SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
-----------------------------------------------------------
FORM U-3A-2
STATEMENT BY HOLDING COMPANY CLAIMING EXEMPTION
UNDER RULE U-2 FROM THE PROVISIONS OF THE PUBLIC
UTILITY HOLDING COMPANY ACT OF 1935
TO BE FILED ANNUALLY PRIOR TO MARCH 1
ALEXANDER & BALDWIN, INC.
(Name of Company)
P. O. Box 3440
Honolulu, Hawaii 96801
(hereinafter called the "Claimant") and its wholly-owned subsidiary,
A&B-Hawaii, Inc., P. O. Box 3440, Honolulu, Hawaii 96801 (hereinafter called
"Co-claimant"), hereby file with the Securities and Exchange Commission,
pursuant to Rule U-2, this joint and consolidated statement claiming exemption
as a holding company from the provisions of the Public Utility Holding Company
Act of 1935. This statement is filed jointly by Claimant and Co-claimant
pursuant to oral authorization to file on a joint and consolidated basis
received from the Commission on February 21, 1990. In support of such claim
for exemption the followinginformation is submitted:
1. The name, jurisdiction of organization, location and nature of
business of Claimant and Co-claimant, and every subsidiary thereof, other than
any exempt wholesale generator (EWG) or foreign utility company in which
Claimant or Co-claimant directly or indirectly hold an interest, as at
January 31, 1997 (indirect subsidiaries are indicated by indentation).
Jurisdiction
Name: of Organization Location Nature of Business
---- -------------- -------- ------------------
Alexander & Baldwin,
Inc. Hawaii Honolulu, Ocean carriage of goods,
Hawaii real property management
and development,
investments
Subsidiaries:
A&B Inc. Hawaii Honolulu, Inactive
Hawaii
A&B-Hawaii, Inc. Hawaii Honolulu, Agriculture/food (inclu-
Hawaii ding sugar cane and
coffee plantations),
real property management
and development, general
freight and petroleum
hauling and self-storage
services
A&B Development California Honolulu, Ownership, management
Company Hawaii and development of real
(California) property in California
A&B Properties, Hawaii Kahului, Ownership, management,
Inc. Hawaii development and selling
of real property
California and Hawaii Crockett, Refining raw sugar and
Hawaiian Sugar California marketing of refined
Company, Inc. sugar products and
molasses
MLM Corporation California Crockett, Marketing of refined
California sugar products
East Maui Irri- Hawaii Puunene, Collection and distribu-
gation Company, Hawaii tion of irrigation water
Limited on island of Maui
Kahului Trucking & Hawaii Kahului, Motor carriage of goods,
Storage, Inc. Hawaii self-storage services
and stevedoring on
island of Maui
Kauai Commercial Hawaii Lihue, Motor carriage of goods
Company, Hawaii and self-storage
Incorporated services on island of
Kauai
Kukui'ula Hawaii Koloa, Ownership, management
Development Hawaii and development of real
Company, Inc. property on island of
Kauai
McBryde Sugar Hawaii Eleele, Coffee plantation
Company, Limited Hawaii
Island Coffee Hawaii Eleele, Grow, process and sell
Company, Inc. Hawaii coffee
Ohanui Corporation Hawaii Puunene, Collection and distri-
Hawaii bution of domestic water
on island of Maui
South Shore Hawaii Koloa, Development and opera-
Community Hawaii tion of sewer trans-
Services, Inc. mission and treatment
system on island of
Kauai
South Shore Hawaii Koloa, Development and opera-
Resources, Inc. Hawaii tion of water source
and delivery system on
island of Kauai
WDCI, INC. Hawaii Honolulu, Ownership, manage-
Hawaii ment and development of
property
Hawaiian Sugar & Hawaii Crockett, Ocean carriage of sugar
Transportation California from Hawaii
Cooperative
Matson Navigation Hawaii San Ocean carriage of goods
Company, Inc. Francisco, between West Coast of
California United States and
Hawaii, Western Pacific
and Asian ports
Matson Intermodal Hawaii San Broker, shipper's agent
System, Inc. Francisco, and freight forwarder
California for overland cargo
services of ocean
carriers
Matson Leasing Hawaii San Formerly container
Company, Inc. Francisco, leasing; in process of
California winding up
Matson Services Hawaii San Tugboat services
Company, Inc. Francisco,
California
Matson Terminals, Hawaii San Stevedoring and terminal
Inc. Francisco, services
California
The Matson California San Inactive
Company Francisco,
California
The Oceanic California San Inactive
Steamship Francisco,
Company California
2. A brief description of the properties of Claimant and
Co-claimant, and each of their subsidiary public utility companies, used for
the generation, transmission and distribution of electric energy for sale, or
for the production, transmission and distribution of natural or manufactured
gas:
Claimant: None
Co-Claimant: 4 steam-driven generators with rated capacities of 1
of 12,000 KW, 2 of 10,000 KW, and 1 of 20,000 KW; 5
hydroelectric plants with rated capacities of 1 of
1,000 KW, 3 of 1,500 KW and 1 of 500 KW; about 80
miles of transmission lines; all located on the
island of Maui, State of Hawaii
McBryde Sugar Company, 2 steam-driven generators with rated capacities of
Limited ("McBryde") 7,500 KW; 2 hydroelectric plants with rated
(Note 1) capacities of 1 of 1,000 KW and 1 of 3,600 KW; about
70 miles of transmission lines; all located on the
island of Kauai, State of Hawaii
3. Information for the calendar year 1996 with respect to Claimant
and Co-claimant, and each of their subsidiary public utility companies:
(a)(1) Number of kwh of electric energy sold (all sales were at
wholesale):
Claimant None
Co-claimant 82,441,521 kwh
McBryde 25,227,000 kwh
____________
Note 1. McBryde Sugar Company, Limited has filed with the Securities and
Exchange Commission an application for an order declaring that it is
not an electric utility company.
(2) Number of Mcf of natural or manufactured gas distributed at
retail:
None. Neither Claimant nor Co-claimant, nor any of their
subsidiary public utility companies, distributes any natural or manufactured
gas at retail.
(b) Number of kwh of electric energy and Mcf of natural or
manufactured gas distributed at retail outside the State in which each such
company is organized:
None. Neither Claimant nor Co-claimant, nor any of their
subsidiary public utility companies, distributes any electric energy or natural
or manufactured gas at retail outside the State in which each such company is
organized.
(c) Number of kwh of electric energy and Mcf of natural or
manufactured gas sold at wholesale outside the State in which each such company
is organized, or at the State line:
None. Neither Claimant nor Co-claimant, nor any of their
subsidiary public utility companies, sells electric energy or natural or
manufactured gas at wholesale (or otherwise) outside the State in which each
such company is organized, or at the State line.
