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") hereby files with the Securities and
Exchange Commission, pursuant to Rule U-2, its statement claiming exemption as
a holding company from the provisions of the Public Utility Holding Company Act
of 1935. 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 every subsidiary thereof, other than any exempt
wholesale generator (EWG) or foreign utility company in which Claimant directly
or indirectly holds an interest, as at January 31, 2000 (indirect subsidiaries
are indicated by indentation).
Jurisdiction
of
Name Organization Location Nature of Business
---- ------------ -------- ------------------
Alexander & Baldwin, Hawaii Honolulu, Ocean carriage of goods,
Inc. Hawaii real property management
and development,
investments
Subsidiaries:
A&B Inc. Hawaii Honolulu, Inactive
Hawaii
A&B Development California Honolulu, Ownership, manage-
Company Hawaii ment and development of
(California) real property in
California
A & B Properties, Hawaii Kahului, Ownership, management,
Inc. Hawaii development and selling
of real property
Prospect Hawaii Honolulu, Development and selling of
Venture LLC Hawaii real property
Haleakala Town Hawaii Honolulu, Development and selling of
Center LLC Hawaii real property
Upcountry Maui Hawaii Honolulu, Development and selling of
Town Center LLC Hawaii real property
West Maui Hawaii Honolulu, Development and selling of
Development Hawaii real property
Company LLC
ABHI-Crockett, Hawaii Honolulu, Investment in sugar
Inc. Hawaii refining and marketing
business
Agri-Quest Hawaii Puunene, Diversified agriculture
Development Hawaii
Company, Inc.
East Maui Irrigation Hawaii Puunene, Collection and distribu-
Company, Limited Hawaii tion of irrigation water
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 services
Incorporated on island of Kauai
Kukui'ula Hawaii Koloa, Ownership, management
Development Hawaii and development of real
Company, Inc. property on island of
Kauai
South Shore Hawaii Koloa, Development and
Community Hawaii operation of sewer trans-
Services LLC mission and treatment
system on island of Kauai
South Shore Hawaii Koloa, Development and
Resources LLC Hawaii operation of water source
and delivery system 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 distribu-
Hawaii tion of domestic water on
island of Maui
WDCI, Inc. Hawaii Honolulu, Ownership, manage-
Hawaii ment and development of
property
C&H Sugar Delaware Crockett, Refining raw sugar and
Company, Inc. California marketing of refined
sugar products and
molasses
Hawaiian Sugar & Hawaii Puunene, Ocean carriage of sugar
Transportation Hawaii 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 for
California overland cargo services of
ocean carriers
Matson Services Hawaii San Tugboat services
Company, Inc. Francisco,
California
Matson Terminals, Hawaii San Stevedoring and terminal
Inc. Francisco, services
California
Matson Logistics Hawaii San Agent to provide delivery
Solutions, Inc. Francisco, of equipment, goods and
California supplies for businesses
and projects
Matson Ventures, Hawaii San Ownership of interest
Inc. Francisco, in stevedoring and
California terminal services
entity
SSA Terminals, Delaware Seattle, Stevedoring and
LLC Washington terminal services
Sea Star Line, Delaware Jacksonville, Investment in business
LLC Florida providing ocean carriage
of goods between Florida
and Puerto Rico
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 each of
its 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: 4 steam-driven generators with rated capacities of 1
of 4,000 KW, 1 of 10,000 KW, 1 of 12,000 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
Limited ("McBryde") 1 of 1,000 KW and 1 of 3,600 KW; about 18 miles
(Note 1) of transmission lines; all located on the island of
Kauai, State of Hawaii
_______________
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.
3. Information for the calendar year 1999 with respect to Claimant
and each of its subsidiary public utility companies:
(a)(1) Number of kwh of electric energy sold (all sales were at
wholesale):
Claimant 70,210,000 kwh, with associated
revenues of $5,725,000
McBryde 23,817,000 kwh, with associated
revenues of $1,192,824
(2) Number of Mcf of natural or manufactured gas distributed at
retail:
None. Neither Claimant nor any of its 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 any of its 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 any of its 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 any of its 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 each interest it holds 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. Claimant does not hold 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.
Not 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).
EXHIBIT A
---------
A consolidating statement of income and retained earnings of Claimant
and its subsidiary companies for the last calendar year, together with a
consolidating balance sheet of Claimant and its 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
applicable 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. Claimant does not hold any interest, directly or
indirectly, in an EWG or a foreign utility company.
The above-named Claimant has caused this statement to be duly executed
on its behalf by its authorized officer this 28th day of February, 2000.
ALEXANDER & BALDWIN, INC.
(Name of Claimant)
By: /s/ G. Stephen Holaday
---------------------------
G. Stephen Holaday
Vice President
(Corporate Seal)
Attest:
By: /s/ Alyson J. Nakamura
----------------------
Secretary
Name, title and address of Officer to whom notices and correspondence
concerning this statement should be addressed:
Michael J. Marks
Vice President and General Counsel
Alexander & Baldwin, Inc.
