FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1999
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OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-565
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ALEXANDER & BALDWIN, INC.
-------------------------
(Exact name of registrant as specified in its charter)
HAWAII 99-0032630
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. BOX 3440, HONOLULU, HAWAII 96801
822 BISHOP STREET, HONOLULU, HAWAII 96813
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(Address of principal executive (Zip Code)
offices)
(808) 525-6611
--------------
(Registrant's telephone number, including area code)
N/A
---
(Former name, former address and former
fiscal year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No / /
Number of shares of common stock outstanding as of
June 30, 1999: 43,319,759
<PAGE> PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
The condensed financial statements and notes for the second quarter and first
six months of 1999 are presented below with comparative figures from the 1998
financial statements.
<TABLE>
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF INCOME
(In thousands except per share amounts)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1999 1998 1999 1998
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenue:
Net sales, revenue from
services and rentals $258,729 $361,502 $449,794 $645,769
Interest, dividends and
other 5,114 4,323 11,491 11,463
-------- -------- -------- --------
Total revenue 263,843 365,825 461,285 657,232
-------- -------- -------- --------
Costs and Expenses:
Costs of goods sold,
services and rentals 198,834 301,953 343,483 539,161
Selling, general and
administrative 23,739 27,229 46,864 53,310
Interest 4,369 6,293 8,896 12,373
Income taxes 13,652 11,380 22,955 19,644
-------- -------- -------- --------
Total costs and expenses 240,594 346,855 422,198 624,488
-------- -------- -------- --------
Income before cumulative effect
of change in accounting method 23,249 18,970 39,087 32,744
Cumulative effect of change in
accounting method for
insurance-related assessments
(net of income taxes of
$3,481) -- -- -- (5,801)
-------- -------- -------- --------
Net Income $ 23,249 $ 18,970 $ 39,087 $ 26,943
======== ======== ======== ========
Basic and Diluted Earnings Per
Share $ 0.54 $ 0.42 $ 0.90 $ 0.60
Dividends Per Share $ 0.225 $ 0.225 $ 0.450 $ 0.450
Average Numbers of Shares
Outstanding 43,318 44,869 43,438 44,855
</TABLE>
<PAGE>
<TABLE>
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
INDUSTRY SEGMENT DATA
(In thousands)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1999 1998 1999 1998
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenue:
Ocean Transportation $ 187,836 $ 182,124 $ 357,031 $ 360,924
Property Development and
Management:
Leasing 10,833 9,198 22,420 18,433
Sales 27,179 60,792 35,111 68,573
Food Products 37,269 112,994 45,271 207,868
Other 726 717 1,452 1,434
--------- --------- --------- ---------
Total $ 263,843 $ 365,825 $ 461,285 $ 657,232
========= ========= ========= =========
Operating Profit:(1)
Ocean Transportation $ 25,318 $ 16,787 $ 43,583 $ 34,157
Property Development and
Management:
Leasing 6,394 5,589 14,016 11,488
Sales 9,949 13,994 15,489 18,636
Food Products 2,019 3,047 3,490 6,045
Other 690 685 1,340 1,363
--------- --------- --------- ---------
Total $ 44,370 $ 40,102 $ 77,918 $ 71,689
========= ========= ========= =========
(1)Before interest expense, corporate expenses and income taxes
</TABLE>
<PAGE>
<TABLE>
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
CONDENSED BALANCE SHEETS
(In thousands)
<CAPTION>
JUNE 30 December 31
1999 1998
---- ----
(UNAUDITED) (audited)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 9,006 $ 86,818
Accounts and notes receivable, net 134,687 129,808
Inventories 27,331 19,772
Real estate held for sale 11,817 8,535
Deferred income taxes 10,817 9,524
Prepaid expenses and other assets 8,474 9,407
Accrued deposits to Capital Construction
Fund (10,881) (9,070)
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Total current assets 191,251 254,794
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Investments 137,230 159,068
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Real Estate Developments 58,414 57,690
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Property, at cost 1,787,446 1,787,424
Less accumulated depreciation and
amortization 865,546 837,704
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Property - net 921,900 949,720