(d) Number of kwh of electric energy and Mcf of natural or
manufactured gas purchased outside the State in which each such company is
organized, or at the State line:
None. Neither Claimant nor Co-claimant, nor any of their
subsidiary public utility companies, purchases any electric energy or natural
or manufactured gas outside the State in which each such company is organized,
or at the State line.
4. The following information for the reporting period with respect
to Claimant and Co-claimant and each interest they hold directly or indirectly
in an EWG or a foreign utility company, stating monetary amounts in United
States dollars:
(a) Name, location, business address and description of the
facilities used by the EWG or foreign utility company for the generation,
transmission and distribution of electric energy for sale or for the
distribution at retail of natural or manufactured gas.
Not applicable. Neither Claimant nor Co-claimant holds any
interest, directly or indirectly, in an EWG or a foreign utility company.
(b) Name of each system company that holds an interest in such
EWG or foreign utility company; and description of the interest held.
No applicable (see 4(a) above).
(c) Type and amount of capital invested, directly or
indirectly, by the holding company claiming exemption; any direct or indirect
guarantee of the security of the EWG or foreign utility company by the holding
company claiming exemption; and any debt or other financial obligation for
which there is recourse, directly or indirectly, to the holding company
claiming exemption or another system company, other than the EWG or foreign
utility company.
Not applicable (see 4(a) above).
(d) Capitalization and earnings of the EWG or foreign utility
company during the reporting period.
Not applicable (see 4(a) above).
(e) Identify any service, sales or construction contract(s)
between the EWG or foreign utility company and a system company, and describe
the services to be rendered or goods sold and fees or revenues under such
agreement(s).
Not applicable (see 4(a) above).
<PAGE>
EXHIBIT A
---------
Consolidating statements of income and retained earnings of Claimant
and Co-claimant, and their subsidiary companies, for the last calendar year,
together with a consolidating balance sheet of Claimant and Co-claimant, and
their subsidiary companies, as of the close of such calendar year, are attached
hereto.
EXHIBIT B
---------
FINANCIAL DATA SCHEDULE
-----------------------
The registrant is required to submit this report and any amendments
thereto electronically via EDGAR. Attached hereto is a Financial Data Schedule
that sets forth the financial and other data specified below that are appli-
cable to the registrant on a consolidated basis:
ITEM NO. CAPTION HEADING
1 Total Assets
2 Total Operating Revenues
3 Net Income
EXHIBIT C
---------
An organizational chart showing the relationship of each EWG or foreign
utility company to associate companies in the holding-company system.
Not applicable. Neither Claimant nor Co-claimant holds any interest,
directly or indirectly, in an EWG or a foreign utility company.
The above-named Claimant and Co-claimant have caused this joint and
consolidated statement to be duly executed on their behalf by their authorized
officers this 26th day of February, 1997.
ALEXANDER & BALDWIN, INC. A&B-HAWAII, INC.
(Name of Claimant) (Name of Co-Claimant)
By: /s/Glenn R. Rogers By: /s/Glenn R. Rogers
---------------------------- ----------------------------
Glenn R. Rogers Glenn R. Rogers
Vice President Senior Vice President
(Corporate Seal) (Corporate Seal)
Attest: Attest:
/s/Michael J. Marks /s/Michael J. Marks
- ---------------------------- ----------------------------
Secretary Assistant Secretary
Name, title and address of Officer to whom notices and correspondence
concerning this statement should be addressed:
If to Claimant
Alexander & Baldwin Inc.: Michael J. Marks
Vice President, General Counsel and Secretary
Alexander & Baldwin, Inc.
P. O. Box 3440
Honolulu, Hawaii 96801
If to Co-claimant
A&B-Hawaii, Inc.: Michael J. Marks
Senior Vice President and General Counsel
A&B-Hawaii, Inc.
P. O. Box 3440
Honolulu, Hawaii 96801
February 26, 1997
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT A
ALEXANDER & BALDWIN, INC.
CONSOLIDATING STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
($000 omitted)
ABIC Elim ABI MNC ABHI
<S> <C> <C> <C> <C> <C>
OPERATING REVENUE:
Net sales 46,562 9,703 36,859
Net sugar sales 472,769 472,769
Transportation and terminal services 547,427 541,411 6,016
Rentals and other services 143,392 8,746 104,088 30,558
--------- ------ ------- -------
Total operating revenues 1,210,150 18,449 645,499 546,202
OPERATING COSTS AND EXPENSES:
Cost of goods sold 30,793 1,407 29,386
Cost of sugar sold 404,207 404,207
Cost of services 550,745 (38) 2,924 510,868 36,991
Plantation closure (4,624) (4,624)
--------- ------ ------ ------- -------
Total operating costs and expenses 981,121 (38) 4,331 510,868 465,960
--------- ------ ------ ------- -------
GROSS MARGIN 229,029 38 14,118 134,631 80,242
GENERAL, ADMIN & SELLING EXPENSES 102,462 7,331 64,778 30,353
--------- ------ ------ ------- -------
INCOME FROM OPERATIONS 126,567 38 6,787 69,853 49,889
OTHER INCOME:
Interest - other 15,085 249 14,387 449
Interest - intercompany (1,460) 257 1,179 24
Total interest 15,085 (1,460) 506 15,566 473
Dividends 2,756 2,756
Gain (loss) on disposal of property 1,534 684 1,116 (266)
Other 3,043 15 584 2,444
--------- ------ ------ ------- -------
Total other income 22,418 (1,460) 3,961 17,266 2,651
OTHER DEDUCTIONS:
Interest capitalized (484) (484)
Interest - other 34,565 376 16,788 17,401
--------- ------ ------- -------
Total interest (other than intercompany) 34,081 376 16,788 16,917
Interest - intercompany (1,460) 24 1,436
--------- ------ ------ ------- -------
Total interest 34,081 (1,460) 400 16,788 18,353
Other 10,871 619 4,322 5,930
--------- ------ ------ ------- -------
Total other deductions 44,952 (1,460) 1,019 21,110 24,283
--------- ------ ------ ------- -------
INCOME BEFORE INCOME TAXES 104,033 38 9,729 66,009 28,257
PROVISION FOR INCOME TAXES (CREDIT):
Current - Federal 23,549 1,065 888 29,589 (7,993)
Current - State 4,779 1 255 3,449 1,074
Deferred income taxes 10,420 (1,052) 1,865 (7,921) 17,528
--------- ------ ------ ------- -------
Total provision for income 38,748 14 3,008 25,117 10,609
--------- ------ ------ ------- -------
NET INCOME 65,285 24 6,721 40,892 17,648
========= ====== ====== ======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALEXANDER & BALDWIN, INC
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1996
($000 omitted)
ABIC Elim ABI MNC ABHI
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash 8,706 8,706
