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 following information 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 holds an interest, as at
January 31, 1998 (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
Prospect Hawaii Honolulu, Development and selling
Venture LLC Hawaii 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
Kauai 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
Matson Logistics California San Agent to provide deli-
Solutions, Inc. Francisco, very of equipment, goods
California and supplies for busi-
nesses and projects
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 hydroelectric plants with rated capacities of 1
Limited ("McBryde") of 1,000 KW and 1 of 3,600 KW; about 70 miles of
(Note 1) transmission lines; all located on the island of
Kauai, State of Hawaii
3. Information for the calendar year 1997 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 85,680,000 kwh
McBryde 23,712,000 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, 1998.
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
Executive 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, 1998
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT A
ALEXANDER & BALDWIN, INC.
CONSOLIDATING STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
($000 OMITTED)
ABIC ABI/MATSON ABHIC OTHER ABHI MCB
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUE:
Net sales 497,973 8,430 489,543 404,770 76,471 8,302
Transportation and terminal services 566,705 560,659 6,046 6,046 - -
Rentals and other services 159,153 127,014 32,139 32,139 - -
Power generation 9,513 - 9,513 - 8,144 1,369
--------- ------- ------- ------- ------- ------
Total operating revenue 1,233,344 696,103 537,241 442,955 84,615 9,671
--------- ------- ------- ------- ------- ------
OPERATING COSTS AND EXPENSES:
Cost of goods sold 416,861 6,792 410,069 319,661 80,717 9,691
Cost of services 585,739 547,571 38,168 38,168 - -
Power generation 9,118 - 9,118 - 8,612 506
--------- ------- ------- ------- ------- ------
Total operating costs and expenses 1,011,718 554,363 457,355 357,829 89,329 10,197
--------- ------- ------- ------- ------- ------
GROSS MARGIN 221,626 141,740 79,886 85,126 (4,714) (526)
GENERAL, ADMIN & SELLING EXPENSES 99,839 70,190 29,649 24,959 4,690 -
--------- ------- ------- ------- ------- ------
INCOME FROM OPERATIONS 121,787 71,550 50,237 60,167 (9,404) (526)
OTHER INCOME 42,101 37,553 4,548 (1,232) 3,482 2,298
OTHER EXPENSE 36,676 16,346 20,330 6,022 13,354 954
--------- ------- ------- ------- ------- ------
INCOME BEFORE INCOME TAXES 127,212 92,757 34,455 52,913 (19,276) 818
PROVISION FOR INCOME TAXES 45,825 33,832 11,993 18,774 (6,286) (495)
--------- ------- ------- ------- ------- ------
NET INCOME 81,387 58,925 22,462 34,139 (12,990) 1,313
========= ======= ======= ======= ======= ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALEXANDER & BALDWIN, INC.
CONSOLIDATING BALANCE SHEET
FOR THE YEAR ENDED DECEMBER 31, 1997
($000 OMITTED)
ABIC ABI/MATSON ABHIC OTHER ABHI MCB
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash 21,623 20,607 1,016 428 588
Accounts and notes receivable 176,165 138,776 37,389 19,832 15,247 2,310
Inventories 81,772 7,846 73,926 60,705 9,616 3,605
Prepaid expenses and other current assets 9,381 804 8,577 6,790 393 1,394
--------- --------- ------- ------- ------- ------
Total current assets 288,941 168,033 120,908 87,755 25,844 7,309
INVESTMENTS:
Subsidiaries - - - (265,504) 265,504 -
Divisions - - - (31,683) 31,683 -
Other 102,813 101,624 1,189 709 473 7
--------- --------- ------- ------- ------- ------
Total investments 102,813 101,624 1,189 (296,478) 297,660 7
REAL ESTATE DEVELOPMENTS 68,056 - 68,056 68,056 - -
PROPERTY:
Land 66,161 17,150 49,011 41,068 5,677 2,266
Buildings 215,656 66,465 149,191 143,960 3,596 1,635
Vessels 815,805 815,805 - - - -
Machinery and equipment 660,157 405,019 255,138 128,788 111,358 14,992
Power generation 58,261 - 58,261 - 55,916 2,345
Other 158,983 60,595 98,388 29,913 58,755 9,720
--------- --------- ------- ------- ------- ------
