<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-Q
--------------------
(Mark one)
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities and Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities and Exchange Act of 1934
For the transition period from to
--------------- ---------------
COMMISSION FILE NUMBER 1-14020
CASTLE & COOKE, INC.
(Exact name of registrant as specified in its charter)
HAWAII 77-0412800
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10900 WILSHIRE BOULEVARD, 16TH FLOOR
LOS ANGELES, CA 90024
(Address of principal executive offices and zip code)
(310) 208-3636
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Shares Outstanding at May 10, 1996
----- ----------------------------------
Common Stock, without par value 19,954,725 shares
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<PAGE>
CASTLE & COOKE, INC.
FORM 10-Q
FOR THE QUARTER ENDED
MARCH 31, 1996
TABLE OF CONTENTS
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -- March 31, 1996 and
December 31, 1995............................................... 3
Consolidated Statements of Income -- quarters ended
March 31, 1996 and March 31, 1995............................... 4
Consolidated Statements of Cash Flows -- quarters ended
March 31, 1996 and March 31, 1995............................... 5
Notes to Consolidated Financial Statements........................ 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................7-9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................10
SIGNATURES..................................................................11
2
<PAGE>
CASTLE & COOKE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
(Unaudited) (Audited)
----------- ------------
<S> <C> <C>
Cash and cash equivalents $ 1,830 $ 4,781
Receivables, net 41,178 35,065
Real estate developments 550,703 571,828
Property, and equipment, net 449,180 442,162
Other assets 18,607 17,897
---------- ----------
Total assets $1,061,498 $1,071,733
---------- ----------
---------- ----------
Notes payable $ 177,000 $ 185,000
Note payable to Dole 10,000 10,000
Accounts payable 20,521 26,697
Accrued liabilities 41,213 39,917
Deferred income taxes 180,326 178,877
Deferred income and other liabilities 17,463 18,070
---------- ----------
Total liabilities 446,523 458,561
---------- ----------
Preferred stock 35,175 35,000
Common shareholders' equity
Common stock 510,953 510,953
Retained earnings 68,847 67,219
---------- ----------
Total common shareholders' equity 579,800 578,172
---------- ----------
Total liabilities and shareholders' equity $1,061,498 $1,071,733
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
3
<PAGE>
CASTLE & COOKE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT EARNINGS PER COMMON SHARE AMOUNTS)
<TABLE>
<CAPTION>
Quarter Ended
--------------------------
Predecessor
(Dole)
March 31, March 31,
1996 1995
---------- -------------
<S> <C> <C>
REVENUES
Residential property sales $ 46,133 $ 59,455
Resort revenues 19,319 12,695
Commercial and other revenues 11,606 9,514
-------- --------
Total revenues 77,058 81,664
COST OF OPERATIONS
Cost of residential property sales 41,067 51,785
Cost of resort operations 20,389 18,934
Cost of commercial and other operations 7,737 6,892
General and administrative expenses 3,220 2,361
-------- --------
Total cost of operations 72,413 79,972
-------- --------
Operating income 4,645 1,692
Interest and other income, net 787 649
Interest expense 989 -
-------- --------
Income before income taxes 4,443 2,341
Provision for income taxes 1,755 960
-------- --------
Net income 2,688 1,381
Preferred stock dividend and accretion (1,060) -
-------- --------
Net income available to common shareholders $ 1,628 $ 1,381
-------- --------
-------- --------
Earnings per common share $ .08 $ .07
-------- --------
-------- --------
Average number of common shares outstanding
for 1996 and pro forma for 1995 19,952 19,952
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
CASTLE & COOKE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Quarter Ended
--------------------------
Predecessor
(Dole)
March 31, March 31,
1996 1995
---------- -------------
<S> <C> <C>
Operating activities
Net income $ 2,688 $ 1,381
Adjustments to reconcile net income to
cash flow used in operating activities
Depreciation and amortization 4,546 7,031
Deferred income taxes 1,449 6,605
Increase in receivables, net (6,113) (859)
Decrease (increase) in real estate developments 13,063 (5,413)
Decrease in accounts payable (6,176) (3,057)
Increase (decrease) in accrued liabilities 411 (2,726)
Net change in other assets and liabilities (1,317) (179)
-------- --------
Cash flow provided by operating activities 8,551 2,783
-------- --------
Investing activities
Acquisition of property, plant and equipment (3,502) (1,299)
-------- --------
Cash flow used in investing activities (3,502) (1,299)
-------- --------
Financing activities
Net reductions under revolving loan agreement (8,000) -
-------- --------
Cash flow used in financing activities (8,000) -
-------- --------
Decrease in cash and cash equivalents (2,951) (1,484)
Cash and cash equivalents at beginning of period 4,781 1,404
-------- --------
Cash and cash equivalents at end of period $ 1,830 $ 2,888
-------- --------
-------- --------
SUPPLEMENTAL CASH FLOW DATA
Cash paid during the first quarter for:
Interest paid $ 3,113 $ -
Income taxes paid 306 -
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
5
<PAGE>
CASTLE & COOKE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The consolidated financial statements included herein have been prepared by
Castle & Cooke, Inc. (the Company), without audit, and include all adjustments
which are, in the opinion of management, necessary for a fair presentation of
the results of operations for the three months ended March 31, 1996 and March
31, 1995, respectively, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures in such
financial statements are adequate to make the information presented not
misleading. The consolidated financial statements should be read in conjunction
with the Company's financial statements and the notes thereto for the year ended
December 31, 1995, included in the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission.