Short-term investments 15,600 15,600
Accounts and notes receivable:
Trade 133,040 110 104,014 28,916
Sugar receivable 6,019 6,019
Other 32,547 1,799 26,950 3,798
Undistributed return from sugar 57,972 57,972
Crop Advances to HSTC 660 660
Property held for Resale 17,383 17,383
Saleable inventories 3,568 3,568
Materials and supplies 41,182 17,267 23,915
Deferred income tax 17,708 302 10,588 6,818
Prepaid expenses 12,114 748 8,224 3,142
Accrued for deposit in CCF (1,656) (1,656)
--------- ------- ------- ------
Total current assets 344,843 2,959 180,987 160,897
INVESTMENTS: Subsidiaries consolidated (592,684) 592,684
Divisions (75,639) 75,639
Other 91,602 90,796 806
REAL ESTATE DEVELOPMENTS 70,144 70,144
PROPERTY:
Land 61,869 (3,683) 17,542 48,010
Buildings 204,588 (2,133) 59,062 147,659
Vessels 816,516 816,516
Machinery and equipment 676,830 591 395,755 280,484
Water, power and sewer system 78,726 4,676 74,050
Other property improvements 88,529 2,526 51,619 34,384
--------- -------- ------- --------- -------
Total 1,927,058 (5,816) 84,397 1,263,890 584,587
Less accumulated depreciation 864,002 (38) 9,648 620,266 234,126
--------- -------- ------- --------- -------
Property - net 1,063,056 (5,778) 74,749 643,624 350,461
CAPITAL CONSTRUCTION FUND 178,616 178,616
NONCURRENT INTERCOMPANY RECEIVABLES (40,477) 15,537 24,940
DEFERRED CHARGES AND OTHER ASSETS 52,843 (297) 10,324 2,980 39,836
--------- -------- ------- --------- -------
TOTAL 1,801,104 (674,398) 806,674 1,021,744 647,084
========= ======== ======= ========= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALEXANDER & BALDWIN, INC
CONSOLIDATING BALANCE SHEET, CONTINUED
DECEMBER 31, 1996
($000 omitted)
ABIC Elim ABI MNC ABHI
<S> <C> <C> <C> <C> <C>
CURRENT LIABILITIES:
Notes payable 62,000 62,000
Current portion of long-term debt 31,966 15,294 16,672
Capital lease obligations-current 12,116 11,616 500
Bank Overdraft 482 16 466
Accounts payable 50,489 232 36,005 14,252
Payrolls and vacation pay 21,996 723 13,388 7,885
Income taxes - current 1,296 (65) (18,306) 13,447 6,220
Other taxes 5,445 505 3,475 1,465
Postretirement benefits obligations-current 5,710 8 1,107 4,595
Uninsured claims 16,129 12,514 3,615
Reserve for dry-docking 5,950 5,950
Other liabilities 29,826 2,593 6,671 20,562
--------- -------- ------- --------- -------
Total current liabilities 243,405 (65) (14,229) 119,933 137,766
LONG-TERM LIABILITIES:
Long-term debt 345,618 197,720 147,898
Capital lease obligations-noncurrent 12,039 9,539 2,500
Postretirement benefits obligations-current 116,047 56 28,880 87,111
Deferred income taxes 350,913 (2,089) 51,572 237,291 64,139
Other 48,754 (290) 5,684 36,590 6,770
--------- -------- ------- --------- -------
Total long-term liabilities 873,371 (2,379) 57,312 510,020 308,418
--------- -------- ------- --------- -------
Total liabilities 1,116,776 (2,444) 43,083 629,953 446,184
SHAREHOLDERS' EQUITY:
Capital stock 37,150 (2) 37,150 1 1
Additional capital 43,377 (149,381) 43,377 21,836 127,545
Unrealized holding gains 48,205 48,205
Retained earnings 568,969 (446,932) 572,593 369,954 73,354
Treasury stock (13,373) (13,373)
Division investment (75,639) 75,639
--------- -------- ------- --------- -------
Total shareholders' equity 684,328 (671,954) 763,591 391,791 200,900
--------- -------- ------- --------- -------
TOTAL 1,801,104 (674,398) 806,674 1,021,744 647,084
========= ======== ======= ========= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALEXANDER & BALDWIN, INC
CONSOLIDATING STATEMENT OF RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1996
($000 omitted)
ABIC Elim ABI MNC ABHI
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 546,394 (438,416) 550,042 379,062 55,706
Net income 65,285 24 6,721 40,892 17,648
Dividends to shareholders (39,860) (39,860)
Capital stock purchased and retired (1,213) (1,213)
Intercompany dividends 50,000 (50,000)
Intercompany property sales
Stock acquired in payment of options (1,637) (1,637)
Net income of subsidiaries (58,540) 58,540
Other
------- -------- ------- ------- ------
Balance at December 31, 1996 568,969 (446,932) 572,593 369,954 73,354
======= ======== ======= ======= ======
</TABLE>
<PAGE>
LEGEND OF COMPANY REFERENCES IN CONSOLIDATING FINANCIAL SCHEDULES
ABIC Alexander & Baldwin, Inc. Consolidated
Elim Eliminations
ABI Alexander & Baldwin, Inc.
MNC Matson Navigation Company, Inc.
ABHI A&B-Hawaii, Inc.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION: The consolidated financial statements include the
accounts of Alexander & Baldwin, Inc. and all subsidiaries, after elimination
of significant intercompany amounts.
OCEAN TRANSPORTATION: Voyage revenue and variable costs and expenses are
included in income at the time each voyage leg commences. This method of
accounting does not differ materially from other acceptable accounting
methods.
Vessel depreciation, charter hire, terminal operating overhead, and general and
administrative expenses are charged to expense as incurred. Expected costs of
regularly-scheduled dry docking of vessels and planned major vessel repairs
performed during dry docking are accrued.
PROPERTY DEVELOPMENT AND MANAGEMENT: Sales are recorded when the risks and
benefits of ownership have passed to the buyers (generally at closing dates),
adequate down payments have been received and collection of remaining balances
is reasonably assured.
Expenditures for real estate developments are capitalized during construction
and are classified as Real Estate Developments on the balance sheet. When
construction is complete, the costs are reclassified either as Property or as
Real Estate Held For Sale, based upon the Company's intent to sell the
completed asset or to hold it as an investment. Cash flows related to real
estate developments are classified as operating or investing activities, based
upon the Company's intention either to sell the property or to retain ownership
of the property as an investment following completion of construction.
FOOD PRODUCTS: Revenue is recorded when refined sugar products and coffee are
sold to third parties.
Costs of growing sugar cane are charged to the cost of production in the year
incurred and to cost of sales as refined products are sold. The cost of raw
cane sugar purchased from third parties is recorded as inventory at the
purchase price.
Costs of developing coffee are capitalized during the development period and
depreciated over the estimated productive lives of the orchards. Costs of
growing coffee are charged to inventory in the year incurred and to cost of
sales as coffee is sold.
CASH AND CASH EQUIVALENTS: The Company considers highly liquid investments
purchased with original maturities of three months or less, which have no
significant risk of change in value, to be cash equivalents.