Total property 1,975,023 1,365,034 609,989 343,729 235,302 30,958
Less accumulated depreciation 938,508 683,629 254,879 84,857 157,843 12,179
--------- --------- ------- ------- ------- ------
Property - net 1,036,515 681,405 355,110 258,872 77,459 18,779
OTHER ASSETS 208,473 145,677 62,796 72,038 3,843 (13,085)
--------- --------- ------- ------- ------- ------
TOTAL ASSETS 1,704,798 1,096,739 608,059 190,243 404,806 13,010
========= ========= ======= ======= ======= ======
CURRENT LIABILITIES:
Current portion of long-term debt 51,485 24,826 26,659 19,583 7,076 -
Accounts payable 46,835 38,434 8,401 6,023 2,228 150
Other current liabilities 75,815 46,532 29,283 17,562 10,549 1,172
--------- --------- ------- ------- ------- ------
Total current liabilities 174,135 109,792 64,343 43,168 19,853 1,322
LONG-TERM LIABILITIES:
Long-term debt 292,885 132,646 160,239 28,500 131,739 -
Other long-term liabilities 518,190 358,075 160,115 103,694 44,444 11,977
--------- --------- ------- ------- ------- ------
Total long-term liabilities 811,075 490,721 320,354 132,194 176,183 11,977
SHAREHOLDERS' EQUITY:
Capital stock 36,769 36,768 1 (2,350) 1 2,350
Additional capital 49,437 (78,108) 127,545 (13,316) 127,545 13,316
Unrealized holding gains 55,144 55,144 - - - -
Retained earnings 591,135 495,319 95,816 30,464 81,224 (15,872)
Treasury stock (12,897) (12,897) - 83 - (83)
--------- --------- ------- ------- ------- ------
Total shareholders' equity 719,588 496,226 223,362 14,881 208,770 (289)
--------- --------- ------- ------- ------- ------
TOTAL LIABILITIES AND EQUITY 1,704,798 1,096,739 608,059 190,243 404,806 13,010
========= ========= ======= ======= ======= ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALEXANDER & BALDWIN, INC.
CONSOLIDATING STATEMENT OF RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1997
($000 OMITTED)
ABIC ABI/MATSON ABHIC OTHER ABHI MCB
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 568,969 495,615 73,354 29,757 60,782 (17,185)
Net income 81,387 58,925 22,462 34,139 (12,990) 1,313
Dividends to shareholders (39,789) (39,789) - - - -
Capital stock purchased and retired (16,117) (16,117) - - - -
Stock acquired in payment of options (3,315) (3,315) - - - -
Intercompany dividends - - - - - -
Net income of subsidiaries - - - (33,432) 33,432 -
------- ------- ------ ------- ------ -------
Balance at December 31, 1997 591,135 495,319 95,816 30,464 81,224 (15,872)
======= ======= ====== ======= ====== =======
</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.
COMPREHENSIVE INCOME: The Statements of Income include a new measure called
Comprehensive Income. This is intended to report a measure of all changes in
Shareholders' Equity that result from either recognized transactions or other
economic events, excluding capital stock transactions, which impact
Shareholders' Equity. For the Company, the only difference between Net Income
and Comprehensive Income is the unrealized holding gains on securities
available for sale. Comprehensive Income is not used in the calculation of
Earnings Per Share.
BASIC AND DILUTED EARNINGS PER SHARE OF COMMON STOCK: Basic Earnings per Share
is determined by dividing Net Income by the weighted-average common shares
outstanding during the year. The impact on earnings per share of the Company's
stock options is immaterial, consequently, Diluted Earnings per Share is the
same amount as Basic Earnings per Share.
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.
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 contract hedges are recorded in inventory and subsequently charged to
cost of sales when the related inventory is sold. 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 1996 and 1995 financial statements
have been reclassified to conform with the 1997 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 approximately $362 million in
cash, and realized an after-tax gain of $18 million. Sales and gross profit of
the discontinued operation were $35,251,000 and $14,762,000, respectively, in
1995.
