PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
The condensed financial statements and notes for the first quarter of 1997 are
presented below.
<TABLE>
CONDENSED STATEMENTS OF INCOME
(In thousands except per share amounts)
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
<CAPTION>
Three Months Ended
March 31
1997 1996
-------- --------
(unaudited)
<S> <C> <C>
Revenue:
Net sales, revenue from services and rentals $271,192 $253,719
Interest, dividends and other 25,060 5,257
-------- --------
Total revenue 296,252 258,976
-------- --------
Costs and Expenses:
Costs of goods sold, services and rentals 227,791 211,529
Selling, general and administrative 26,555 27,313
Interest 7,942 8,810
Income taxes 12,739 4,133
-------- --------
Total costs and expenses 275,027 251,785
-------- --------
Net Income $ 21,225 $ 7,191
======== ========
Earnings Per Share $ 0.47 $ 0.16
Dividends Per Share $ 0.22 $ 0.22
Average Number of Shares Outstanding 45,311 45,305
</TABLE>
<PAGE>
<TABLE>
INDUSTRY SEGMENT DATA
(In thousands)
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
<CAPTION>
Three Months Ended
March 31
1997 1996
-------- --------
(unaudited)
<S> <C> <C>
Revenue:
Ocean Transportation $181,120 $152,222
Property Development and Management:
Leasing 9,116 8,888
Sales 4,111 2,161
Food Products 101,188 95,040
Other 717 665
-------- --------
Total $296,252 $258,976
======== ========
Operating Profit: (1)
Ocean Transportation $ 34,050 $ 17,613
Property Development and Management:
Leasing 6,234 5,942
Sales 1,580 232
Food Products 2,119 (888)
Other 663 613
-------- --------
Total $ 44,646 $ 23,512
======== ========
(1) Before interest expense, corporate expenses and income taxes
</TABLE>
<PAGE>
<TABLE>
CONDENSED BALANCE SHEETS
(In thousands)
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
<CAPTION>
March 31 December 31
1997 1996
-------- -----------
(unaudited)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 55,859 $ 23,824
Accounts and notes receivable, net 155,708 172,266
Inventories 142,319 102,722
Real estate held for sale 16,550 17,383
Deferred income taxes 17,548 17,708
Prepaid expenses and other 11,591 12,114
Accrued deposits to Capital Construction Fund (21,559) (1,656)
---------- ----------
Total current assets 378,016 344,361
---------- ----------
Investments 87,632 91,602
---------- ----------
Real Estate Developments 66,612 70,144
---------- ----------
Property, at cost 1,947,706 1,927,058
Less accumulated depreciation and amortization 884,957 864,002
---------- ----------
Property - net 1,062,749 1,063,056
---------- ----------
Capital Construction Fund 201,427 178,616
---------- ----------
Other Assets 46,850 52,843
---------- ----------
Total $1,843,286 $1,800,622
========== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 44,994 $ 44,082
Short-term commercial paper borrowings 71,000 62,000
Accounts payable 53,644 50,496
Other 85,943 86,352
---------- ----------
Total current liabilities 255,581 242,930
---------- ----------
Long-term Liabilities:
Long-term debt 367,170 345,618
Capital lease obligations 7,488 12,039
Post-retirement benefit obligations 116,522 116,047
Other 51,875 48,747
---------- ----------
Total long-term liabilities 543,055 522,451
---------- ----------
Deferred Income Taxes 354,825 350,913
---------- ----------
Shareholders' Equity:
Capital stock 37,065 37,150
Additional capital 46,041 43,377
Unrealized holding gains on securities 44,386 48,205
Retained earnings 575,230 568,969
Cost of treasury stock (12,897) (13,373)
---------- ----------
Total shareholders' equity 689,825 684,328
---------- ----------
Total $1,843,286 $1,800,622
========== ==========
</TABLE>
<PAGE>
<TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
<CAPTION>
Three Months Ended
March 31
1997 1996
-------- --------
(unaudited)
<S> <C> <C>
Cash Flows from Operating Activities $ 30,650 $ 5,635
-------- --------
Cash Flows from Investing Activities:
Capital expenditures (8,044) (166,347)
Proceeds from disposal of property,
investments and other assets 86 2,129
Deposits into Capital Construction Fund (2,908) (2,796)
Withdrawals from Capital Construction Fund - 145,500
Increase in investments (1,797) -
-------- --------
Net cash used in investing activities (12,663) (21,514)
-------- --------
Cash Flows from Financing Activities:
Proceeds from issuances of long-term debt 34,500 26,000
Payments of long-term debt (16,672) (13,244)
Proceeds of short-term commercial paper
borrowings - net 9,000 -
Proceeds from issuances of capital stock 363 117
Repurchases of capital stock (3,169) -
Dividends paid (9,974) (9,970)
-------- --------
Net cash provided by financing activities 14,048 2,903
-------- --------
Net Increase (Decrease) in Cash and Cash
Equivalents $ 32,035 $(12,976)
======== ========
Other Cash Flow Information:
Interest paid, net of amounts capitalized $ 7,892 $ 8,529
Income taxes paid, net of refunds 1,076 2,501
Other Non-Cash Information:
Net accrued deposits to Capital Construction Fund 19,903 37
Depreciation 22,729 21,745
Tax-deferred property exchanges 1,558 -
Decrease in unrealized holding gains (3,819) (2,324)
</TABLE>
<PAGE>
FINANCIAL NOTES
(Unaudited)
(a) The condensed balance sheet as of March 31, 1997 and the condensed
statements of income and the condensed statements of cash flows for the
three months ended March 31, 1997 and 1996 are unaudited. Because of the
nature of the Company's operations, the results for interim periods are
not necessarily indicative of results to be expected for the year, but in
the opinion of management, all material adjustments necessary for the fair
presentation of interim period results have been included in the interim
financial statements.