INVENTORIES: Sugar inventory, consisting of raw and refined sugar products,
and coffee inventory, are stated at the lower of cost (first-in, first-out
basis) or market. Other inventories, composed principally of materials and
supplies, are stated at the lower of cost (principally average cost) or market.
PROPERTY: Property is stated at cost. Major renewals and betterments are
capitalized. Replacements, maintenance and repairs which do not improve or
extend asset lives are charged to expense as incurred. Assets held under
capital leases are included with property owned. Gains or losses from property
disposals are included in income.
CAPITALIZED INTEREST: Interest costs incurred in connection with significant
expenditures for real estate developments or the construction of assets are
capitalized.
DEPRECIATION: Depreciation is computed using the straight-line method.
Depreciation expense includes amortization of assets under capital leases and
vessel spare parts.
Estimated useful lives of property are as follows:
Buildings........................................... 10 to 50 years
Vessels............................................. 10 to 40 years
Marine containers................................... 15 years
Machinery and equipment............................. 3 to 35 years
Utility systems and other depreciable property...... 5 to 60 years
OTHER NON-CURRENT ASSETS: Other non-current assets consist principally of
sugar supply contracts and intangible assets. These assets are being amortized
using the straight-line method over periods not exceeding 30 years.
PENSION PLANS: Certain ocean transportation subsidiaries are members of the
Pacific Maritime Association (PMA), the Maritime Service Committee or the
Hawaii Stevedore Committee, which negotiate multi-employer pension plans
covering certain seagoing and shoreside bargaining unit personnel. The
subsidiaries negotiate multi-employer pension plans covering other bargaining-
unit personnel. Pension costs are accrued in accordance with contribution
rates established by the PMA, the parties to a plan or the trustees of a plan.
Several trusteed, noncontributory, single-employer defined benefit plans cover
substantially all other employees.
INCOME TAXES: Income tax expense is based on revenue and expenses in the
statements of income. Deferred income tax liabilities and assets are computed
at current tax rates for temporary differences between the financial statement
and income tax bases of assets and liabilities.
FAIR VALUES: The carrying values of current assets (other than inventories,
real estate held for sale, deferred income taxes and prepaid and other assets)
and of debt instruments are reasonable estimates of their fair values. Real
estate is carried at the lower of cost or fair value. Fair values are
generally determined using the expected market value for the property, less
sales costs. For residential units and lots held for sale, fair value is
determined by reference to the sales of similar property, market studies,
tax assessments and discounted cash flows. For commercial property, fair value
is determined using recent comparable sales, tax assessments and cash flow
analysis. A large portion of the Company's real estate is undeveloped land
located in Hawaii. This land has a cost basis which averages approximately
$150 per acre, a value which is much lower than fair value.
FUTURES CONTRACTS: Realized and unrealized gains and losses on commodity
futures contracts are deferred and recorded in inventory. These amounts are
not significant.
ENVIRONMENTAL COSTS: Environmental expenditures that relate to current
operations are expensed or capitalized as appropriate. Expenditures that
relate to an existing condition caused by past operations or events, and which
do not contribute to current or future revenue generation, are charged to
expense. Liabilities are recorded when environmental assessments or remedial
efforts are probable and the costs can be reasonably estimated.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenue and expenses during the
reporting periods. Future actual amounts could differ from those estimates.
RECLASSIFICATIONS: Certain amounts in the 1995 and 1994 financial statements
have been reclassified to conform with the 1996 presentation.
RESTATEMENTS: The financial statements for all periods presented have been
restated to reflect the sale of certain net assets of the Company's container
leasing segment, as described in Note 2.
2. DISCONTINUED OPERATIONS
In June 1995, the Company sold the net assets of its container leasing
subsidiary, Matson Leasing Company, Inc., for $361.7 million in cash, and
realized an after-tax gain of $18 million. Specifically excluded from the sale
were long-term debt and U. S. tax obligations of the business.
Summary operating results of discontinued operations, excluding the above gain,
were as follows:
1995 1994
---- ----
(In thousands)
Net sales .................................... $35,251 $ 63,060
======= ========
Gross profit .................................. $14,762 $ 24,499
======= ========
Earnings before income taxes .................. $ 8,564 $ 16,604
Income taxes .................................. 3,228 5,975
------- --------
Net earnings from discontinued operations...... $ 5,336 $ 10,629
======== ========
3. INVESTMENTS
At December 31, 1996 and 1995, investments principally consisted of marketable
equity securities, limited partnership interests and purchase-money mortgages.
The marketable equity securities are classified as "available for sale" and are
stated at quoted market values. The unrealized holding gains on these
securities, net of deferred income taxes, have been recorded as a separate
component of shareholders' equity.
The components of the net unrealized holding gains at December 31, 1996 and
1995 were as follows:
1996 1995
---- ----
(In thousands)
Market value.............................. $85,796 $73,460
Less historical cost ..................... 9,966 9,966
------- -------
Unrealized holding gains ................. 75,830 63,494
Less deferred income taxes ............... 27,625 23,664
------- -------
Net unrealized holding gains ............. $48,205 $39,830
======= =======
The investments in limited partnership interests and purchase money mortgages
are recorded at cost, which approximated market values, of $5,806,000 and
$8,786,000 at December 31, 1996 and 1995, respectively. The purchase money
mortgages are intended to be held to maturity. The value of the underlying
investments of the limited partnership interests are assessed annually and are
approximately equal to the original cost.
See Note 4 for a discussion of market values of investments in the Capital
Construction Fund.
4. CAPITAL CONSTRUCTION FUND
A subsidiary is party to an agreement with the United States Government which
established a Capital Construction Fund (CCF) under provisions of the Merchant
Marine Act, 1936, as amended. The agreement has program objectives for the
acquisition, construction or reconstruction of vessels and for repayment of
existing vessel indebtedness. Deposits to the CCF are limited by certain
applicable earnings. Such deposits are Federal income tax deductions in the
year made; however, they are taxable, with interest payable from the year of
deposit, if withdrawn for general corporate purposes or other non-qualified
purposes, or upon termination of the agreement. Qualified withdrawals for
investment in vessels having adequate tax bases do not give rise to a current
tax liability, but reduce the depreciable bases of the vessels or other assets
for income tax purposes. Amounts deposited into the CCF are a preference item
for calculating Federal alternative minimum taxable income. Deposits not
committed for qualified purposes within 25 years from the date of deposit, will
be treated as non-qualified withdrawals over the subsequent five years. As of
year-end, the oldest CCF deposits date from 1991. Management believes that all
amounts on deposit in the CCF at the end of 1996 will be used or committed for
qualified purposes prior to the expiration of the applicable 25-year periods.