3. INVESTMENTS
At December 31, 1997 and 1996, 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, 1997 and
1996 were as follows (in thousands):
1997 1996
- ---------------------------------------------------------------------
Market value $ 96,597 $85,796
Less historical cost 9,851 9,966
- ---------------------------------------------------------------------
Unrealized holding gains 86,746 75,830
Less deferred income taxes 31,602 27,625
- ---------------------------------------------------------------------
Net unrealized holding gains $ 55,144 $48,205
=====================================================================
The investments in limited partnership interests and purchase-money mortgages
are recorded at cost, which approximated market values, of $6,216,000 and
$5,806,000 at December 31, 1997 and 1996, 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 1994. Management believes that all amounts on
deposit in the CCF at the end of 1997 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, 1997 and 1996, the balances on deposit in the CCF are
summarized in Table 1.
<TABLE>
<CAPTION>
TABLE 1 (In thousands)
- ---------------------------------------------------------------------------------------------------------
1997 1996
- ---------------------------------------------------------------------------------------------------------
Amortized Fair Unrealized Amortized Fair Unrealized
Cost Value Gain (Loss) Cost Value Gain (Loss)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mortgage-backed securities $ 69,451 $ 68,738 $ (713) $ 84,642 $ 80,871 $(3,771)
Cash and cash equivalents 69,159 69,159 - 92,318 92,318 -
Accrued deposits 10,000 10,000 - 1,656 1,656 -
- -------------------------------------------------------------------------------------------------------
Total $148,610 $147,897 $ (713) $178,616 $174,845 $(3,771)
=======================================================================================================
</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 1997, 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 2005 through 2028. The MBS have a weighted average life of approximately
5.6 years. The Company earned $5,897,000 in 1997, $6,838,000 in 1996 and
$7,655,000 in 1995 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 1998.
During 1997 and 1996, 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 $5,828,000 in 1997, $5,552,000 in
1996 and $5,903,000 in 1995. 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
paid or cargo volume. 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 Pacific Coast
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 $2,896,000 for the year
ended December 31, 1997, based on estimates by plan actuaries. Management has
no present intention of withdrawing from and does not anticipate termination of
any of the aforementioned plans.
The net pension benefit and components for 1997, 1996 and 1995, of single-
employer defined benefit pension plans, which cover substantially all other
employees, were as follows (in thousands):
1997 1996 1995
- ---------------------------------------------------------------------------
Service cost--benefits earned
during the year $ 6,692 $ 6,326 $ 6,210
Interest cost on projected benefit
obligations 23,807 23,295 21,785
Actual return on plan assets (84,027) (47,980) (78,713)
Net amortization and deferral 48,272 14,599 50,298
Curtailments and terminations 412 (779) (1,761)
- ---------------------------------------------------------------------------
Net pension benefit $ (4,844) $ (4,539) $ (2,181)
===========================================================================
The funded status of the single-employer plans at December 31, 1997 and 1996
was as follows (in thousands):
1997 1996
- ---------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Vested benefits $ 310,593 $ 284,755
Non-vested benefits 9,395 8,415
- ---------------------------------------------------------------------------
Accumulated benefit obligations 319,988 293,170
Additional amounts related to projected
compensation levels 34,895 32,925
- ---------------------------------------------------------------------------
Projected benefit obligations 354,883 326,095
Plan assets at fair value 443,248 380,909
- ---------------------------------------------------------------------------
Excess of plan assets over
projected benefit obligations (88,365) (54,814)
Prior service costs to be recognized in future
years (5,707) (3,518)
Unrecognized actuarial net gain 91,011 59,119
Unrecognized net asset at
January 1, 1987 (being amortized over
periods of 4 to 15 years) 1,869 2,864
- ---------------------------------------------------------------------------
Accrued pension liability (asset) $ (1,192) $ 3,651
===========================================================================
At December 31, 1997 and 1996, the projected benefit obligations were
determined using a discount rate of 7.25 percent and 7.5 percent, respectively,
and assumed increases in future compensation levels of 4.25 percent and 4.5
percent, respectively. The expected long-term rate of return on assets was
9 percent for 1997 and 1996. The assets of the plans consist principally of
listed stocks and bonds. Gains and losses are amortized using the minimum
method allowed by Statement of Financial Accounting Standards (SFAS) No. 87.