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Capital Construction Fund 143,648 143,303
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Other Assets 76,877 41,065
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Total $1,529,320 $1,605,640
========== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable and current portion of
long-term debt $ 34,103 $ 45,533
Short-term commercial paper borrowing -- 42,000
Accounts payable 39,772 37,781
Other 71,344 62,367
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Total current liabilities 145,219 187,681
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Long-term Liabilities:
Long-term debt 241,791 255,766
Post-retirement benefit obligations 62,061 61,929
Other 53,198 52,593
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Total long-term liabilities 357,050 370,288
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Deferred Income Taxes 350,958 353,029
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Shareholders' Equity:
Capital stock 35,529 36,098
Additional capital 52,968 51,946
Unrealized holding gains on securities 49,599 63,329
Retained earnings 550,402 555,820
Cost of treasury stock (12,405) (12,551)
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Total shareholders' equity 676,093 694,642
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Total $1,529,320 $1,605,640
========== ==========
</TABLE>
<PAGE>
<TABLE>
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
Six Months Ended
June 30
1999 1998
---- ----
(unaudited)
<S> <C> <C>
Cash Flows from Operating Activities $ 49,235 $ 24,745
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Cash Flows from Investing Activities:
Capital expenditures (27,854) (48,991)
Proceeds from disposal of property,
investments and other assets 2,856 3,323
Deposits into Capital Construction Fund (4,702) --
Withdrawals from Capital Construction Fund 6,168 --
Net increase in investments (808) (466)
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Net cash used in investing activities (24,340) (46,134)
---------- ----------
Cash Flows from Financing Activities:
Proceeds from issuances of long-term debt 5,000 15,000
Payments of long-term debt (67,430) (24,150)
Proceeds (payments) of short-term
borrowings, net (5,000) 47,000
Proceeds from issuances of capital stock 54 853
Repurchases of capital stock (15,792) (2,250)
Dividends paid (19,539) (20,187)
---------- ----------
Net cash provided by (used in)
financing activities (102,707) 16,266
---------- ----------
Net Decrease in Cash and Cash Equivalents $ (77,812) $ (5,123)
========== ==========
Other Cash Flow Information:
Interest paid, net of amounts capitalized $ 6,497 $ 13,317
Income taxes paid, net of refunds 14,832 16,997
Other Non-Cash Information:
Accrued deposits to Capital Construction
Fund, net 1,811 --
Depreciation 38,973 44,344
Tax-deferred property sales 30,813 64,597
Tax-deferred property purchases 5,308 36,141
Change in unrealized holding gains (13,730) (4,525)
</TABLE>
<PAGE>
FINANCIAL NOTES
(Unaudited)
(a) The condensed balance sheet as of June 30, 1999, the condensed statements
of income for the three months and six months ended June 30, 1999 and
1998, and the condensed statements of cash flows for the six months ended
June 30, 1999 and 1998 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) The Company's total non-owner changes in shareholders' equity consist of
net income plus unrealized holding gains on securities (comprehensive
income). On this basis, comprehensive income for the three months ended
June 30, 1999 and 1998 was $18 million and $15 million, respectively.
Comprehensive income for the six months ended June 30, 1999 and 1998 was
$25 million and $22 million, respectively.
(d) Certain amounts have been reclassified to conform with the current year's
presentation.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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SECOND QUARTER EVENTS:
OPERATING RESULTS: Net income for the second quarter of 1999 was $23,249,000,
or $0.54 per share. Net income for the comparable period of 1998 was
$18,970,000, or $0.42 per share. Revenue in the second quarter of 1999 was
$263,843,000, compared with revenue of $365,825,000 in the second quarter of
1998. The significant decrease in revenue resulted primarily from the sale, in
December 1998, of Alexander & Baldwin, Inc.'s (A&B's) majority interest in
California and Hawaiian Sugar Company, Inc. (C&H).