Under the terms of the CCF agreement, the subsidiary may designate certain
qualified earnings as `accrued deposits'' or may designate, as obligations of
the CCF, qualified withdrawals to reimburse qualified expenditures initially
made with operating funds. Such accrued deposits to and withdrawals from the
CCF are reflected on the balance sheet either as obligations of the Company's
current assets or as receivables from the CCF.
The Company has classified its investments in the CCF as "held-to-maturity"
and, accordingly, has not reflected temporary unrealized market gains and
losses on the balance sheets or statements of income. The long-term nature of
the CCF program supports the Company's intention to hold these investments to
maturity.
At December 31, 1996 and 1995, the balances on deposit in the CCF are
summarized in Table 1.
<TABLE>
<CAPTION>
TABLE 1 (In thousands)
1996 1995
--------------------------------- ---------------------------------
Amortized Fair Unrealized Amortized Fair Unrealized
Cost Value Gain (Loss) Cost Value Gain (Loss)
--------- ----- ----------- --------- ----- -----------
<S> <C> <C> <C> <C> <C> <C>
Mortgage-backed securities..... $ 84,642 $ 80,871 $(3,771) $ 95,156 $ 91,132 $(4,024)
Cash and cash equivalents...... 92,318 92,318 - 215,823 215,856 33
Accrued deposits............... 1,656 1,656 - 6,233 6,233 -
-------- -------- ------- -------- -------- -------
Total.......................... $178,616 $174,845 $(3,771) $317,212 $313,221 $(3,991)
======== ======== ======== ======== ======== =======
</TABLE>
Fair value of the mortgage-backed securities ("MBS") was determined by an
outside investment management company, based on the experience of trading
identical or substantially similar securities. No central exchange exists for
these securities; they are traded over-the-counter.
At the end of 1996, the fair value of the Company's investments in MBS is less
than amortized cost due to interest rate sensitivity inherent in the fair
value determination of such securities. While an unrealized market loss
exists, the Company intends to hold these investments to maturity, which ranges
from 1997 through 2024. The MBS have a weighted average life of approximately
six years. The Company earned $6,838,000 in 1996, $7,655,000 in 1995 and
$8,292,000 in 1994 on its investments in MBS.
Fair values of the remaining CCF investments were based on quoted market
prices, if available. If a quoted market price was not available, fair value
was estimated using quoted market prices of similar securities and investments.
These remaining investments mature in 1997.
During 1996 and 1995, there were no sales of securities classified as "held-to-
maturity" included in the CCF.
5. EMPLOYEE BENEFIT PLANS
Total contributions to the multi-employer pension plans covering personnel in
shoreside and seagoing bargaining units were $5,552,000 in 1996, $5,903,000 in
1995 and $8,216,000 in 1994. Union collective bargaining agreements provide
that total employer contributions during the terms of the agreements must be
sufficient to meet the normal costs and amortization payments required to be
funded during those periods. Contributions are generally based on union labor
used or cargo handled or carried. A portion of such contributions is for
unfunded accrued actuarial liabilities of the plans being funded over periods
of 25 to 40 years, which began between 1967 and 1976.
The multi-employer plans are subject to the plan termination insurance
provisions of the Employee Retirement Income Security Act of 1974, as amended,
and are paying premiums to the Pension Benefit Guarantee Corporation (PBGC).
The statutes provide that an employer which withdraws from or significantly
reduces its contribution obligation to a multi-employer plan generally will be
required to continue funding its proportional share of the plan's unfunded
vested benefits.
Under special rules approved by the PBGC and adopted by the longshore plan in
1984, the Company could cease Pacific Coast cargo-handling operations
permanently and stop contributing to the plan without any withdrawal liability,
provided that the plan meets certain funding obligations as defined in the
plan. The estimated withdrawal liabilities under the Hawaii longshore plan and
the seagoing plans aggregated approximately $6,400,000 for various plan years
ending in 1996 and 1995. Management has no present intention of withdrawing
from and does not anticipate termination of any of the aforementioned plans.
The net pension cost (benefit) and components for 1996, 1995 and 1994, of
single-employer defined benefit pension plans, which cover substantially all
other employees, were as follows:
1996 1995 1994
---- ---- ----
(In thousands)
Service cost--benefits earned
during the year ....................... $ 6,326 $ 6,210 $ 7,317
Interest cost on projected benefit
obligation ............................ 23,295 21,785 20,542
Actual return on plan assets.............. (47,980) (78,713) 3,719
Net amortization and deferral............. 14,599 50,298 (29,062)
Curtailments and terminations ............ (779) (1,761) 1,300
------- -------- --------
Net pension cost (benefit) ............... $ (4,539) $ (2,181) $ 3,816
======== ======== ========
The funded status of the single-employer plans at December 31, 1996 and 1995
was as follows:
1996 1995
---- ----
(In thousands)
Actuarial present value of benefit obligation:
Vested benefits ......................... $ 284,755 $ 241,422
Non-vested benefits ..................... 8,415 9,881
--------- ---------
Accumulated benefit obligation .......... 293,170 251,303
Additional amounts related to projected
compensation levels................... 32,925 34,276
--------- ---------
Projected benefit obligation ............ 326,095 285,579
Plan assets at fair value................... 380,909 348,208
--------- ---------
Excess of plan assets over
projected benefit obligation............. (54,814) (62,629)
Prior service costs to be recognized in
future years ............................ (3,518) (3,739)
Unrecognized actuarial net gain............. 59,119 75,759
Unrecognized net asset at
January 1, 1987 (being amortized over
periods of 4 to 15 years) ............... 2,864 3,954
--------- ---------
Accrued pension liability................... $ 3,651 $ 13,345
========= =========
At December 31, 1996 and 1995, the projected benefit obligation was determined
using a discount rate of 7.5% and 8%, respectively, and assumed increases in
future compensation levels of 4.5% and 5%, respectively. The expected long-
term rate of return on assets was 9% for 1996 and 1995. The assets of the
plans consist principally of listed stocks and bonds.
Contributions are determined annually for each plan by the Company's pension
administrative committee, based upon the actuarially determined minimum
required contribution under ERISA and the maximum deductible contribution
allowed for tax purposes. For the plans covering employees who are members of
collective bargaining units, the benefit formulas are determined according to
the collective bargaining agreements, either using career average pay as the
base or a flat dollar amount per year of service. The benefit formulas for the
remaining defined benefit plans are based on final average pay.
The Company has non-qualified supplemental pension plans covering certain
employees and retirees, which provide for incremental pension payments from the
Company's general funds so that total pension benefits would be substantially
equal to amounts that would have been payable from the Company's qualified
pension plans if it were not for limitations imposed by income tax regulations.
The projected benefit obligation, included with other non-current liabilities,
relating to these unfunded plans, totaled $9,844,000 and $8,680,000 at December
31, 1996 and 1995, respectively.