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 obligation, included with other non-current liabilities, relating to these
unfunded plans, totaled $10,654,000 and $9,844,000 at December 31, 1997 and
1996, 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 1997, 1996 and 1995 included the following (in thousands):
1997 1996 1995
- ---------------------------------------------------------------------
Service cost $ 1,310 $ 1,351 $ 1,512
Interest cost 6,250 6,605 7,031
Net amortization (6,683) (2,016) (1,524)
Curtailment gain - (2,476) (2,045)
- ---------------------------------------------------------------------
Post-retirement benefit cost $ 877 $ 3,464 $ 4,974
=====================================================================
The unfunded accumulated post-retirement benefit obligations at December 31,
1997 and 1996 are summarized below (in thousands):
1997 1996
- ----------------------------------------------------------------------
Retirees $ 52,668 $ 54,951
Fully-eligible active plan participants 12,120 10,865
Other active plan participants 26,324 27,780
Unrecognized prior service cost 3,824 3,643
Unrecognized net gain 22,353 24,518
- ----------------------------------------------------------------------
Accumulated post-retirement benefit
obligations 117,289 121,757
Current obligation 5,164 5,710
- ----------------------------------------------------------------------
Non-current obligation $112,125 $116,047
======================================================================
At December 31, 1997 and 1996, the weighted average discount rates used in
determining the accumulated post-retirement benefit obligations were 7.25
percent and 7.5 percent, respectively, and the assumed health care cost trend
rate used in measuring the accumulated post-retirement benefit obligations was
10 percent through 2001, decreasing to 5 percent thereafter. For 1997, gains
and losses are being amortized over five years. For 1996 and previous years,
gains and losses were amortized using the minimum method allowed by SFAS No.
106. This change did not significantly affect financial results for 1997. If
the assumed health care cost trend rate were increased by one percentage point,
the accumulated post-retirement benefit obligation as of December 31, 1997 and
1996 would have increased by approximately $11,113,000 and $11,105,000,
respectively, and the net periodic post-retirement benefit cost for 1997 and
1996 would have increased by approximately $1,172,000 and $1,208,000,
respectively.
7. LONG-TERM DEBT, CREDIT AGREEMENTS
At December 31, 1997 and 1996, long-term debt consisted of the following (in
thousands):
1997 1996
- -------------------------------------------------------------------
Commercial paper, 1997 high 6.70%, low 5.15% $130,852 $225,632
Bank variable rate loans (1997 high 6.325%,
low 5.570%) due after 1997 41,500 22,000
Term loans:
7.18%, payable through 2007 67,500 75,000
8%, payable through 2000 27,500 37,500
9.05%, payable through 1999 14,815 21,285
9.8%, payable through 2004 14,583 16,667
9%, payable through 1999 10,588 15,882
7.43%, payable through 2007 15,000 15,000
7.65%, payable through 2001 10,000 10,000
11.78%, repaid in 1997 - 618
- -------------------------------------------------------------------
Total 332,338 439,584
Less current portion 24,453 31,966
Commercial paper classified as current 17,000 62,000
- -------------------------------------------------------------------
Long-term debt $290,885 $345,618
===================================================================
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, 1999, 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,
1997 and 1996, $25,000,000 and $15,000,000, 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, 1998, but may be canceled by the bank at any time. At
December 31, 1997 and 1996, $11,500,000 and $7,000,000, 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 September 8, 2000.
At December 31,1997, $5,000,000 was outstanding under this agreement. No
amount was outstanding at December 31, 1996.
A subsidiary has a $50,000,000 one-year revolving credit agreement with a two-
year term option. 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, 1997 and 1996, there were no amounts outstanding under
this agreement.