P. O. Box 3440
Honolulu, Hawaii 96801
<PAGE>
<TABLE>
<CAPTION>
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1999
($000 OMITTED)
<S> <C> <C> <C> <C> <C> <C>
ABIC ABI/MATSON ABHIC OTHER ABHI MCB
OPERATING REVENUE:
Ocean transportation 733,488 733,488 - - - -
Property development & management 92,342 11,802 80,540 80,225 - 315
Food products 104,768 - 104,768 11,778 86,976 6,014
Equity in earnings of affiliates - - - - -
Power generation 7,047 - 7,047 - 5,725 1,322
------- ------- ------- ------ ------ -------
Total operating revenue 937,645 745,290 192,355 92,003 92,701 7,651
OPERATING COSTS AND EXPENSES:
Cost of goods and services 736,055 594,731 141,324 46,511 82,948 11,865
Plantation closure - - - - - -
Write-down of long-lived assets 15,410 - 15,410 - - 15,410
Power generation 2,194 - 2,194 - 1,720 474
------- ------- ------- ------ ------ -------
Total operating costs and expenses 753,659 594,731 158,928 46,511 84,668 27,749
------- ------- ------- ------ ------ -------
GROSS MARGIN 183,986 150,559 33,427 45,492 8,033 (20,098)
GENERAL, ADMIN & SELLING EXPENSES 86,099 76,339 9,760 5,239 4,521 -
------- ------- ------- ------ ------ -------
INCOME FROM OPERATIONS 97,887 74,220 23,667 40,253 3,512 (20,098)
OTHER INCOME 21,627 15,308 6,319 3,368 2,894 57
OTHER EXPENSE 23,974 14,410 9,564 583 10,717 (1,736)
------- ------- ------- ------ ------ -------
INCOME (LOSS) BEFORE INCOME TAXES 95,540 75,118 20,422 43,038 (4,311) (18,305)
PROVISION FOR INCOME TAXES (BENEFIT) 32,961 26,143 6,818 15,593 (1,817) (6,958)
------- ------- ------- ------ ------ -------
NET INCOME (LOSS) 62,579 48,975 13,604 27,445 (2,494) (11,347)
======= ======= ======= ====== ====== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1999
($000 OMITTED)
<S> <C> <C> <C> <C> <C> <C>
ABIC ABI/MATSON ABHIC OTHER ABHI MCB
CURRENT ASSETS:
Cash 3,333 4,192 (859) (2,387) 1,903 (375)
Accounts and notes receivable 136,637 124,366 12,271 2,763 8,290 1,218
Inventories 28,633 5,330 23,303 13,303 5,566 4,434
Prepaid expenses and other current assets 33,847 26,410 7,437 3,740 3,266 431
--------- --------- ------- -------- ------- -------
Total current assets 202,450 160,298 42,152 17,419 19,025 5,708
--------- --------- ------- -------- ------- -------
INVESTMENTS:
Subsidiaries - - - (249,485) 249,485 -
Divisions - - - (32,634) 32,634 -
Other 158,726 118,535 40,191 39,455 729 7
--------- --------- ------- -------- ------- -------
Total investments 158,726 118,535 40,191 (242,664) 282,848 7
--------- --------- ------- -------- ------- -------
REAL ESTATE DEVELOPMENTS 60,810 - 60,810 60,810 - -
--------- --------- ------- -------- ------- -------
PROPERTY:
Land 86,421 17,693 68,728 60,767 5,676 2,285
Buildings 238,625 66,933 171,692 166,988 3,672 1,032
Vessels 766,525 766,525 - - - -
Machinery and equipment 478,116 356,896 121,220 7,970 108,172 5,078
Power generation 57,155 - 57,155 - 54,810 2,345
Other 121,744 28,583 93,161 22,204 70,957 -
--------- --------- ------- -------- ------- -------
Total 1,748,586 1,236,630 511,956 257,929 243,287 10,740
Less accumulated depreciation 819,959 608,898 211,061 42,188 162,490 6,383
--------- --------- ------- -------- ------- -------
Property - net 928,627 627,732 300,895 215,741 80,797 4,357
--------- --------- ------- -------- ------- -------
OTHER ASSETS 210,847 117,978 92,869 27,208 80,265 (14,604)
--------- --------- ------- -------- ------- -------
TOTAL 1,561,460 1,024,543 536,917 78,514 462,935 (4,532)
========= ========= ======= ======== ======= =======
CURRENT LIABILITIES:
Current portion of long-term debt 22,500 15,000 7,500 - 7,500 -
Accounts payable 55,655 51,148 4,507 2,894 1,601 12
Other current liabilities 64,490 51,616 12,874 (770) 13,515 129
--------- --------- ------- -------- ------- -------
Total current liabilities 142,645 117,764 24,881 2,124 22,616 141
--------- --------- ------- -------- ------- -------
LONG-TERM LIABILITIES:
Long-term debt 277,570 107,070 170,500 - 170,500 -
Other long-term liabilities 470,282 358,737 111,545 57,921 46,918 6,706
--------- --------- ------- -------- ------- -------
Total long-term liabilities 747,852 465,807 282,045 57,921 217,418 6,706
--------- --------- ------- -------- ------- -------
SHAREHOLDERS' EQUITY:
Capital stock 34,933 34,932 1 (2,350) 1 2,350
Additional capital 53,124 (74,421) 127,545 (13,316) 127,545 13,316
Unrealized holding gains 49,461 49,461 - - - -
Retained earnings 545,849 443,404 102,445 34,052 95,355 (26,962)
Treasury stock (12,404) (12,404) - 83 - (83)
--------- --------- ------- -------- ------- -------
Total shareholders' equity 670,963 440,972 229,991 18,469 222,901 (11,379)
--------- --------- ------- -------- ------- -------
TOTAL 1,561,460 1,024,543 536,917 78,514 462,935 (4,532)
========= ========= ======= ======== ======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1999
($000 OMITTED)
<S> <C> <C> <C> <C> <C> <C>
ABIC ABI/MATSON ABHIC OTHER ABHI MCB
Balance at December 31, 1998 555,820 466,979 88,841 27,343 77,113 (15,615)
Net income 62,579 48,975 13,604 27,445 (2,494) (11,347)
Dividends to shareholders (38,899) (38,899) - - - -
Capital stock purchased and retired (33,651) (33,651) - - - -
Net income of subsidiaries - - - (20,736) 20,736 -
------- ------- ------- ------- ------ -------
Balance at December 31, 1999 545,849 443,404 102,445 34,052 95,355 (26,962)
======= ======= ======= ====== ====== =======
</TABLE>
<PAGE>
LEGEND OF COMPANY REFERENCES IN CONSOLIDATING FINANCIAL SCHEDULES:
ABIC Alexander & Baldwin, Inc. Consolidated
ABI/MATSON Alexander & Baldwin, Inc. / Matson Navigation
Company, Inc. / Consolidating Adjustments
ABHIC A&B - Hawaii, Inc. Consolidated
OTHER All other A&B - Hawaii, Inc. Subsidiaries / Consolidating
Adjustments
ABHI A&B - Hawaii, Inc.