(b) Estimated effective annual income tax rates differ from statutory rates,
primarily due to the dividends-received deduction and various tax
credits.
(c) Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"
is effective for financial statements for both interim and annual periods
ending after December 15, 1997. The Statement will not have a material
impact on the Company's computation and presentation of earnings per
share.
(d) Certain amounts have been reclassified to conform with current year
presentation.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
- ---------------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ------------------------------------------------
OPERATING RESULTS
Net income for the first quarter of 1997 was $21,225,000,
or $0.47 per share. Net income for the comparable period of 1996 was
$7,191,000, or $0.16 per share. Net income in the first quarter of 1997
included a net benefit of $12,361,000, or $0.27 per share, resulting from the
settlement of a long-standing litigated insurance matter. Excluding this
settlement, after-tax income rose 23 percent compared with the first quarter
of 1996.
FINANCIAL CONDITION AND LIQUIDITY
The Company's principal liquid resources, which consist of cash and cash
equivalents, receivables, sugar and coffee inventories and unused lines of
credit, less accrued deposits to the Capital Construction Fund (CCF), totaled
$510,410,000 at March 31, 1997, a decrease of $2,564,000 from December 31,
1996. The decrease was due primarily to lower amounts available under lines
of credit, an increase in accrued deposits to the CCF and lower receivables,
nearly offset by increased sugar and coffee inventories and higher cash
balances. Amounts available under lines of credit decreased $36,001,000,
primarily due to increased borrowing for plantation off-season repairs and the
purchase of sugar inventory and as a result of fewer subdivision sales.
Accrued deposits to the CCF increased $19,903,000. Receivables decreased
$16,558,000, due principally to Matson Navigation Company, Inc.'s (Matson)
receipt of the insurance proceeds, a portion of which had been accrued in 1996.
Sugar and coffee inventories increased $37,863,000, due principally to the
timing of raw sugar purchases and the inventorying of sugar production costs
in the first quarter of 1997. Cash and cash equivalents increased by
$32,035,000, due primarily to Matson's receipt of the insurance-litigation
proceeds.
Working capital was $122,435,000 at March 31, 1997, an increase of
$21,004,000 from the amount at the end of 1996. This increase was due
primarily to the previously described increases in sugar inventories and
cash, partially offset by the increase in accrued deposits to the CCF and lower
receivables.
RESULTS OF SEGMENT OPERATIONS -
FIRST QUARTER 1997 COMPARED WITH THE FIRST QUARTER 1996
OCEAN TRANSPORTATION revenue of $181,120,000 for the first quarter of 1997 was
19 percent higher than the 1996 first-quarter revenue. Taking into account
one-time events, operating profit in the first quarter of 1997 of $34,050,000
was nearly double that of the first quarter of 1996. This year, the settlement
of litigation, arising from earthquake damage in 1989 to Matson's Oakland
terminal, contributed $19,937,000, net of repair expenses and litigation costs,
to operating profit. Last year, interim bareboat chartering of vessels to APL
Limited, prior to the commencement of Matson's Guam service, contributed
$5,634,000 to first-quarter operating profit. This one-time payment
compensated the Company for the delays in its obtaining physical possession of
certain vessels.