A subsidiary has an uncommitted $15,000,000 revolving credit agreement with a
commercial bank. The Agreement extends to November 28, 2000. At December 31,
1997 and 1996, 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, 1997 and 1996, $15,000,000 had been borrowed.
COMMERCIAL PAPER: At December 31, 1997, 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, 1997,
$99,852,000 of commercial paper notes was outstanding under this program.
Maturities ranged from 3 to 34 days. The borrowings outstanding under this
program are classified as long-term, because the subsidiary intends to continue
the program 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, 1997,
$31,000,000 of commercial paper notes was outstanding under this program.
Maturities ranged from 22 to 26 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, 1997, $17,000,000 was classified as current. The commercial paper
is supported by a $100,000,000 backup revolving credit facility with five
commercial banks. Both the commercial paper program and the backup facility
are guaranteed by the subsidiary's parent and by the Company.
LONG-TERM DEBT MATURITIES: At December 31, 1997, maturities and planned
prepayments of all long-term debt during the next five years totaled
$24,453,000 for 1998, $32,616,000 for 1999, $19,583,000 for 2000, $17,083,000
for 2001 and $9,583,000 for 2002.
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
1998; 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 1998 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 $45,560,000, $45,559,000 and
$46,680,000 for the years ended December 31, 1997, 1996 and 1995, respectively.
Contingent rents and income from sublease rents were not significant.
Assets recorded under capital lease obligations and included in property at
December 31, 1997 and 1996 were as follows (in thousands):
1997 1996
- -------------------------------------------------------------------------
Vessel $55,253 $55,253
Machinery and equipment 42,039 42,468
- -------------------------------------------------------------------------
Total 97,292 97,721
Less accumulated amortization 95,866 90,462
- -------------------------------------------------------------------------
Property under capital leases--net $ 1,426 $ 7,259
=========================================================================
Future minimum payments under all leases and the present value of minimum
capital lease payments as of December 31, 1997 were as follows (in thousands):
Capital Operating
Leases Leases
- --------------------------------------------------------------------------
1998 $ 11,081 $ 27,539
1999 609 17,321
2000 578 14,448
2001 547 12,412
2002 516 11,705
Thereafter - 90,191
- --------------------------------------------------------------------------
Total minimum lease payments 13,331 $173,616
Less amount representing interest 1,299 ========
- ---------------------------------------------------------------
Present value of future minimum payments 12,032
Less current portion 10,032
- ---------------------------------------------------------------
Long-term obligations at December 31, 1997 $ 2,000
===============================================================
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 $8,257,000 and $7,713,000 at December 31, 1997 and 1996,
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, 1997 and 1996 were
as follows (in thousands):
1997 1996
- --------------------------------------------------------------------------
Leased property $267,569 $246,802
Less accumulated amortization 47,253 42,722
- --------------------------------------------------------------------------
Property under operating leases--net $220,316 $204,080
==========================================================================
Total rental income under these operating leases for the three years ended
December 31, 1997 was as follows (in thousands):
1997 1996 1995
- ---------------------------------------------------------------------------
Minimum rentals $ 35,535 $ 34,556 $ 28,164
Contingent rentals (based on sales volume) 1,048 1,232 880
- ---------------------------------------------------------------------------
Total $ 36,583 $ 35,788 $ 29,044
===========================================================================
Contingent rentals are based on sales volume.