MCB McBryde Sugar Company, Limited
<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 wholly-owned subsidiaries, after
elimination of significant intercompany amounts. Investments in 20 to 50
percent owned companies are accounted for using the equity method.
COMPREHENSIVE INCOME: Comprehensive Income includes changes 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 on 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 Sheets. When
construction is complete, the costs are reclassified as either Real Estate Held
for Sale or Property, 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 either operating or investing activities, based
upon the Company's intention to sell the property or to retain ownership of the
property as an investment following completion of construction.
FOOD PRODUCTS: Revenue from bulk raw sugar sales is recorded when delivered to
the cooperative of Hawaiian producers based on the estimated net return to
producers. Revenue from coffee is recorded when sold to third parties.
Costs of growing and harvesting sugar cane are charged to the cost of
production in the year incurred and to cost of sales as raw sugar is delivered
to the cooperative of Hawaiian producers.
Costs of developing coffee orchards are capitalized during the development
period and depreciated over the estimated productive lives. 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: Raw sugar and coffee inventories 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. 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. Interest expense is shown net of capitalized interest on the
Statements of Income, because the amounts are not significant.
DEPRECIATION: Depreciation is computed using the straight-line method.
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
PENSION PLANS: Certain ocean transportation subsidiaries are members of the
Pacific Maritime Association (PMA) and the Hawaii Stevedoring Industry
Committee, which negotiate multi-employer pension plans covering certain
shoreside bargaining unit personnel. The subsidiaries directly 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, non-
contributory, 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 certain
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, market value is
determined by reference to the sales of similar property, market studies, tax
assessments and cash flows. For commercial property, market value is
determined using recent comparable sales, tax assessments and cash flows. 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.
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 estimated reasonably.
YEAR-2000 COSTS: Computer and related costs necessary to prepare for the Year-
2000 date change were treated as an operating expense in the year incurred,
unless a computer system was being replaced for operating reasons as well as
for Year-2000 compliance, in which case the costs were capitalized. The annual
amounts charged to expense were not significant. (See Management's Discussion
and Analysis, unaudited, for additional information.)
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 amounts reported in the financial statements
and accompanying notes. Future actual amounts could differ from those
estimates.
RECLASSIFICATIONS: Certain amounts in the 1998 and 1997 financial statements
have been reclassified to conform with the 1999 presentation.
2. INVESTMENTS AND PARTIAL SALE OF SUBSIDIARY
At December 31, 1999 and 1998, investments consisted principally of marketable
equity securities, equity in affiliated companies, limited partnership
interests and purchase-money mortgages, as follows (in thousands):
1999 1998
- ---------------------------------------------------------------------------
Marketable equity securities $ 88,485 $ 110,119
Equity in affiliated companies:
California and Hawaiian Sugar Company,
Inc. (C&H) 37,591 34,960
SSA Terminals, LLC (SSAT) 18,278 --
Sea Star Line, LLC (Sea Star) 8,429 7,008
Other 300 600
Limited partnership interests, purchase-money
mortgages and other 5,643 6,381
- ---------------------------------------------------------------------------
Total Investments $ 158,726 $ 159,068
===========================================================================
MARKETABLE EQUITY SECURITIES: 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, 1999 and
1998 were as follows (in thousands):
1999 1998
- ---------------------------------------------------------------------------
Market value $ 88,485 $ 110,119
Less historical cost 10,173 9,851
- ---------------------------------------------------------------------------
Unrealized holding gains 78,312 100,268
Less deferred income taxes 28,851 36,939
- ---------------------------------------------------------------------------
Net unrealized holding gains $ 49,461 $ 63,329
===========================================================================
EQUITY IN AFFILIATED COMPANIES: On December 24, 1998, the Company recognized a
loss of $19,756,000 on the sale of a majority of its equity interest in its
sugar refining and marketing unit, C&H. The Company received approximately
$45,000,000 in cash, after the repayment of certain C&H indebtedness,
$25,000,000 in senior preferred stock, and $9,600,000 in junior preferred
stock. The Company retained an approximately 36 percent common stock interest
in the recapitalized C&H. The Company holds all of C&H's senior preferred
stock and 40 percent of C&H's junior preferred stock. Dividends on the senior
and junior preferred stocks are cumulative. Through December 2003, dividends
on the senior preferred stock may be paid either in cash or by issuance of
additional shares of senior preferred stock. Shares of senior preferred stock
received as dividends are valued at their estimated realizable values. C&H
must redeem from the Company, at one thousand dollars per share, the
outstanding senior preferred stock in December 2009 and outstanding junior
preferred stock in December 2010. C&H is included in the consolidated results
of the Company up to the date of the sale. Effective December 24, 1998, the
Company began accounting for its investment in C&H under the equity method.