6. POST-RETIREMENT BENEFIT PLANS
The Company has plans that provide certain retiree health care and life
insurance benefits to substantially all salaried and to certain hourly
employees. Employees are generally eligible for such benefits upon retirement
and completion of a specified number of years of credited service. The Company
does not pre-fund these benefits and has the right to modify or terminate
certain of these plans in the future. Certain groups of retirees pay a portion
of the benefit costs.
The net periodic cost for post-retirement health care and life insurance
benefits during 1996, 1995 and 1994 included the following:
1996 1995 1994
---- ---- ----
(In thousands)
Service cost........................... $ 1,351 $ 1,512 $ 2,149
Interest cost.......................... 6,605 7,031 7,825
Net amortization....................... (2,016) (1,524) (216)
Curtailment gain....................... (2,476) (2,045) -
-------- ------- --------
Post-retirement benefit cost........... $ 3,464 $ 4,974 $ 9,758
======== ======= ========
The unfunded accumulated post-retirement benefit obligation at December 31,
1996 and 1995 is summarized below:
1996 1995
---- ----
(In thousands)
Accumulated post-retirement benefit obligation:
Retirees .................................. $ 54,951 $ 56,606
Fully-eligible active plan participants ... 10,865 9,073
Other active plan participants ............ 27,780 25,373
Unrecognized prior service cost ........... 3,643 5,676
Unrecognized net gain ..................... 24,518 26,862
-------- --------
Total ................................... 121,757 123,590
Current obligation........................... 5,710 5,118
-------- --------
Non-current obligation....................... $116,047 $118,472
======== ========
At December 31, 1996 and 1995, the weighted average discount rates used in
determining the accumulated post-retirement benefit obligations were 7.5% and
8%, respectively, and the assumed health care cost trend rate used in measuring
the accumulated post-retirement benefit obligation was 10% through 2001,
decreasing to 5% thereafter. If the assumed health care cost trend rate were
increased by one percentage point, the accumulated post-retirement benefit
obligation as of December 31, 1996 and 1995 would have increased by
approximately $11,105,000 and $10,405,000, respectively, and the net periodic
post-retirement benefit cost for 1996 and 1995 would have increased by
approximately $1,208,000 and $1,190,000, respectively.
7. LONG-TERM DEBT, CREDIT AGREEMENTS
At December 31, 1996 and 1995, long-term debt consisted of the following:
1996 1995
---- ----
(In thousands)
Commercial paper, 5.33%-5.70%............. $ 225,632 $ 246,437
Bank variable rate loans (1996 high 6.38%,
low 5.50%) due after 1996 ............. 22,000 40,000
Term loans:
7.19%, payable through 2007 ............ 75,000 75,000
8%, payable through 2000 . ............. 37,500 47,500
9.05%, payable through 1999 ............ 21,285 27,201
9.8%, payable through 2004 ............. 16,667 18,750
9%, payable through 1999 .. ............ 15,882 21,176
7.43%, payable through 2007 ............ 15,000 -
7.65%, payable through 2001 ............ 10,000 10,000
11.78%, payable through 1997 ........... 618 1,269
Limited partnership subscription notes,
no interest, repaid in 1996 ............ - 850
--------- ---------
Total .................................. 439,584 488,183
Less current portion ................... 31,966 24,794
Commercial paper classified as current . 62,000 83,000
--------- ---------
Long-term debt ......................... $ 345,618 $ 380,389
========= =========
VARIABLE RATE LOANS: The Company and a subsidiary have a revolving credit and
term loan agreement with five commercial banks, whereby they may borrow up to
$155,000,000, under revolving loans to November 30, 1998, at varying rates of
interest. Any revolving loan outstanding on that date may be converted into a
term loan, which would be payable in 16 equal quarterly installments. The
agreement contains certain restrictive covenants, the most significant of which
requires the maintenance of an interest coverage ratio of 2:1. At December 31,
1996 and 1995, $15,000,000 and $10,000,000, respectively, were outstanding
under this agreement.
The Company and a subsidiary have an uncommitted $45,000,000 short-term
revolving credit agreement with a commercial bank. The agreement extends to
November 30, 1997, but may be canceled by the bank at any time. At
December 31, 1996 and 1995, $7,000,000 and $17,000,000, respectively, were
outstanding under this agreement.
The Company and a subsidiary have an uncommitted $25,000,000 revolving credit
agreement with a commercial bank. The agreement extends to July 18, 1997. At
December 31, 1996, there were no amounts outstanding under this agreement. At
December 31, 1995, $13,000,000 was outstanding.
During 1995, a subsidiary entered into a $50,000,000 one-year Revolving Credit
Agreement to replace two previous credit facilities. Up to $25,000,000 of this
agreement serves as a commercial paper liquidity back-up line, with the balance
available for general corporate funds. At December 31, 1996 and 1995, there
were no amounts outstanding under this agreement.
TERM LOAN: The Company and a subsidiary have a shelf facility under which they
may borrow up to $50,000,000 in $5,000,000 term loan increments. At December
31, 1996, $15,000,000 had been borrowed.
COMMERCIAL PAPER: At December 31, 1996, there were two commercial paper
programs. The first program was used by a subsidiary to finance the
construction of a vessel, which was delivered in 1992. At December 31, 1996,
$149,632,000 of commercial paper notes was outstanding under this program.
Maturities ranged from 6 to 66 days. The borrowings outstanding under this
program are classified as long-term, because the subsidiary intends to continue
the program indefinitely and eventually to repay the borrowings with qualified
withdrawals from the Capital Construction Fund.
The second commercial paper program is used by a subsidiary to fund the
purchases of sugar inventory from Hawaii sugar growers and to provide working
capital for sugar refining and marketing operations. At December 31, 1996,
$76,000,000 of commercial paper notes was outstanding under this program.
Maturities ranged from 7 to 51 days. The interest cost and certain fees on the
borrowings relating to sugar inventory advances to growers are reimbursed by
the growers. Of the total commercial paper borrowing outstanding at
December 31, 1996, $62,000,000 was classified as current. The commercial paper
is supported by a $100,000,000 backup revolving credit facility with six
commercial banks. Both the commercial paper program and the backup facility
are guaranteed by the subsidiary's parent and by the Company.
In 1995, the Company repaid the outstanding commercial paper notes of a third
program which had been used to finance container purchases of the discontinued
container leasing business.
LONG-TERM DEBT MATURITIES: At December 31, 1996, maturities and planned
prepayments of all long-term debt during the next five years totaled
$31,966,000 for 1997, $24,453,000 for 1998, $32,616,000 for 1999, $19,583,000
for 2000 and $17,083,000 for 2001.
8. LEASES
THE COMPANY AS LESSEE: Various subsidiaries of the Company lease a vessel and
certain land, buildings and equipment under both capital and operating leases.
Capital leases include one vessel leased for a term of 25 years ending in 1998;
containers, machinery and equipment for terms of 5 to 12 years expiring through
1997; and a wastewater treatment facility in California, the title to which
will revert to a subsidiary in 2002. Principal operating leases cover office
and terminal facilities for periods which expire between 1997 and 2026.
