sales during the fourth
quarter of 2003 were two lots at Maui Business Park, eight full floors at Alakea
Corporate Tower in Honolulu, 37 homes at the Kai Lani joint venture on Oahu and
six at the HoloHolo Ku joint venture on the island of Hawaii. Among the larger
sale transactions in the fourth quarter of 2002 were a shopping center and an
industrial property in Southern California, plus four lots at Maui Business Park
and five homes at HoloHolo Ku.
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Year Ended December 31
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Dollars in Millions 2003 2002 Change
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Revenue 1 $ 63.8 $ 93.0 - 31%
Operating Profit 1 $ 23.8 $ 19.4 23%
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1 Before removing amounts treated as discontinued operations.
There was a similar shift in the mix of sales for full year 2003 versus
2002--with a greater contribution from subdivision and joint venture sales
activities and less from sales of larger properties. Sales in 2003 included a
shopping center in Nevada, six commercial properties on Maui, 23 residential
properties, eight floors at Alakea Corporate Tower, seven industrial lots on
Oahu, five industrial lots on Maui and a total of 142 residential units at two
joint venture developments. In 2002, prominent sales included a seven-building
complex in Texas, the shopping center and industrial property in Southern
California, several smaller commercial properties, an undeveloped parcel in
upcountry Maui, nine business parcels on Oahu and Maui, 27 residential
properties, a shopping center in Colorado and five residential units at a joint
venture.
The sales of certain properties within the real estate portfolio are
reported as "discontinued operations" if their earnings and cash flows are
separately identifiable and material. The after-tax gains on those sales, and
the current and historical earnings of all of these properties, are classified
in the financial statements under the caption "Discontinued Operations:
Properties." During 2003, six properties met these criteria and were treated as
discontinued operations.
FOOD PRODUCTS
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Quarter Ended December 31
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Dollars in Millions 2003 2002 Change
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Revenue $ 29.3 $ 33.5 - 13%
Operating Profit $ 0.5 $ 5.8 - 91%
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Tons Sugar Produced 49,500 61,100 - 19%
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In the fourth quarter of 2003, lower food products revenue resulted
primarily from lower production and sales of raw sugar. Higher unit costs for
the quarter and full year were driven by the lower production in the quarter,
which caused a substantial decrease in operating profit, especially when
compared with the last quarter of 2002 when these factors had been especially
strong.
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Year Ended December 31
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Dollars in Millions 2003 2002 Change
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Revenue $ 112.9 $ 112.7 --
Operating Profit $ 5.1 $ 13.8 - 63%
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Tons Sugar Produced 205,700 215,900 - 5%
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For full year 2003, food products revenue was unchanged. This resulted
from lower production and sales of raw sugar being offset by the benefit of
modestly higher sugar prices. At the operating profit level, however, the
combination of higher costs and lower volume combined to depress margins
severely. Higher costs primarily resulted from the cost of pensions, personnel,
insurance, maintenance and other reserves.
In a decision related to the Food Products segment, the Company reduced
consolidated income in the fourth quarter to reflect a $7.7 million reduction in
the carrying value of its equity investment in C&H Sugar Company, Inc. The
carrying value had been $11.5 million since a prior reduction was made in 2001.
This value impairment reflects the highly leveraged capital structure of C&H and
the uncertainty of future cash flows when related to the C&H securities held by
A&B.
BALANCE SHEET COMMENTS
Comparing the year-end balance sheets for 2003 and 2002, the $107
million project cost for Matson's new container vessel, delivered in the third
quarter of 2003, was the largest component of the increase in property, net. The
ship's financing added $55 million to long-term debt and it reduced balances in
the capital construction fund (CCF) by $41.5 million. In the first quarter,
there was a conveyance of land and improvements with a carrying cost of $27.7
million to the Kukui'Ula joint venture. This reduced real estate developments
and raised investments. Real estate developments and current assets rose in the
fourth quarter with the $67 million acquisition of Wailea and other property
investments.
CASH FLOW COMMENTS
Comparing 2003 with 2002, operating cash flows increased by a net $75.6
million. The increase was due principally to better operating results in 2003
and the effects of the timing of tax payments made in 2002 resulting from the
sale of securities in late 2001. Capital expenditures were $169.6 million
greater, primarily because of the delivery of the new containership and higher
real estate expenditures and acquisitions. The CCF withdrawals and increase in
debt also resulted principally from the vessel delivery.
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 that involve a number of
risks and uncertainties described on page 19 of the Company's Annual Report on
Form 10-K, which is included in the Company's 2002 annual report to
shareholders. These factors could cause actual results to differ materially
from those projected in the statements.
ALEXANDER & BALDWIN, INC.