Financial information for C&H as of December 31, 1999 and 1998 and for the year
ended December 31, 1999 follows (in thousands):
CONDENSED BALANCE SHEETS 1999 1998
- ----------------------------------------------------------------------
ASSETS:
Current $ 82,707 $ 77,109
Property and other 136,941 139,191
- ----------------------------------------------------------------------
Total $ 219,648 $ 216,300
======================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current $ 39,044 $ 36,092
Long-term debt and other 117,064 123,845
Shareholders' equity, including
preferred stock 63,540 56,363
- ----------------------------------------------------------------------
Total $ 219,648 $ 216,300
======================================================================
CONDENSED STATEMENT OF INCOME 1999
- -----------------------------------------------------
Revenue $ 470,838
Cost and Expenses 463,454
- -----------------------------------------------------
Net Income $ 7,384
=====================================================
In September 1998, the Company invested in a joint venture with Saltchuk
Resources, Inc. and International Shipping Agency, Inc. to form Sea Star, which
operates an ocean transportation service between Florida and Puerto Rico. The
Company charters two vessels to Sea Star. This investment represents a
minority interest and is accounted for under the equity method.
In July 1999, the Company entered into a joint venture with Stevedoring
Services of America to form SSAT, which provides stevedoring and terminal
services at six terminals in three West Coast ports to the Company and other
shipping lines. Each company contributed the assets of their California and
Seattle, Washington terminals.
The carrying amounts of investments in affiliated companies approximated their
fair values at December 31, 1999 and 1998.
LIMITED PARTNERSHIP INTERESTS AND PURCHASE-MONEY MORTGAGES: The investments in
limited partnerships are recorded at the lower of cost or fair value and
purchase-money mortgages are recorded at cost. The purchase-money mortgages
are intended to be held to maturity. The values of the investments in limited
partnerships are assessed annually.
See Note 5 for a discussion of market values of investments in the Capital
Construction Fund.
3. CHANGE IN ACCOUNTING METHOD FOR INSURANCE-RELATED ASSESSMENTS
The Company self-insured a portion of its federal workers' compensation
liability through October 1, 1999. As such, the Company utilized the U.S.
Department of Labor (DOL) second injury fund, as authorized by Section 8(f) of
the U.S. Longshore and Harborworkers' Compensation Act. Under this Act, the
DOL annually assesses self-insurers for their share of the related cost.
Through 1997, these assessments were recorded as expense in the year the
amounts were assessed and paid. Effective January 1, 1998, the Company adopted
the provisions of the American Institute of Certified Public Accountants
Statement of Position 97-3, "Accounting by Insurance and Other Enterprises for
Insurance-Related Assessments." This statement requires that the Company
record, as a liability, the expected cost of future assessments relating to
existing compensation claims made prior to the end of the fiscal year. In
adopting this statement, the Company recorded a one-time, non-cash charge to
1998 earnings of $9,282,000 ($5,801,000 net of income tax, $0.13 per share),
representing the cumulative effect of the accounting change as of January 1,
1998. The discount rate used in estimating the liability was 5.43%. On an
undiscounted basis, the pre-tax liability was approximately $13,869,000 as of
December 31, 1998. As of December 31, 1999, the undiscounted liability was
$15,364,000 and the pre-tax discounted liability was $9,862,000, using a
discount rate of 6.76%. The effect of the change on operating costs was not
significant for the current or prior years.
4. WRITE-DOWN OF LONG-LIVED ASSETS
The Company began growing coffee in Hawaii in 1987 as an alternative crop to
sugar cane. Since inception, the Company's coffee operation has continually
generated operating losses and negative cash flows. During the second half of
1999, the Company significantly reduced the workforce and changed its marketing
and selling plans. To exacerbate the problem further, in 1999, coffee
commodity prices dropped significantly, due to an oversupply of coffee in the
marketplace. Because of continuing cash-flow losses, the ongoing viability of
the coffee operation was evaluated again. As a result, the Company determined
that the estimated future cash flows of the coffee operation were less than the
carrying value of its productive assets, consisting mainly of orchards and
field and processing equipment. Accordingly, a $15,410,000 (pre-tax) charge
was recorded to write-down these productive assets to their fair value (i.e.,
present value of estimated future cash flows).
During 1998, the Company changed the strategic direction of its 1,045 acre
Kukui'Ula real estate development, from a single master-planned residential
community to a series of individual subdivisions with fewer units, as a result
of continued weaknesses in the State's and Kauai's economy and real estate
markets. As a result, the Company determined that its investment in a waste
water treatment plant (WWTP) could not be recovered through the WWTP's future
cash flows; accordingly, the costs of the WWTP were reduced by $15,900,000, to
the plant's fair value, which was based on the present value of estimated
future cash flows. Under the original higher-density Kukui'Ula development
plan, the cost of the WWTP would have been recoverable from its future cash
flows. The changes in the development plan also resulted in the write-off of
$4,316,000 for design and study costs, which were determined to have no future
economic benefit. The remaining carrying cost of the Kukui'Ula project is
approximately $29,650,000 and, based on current development plans, the Company
has determined that this amount is recoverable from the project's future cash
flows.
5. 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 December 31, 1999,
the oldest CCF deposits date from 1994. Management believes that all amounts
on deposit in the CCF at the end of 1999 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 Sheets 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, 1999 and 1998, the balances on deposit in the CCF are
summarized in Table 1.