Management expects that in the normal course of business, most operating leases
will be renewed or replaced by other similar leases.
Rental expense under operating leases totaled $50,869,000, $46,680,000 and
$48,169,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
Contingent rents and income from sublease rents were not significant.
Assets recorded under capital lease obligations and included in property at
December 31, 1996 and 1995 were as follows:
1996 1995
---- ----
(In thousands)
Vessel ............................................. $ 55,253 $55,253
Machinery and equipment............................. 42,468 42,688
-------- -------
Total............................................ 97,721 97,941
Less accumulated amortization....................... 90,462 84,813
-------- -------
Property under capital leases--net ................. $ 7,259 $13,128
======== =======
Future minimum payments under all leases and the present value of minimum
capital lease payments as of December 31, 1996 were as follows:
Capital Operating
Leases Leases
------ ------
(In thousands)
1997................................................ $ 14,603 $25,186
1998................................................ 11,089 24,252
1999................................................ 609 16,203
2000................................................ 578 13,394
2001................................................ 547 12,206
Thereafter.......................................... 516 101,866
-------- -------
Total minimum lease payments........................ 27,942 $193,107
========
Less amount representing interest................... 3,787
--------
Present value of future minimum payments............ 24,155
Less current portion................................ 12,116
--------
Long-term obligations at December 31, 1996.......... $ 12,039
========
A subsidiary is obligated to pay terminal facility rent equal to the principal
and interest on Special Facility Revenue Bonds issued by the Department of
Transportation of the State of Hawaii. Interest on the bonds is payable semi-
annually and principal, in the amount of $16,500,000, is due in 2013. An
accrued liability of $7,713,000 and $7,170,000 at December 31, 1996 and 1995,
respectively, included in other long-term liabilities, provides for a pro-rata
portion of the principal due on these bonds.
THE COMPANY AS LESSOR: Various Company subsidiaries lease land, buildings and
land improvements under operating leases. The historical cost of and
accumulated depreciation on leased property at December 31, 1996 and 1995 were
as follows:
1996 1995
---- ----
(In thousands)
Leased property..................................... $246,802 $246,609
Less accumulated amortization....................... 42,722 37,555
-------- --------
Property under operating leases--net................ $204,080 $209,054
======== ========
Total rental income under these operating leases for the three years ended
December 31, 1996 was as follows:
1996 1995 1994
---- ---- ----
(In thousands)
Minimum rentals............................. $34,556 $28,164 $31,792
Contingent rentals (based on sales volume).. 1,232 880 1,515
------- ------- -------
Total.................................. $35,788 $29,044 $33,307
======= ======= =======
Future minimum rental income on non-cancelable leases at December 31, 1996 was
as follows:
Operating
Leases
------------
(In thousands)
1997...................................... $ 28,860
1998...................................... 20,903
1999...................................... 17,059
2000...................................... 13,353
2001 ..................................... 10,898
Thereafter................................ 114,939
---------
Total .................................. $ 206,012
=========
9. INCOME TAXES
The income tax expense for the three years ended December 31, 1996 consisted of
the following:
1996 1995 1994
---- ---- ----
(In thousands)
Current:
Federal................................ $23,549 $(23,833) $29,796
State.................................. 4,779 403 1,444
------- -------- -------
Total ............................... 28,328 (23,430) 31,240
Deferred.................................. 10,420 42,965 1,412
------- -------- -------
Income tax expense ....................... $38,748 $ 19,535 $32,652
======= ======== =======
Total income tax expense for the three years ended December 31, 1996 differs
from amounts computed by applying the statutory Federal rate to pre-tax income,
for the following reasons:
1996 1995 1994
---- ---- ----
(In thousands)
Computed income tax expense............... $36,412 $18,184 $33,821
Increase (decrease) resulting from:
State tax on income, less applicable
Federal tax.......................... 2,605 326 1,332
Low-income housing credits............. (1,219) (1,224) (1,219)
Fair market value over cost of
donations............................ (11) - (2,138)
Other-net.............................. 961 2,249 856
------- ------- -------
Income tax expense ................. $38,748 $19,535 $32,652
======= ======= =======
The tax effects of temporary differences that give rise to significant portions
of the net deferred tax liability at December 31, 1996 and 1995 were as
follows:
1996 1995
---- ----
(In thousands)
Capital Construction Fund........................... $159,304 $166,649
Accelerated depreciation............................ 123,575 130,456
Tax-deferred gains on real estate transactions...... 73,890 69,585
Unrealized holding gains on securities.............. 27,625 23,664
Post-retirement benefits............................ (49,398) (47,813)
Insurance reserves.................................. (6,791) (6,766)
Alternative minimum tax benefits.................... (3,905) (14,264)
Other-net........................................... 8,905 (2,571)
-------- --------
Total............................................ $333,205 $318,940
======== ========
The Internal Revenue Service (IRS) has completed its audits of the Company's
tax returns through 1991 and, with one exception, has settled all substantive
issues raised during the audits. No settlement had a material effect on the
Company's financial position or results of operations. The Company is
contesting the remaining issue, which relates to the classification of cross
border lease transactions. The IRS has commenced an audit of the Company's
tax returns for 1992 through 1995. Management believes that the ultimate
resolution of the outstanding audit issue and other matters which may result
from the current audits will not have a material effect on the Company's
financial position or results of operations.
10. CAPITAL STOCK AND STOCK OPTIONS
The Company has a stock option plan ("1989 Plan") under which key employees may
be granted stock purchase options and stock appreciation rights. A second
stock option plan for key employees terminated in 1993, but shares previously
granted under the plan are still exercisable. Under the 1989 Plan, option
prices may not be less than the fair market value of a share of the Company's
common stock on the dates of grant, and each option generally becomes
exercisable in-full one year after the date granted. Payment for options
exercised, to the extent not reduced by the application or surrender of stock
appreciation rights, may be made in cash or in shares of the Company's stock.
If payment is made in shares of the Company's stock, the option holder may
receive, under a reload feature of the 1989 Plan, a new stock option grant for
the number of shares equal to that surrendered, with an option price not less
than the fair market value of the Company's stock on the date of exercise.
During 1996, 471,264 new options were granted under the 1989 Plan, including
40,489 reload options.
The 1989 Plan also permits issuance of shares of the Company's common stock as
a reward for past service rendered to the Company or one of its subsidiaries or
as an incentive for future service with such entities. The recipients'
interest in such shares may be fully vested upon issuance or may vest in one or
more installments, upon such terms and conditions as are determined by the
committee which administers the plan. The number of incentive shares issued
during 1996 or outstanding at the end of the year was not material.