Net income for the first half of 1999 was $39,087,000, or $0.90 per share,
versus $26,943,000, or $0.60 per share, in the comparable 1998 period. Net
income in the first half of 1998 included a charge of $5,801,000, or $0.13 per
share, to reflect the cumulative effect of an accounting change. Revenue in
the first half of 1999 was $461,285,000, compared with $657,232,000 in the
first half of 1998. The significant decrease in revenue in the first half also
resulted primarily from the sale of A&B's majority interest in C&H.
In the second quarter of 1999, A&B's consolidated operating profit was
$44,370,000, 11-percent higher than the $40,102,000 operating profit in the
second quarter of 1998. For the first half, operating profit was $77,918,000,
an increase of nine percent versus $71,689,000 in the first half of 1998. In
both the second quarter and first half of 1999, ocean transportation and
property leasing results improved, but property sales and the food products
segment results were lower.
FINANCIAL CONDITION AND LIQUIDITY
The Company's principal liquid resources, comprising cash and cash equivalents,
receivables, sugar and coffee inventories and unused lines of credit, less
accrued deposits to the Capital Construction Fund (CCF), totaled $353,574,000
at June 30, 1999, a decrease of $11,819,000 from December 31, 1998. This net
reduction was due primarily to a decrease in cash, partially offset by an
increase in amounts available under lines of credit, in sugar and coffee
inventories and in receivables. In addition, there was an increase in accrued
deposits to the CCF, which also contributed to the net reduction. Cash and
cash equivalents decreased by $77,812,000, due primarily to the proceeds from
the 1998 sale of C&H, which were used to repay debt in 1999. Amounts available
under lines of credit increased $56,500,000, due primarily to the addition of a
new credit facility. Sugar and coffee inventories increased $6,425,000, due
principally to the timing of the sugar-harvesting season. Receivables
increased $4,879,000, primarily the result of an advance to a joint venture.
Working capital was $46,032,000 at June 30, 1999, a decrease of $21,081,000
from the amount at the end of 1998. This net reduction was due primarily to a
decrease in cash and an increase in accounts payable, partially offset by a
decrease in current portion of debt and an increase in inventories.
RESULTS OF SEGMENT OPERATIONS -
SECOND QUARTER 1999 COMPARED WITH THE SECOND QUARTER 1998
OCEAN TRANSPORTATION revenue of $187,836,000 for the second quarter of 1999 was
three-percent higher than the 1998 second quarter revenue. Operating profit of
$25,318,000 for the second quarter of 1999 was 51-percent higher than
$16,787,000 in the second quarter of 1998. The improvement was due primarily
to higher cargo volume and lower costs. Matson's second-quarter 1999 Hawaii
service container volume was eight-percent higher than in the 1998 second
quarter and automobile volume was 32-percent higher. Cargo was higher, in
part, due to competitive gains in automobiles and household goods and to
shipments in advance of the expiration of the West Coast longshore contract on
July 1. Lower costs were attributable primarily to a reduction in the number
of ships serving Hawaii, from a total of eight to six, for most of the second
quarter of 1999.
Container terminals on the U.S. West Coast suffered a variety of slowdowns and
other reductions in productivity, subsequent to the expiration of the longshore
contract. A settlement was announced on July 16, subject to approval by
employers and of union members.
PROPERTY DEVELOPMENT AND MANAGEMENT - LEASING revenue of $10,833,000 for the
second quarter of 1999 was 18-percent higher than the second quarter 1998
revenue, and operating profit of $6,394,000 was 14-percent higher than in the
comparable 1998 period. The increase was due primarily to the contribution of
new properties added to the portfolio during the latter part of 1998.
PROPERTY DEVELOPMENT AND MANAGEMENT - SALES revenue for the second quarter of
1999 was $27,179,000, compared with $60,792,000 in sales recorded in the second
quarter of 1998. In the second quarter of 1999, operating profit from property
sales was a strong $9,949,000, but still it was $4,045,000 less than the
unusually high $13,994,000 recorded in the second quarter of 1998. Sales in the
second quarter of 1999 included the sale of a 109,000 square foot office and
research facility in Seattle, Washington. This sale contributed $10,800,000 to
operating profit. Other 1999 second-quarter sales included one business parcel
and three residential properties. Sales in the second quarter of 1998 included
the sales of an R&D and office complex and a 14-acre parcel in Maui Business
Park (MBP), plus one other business parcel and five residential properties.