<TABLE>
<CAPTION>
TABLE 1 (In thousands)
1999 1998
--------------------------------- ----------------------------------
Amortized Fair Unrealized Amortized Fair Unrealized
Cost Value Loss Cost Value Gain
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mortgage-backed securities $ 37,086 $ 35,843 $ (1,243) $ 52,606 $ 53,108 $ 502
Cash and cash equivalents 105,153 104,958 (195) 81,627 81,627 --
Accrued deposits 3,152 3,152 9,070 9,070 --
- ---------------------------------------------------------------------------------------------------------
Total $145,391 $143,953 $ (1,438) $143,303 $143,805 $ 502
=========================================================================================================
</TABLE>
Fair value of the mortgage-backed securities was determined by an outside
investment management company, based on experience trading identical or
substantially similar securities. No central exchange exists for these
securities; they are traded over-the-counter. The Company earned $3,152,000 in
1999, $4,514,000 in 1998 and $5,897,000 in 1997 on its investments in
mortgage-backed securities. The fair values of other CCF investments are based
on quoted market prices. These other investments mature no later than May,
2001. There were no sales of securities classified as "held-to-maturity"
during 1999 or 1998.
6. EMPLOYEE BENEFIT PLANS
The Company has funded single-employer defined benefit pension plans which
cover substantially all non-bargaining unit employees.
In addition, 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 status of the funded defined benefit pension plans and the unfunded
accumulated post-retirement benefit plans, at December 31, 1999, 1998 and 1997,
is shown in Table 2 (page 36).
The net periodic benefit cost for the defined benefit pension plans and the
post-retirement health care and life insurance benefit plans during 1999, 1998
and 1997 is summarized in Table 3 (page 36).
As described in Note 2, the Company sold a majority of its interest in C&H
during 1998. The impact of this transaction on the benefit obligation and the
plan assets is noted in Table 2. At the time of the transaction, C&H had
recorded in its financial statements net obligations of $12,300,000 and
$46,500,000 for its pension and post-retirement benefit plans, respectively.
The assumptions used to determine the benefit information were as follows:
<TABLE>
<CAPTION>
Pension Benefits Other Post-retirement Benefits
---------------------- ------------------------------
1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Discount rate 7.75% 6.75% 7.25% 7.75% 6.75% 7.25%
Expected return on plan assets 9.00% 9.00% 9.00% -- -- --
Rate of compensation increase 4.25% 4.25% 4.25% 4.25% 4.25% 4.25%
</TABLE>
For post-retirement benefit measurement purposes, a 10-percent annual rate of
increase in the per capita cost of covered health care benefits was assumed
through 2001. The rate was assumed to decrease to 5-percent for 2002 and
remain at that level thereafter. Unrecognized gains and losses of the
post-retirement benefit plans are amortized over five years.
If the assumed health care cost trend rate were increased or decreased by one
percentage point, the accumulated post-retirement benefit obligation, as of
December 31, 1999, 1998 and 1997, and the net periodic post-retirement
benefit cost for 1999, 1998 and 1997, would have increased or decreased as
follows (in thousands):
<TABLE>
<CAPTION>
Other Post-retirement Benefits
One Percentage Point
---------------------------------------------------------------
Increase Decrease
--------------------------- -----------------------------
1999 1998 1997 1999 1998 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Effect on total of service and
interest cost components $ 416 $ 689 $ 1,172 $ (347) $ (583) $(1,016)
Effect on post-retirement
benefit obligation $ 4,062 $ 5,157 $11,113 $(3,388) $(4,387) $(9,786)
</TABLE>
The assets of the defined benefit pension plans consist principally of listed
stocks and bonds. Contributions are determined annually for each plan by the
Company's pension administrative committee, based upon the actuarially
determined minimum required contribution under the Employee Retirement Income
Security Act of 1974, as amended, (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 $10,801,000 and $11,860,000 at December 31, 1999 and
1998, respectively. The annual expense associated with the non-qualified plans
was not significant.
Total contributions to the multi-employer pension plans covering personnel in
shoreside and seagoing bargaining units were $4,367,000 in 1999, $5,633,000 in
1998 and $5,828,000 in 1997. 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 ERISA and are paying premiums to the Pension Benefit Guarantee
Corporation (PBGC). The statutes provide that an employer who 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 $158,000 as of December
31, 1999, 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.
<TABLE>
<CAPTION>
Table 2 (In thousands)
Pension Benefits Other Post-retirement Benefits
----------------------------------- -----------------------------------
1999 1998 1997 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at
beginning of year $ 229,573 $ 354,883 $ 326,095 $ 55,298 $ 91,112 $ 93,596
Service cost 5,705 7,182 6,692 892 1,154 1,310
Interest cost 15,013 25,024 23,807 3,460 5,474 6,250
Plan participants' contributions -- -- -- 1,423 1,615 1,635
Actuarial (gain) loss (25,177) 20,682 16,567 (8,198) (8,482) (4,198)
Sale of subsidiary -- (158,758) -- -- (29,615) --
Benefits paid (12,109) (22,631) (21,687) (4,320) (6,326) (6,933)
Amendments 10,129 3,191 2,997 -- 366 (548)
Settlements (1,304) -- -- -- -- --
Curtailments (3,823) -- -- (719) -- --
Special or contractual
termination benefits 182 -- 412 -- -- --
- -------------------------------------------------------------------------------------------------------------
Benefit obligation at
end of year 218,189 229,573 354,883 47,836 55,298 91,112
- -------------------------------------------------------------------------------------------------------------
CHANGE IN PLAN ASSETS
Fair value of plan assets at
beginning of year 338,267 443,249 380,909 -- -- --
Actual return on plan assets 56,236 72,646 84,027 -- -- --
Settlements (1,304) -- -- -- -- --
Sale of subsidiary -- (154,997) -- -- -- --
Benefits paid (12,109) (22,631) (21,687) -- -- --
- -------------------------------------------------------------------------------------------------------------
Fair value of plan assets
at end of year 381,090 338,267 443,249 -- -- --
- -------------------------------------------------------------------------------------------------------------