The Company also has a Directors' stock option plan, under which each non-
employee Director of the Company, elected at an Annual Meeting of Shareholders,
is automatically granted, on the date of each such Annual Meeting, an option to
purchase 3,000 shares of the Company's common stock at the average fair market
value of the shares for the five consecutive trading days prior to the grant
date. Each option becomes exercisable six months after the date granted.
During 1996, 24,000 new options were granted and no options were canceled or
exercised. At December 31, 1996, 186,000 options were outstanding under the
plan.
The Company applies Accounting Principles Board Opinion Number 25, "Accounting
for Stock Issued to Employees," and related Interpretations in accounting for
its stock-based compensation plans. Accordingly, no compensation cost is
recognized in the Company's income statement for stock option plans at the time
grants are awarded. If the compensation costs for the 1989 Plan had been
determined consistent with Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," the after-tax cost for grants made
in 1996 and 1995 would have been approximately $900,000 and $1.3 million,
respectively. Earnings per share for 1996 and 1995 would have declined by
$0.02 and $0.03, respectively. The potential impact of the Director's stock
option plan was immaterial.
Changes in shares under all option plans, for the three years ended
December 31, 1996, were as follows:
Price Range
Shares Per Share
------ ---------
1994: Granted............................. 475,200 $24.700-27.000
Exercised........................... (12,300) 17.375-24.750
Canceled............................ (55,996) 24.250-36.250
--------
Outstanding, December 31............ 2,444,032 17.375-37.875
1995: Granted............................. 551,800 21.750-22.500
Exercised........................... (23,550) 17.375-24.750
Canceled............................ (385,531) 24.250-36.250
--------
Outstanding, December 31............ 2,586,751 17.375-37.875
1996: Granted............................. 495,264 21.750-32.625
Exercised........................... (125,188) 17.375-24.750
Canceled............................ (15,800) 24.250-36.250
---------
Outstanding, December 31
(2,510,252 exercisable) .......... 2,941,027 $17.375-37.875
=========
Options outstanding at December 31, 1996 include 48,916 shares that carry stock
appreciation rights which expire in January 1997. The outstanding options do
not have a material dilutive effect in the calculation of earnings per share of
common stock.
The Company has a Shareholder Rights Plan, designed to protect the interests of
shareholders in the event an attempt is made to acquire the Company. The
rights initially will trade with the Company's outstanding common stock and
will not be exercisable absent certain acquisitions or attempted acquisitions
of specified percentages of such stock. If exercisable, the rights generally
entitle shareholders to purchase additional shares of the Company's stock or
shares of an acquiring company's stock at prices below market value.
11. RELATED PARTY TRANSACTIONS, COMMITMENTS AND CONTINGENCIES
At December 31, 1996, the Company and its subsidiaries had an unspent balance
of total appropriations for capital expenditures of approximately $46,688,000.
However, there is no contractual obligation to spend this entire amount.
The Company has arranged for standby letters of credit of approximately
$20,689,000, necessary to qualify as a self-insurer for state and federal
workers' compensation liabilities. The Company also has other letters of
credit outstanding for normal operating matters which total approximately
$4,701,000.
A subsidiary is a party, acting as the steam host, to a Steam Purchase
Agreement with a developer which constructed and operates a cogeneration
facility contiguous to the subsidiary's California refinery. The agreement
provides that, during the 30-year period of the agreement, the subsidiary will
receive steam necessary for refinery operations at a reduced price, compared to
the market price of fuel which previously had to be purchased to generate its
steam requirements.
A subsidiary is party to a long-term sugar supply contract with Hawaiian
Sugar & Transportation Cooperative (HSTC), a raw sugar marketing and
transportation cooperative owned by the Company and by the other Hawaii sugar
growers. Under the terms of this contract, the subsidiary is obligated to
purchase, and HSTC is obligated to sell, all of the raw sugar delivered to HSTC
by the Hawaii sugar growers, at prices determined by the quoted domestic sugar
market. The subsidiary made purchases of raw sugar totaling $190,196,000 and
$158,284,000 under the contract during 1996 and 1995, respectively. The
contract also requires that the subsidiary provide cash advances to HSTC prior
to the physical receipt of the sugar at its refinery (see Note 7). Such
advances are determined by the estimated raw sugar market prices. Amounts due
to HSTC are credited against outstanding advances to HSTC upon delivery of raw
sugar to the subsidiary's refinery.
The Company and certain subsidiaries are parties to various legal actions and
are contingently liable in connection with claims and contracts arising in the
normal course of business, the outcome of which, in the opinion of management
after consultation with legal counsel, will not have a material adverse effect
on the Company's financial position or results of operations.
12. INDUSTRY SEGMENTS
Industry segment information for 1996, 1995 and 1994, on page 26, is
incorporated herein by reference. Segments are:
Ocean transportation -- carrying freight between various U.S. and Canadian West
Coast, Hawaii and other Pacific ports, and providing terminal services.
Property development and management -- developing, managing and selling
residential, commercial and industrial properties.
Food products -- growing, processing and marketing sugar, molasses and coffee,
and generating and selling electricity.
As discussed in Note 2, the net assets of the container leasing segment were
sold in 1995.
13. SUBSEQUENT EVENT
On February 13, 1997, a subsidiary received $33,650,000 in settlement of a
lawsuit that involved insurance claims over damage to the subsidiary's port
facilities resulting from the October 1989 Loma Prieta earthquake. After
satisfying terminal repair costs and litigation expenses of approximately
$12,600,000, the Company, through its subsidiaries, will record approximately
$21,000,000 of pre-tax income in the first quarter of 1996. After taxes, this
will add about $13,000,000, or $0.29 per share, to net income during that
period.
<PAGE>
EXHIBIT B
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
FINANCIAL DATA SCHEDULE
DECEMBER 31, 1996
(In thousands)
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDTAING BALANCE SHEET AND CONSOLIDATING INCOME
STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
Item No. Caption Heading
1 Total Assets $1,801,104
2 Total Operating Revenues $1,210,150
3 Net Income $65,285
<PAGE>
February 26, 1997
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N. W.
Washington, D. C. 20549
Re: Form U-3A-2 - Alexander & Baldwin, Inc.
and A&B-Hawaii, Inc. - SEC File No. 69-166
------------------------------------------
Gentlemen:
Submitted herewith for filing is the joint and consolidated Statement of
Alexander & Baldwin, Inc. and its wholly-owned subsidiary, A&B-Hawaii, Inc., on
Form U-3A-2 claiming an exemption under Rule U-2 from the provisions of the
Public Utility Holding Company Act of 1935. This filing is being made by
direct transmission to the Commission's EDGAR system, and is being filed
jointly pursuant to oral authorization to file on a joint and consolidated
basis received from the Commission on February 21, 1990. Payment of the $500
filing fee was made by wire transfer on February 14, 1997 through the
Securities and Exchange Commission's lockbox depository at Mellon Bank in
Pittsburgh, Pennsylvania.
Very truly yours,
/s/ Francis K. Mukai
Assistant General Counsel