Excluding both of these one-time events, ocean transportation operating
profit in the first quarter of 1997 increased by 18 percent over the first
quarter of 1996. This increase was primarily the result of benefitting from
three full months of the Guam service in 1997, versus eight weeks in 1996,
higher Hawaii service freight rates and auto volumes, and increased freight
volume in the Pacific Coast and Mid-Pacific services. These benefits were
partially offset by higher operating costs, due to continued terminal
productivity difficulties associated with a 1996 West Coast longshore labor
agreement. Hawaii service freight volume was four-percent lower in the first
quarter of 1997, while auto volume increased by 12 percent.
PROPERTY DEVELOPMENT AND MANAGEMENT - LEASING revenue of $9,116,000 for the
first quarter of 1997 was three-percent higher than the first quarter 1996
revenue, and operating profit of $6,234,000 was five-percent higher than the
1996 first-quarter amount. These increases were primarily due to the
contribution from properties added to the portfolio in 1996 and early 1997,
and higher occupancy in several properties. The additional leased properties
included two office buildings in Hawaii (Honolulu, Oahu and Wailuku, Maui) and
a retail center in Greeley, Colorado. Year-to-date occupancy rates for the
U.S. mainland leased properties averaged 99 percent, versus 98 percent a year
ago. Hawaii occupancy rates averaged 82 percent, versus 90 percent in the
first quarter of 1996, reflecting the continued weak real estate market in
Hawaii and the impact of large discount retailers. Both of these factors have
limited the absorption of new and vacant space.
PROPERTY DEVELOPMENT AND MANAGEMENT - SALES revenue of $4,111,000 in the first
quarter of 1997 compared with $2,161,000 in the comparable period of 1996.
Operating profit from property sales in the first quarter of 1997 was
$1,580,000, versus $232,000 in the same period in 1996. Among the
first-quarter 1997 sales was a one-acre developed lot, which contributed
$1,503,000 to operating profit, plus a total of 11 residential subdivision
sales. First-quarter 1996 sales consisted primarily of 12 residential
subdivision sales. The proceeds from the developed lot sold in the
first-quarter of 1997 will be treated as a tax-deferred exchange. No
tax-deferred sales were completed in the comparable period of 1996.
The mix of property sales in any year can be diverse. Sales can include
property sold under threat of condemnation, developed residential real estate,
commercial properties, developable subdivision lots and undeveloped land. The
sale of undeveloped land and subdivision lots generally provides a greater
contribution margin than does the sale of developed and commercial property,
due to the low historical-cost basis of the Company's Hawaii land, which
averages approximately $150 per acre. Consequently, property sales revenue
trends and the amount of real estate held for sale on the condensed balance
sheets are not necessarily indicative of future profitability for this segment.
FOOD PRODUCTS revenue of $101,188,000 for the first quarter of 1997 was six
percent higher than the revenue reported for the comparable period of 1996.
Operating profit was $2,119,000 for the first quarter of 1997, versus a loss of
$888,000 a year earlier. Sugar refining results improved, due to stronger
selling prices, increased sales volume and reduced refining expenses. Hawaii
agribusiness results were slightly lower, due primarily to lower sales of
electric power.
OTHER
INSURANCE LITIGATION: Matson received a favorable cash settlement of
$33,650,000 on February 13, 1997 for a contested insurance claim in connection
with repairing port facilities damaged by a 1989 earthquake. As noted
previously, this settlement resulted in additional net income of $12,361,000 in
the first quarter of 1997.
LEGISLATION: Under the Federal Agriculture Improvement and Reform Act, an
initial import quota of 1,874,000 short tons of raw sugar was established.
This tonnage will increase or decrease by specified amounts, at scheduled
intervals, based upon changes in sugar supply, demand and inventories. During
the first quarter of 1997, the import quota was increased by 220,000 short tons
to its current level of 2,094,000 short tons. The U.S. Department of
Agriculture monitors this program and may, at its discretion, alter the
sugar import quota in order to ensure that adequate supplies of raw sugar are
available to meet demand.
TAX-DEFERRED EXCHANGES: In the first quarter of 1997, the Company sold one
parcel of land on Maui for $1,558,000. The proceeds from this sale are
reflected in the Condensed Statements of Cash Flows under the caption "Other
Non-Cash Information" and are expected to be reinvested in 1997 on a tax-
deferred basis. Also, during the quarter, the Company reinvested proceeds of
$9,753,000 on a tax-deferred basis from sales completed in 1996.
SHARE REPURCHASES: During the first quarter of 1997, the Company repurchased
136,000 shares of its common stock for an aggregate of $3,523,000. In December
1996, the Board of Directors authorized the repurchase of up to 3,000,000
additional shares of the Company's stock.