Plan assets less benefit
obligation 162,901 108,694 88,366 (47,836) (55,298) (91,112)
Unrecognized net actuarial gain (135,670) (88,373) (91,012) (15,841) (10,104) (22,353)
Unrecognized transition asset (183) (876) (1,869) -- -- --
Unrecognized prior
service cost (benefit) 13,939 4,767 5,707 32 358 (3,824)
- -------------------------------------------------------------------------------------------------------------
Accrued asset (obligation) $ 40,987 $ 24,212 $ 1,192 $ (63,645) $ (65,044) $(117,289)
=============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Table 3 (In thousands)
Pension Benefits Other Post-retirement Benefits
----------------------------------- -----------------------------------
1999 1998 1997 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMPONENTS OF NET PERIODIC
BENEFIT COST
Service cost $ 5,705 $ 7,182 $ 6,692 $ 892 $ 1,154 $ 1,310
Interest cost 15,013 25,024 23,807 3,460 5,474 6,250
Expected return on plan
assets (29,922) (38,862) (33,309) -- -- --
Recognition of net gain (4,251) (4,128) (2,258) (2,644) (7,221) (6,315)
Amortization of prior
service cost 905 1,105 808 8 (359) (368)
Amortization of unrecognized
transition asset (713) (992) (996) -- -- --
Recognition of settlement gain 53 -- -- -- -- --
Recognition of curtailment gain (3,641) -- -- (292) -- --
- -------------------------------------------------------------------------------------------------------------
Net periodic benefit
cost/(income) $ (16,957) $ (10,671) $ (5,256) $ 1,424 $ (952) $ 877
=============================================================================================================
Cost of termination benefits
recognized $ 182 $ -- $ 412 $ -- $ -- $ --
=============================================================================================================
</TABLE>
7. NOTES PAYABLE AND LONG-TERM DEBT
At December 31, 1999 and 1998, long-term debt consisted of the following (in
thousands):
1999 1998
- -------------------------------------------------------------------
Commercial paper, 1999 high 6.6%, low 4.9% $ 99,570 $ 141,766
Bank variable rate loans, due after 1999,
1999 high 6.9%, low 5.1% 78,000 78,500
Term loans:
7.16%, payable through 2007 60,000 67,500
7.43%, payable through 2007 15,000 15,000
7.57%, payable through 2009 15,000 --
7.55%, payable through 2009 15,000 --
7.65%, payable through 2001 10,000 10,000
8%, payable through 2000 7,500 17,500
9.05%, payable through 1999 -- 7,739
9%, payable through 1999 -- 5,294
- -------------------------------------------------------------------
Total 300,070 343,299
Less current portion 22,500 45,533
Commercial paper classified as current -- 42,000
- -------------------------------------------------------------------
Long-term debt $ 277,570 $ 255,766
===================================================================
COMMERCIAL PAPER: At December 31, 1999, $99,570,000 of commercial paper notes
was outstanding under a commercial paper program used by a subsidiary to
finance the construction of a vessel. Maturities ranged from 10 to 42 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.
At December 31, 1998, $42,000,000 of commercial paper notes was outstanding
under a separate commercial paper program used by C&H, before the partial sale
of that business (see Note 2), to fund the purchases of raw sugar inventory and
to provide working capital for sugar refining and marketing operations. This
program was terminated on January 19, 1999 as a result of the partial sale;
accordingly, the borrowings outstanding were classified as current at December
31, 1998. This program was supported by an $85,000,000 backup revolving credit
facility with four commercial banks, which also was terminated in January 1999.
VARIABLE RATE LOANS: The Company has a revolving credit and term loan
agreement with four commercial banks, whereby it may borrow up to $140,000,000,
under revolving loans to November 30, 2001, at varying rates of interest. Any
revolving loan outstanding on that date may be converted into a term loan,
which would be payable in 12 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, 1999 and
1998, $60,000,000 and $50,000,000, respectively, were outstanding under this
agreement.
The Company has an uncommitted $45,000,000 short-term revolving credit
agreement with a commercial bank. The agreement extends to November 30, 2000,
but may be canceled by the bank or the Company at any time. At December 31,
1999 and 1998, $13,000,000 and $3,500,000, respectively, were outstanding under
this agreement.
The Company has a $50,000,000 one-year revolving credit agreement with a
commercial bank containing a two-year term option. At December 31, 1999 and
1998, $5,000,000 and $15,000,000, respectively, were outstanding under this
agreement.
The Company has a $25,000,000 one-year revolving credit agreement with a
commercial bank which serves as a commercial paper liquidity back-up line. At
December 31, 1999 and 1998, no amounts were outstanding under this agreement.
In 1999, the Company had an uncommitted $25,000,000 revolving credit agreement
with a commercial bank. This agreement expired December 31, 1999 and was
replaced in January 2000 with a comparable $25,000,000 revolving credit
agreement with another commercial bank. At December 31, 1999, no amount was
outstanding under either agreement. At December 31, 1998, $10,000,000 was
outstanding under the initial agreement.
LONG-TERM DEBT MATURITIES: At December 31, 1999, maturities and planned
prepayments of all long-term debt during the next five years totaled
$22,500,000 for 2000, $15,000,000 for 2001, $7,500,000 for 2002 and $9,643,000
for 2003 and 2004.
8. LEASES
THE COMPANY AS LESSEE: Principal operating leases include office and terminal
facilities, containers and equipment leased for periods which expire between
2000 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 $28,343,000, $45,519,000 and
$45,560,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
Future minimum payments under operating leases as of December 31, 1999 were as
follows (in thousands):
Operating
Leases
- ---------------------------------------------------------------
2000 $ 11,030
2001 10,842
2002 11,011
2003 11,006
2004 11,181
Thereafter 109,984
- ---------------------------------------------------------------
Total minimum lease payments $ 165,054
===============================================================
The Company 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 $9,344,000 and $8,800,000 at December 31, 1999 and 1998,
respectively, included in other long-term liabilities, provides for a pro-rata
portion of the principal due on these bonds.