The Company was formed on October 10, 1995 to be the successor of the assets
and related liabilities of the real estate and resorts business of Dole Food
Company, Inc. and its subsidiaries ("Dole"). On December 28, 1995, Dole
completed the separation of its real estate and resorts business from its
food business through a pro rata distribution to its shareholders.
The consolidated statements of operations and cash flows contained herein
prior to December 28, 1995 are those of Dole and have been prepared on the
basis that the assets and liabilities of the real estate and resorts business
were transferred using historical carrying values as recorded by Dole and
present the Company's results of operations and cash flows as derived from
Dole's historical financial statements.
The Company's operating results are subject to significant variability as a
result of, among other things, the receipt of regulatory approvals, status of
development in particular projects and the timing of sales in developed
projects. The results of operations for the quarter ended March 31, 1996, are
not necessarily indicative of the results to be expected for the full year.
Operating results for 1995 have been restated to reflect results from January 1,
1995 to March 31, 1995. Results were previously reported for the former
parent's fiscal quarter ending March 25, 1995.
NOTE 2. COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries are contingently liable as joint indemnitors
to surety companies for subdivision, off-site improvement and construction
bonds issued on their behalf.
The Company is a defendant in several lawsuits arising in the normal course
of business. In the opinion of management, the final resolution of these
lawsuits will not have a material adverse effect on its financial position or
results of operations.
6
<PAGE>
CASTLE & COOKE, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
REVENUES
Consolidated revenues decreased from $81.7 million in 1995 to $77.1 million
in 1996. Residential property sales decreased from $59.5 million in 1995 to
$46.1 million in 1996 primarily due to the sale of an apartment complex in
Bakersfield for $15 million in 1995. First quarter deliveries in 1996
included 141 homes and 167 lots, compared to deliveries of 145 homes and 64
lots in 1995. The average price per home was $279,000 in 1996 and 1995.
Resort revenues increased 52% to $19.3 million in 1996 from $12.7 million in
1995. This increase was primarily due to improved occupancy and room rates
at the resorts and the sale of four luxury villas at Koele.
COST AND EXPENSES
Consolidated cost of operations decreased from $80.0 million in 1995 to $72.4
million in 1996. The cost of residential property sales decreased from $51.8
million in 1995 to $41.0 million in 1996 primarily due to the cost of the
apartment complex sold in Bakersfield ($14.6 million). Excluding the
apartment complex sale, the cost of residential property sales as a
percentage of residential property sales increased from 84% in 1995 to 89% in
1996. This increase is primarily due to aggressive marketing programs and
sales incentives in Oahu. The incentives have been necessary to stimulate
activity in the soft market and have led to decreased earnings compared to
the prior year despite a similar number of closings. The cost of resort
operations increased from $18.9 million in 1995 to $20.4 million in 1996
primarily due to the cost related to increased occupancy at the hotels and
the sale of four luxury villas at Koele, partially offset by a reduction in
depreciation. The cost of resort operations as a percentage of resort
revenues improved from 149% in 1995 to 106% in 1996 primarily due to a
decrease in depreciation expense that resulted from the $168 million
writedown of long-lived assets recorded in the third quarter of 1995. In
addition, a significant portion of the resort operation's costs are fixed
and, accordingly, do not increase proportionately as occupancy and resort
revenues increase. The cost of commercial and other operations as a
percentage of commercial revenues decreased from 72% in 1995 to 67% in 1996
primarily due to the fact that a significant portion of commercial and other
costs are fixed and generally do not increase proportionately with revenues.