The proceeds from one of the second quarter 1999 sales and three of the second
quarter 1998 sales are expected to be reinvested on a tax-deferred basis.
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 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 $37,269,000 for the second quarter of 1999 was
significantly lower than the revenue reported for the comparable period of
1998. Second quarter 1999 operating profit of $2,019,000 also decreased from
$3,047,000 in the second quarter of 1998. Both reductions were primarily the
direct result of the partial sale of C&H.
RESULTS OF SEGMENT OPERATIONS -
FIRST SIX MONTHS 1999 COMPARED WITH THE FIRST SIX MONTHS OF 1998
OCEAN TRANSPORTATION revenue of $357,031,000 for the first half of 1999 was
one-percent lower than in the first half of 1998. However, first half 1999
operating profit of $43,583,000 increased $9,426,000, or 28 percent, from
$34,157,000 in the first half of 1998. Competitive gains in cargo volume and
lower operating costs also were the primary reasons for this improvement. For
the first half of 1999, Matson's Hawaii service container volume was
two-percent higher than in the 1998 first half and its automobile volume was
12-percent higher.
PROPERTY DEVELOPMENT AND MANAGEMENT - LEASING revenue of $22,420,000 for the
first half of 1999 was 22-percent higher than the results in the comparable
1998 period. First half 1999 operating profit of $14,016,000 was also
22-percent higher than in the first half of 1998. The first half of 1999 also
benefited from changes in the property portfolio occurring in the latter part
of 1998, in addition to the one-time buyout of a long-term ground lease
occurring in the first quarter of 1999. Although year-to-date 1999 occupancy
levels for Mainland properties averaged 93 percent, the same as in the first
half of 1998, occupancy levels for Hawaii properties averaged 73 percent,
versus 66 percent in the comparable period of 1998.
PROPERTY DEVELOPMENT AND MANAGEMENT - SALES revenue of $35,111,000 in the first
half of 1999 compared with $68,573,000 recorded in the first half of 1998.
Operating profit of $15,489,000 from property sales in the first half of 1999
was $3,147,000 lower than $18,636,000 in the first half of 1998. The two large
sales in the 1998 second quarter were the primary reasons for the decrease.
Sales in the first half of 1999 included the previously mentioned sales of a
Seattle property, plus five business parcels and 11 residential properties.
Among the first half 1998 sales were the R&D and office complex and the 14-acre
parcel in MBP, plus five other business parcels and 14 residential properties.
The proceeds from four of the 1999 sales and seven of the 1998 sales are
expected to be reinvested on a tax-deferred basis.
FOOD PRODUCTS revenue of $45,271,000 in the first half of 1999 was
significantly lower than the revenue reported for the comparable period of
1998. Operating profit of $3,490,000 in the first half of 1999 also decreased
from $6,045,000 in the first half of 1998. Again, both reductions were
primarily the result of the 1998 sale of C&H.
OTHER MATTERS
C&H RECAPITALIZATION AND PARTIAL SALE: On December 24, 1998, the Company
recapitalized and sold a majority of its equity in C&H. C&H is included in the
consolidated results and in the Food Products Segment of the Company up to the
date of sale. Effective December 24, 1998, the Company began accounting for
its investment in C&H under the equity method.
TAX-DEFERRED REAL ESTATE EXCHANGES: In the first half of 1999, the Company
sold four parcels of land for $30,813,000 (net reinvestment proceeds). The
proceeds from these sales are reflected in the Statements of Cash Flows under
the caption "Other Non-Cash Information." During the first half of 1999, the
Company reinvested proceeds of $5,308,000 on a tax-deferred basis.