ENVIRONMENTAL MATTERS: As with most industrial and land-development companies
of its size, the Company's operations have certain risks which could result in
expenditures for environmental remediation. The Company believes that it is in
compliance, in all material respects, with applicable environmental laws and
regulations, and works proactively to identify potential environmental
concerns. Management believes that appropriate liabilities have been accrued
for environmental matters.
ECONOMIC CONDITIONS: The outlook for Hawaii's economy is only modestly
encouraging, amid short-term forecasts of flat economic activity. The apparent
recovery in Hawaii's visitor industry may have been jeopardized by the
strengthening of the U.S. dollar versus the Japanese yen, which raises the cost
of U.S. travel to Japanese visitors. Higher hotel room rates continue;
however, this in turn may be contributing to shorter average lengths of stay.
The construction industry recently has shown some improvement, with 1996
construction completed increasing for the first time since 1991. Yet, the job
count in this industry continues to decline and several major construction
projects are winding down. Waikiki hotel renovation and reconstruction
activity is anticipated with the pending completion of the Waikiki convention
center and retraction of a previous building moratorium. Still, the Company
has no basis to expect that Hawaii's economy will provide a significant boost
to earnings in 1997.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Company, from time to time, may make or may have made certain forward-
looking statements, whether orally or in writing, such as forecasts and
projections of the Company's future performance or statements of management's
plans and objectives. Such forward-looking statements may be contained in,
among other things, Securities and Exchange Commission (SEC) filings such as
the Form 10-Q, press releases made by the Company and oral statements made by
the officers of the Company. Except for historical information contained in
these written or oral communications, such communications contain forward-
looking statements. These forward-looking statements involve a number of
risks and uncertainties that could cause actual results to differ materially
from those projected in the statements, including, but not limited to:
(1) economic conditions in Hawaii and elsewhere; (2) market demand;
(3) competitive factors and pricing pressures in the Company's primary markets;
(4) legislative and regulatory environment at the federal, state and local
levels; (5) dependence on raw sugar suppliers and other third-party suppliers;
(6) fuel prices; and (7) other risk factors described elsewhere in these
communications and from time time in the Company's filings with the SEC.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------------------------------------------
(a) Exhibits
--------
11. Statement re computation of per share earnings.
27. Financial Data Schedule.
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of l934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALEXANDER & BALDWIN, INC.
---------------------------------
(Registrant)
Date: May 13, 1997 /s/ Glenn R. Rogers
---------------------------------
Glenn R. Rogers
Vice President and Chief
Financial Officer
Date: May 13, 1997 /s/ Thomas A. Wellman
---------------------------------
Thomas A. Wellman
Controller
<PAGE>
EXHIBIT INDEX
-------------
11. Statement re computation of per share earnings.
27. Financial Data Schedule.
<TABLE>
EXHIBIT 11
<CAPTION>
ALEXANDER & BALDWIN, INC.
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(In thousands, except per share amounts)
- ---------------------------------------------------------------------
1997 1996
---- ----
Primary Earnings Per Share (a)
- --------------------------------------------------
<S> <C> <C>
Net income $21,225 $ 7,191
======= =======
Average number of shares outstanding 45,311 45,305
======= =======
Primary earnings per share $ 0.47 $ 0.16
======= =======
Fully Diluted Earnings Per Share
- --------------------------------------------------
Net income $21,225 $ 7,191
======= =======
Average number of shares outstanding 45,311 45,305
Effect of assumed exercise of
outstanding stock options 132 59
------- -------
Average number of shares outstanding
after assumed exercise of
outstanding stock options 45,443 45,364
======= =======
Fully diluted earnings per share $ 0.47 $ 0.16
======= =======
(a) The computations of primary earnings per share do not include the effects
of assumed exercises of employee stock options because such effects are
immaterial.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the condensed
balance sheet as of March 31, 1997 and the condensed statement of income for the
three months ended March 31, 1997 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 7,077
<SECURITIES> 48,782
<RECEIVABLES> 161,655
<ALLOWANCES> 5,947
<INVENTORY> 142,319
<CURRENT-ASSETS> 378,016
<PP&E> 1,947,706
<DEPRECIATION> 884,957
<TOTAL-ASSETS> 1,843,286
<CURRENT-LIABILITIES> 255,581
<BONDS> 367,170
0
0
<COMMON> 37,065
<OTHER-SE> 652,760
<TOTAL-LIABILITY-AND-EQUITY> 1,843,286
<SALES> 271,192
<TOTAL-REVENUES> 296,252
<CGS> 227,791
<TOTAL-COSTS> 227,791
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,942
<INCOME-PRETAX> 33,964
<INCOME-TAX> 12,739
<INCOME-CONTINUING> 21,225
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,225
<EPS-PRIMARY> .47
<EPS-DILUTED> .47
</TABLE>