THE COMPANY AS LESSOR: The Company leases land, buildings, land improvements,
and vessels under operating leases. Five vessels were leased under new
agreements commencing in 1998. The historical cost of and accumulated
depreciation on leased property at December 31, 1999 and 1998 were as follows
(in thousands):
1999 1998
- ----------------------------------------------------------------------------
Leased property $ 571,640 $ 530,967
Less accumulated amortization 129,465 113,358
- ----------------------------------------------------------------------------
Property under operating leases--net $ 442,175 $ 417,609
============================================================================
Total rental income under these operating leases for the three years ended
December 31, 1999 was as follows (in thousands):
1999 1998 1997
- ----------------------------------------------------------------------------
Minimum rentals $ 93,275 $ 79,268 $ 35,535
Contingent rentals (based on sales
volume) 1,244 1,079 1,048
- ----------------------------------------------------------------------------
Total $ 94,519 $ 80,347 $ 36,583
============================================================================
Future minimum rental income on non-cancelable leases at December 31, 1999 was
as follows (in thousands):
Operating
Leases
- ---------------------------------------------------------------
2000 $ 92,192
2001 88,705
2002 84,772
2003 80,851
2004 75,547
Thereafter 190,935
- ---------------------------------------------------------------
Total $ 613,002
===============================================================
9. INCOME TAXES
The income tax expense for the three years ended December 31, 1999 consisted of
the following (in thousands):
1999 1998 1997
- ----------------------------------------------------------------------------
Current:
Federal $ 21,035 $ 28,877 $ 30,181
State 3,461 3,723 2,476
- ----------------------------------------------------------------------------
Total 24,496 32,600 32,657
Deferred 8,465 (8,248) 13,168
- ----------------------------------------------------------------------------
Income tax expense $ 32,961 $ 24,352 $ 45,825
============================================================================
Total income tax expense for the three years ended December 31, 1999 differs
from amounts computed by applying the statutory Federal rate to pre-tax income
for the following reasons (in thousands):
1999 1998 1997
- ----------------------------------------------------------------------------
Computed income tax expense $ 33,439 $ 19,353 $ 44,525
State tax on income, less
applicable Federal tax 3,790 1,824 3,732
Low-income housing credits (1,161) (1,204) (1,214)
Fair market value over cost of
donations -- -- (1,306)
Bases differences in net assets
acquired -- 3,114 --
Prior years' tax settlement (2,815) -- --
Other--net (292) 1,265 88
- ----------------------------------------------------------------------------
Income tax expense $ 32,961 $ 24,352 $ 45,825
============================================================================
The tax effects of temporary differences that give rise to significant portions
of the net deferred tax liability at December 31, 1999 and 1998 were as follows
(in thousands):
1999 1998
- ----------------------------------------------------------------------------
Property basis and depreciation $ 196,967 $ 199,523
Capital Construction Fund 52,374 51,072
Tax-deferred gains on real estate transactions 93,966 85,181
Unrealized holding gains on securities 28,851 36,939
Post-retirement benefits (24,662) (27,027)
Insurance reserves (12,172) (10,771)
Other--net 6,770 8,588
- ----------------------------------------------------------------------------
Total $ 342,094 $ 343,505
============================================================================
In 1999, the Company reached an agreement with the Internal Revenue Service
(IRS) settling certain valuation issues relating to the Company's tax returns
through 1995. This agreement resulted in a one-time reduction of income tax
expense of $2,815,000 due to the reversal of previously accrued income tax
liabilities. The IRS is currently auditing the Company's tax returns for 1996
and 1997. Management believes that the outcome 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
EMPLOYEE STOCK OPTION PLANS: During 1999, the Company had two stock option
plans under which key employees were granted options to purchase shares of the
Company's common stock.
Under the 1998 Plan, approved at the 1998 Annual Meeting of Shareholders,
option prices may not be less than the fair market value of the Company's
common stock on the dates of grant, and the options become exercisable over
periods determined, at the dates of grant, by the committee that administers
the plan. Payments for options exercised may be made in cash or in shares of
the Company's stock. If an option to purchase shares is exercised within five
years of the date of grant and if payment is made in shares of the Company's
stock, the option holder may receive, under a reload feature, a new stock
option grant for such number of shares as is equal to the number surrendered,
with an option price not less than the greater of the fair market value of the
Company's stock on the date of exercise or one and one-half times the original
option price. During 1999, options to purchase 515,400 shares were granted, no
reload options to purchase shares were granted, no options to purchase shares
were exercised, and options to purchase 2,400 shares were canceled. At
December 31, 1999, options to purchase 613,000 shares were outstanding under
the 1998 Plan.
The 1989 Plan is substantially the same as the 1998 Plan, except that each
option generally becomes exercisable in-full one year after the date granted.
The 1989 Plan terminated in January 1999, but options granted through 1998
remain exercisable. During 1999, options to purchase 4,575 shares were
exercised and options to purchase 369,250 shares were canceled. At December
31, 1999, options to purchase 2,885,513 shares were outstanding under the 1989
Plan.
The 1998 and 1989 Plans also permit the 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 plans. The number of
incentive shares issued during 1999 or outstanding at the end of the year was
not material.
DIRECTOR STOCK OPTION PLANS: The Company also has two Directors' stock option
plans. Under the 1998 Directors' Plan, 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 fair market value of the shares on
the date of grant. Each option to purchase shares becomes exercisable in three
successive annual installments of 1,000 shares beginning one year after the
date granted. During 1999, options to purchase 24,000 shares were granted and
no options to purchase shares were exercised or canceled. At December 31,
1999, options to purchase 24,000 shares were outstanding under the 1998 Plan.