SHARE REPURCHASES: During the first half of 1999, the Company repurchased
764,000 shares of its common stock for an aggregate of about $15,792,000
(average of $20.67 per share). On March 1, 1999, the Board of Directors
authorized the repurchase of up to 2,000,000 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: At mid-1999, the outlook for 1999 and 2000 is for slow,
but steady, economic growth for the state of Hawaii. Most published estimates
for these periods are for growth in real gross state product ranging from one
to two percent. Modest growth in visitor arrivals, totaling about one percent,
is anticipated, the net result of continued growth in the number of arrivals
from the U. S. mainland, offset, or nearly so, by declines in eastbound
arrivals. Private-sector construction activity appears to have stabilized at
a low level, with construction industry employment steady in recent months, but
authorizations for new construction remain low. Growth in personal income and
non-existent inflation continue to be modestly positive factors. The total
number of jobs still is not expected to grow until the year 2000.
YEAR 2000
State of Year 2000 Readiness
- ----------------------------
Five years ago, the Company and its subsidiaries (collectively, the "Company")
commenced an evaluation of their computer systems and applications to prepare
for the year 2000 ("Y2K"). Following this evaluation, implementation plans for
all business segments were prepared and currently are being executed. The Y2K
initiative is proceeding with the direction of the Board of Directors, which
receives regular progress reports.
The Company's Y2K readiness project addresses risks in the following three
primary areas:
1. the Company's information systems, including hardware and software;
2. the Company's embedded systems, including computers and software that
control machinery, telephone systems, and environmental systems; and
3. third parties with whom the Company does business or otherwise has an
association.
The approach to making the information and embedded systems Y2K ready consists
of five phases: awareness, assessment, remediation, testing and installation.
The awareness phase consists of investigating the nature of the Y2K problem and
educating the Company about the risk. The assessment phase consists of taking
an inventory of the Company's computers and software, and determining which are
Y2K ready and which require remediation or replacement. The remediation phase
consists of fixing or replacing computer software and hardware identified as
not Y2K ready during the assessment phase. The testing phase involves testing
whether the software and hardware will work properly before, on and after
December 31, 1999. The installation phase involves placing the Y2K-ready
components into production.
Company information systems: Company personnel and outside consultants have
assessed the Y2K readiness of the Company's information systems. Certain
information systems that were not Y2K ready and which had a significant impact
on the Company's operations were identified as mission critical. The awareness
and assessment phases are complete. The remediation and testing of those
mission critical information systems also are complete. The installation of
Y2K-ready components for those mission critical systems, and for all other
information systems affected by the Y2K problem, is expected to be complete by
August 31, 1999.
Company embedded systems: Company personnel were assisted by outside
consultants in assessing the embedded systems in our factories, buildings,
ships, shoreside facilities, heavy equipment, etc. The embedded systems with
Y2K problems were evaluated in terms of their impact on operations and safety.
The remediation, testing and installation of all mission critical embedded
systems are complete. A few non-critical embedded systems with minor
operational impact and no impact on safety will be replaced before the end of
1999.
Third parties: In 1998, the Company identified and prioritized the third party
vendors, customers and associates that could impact Company operations. Those
third parties were contacted to assess their Y2K readiness. Additionally,
Company employees conducted in-depth assessments, including face-to-face
meetings, with third parties having the potential to affect materially the
Company. Follow-up contacts will be made during the third quarter of 1999,
which is when most third parties have advised the Company that they will be
substantially complete with their Y2K projects.
Costs
- -----
The implementation plans, which consist of upgrading, modifying, or replacing
various systems, are expected to cost approximately $6,000,000 to $8,000,000,
including a contingency of $2,000,000. At the end of July 1999, the Company
had expended approximately $4,921,000 for this work, of which $3,400,000 was
expended in 1998. A total of $1,200,000 is budgeted for 1999, most of which
was utilized in the first half of 1999. Y2K costs for 1998 represented about
eighteen percent of the Company's total information technology budget. The
1999 costs are expected to be about seven percent of the budget. The internal
and external costs of the Y2K work are being expensed as incurred, unless a
computer system is being replaced for operating reasons as well as Y2K
compliance, in which case the costs are being capitalized. Cash generated from
operations is funding all of the Y2K costs; however, the Company has ample
resources from unused credit facilities, if needed. No major internal systems
projects have been delayed as a result of the Y2K work.