Future minimum rental income on non-cancelable leases at December 31, 1997 was
as follows (in thousands):
Operating
Leases
- -------------------------------------------------------
1998 $ 23,057
1999 19,960
2000 16,288
2001 13,738
2002 11,525
Thereafter 130,618
- ------------------------------------------------------
Total $ 215,186
======================================================
9. INCOME TAXES
The income tax expense for the three years ended December 31, 1997 consisted of
the following (in thousands):
1997 1996 1995
- ---------------------------------------------------------------------------
Current:
Federal $ 30,181 $ 23,549 $(23,833)
State 2,476 4,779 403
- ---------------------------------------------------------------------------
Total 32,657 28,328 (23,430)
Deferred 13,168 10,420 42,965
- ---------------------------------------------------------------------------
Income tax expense $ 45,825 $ 38,748 $ 19,535
===========================================================================
Total income tax expense for the three years ended December 31, 1997 differs
from amounts computed by applying the statutory Federal rate to pre-tax income,
for the following reasons (in thousands):
1997 1996 1995
- ---------------------------------------------------------------------------
Computed income tax expense $ 44,525 $ 36,412 $ 18,184
State tax on income, less applicable
Federal tax 3,732 2,605 326
Low-income housing credits (1,214) (1,219) (1,224)
Fair market value over cost of donations (1,306) (11) -
Other-net 88 961 2,249
- ---------------------------------------------------------------------------
Income tax expense $ 45,825 $ 38,748 $ 19,535
===========================================================================
The tax effects of temporary differences that give rise to significant portions
of the net deferred tax liability at December 31, 1997 and 1996 were as follows
(in thousands):
1997 1996
- --------------------------------------------------------------------------
Accelerated depreciation $178,570 $171,815
Capital Construction Fund 104,408 111,064
Tax-deferred gains on real estate transactions 77,784 73,890
Unrealized holding gains on securities 31,602 27,625
Post-retirement benefits (48,014) (49,398)
Insurance reserves (6,907) (6,791)
Alternative minimum tax benefit - (3,905)
Other-net 12,907 8,905
- --------------------------------------------------------------------------
Total $350,350 $333,205
==========================================================================
The Internal Revenue Service (IRS) has completed its audits of the Company's
tax returns through 1991. No settlement had a material effect on the Company's
financial position or results of operations. The IRS has commenced an audit
of the Company's tax returns for 1992 through 1995. Management believes that
the resolution of the current audit 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 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 1997, new options to
purchase 565,212 shares were granted under the 1989 Plan. This included reload
options to purchase 57,132 shares.
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 1997 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 1997, new options to purchase 21,000 shares were granted, options to
purchase 15,000 shares were exercised and options to purchase 9,000 shares were
canceled. At December 31, 1997, options to purchase 183,000 shares were
outstanding under the plan.
The Company applies Accounting Principles Board Opinion No. 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 and the
Directors' stock option plan had been determined consistent with SFAS No. 123,
"Accounting for Stock-Based Compensation," the after-tax cost for grants made
in 1997, 1996 and 1995 would have been approximately $1,800,000, $900,000 and
$1,300,000, respectively. Earnings per share for 1997, 1996 and 1995 would
have declined by $0.04, $0.02 and $0.03, respectively.
Changes in shares under all option plans, for the three years ended
December 31, 1997, were as follows:
Price Range
Shares Per Share
- -----------------------------------------------------------------------
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 2,941,027 17.375-37.875
1997: GRANTED 586,212 25.100-34.875
EXERCISED (263,351) 17.375-24.750
CANCELED (57,850) 24.750-37.875
- -----------------------------------------------------------------------
OUTSTANDING, DECEMBER 31
(2,600,337 EXERCISABLE) 3,206,038 $21.750-37.875
=======================================================================
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. If not
renewed, the Plan will expire in 1998.
11. RELATED PARTY TRANSACTIONS, COMMITMENTS AND CONTINGENCIES
At December 31, 1997, the Company and its subsidiaries had an unspent balance
of total appropriations for capital expenditures of approximately $84,222,000.
However, there is no contractual obligation to spend this entire amount.
The Company has arranged for standby letters of credit of approximately
$19,930,000 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
$3,958,000.
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 $126,629,000 and
$190,188,000 under the contract during 1997 and 1996, 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 1997, 1996 and 1995, on page 24, 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.
<PAGE>
EXHIBIT B
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
FINANCIAL DATA SCHEDULE
DECEMBER 31, 1997
(In thousands)
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATING 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 $1,704,798
2 Total Operating Revenues $1,233,344
3 Net Income $81,387
<PAGE>
February 26, 1998
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.
Very truly yours,
/s/ Francis K. Mukai
Assistant General Counsel