The 1989 Directors' Plan is substantially the same as the 1998 Directors' Plan,
except that each option generally becomes exercisable in-full one year after
the date granted. This plan terminated in January 1999, but options granted
through termination remain exercisable. During 1999, no options to purchase
shares were exercised and options to purchase 15,000 shares were canceled. At
December 31, 1999, options to purchase 189,000 shares were outstanding under
the 1989 Plan.
Changes in shares under all option plans, for the three years ended December
31, 1999, were as follows:
Price Range
Shares Per Share
- ------------------------------------------------------------------------
1996: 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 3,206,038 21.750-37.875
1998: Granted 606,400 22.750-29.769
Exercised (65,850) 21.750-27.000
Canceled (17,950) 26.250-34.000
Outstanding, December 31 3,728,638 21.750-37.875
1999: Granted 539,400 20.656-20.875
Exercised (4,575) 21.750-23.250
Canceled (551,950) 20.875-37.875
- ------------------------------------------------------------------------
OUTSTANDING, DECEMBER 31 3,711,513 20.656-34.000
========================================================================
EXERCISABLE, DECEMBER 31 3,196,513 20.875-34.000
========================================================================
ACCOUNTING METHOD FOR STOCK-BASED COMPENSATION: 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 stock option grants had been determined consistent
with SFAS No. 123, "Accounting for Stock-based Compensation," the after-tax
cost for grants made in 1999, 1998, and 1997 would have been approximately
$1,471,000, $2,015,000 and $1,800,000, respectively. Earnings per share for
1999, 1998 and 1997 would have declined by $0.03, $0.05 and $0.04,
respectively.
SHAREHOLDER RIGHTS PLAN: 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 out-
standing 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.
SHARE REPURCHASES: During 1999, the Company purchased and retired 1,564,500
shares of its stock, at an average per-share price of $22.26. During 1998, the
Company purchased and retired 969,200 shares, at an average per-share price of
$21.50.
11. RELATED PARTY TRANSACTIONS, COMMITMENTS AND CONTINGENCIES
At December 31, 1999, the Company and its subsidiaries had an unspent balance
of total appropriations for capital expenditures of approximately $81,610,000.
However, there is no contractual obligation to spend this entire amount.
The Company has arranged for standby letters of credit of approximately
$14,500,000, necessary to qualify as a self-insurer for state and federal
workers' compensation liabilities, other insurance-related matters and a
guarantee on a terminal facility lease. In addition, the Company maintains a
letter of credit of $5,024,000 for workers' compensation claims incurred by C&H
employees, under a now-closed self insurance plan, prior to December 24, 1998
(see Note 2). The Company only would be called upon to honor this letter of
intent in the event of C&H's insolvency. The Company also has approximately
$7,954,000 of letters of credit outstanding for normal operating matters.
C&H, in which A&B has a 36-percent common stock interest, 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 two other Hawaii sugar growers. Under the terms of this
contract, C&H 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 Company delivered to HSTC
raw sugar totaling $83,412,000, $79,422,000 and $71,468,000, during 1999, 1998
and 1997, respectively.
Operating expenses in 1999 include approximately $46,856,000 paid to an
unconsolidated affiliate.
A subsidiary has guaranteed obligations of $17,550,000 of an unconsolidated
affiliate in which it has a minority interest.
A subsidiary transferred assets with a value of $16,438,000 to a joint venture
in 1999.
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 1999, 1998 and 1997, on page 23, is
incorporated herein by reference.
Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker, or decision-making group, in deciding how to
allocate resources and in assessing performance. The Company's chief operating
decision-making group is made up of the president and lead executives of each
of the Company's segments. The lead executive for each operating segment
manages the profitability and cash flow of each respective segment's various
product or service lines and businesses. The operating segments are managed
separately because each operating segment represents a strategic business unit
that offers different products or services and serves different markets.
The Company's reportable operating segments include Ocean Transportation,
Property Development and Management and Food Products. The Ocean Transporta-
tion segment carries freight between various United States and Canadian West
Coast, Hawaii and other Pacific ports, and provides terminal and cargo
logistics services. The Property Development and Management segment develops,
manages and sells residential, commercial and industrial properties. The Food
Products segment grows and processes raw sugar and molasses; invests in a sugar
refining and marketing business (see Note 2); grows, mills and markets coffee;
and generates and sells electricity.
The accounting policies of the operating segments are the same as those
described in the summary of significant policies. Reportable segments are
measured based on operating profit, exclusive of non-operating or unusual
transactions, interest expense, general corporate expenses and income taxes.
<PAGE>
EXHIBIT B
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
FINANCIAL DATA SCHEDULE
DECEMBER 31, 1999
($000 OMITTED)
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 $1,561,460
2 Total Operating Revenues $937,645
3 Net Income $62,579
<PAGE>
February 28, 2000
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N. W.
Washington, D. C. 20549
Re: Form U-3A-2 - Alexander & Baldwin, Inc. -
SEC File No. 69-166
----------------------------------------
Gentlemen:
Submitted herewith for filing is the Statement of Alexander & Baldwin,
Inc. ("A&B") 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.
From 1990 until last year, A&B filed Forms U-3A-2 on a joint and
consolidated basis with its wholly-owned subsidiary, A&B-Hawaii, Inc. ("ABHI").
Effective December 31, 1999, ABHI was merged into A&B and ceased to exist as a
legal entity. Therefore, ABHI no longer will be identified as a "Co-Claimant"
in the Forms U-3A-2.
Very truly yours,
/s/ Francis K. Mukai
Francis K. Mukai
Assistant General Counsel
FKM/smt
Enclosure