Risks
- -----
Company information and embedded systems: The Company believes that the Y2K
risks associated with the failure of its information and embedded systems will
be low, due to its Y2K readiness preparations. However, despite the
preparations being taken by the Company to ensure that its information and
embedded systems are Y2K ready, there may be risks due to unforeseen
circumstances.
Third parties: Failure of third parties to be Y2K ready may affect materially
the Company's operations; however, the seriousness of this risk depends on the
nature and duration of the failure. The most serious impact on the Company's
operations from third parties would result if basic services, such as
telecommunications, electric power, and other basic infrastructure services,
were disrupted. Despite some public disclosure from third-party suppliers
about their readiness preparation, and despite the Company's own assessments
and inquiries, the Company cannot accurately estimate the likelihood of
significant third-party disruptions. The only risk largely under the
Company's control is preparing its internal operations for the Y2K.
As such, the most reasonably likely worst case scenario could result from
third-party failures, such as temporary short-term disruptions in customer
services and product deliveries, temporary billing and collection delays, and
temporary delays in payrolls and vendor payments. If the most reasonably
likely worst case scenario occurred, it could have a material adverse impact on
the Company's results of operations, liquidity and financial condition.
Details of the Company's plans for dealing with potential problems will be
included in its contingency plans.
Contingency Plans
- -----------------
The Company's approach to Y2K contingency planning is to complement disaster
plans that already are in effect for the Company. The disaster plans provide
operating procedures for unanticipated outages of electricity, communications
or other essential services, such as those disruptions which might occur due to
a hurricane or tsunami. The Y2K contingency plans will address Y2K-specific
issues that are not covered in the existing disaster plans.
The contingency plans will detail procedures and strategies for each business
unit for dealing with potential problems before, on and after December 31,
1999. These preparations include ensuring that adequate levels of essential
fuel, materials and supplies are available, and completing certain critical
administrative procedures before the end of 1999.
Y2K contingency plans are substantially complete. They will be reviewed and
refined through the end of 1999, as appropriate.
Summary
- -------
Although there can be no absolute assurance that the Company will be successful
in identifying and avoiding all possible problems, the Company continues to
identify and address potential negative consequences which may result from not
being Y2K ready. In particular, there can be no assurance that the Company will
not be affected adversely by the failure of a vendor, customer, or other third
party to address the Y2K issue adequately. However, in the context of the
uncertainties inherent in dealing with the Y2K issue, the Company believes,
based on available information, that the impact of the Y2K issue and its
associated costs will not have a material impact on the results of operations,
liquidity and financial condition. This disclosure is a Year 2000 Readiness
Disclosure, pursuant to the Year 2000 Information and Readiness Disclosure Act.
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 Forms 10-K, 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 environments at the federal, state and local levels, such as
government rate regulations, land-use regulations, government administration of
the U.S. sugar program, and modifications to or retention of cabotage laws; (5)
dependence on third-party suppliers; (6) fuel prices; (7) labor relations; (8)
the ability to locate and correct or replace, on a timely basis, all relevant
computer codes prior to the year 2000; and (9) other risk factors described
elsewhere in these communications and from time to time in the Company's
filings with the SEC.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------
Information concerning market risk is incorporated herein by reference to Item
7A of the Company's Form 10-K for the fiscal year ended December 31, 1998.
There has been no material change in the quantitative and qualitative
disclosure about market risk since December 31, 1998.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ---------------------------
Reference is made to the description of the Surface Transportation Board
case under Item 3, "Legal Proceedings," in Part I of A&B's Annual Report on
Form 10-K for the fiscal year ended December 31, 1998.