-------------------------
2003 and 2002 Fourth-Quarter and Full-Year Results
--------------------------------------------------
2003 2002
---- ----
Three Months Ended December 31:
-------------------------------
Revenue $327,700,000 $281,600,000
Income From Continuing Operations $18,200,000 $13,400,000
Discontinued Operations: Properties 1 600,000 $4,000,000
Net Income $18,800,000 $17,400,000
Basic Share Earnings
Continuing Operations $0.43 $0.33
Net Income $0.44 $0.43
Diluted Share Earnings
Continuing Operations $0.43 $0.32
Net Income $0.44 $0.42
Average Shares Outstanding 42,000,000 41,200,000
Twelve Months Ended December 31:
--------------------------------
Revenue $1,232,500,000 $1,087,700,000
Income From Continuing Operations 69,400,000 $45,900,000
Discontinued Operations: Properties 1 $11,900,000 $12,300,000
Net Income $81,300,000 $58,200,000
Basic Share Earnings
Continuing Operations $1.67 $1.12
Net Income $1.95 $1.42
Diluted Share Earnings
Continuing Operations $1.66 $1.11
Net Income $1.94 $1.41
Average Shares Outstanding 41,600,000 41,000,000
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 Twelve Months Ended
------------------ -------------------
December 31, December 31,
----------- -----------
2003 2002 2003 2002
---- ---- ---- ----
Revenue:
- --------
Transportation
Ocean Transportation $ 199.3 $ 174.7 $ 776.3 $ 686.9
Logistics Services 68.5 52.4 237.7 195.1
Property Development & Management
Leasing 20.3 19.1 80.3 73.1
Sales 10.3 31.8 63.8 93.0
Less Amounts Reported In
Discontinued Operations - (29.9) (38.5) (73.1)
Food Products 29.3 33.5 112.9 112.7
---------- ---------- ---------- ----------
Total Revenue $ 327.7 $ 281.6 $ 1,232.5 $ 1,087.7
========== ========== ========== ==========
Operating Profit, Net Income:
- -----------------------------
Transportation
Ocean Transportation $ 32.4 $ 9.2 $ 92.8 $ 42.4
Logistics Services 1.4 0.7 4.7 3.1
Property Development & Management
Leasing 9.8 8.4 37.0 32.9
Sales 2.7 5.2 23.8 19.4
Less Amounts Reported In
Discontinued Operations (0.9) (6.3) (19.1) (19.5)
Food Products 0.5 5.8 5.1 13.8
---------- ---------- ---------- ----------
Total Operating Profit 45.9 23.0 144.3 92.1
Write-Down of Long-Lived Assets (7.7) - (7.7) -
Interest Expense (3.5) (2.7) (11.6) (11.7)
Corporate Expenses (5.0) (3.6) (15.2) (13.1)
----------- ----------- ----------- -----------
Income From Continuing Operations
Before Income Taxes 29.7 16.7 109.8 67.3
Income Taxes (11.5) (3.3) (40.4) (21.4)
----------- ----------- ----------- -----------
Income From Continuing Operations 18.2 13.4 69.4 45.9
Discontinued Operations: Properties 0.6 4.0 11.9 12.3
---------- ---------- ---------- ----------
Net Income $ 18.8 $ 17.4 $ 81.3 $ 58.2
========== ========== ========== ==========
Basic Earnings Per Share, Continuing Operations $ 0.43 $ 0.33 $ 1.67 $ 1.12
Basic Earnings Per Share, Net Income $ 0.44 $ 0.43 $ 1.95 $ 1.42
Average Shares 42.0 41.2 41.6 41.0
Consolidated Balance Sheets
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(In Millions)
December 31, December 31,
----------- ------------
2003 2002
---- ----
(Unaudited)
ASSETS
Current Assets $ 246.8 $ 233.7
Investments 68.4 32.9
Real Estate Developments 77.0 42.1
Property, Net 1,078.9 942.6
Capital Construction Fund 165.4 208.4
Other Assets 123.1 92.9
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Total $ 1,759.6 $ 1,552.6
============= =============
LIABILITIES & EQUITY
Current Liabilities $ 182.9 $ 151.1
Long-Term Debt 329.7 247.8
Post-Retirement Benefit Obligs. 43.6 42.6
Other Long-Term Liabilities 37.0 49.6
Deferred Income Taxes 355.6 337.8
Shareholders' Equity 810.8 723.7
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Total $ 1,759.6 $ 1,552.6
============= =============
Consolidated Statements of Cash Flows
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(In Millions)
Twelve Months Ended
-------------------
December 31,
------------
2003 2002
---- ----
(Unaudited)
Operating Cash Flows $ 131.3 $ 55.7
Capital Expenditures (214.2) (44.6)
CCF Withdrawals/(Deposits), Net 43.0 (53.7)
Proceeds From Issuance of
(Payment of) Debt, Net 60.1 30.1
Dividends Paid (37.4) (36.9)
All Other, Net 23.0 30.7
----------- -------------
Increase/(Decrease) In Cash $ 5.8 $ (18.7)
=========== =============
Depreciation $ 72.6 $ 70.7
=========== =============