Consolidated general and administrative costs increased from $2.4 million in
1995 to $3.2 million primarily due to increased corporate expenses in 1996
which were previously absorbed by the Company's former parent in 1995 and to
additional corporate costs incurred as a separate, publicly held company in
1996.
Total interest expense in the first quarter of 1996 was $3.6 million of which
$2.6 million was capitalized into real estate developments. The increase in
interest expense is due to the debt incurred in connection with the Company's
separation from its former parent in December of 1995.
NET INCOME AND EARNINGS PER SHARE
Net income available to common shareholders increased 18% from $1.4 million
in 1995 to $1.6 million in 1996. This increase was due to a reduced
operating loss from the resort operations partially offset by the 10%
cumulative preferred stock dividend and accretion. The dividend relates to
the cumulative preferred stock issued in connection with the Company's
separation from its former parent in December of 1995.
7
<PAGE>
CASTLE & COOKE, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NET INCOME AND EARNINGS PER SHARE (CONTINUED)
The Company's effective income tax rate decreased to 39.5% in 1996 from 41% in
1995. This decrease is due to a lower effective tax rate subsequent to the
Company's separation from its former parent in December of 1995.
BACKLOG
The Company's new orders and backlog for homes for 1996 compared to 1995 were as
follows:
<TABLE>
<CAPTION>
Quarter Ended
--------------------------
March 31, March 31,
1996 1995
---------- ----------
<S> <C> <C>
Units
Backlog at beginning of the period 133 207
Add: new orders 201 120
Less: deliveries 141 145
-------- --------
Backlog at end of the period 193 182
-------- --------
Dollars
Backlog at beginning of the period $ 34,298 $ 61,203
Add: new orders 53,555 35,008
Less: deliveries 39,281 40,387
-------- --------
Backlog at the end of the period $ 48,572 $ 55,824
-------- --------
-------- --------
</TABLE>
The increase in new orders in 1996 resulted primarily from special incentive
programs offered by the Company in Oahu.
8
<PAGE>
CASTLE & COOKE, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Castle requires capital to operate its resorts, purchase and develop land,
construct homes and homesites and to acquire, develop and operate commercial
property.
In connection with the separation from its former parent company in December
of 1995, the Company entered into a Credit Agreement with a syndicate of
banks pursuant to which the banks will provide the Company a three year
revolving Credit Facility of up to $240 million until March 1997 at which
time the Credit Facility will be reduced to $140 million. The Credit
Facility bears interest at a variable rate based on the London Interbank
Offered Rate ("LIBOR") or at an alternative rate based upon a designated
Bank's prime rate or the federal funds rate. At March 31, 1996, total
borrowings under this facility were $177 million and the weighted average
interest rate was 7.2%.
During the three months ended March 31, 1996, the Company generated $8.6 million
in net funds from operating activities, as compared to the corresponding period
in 1995 during which the Company generated $2.8 million. The increase is
primarily due to the timing of development expenditures at the Hawaii
residential operations and resort operations.
The Company believes that funds available under the revolving Credit Facility
and cash generated from operations combined with selective sales of commercial
and other properties from time to time will be adequate for its short-term and
long-term cash needs.
9
<PAGE>
CASTLE & COOKE, INC.
PART II.
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
No.
-------
27 Financial Data Schedule
(b) Reports on Form 8-K
THE REGISTRANT FILED NO REPORTS ON FORM 8-K DURING THE QUARTER ENDED
MARCH 31, 1996.
All other items required under Part II are omitted because they are not
applicable.
10
<PAGE>
CASTLE & COOKE, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CASTLE & COOKE, INC.
Registrant
Date: May 10, 1996 BY EDWARD C. ROOHAN
-----------------------------------
Edward C. Roohan
Vice President
and Chief Financial Officer
(Principal financial officer
and accounting officer)
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME FOUND ON
PAGES 3 AND 4 OF THE COMPANY'S 10-Q FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001002506
<NAME> CASTLE & COOKE, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,830
<SECURITIES> 0
<RECEIVABLES> 41,178
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 584,464
<DEPRECIATION> 135,284
<TOTAL-ASSETS> 1,061,498
<CURRENT-LIABILITIES> 0
<BONDS> 0
35,175
0
<COMMON> 510,953
<OTHER-SE> 68,847
<TOTAL-LIABILITY-AND-EQUITY> 1,061,498
<SALES> 77,058
<TOTAL-REVENUES> 77,058
<CGS> 69,193
<TOTAL-COSTS> 69,193
<OTHER-EXPENSES> 3,220
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 989
<INCOME-PRETAX> 4,443
<INCOME-TAX> 1,755
<INCOME-CONTINUING> 2,688
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,688
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