Matson, Sea-Land Services, Inc. ("Sea-Land") and American President
Lines, Ltd. ("APL") filed a joint motion to dismiss the complaint on February
16, 1999. The Government of Guam filed an answer to the motion on
April 1, 1999. On April 15, 1999, Matson, Sea-Land and APL filed a reply
brief. The Government of Guam filed a surreply on April 22, 1999.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -------------------------------------------------------------
At the Annual Meeting of Shareholders of the Company held on April 22,
1999, the Company's shareholders voted in favor of: (i) the election of twelve
directors to the Company's Board of Directors, and (ii) the election of
Deloitte & Touche LLP as the Company's independent auditors. The number of
votes for, against or withheld, as well as the number of abstentions and broker
non-votes, as to each matter voted upon at the Annual Meeting of Shareholders,
were as follows:
(i) Election of Directors For Withheld
--- --------
Michael J. Chun 39,870,900 514,484
John C. Couch 39,545,017 840,366
Leo E. Denlea, Jr. 39,883,431 501,953
W. Allen Doane 39,873,819 511,564
Walter A. Dods, Jr. 39,876,286 509,097
Charles G. King 39,882,619 502,765
Carson R. McKissick 39,884,381 501,002
C. Bradley Mulholland 39,884,159 501,225
Robert J. Pfeiffer 39,847,602 537,781
Lynn M. Sedway 39,870,120 515,264
Maryanna G. Shaw 39,880,002 505,382
Charles M. Stockholm 39,881,077 504,307
(ii) Election of Auditors For Against Abstain
--- ------- -------
40,151,970 80,871 151,192
There were no broker non-votes at the Annual Meeting.
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: August 13, 1999 /s/ Glenn R. Rogers
-------------------------
Glenn R. Rogers
Executive Vice President and
Chief Financial Officer
Date: August 13, 1999 /s/ Thomas A. Wellman
-------------------------
Thomas A. Wellman
Controller
<PAGE>
EXHIBIT INDEX
-------------
11. Statement re computation of per share earnings.
27. Financial Data Schedule.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
ALEXANDER & BALDWIN, INC.
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(In thousands, except per share amounts)
- -------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic Earnings Per Share
- ------------------------
Net income $ 23,249 $ 18,970 $ 39,087 $ 26,943
======== ======== ======== ========
Average number of shares
outstanding 43,318 44,869 43,438 44,855
======== ======== ======== ========
Basic earnings per share $ 0.54 $ 0.42 $ 0.90 $ 0.60
======== ======== ======== ========
Diluted Earnings Per Share
- --------------------------
Net income $ 23,249 $ 18,970 $ 39,087 $ 26,943
======== ======== ======== ========
Average number of shares
outstanding 43,318 44,869 43,438 44,855
Effect of assumed exercise
of outstanding stock
options 12 210 2 203
-------- -------- -------- --------
Average number of shares
outstanding after assumed
exercise of outstanding
stock options 43,330 45,079 43,440 45,058
======== ======== ======== ========
Diluted earnings per share $ 0.54 $ 0.42 $ 0.90 $ 0.60
======== ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
condensed balance sheet as of June 30, 1999 and the condensed statement of
income for the six months ended June 30, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> (3,094)
<SECURITIES> 12,100
<RECEIVABLES> 142,937
<ALLOWANCES> 8,250
<INVENTORY> 27,331
<CURRENT-ASSETS> 191,251
<PP&E> 1,787,446
<DEPRECIATION> 865,546
<TOTAL-ASSETS> 1,529,320
<CURRENT-LIABILITIES> 145,219
<BONDS> 241,791
0
0
<COMMON> 35,529
<OTHER-SE> 640,564
<TOTAL-LIABILITY-AND-EQUITY> 1,529,320
<SALES> 449,794
<TOTAL-REVENUES> 461,285
<CGS> 343,483
<TOTAL-COSTS> 343,483
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,896
<INCOME-PRETAX> 62,042
<INCOME-TAX> 22,955
<INCOME-CONTINUING> 39,087
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,087
<EPS-BASIC> 0.90
<EPS-DILUTED> 0.90
</TABLE>
