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 MARCH 31,JUNE 30, 1998
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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.
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(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
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(Registrant's telephone number, including area code)
N/A
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(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 March 31,June 30, 1998: 44,861,16244,878,184
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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The condensed financial statements and notes for the second quarter and first
quartersix months of 1998 are presented below.below with comparative figures from the 1997
financial statements.
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF INCOME
(In thousands except per share amounts)
Three Months Ended March 31Six Months Ended
June 30 June 30
1998 1997 1998 1997
---- ---- ---- ----
(unaudited) (unaudited)
Revenue:
Net sales, revenue from services
and rentals $284,267 $271,192$361,502 $312,800 $645,769 $583,992
Interest, dividends and other 7,140 25,0604,323 5,128 11,463 30,188
-------- -------- -------- --------
Total revenue 291,407 296,252365,825 317,928 657,232 614,180
-------- ------- -------- --------
Costs and Expenses:
Costs of goods sold, services
and rentals 237,208 228,034301,953 254,341 539,161 482,132
Selling, general and administrative 26,081 26,31227,229 26,538 53,310 53,093
Interest 6,080 7,9426,293 7,803 12,373 15,745
Income taxes 8,264 12,73911,380 10,967 19,644 23,706
-------- -------- -------- --------
Total costs and expenses 277,633 275,027346,855 299,649 624,488 574,676
-------- -------- -------- --------
Net Income $ 13,77418,970 $ 21,22518,279 $ 32,744 $ 39,504
======== ======== ======== ========
Basic and Diluted Earnings Per Share $ 0.310.42 $ 0.470.40 $ 0.73 $ 0.87
======== ======== ======== ========
Dividends Per Share $ 0.225 $ 0.220 $ 0.450 $ 0.440
======== ======== ======== ========
Average Number of Shares Outstanding 44,842 45,311$ 44,869 45,238 $ 44,855 45,274
======== ======== ======== ========
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
INDUSTRY SEGMENT DATA
(In thousands)
Three Months Ended March 31Six Months Ended
June 30 June 30
1998 1997 1998 1997
---- ---- ---- ----
(unaudited) (unaudited)
Revenue:
Ocean Transportation $178,800 $181,120$182,124 $175,005 $360,924 $356,125
Property Development and Management:
Leasing 9,235 9,1169,198 9,609 18,433 18,725
Sales 7,781 4,11160,792 14,480 68,573 18,591
Food Products 94,874 101,188112,994 118,131 207,868 219,319
Other 717 717703 1,434 1,420
-------- -------- -------- --------
Total Revenue $291,407 $296,252$365,825 $317,928 $657,232 $614,180
======== ======== ======== ========
Operating Profit:(1)
Ocean Transportation $ 17,37016,787 $ 34,05022,807 $ 34,157 $ 56,857
Property Development and Management:
Leasing 5,899 6,2345,589 6,433 11,488 12,667
Sales 4,642 1,58013,994 3,080 18,636 4,660
Food Products 2,998 2,4433,047 6,949 6,045 9,392
Other 678 663685 671 1,363 1,334
-------- -------- -------- --------
Total Operating Profit $ 31,58740,102 $ 44,97039,940 $ 71,689 $ 84,910
======== ======== ======== ========
(1)Before interest expense, corporate expenses and income taxes
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
CONDENSED BALANCE SHEETS
(In thousands)
March 31
JUNE 30 December 31
1998 1997
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(unaudited)(UNAUDITED) (audited)
ASSETS
ASSETS
Current Assets:
Cash and cash equivalents $ 11,04516,500 $ 21,623
Accounts and notes receivable, net 158,991171,359 176,165
Inventories 85,54984,302 69,209
Real estate held for sale 10,76610,262 12,563
Deferred income taxes 9,93610,039 9,404
Prepaid expenses and other assets 10,4177,909 9,977
Accrued deposits to Capital Construction Fund (10,000) (10,000)
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Total current assets 276,704290,371 288,941
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Investments 102,63696,760 102,813
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Real Estate Developments 69,54970,806 68,056
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Property, at cost 2,001,2711,993,165 1,975,023
Less accumulated depreciation and amortization 959,950962,591 938,508
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Property - net 1,041,3211,030,574 1,036,515
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Capital Construction Fund 148,610 148,610
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Other Assets 66,50894,288 59,863
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Total $1,705,328$1,731,409 $1,704,798
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LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 30,60053,264 $ 34,485
Short-term commercial paper borrowings 28,00049,000 17,000
Accounts payable 37,14536,412 46,835
Other 79,18181,524 75,815
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Total current liabilities 174,926220,200 174,135
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Long-term Liabilities:
Long-term debt 296,498278,008 290,885
Capital lease obligations 1,500 2,000
Post-retirement benefit obligations 111,875111,151 112,125
Other 39,89143,779 46,311
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Total long-term liabilities 449,764434,438 451,321
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Deferred Income Taxes 358,753359,418 359,754
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Shareholders' Equity:
Capital stock 36,72336,736 36,769
Additional capital 50,74951,158 49,437
Unrealized holding gains on securities 54,35550,619 55,144
Retained earnings 592,609591,391 591,135
Cost of treasury stock (12,551) (12,897)
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Total shareholders' equity 721,885717,353 719,588
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Total $1,705,328$1,731,409 $1,704,798
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ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
Three
Six Months Ended
March 31June 30
1998 1997
---- ----
(unaudited)
Cash Flows from Operating Activities $ 17,10424,745 $ 30,65069,414
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Cash Flows from Investing Activities:
Capital expenditures (27,838) (8,044)(48,991) (17,195)
Proceeds from disposal of property,
investments and other assets 2 86
Deposits into3,323 268
Withdrawals from Capital Construction Fund - (2,908)
Increase30,000
Net increase in investments net (468) (1,797)(466) (1,926)
-------- --------
Net cash used inprovided by (used in) investing
activities (28,304) (12,663)(46,134) 11,147
-------- --------
Cash Flows from Financing Activities:
Proceeds from issuances of long-term debt 11,50015,000 34,500
Payments of long-term debt (10,079) (16,672)(24,150) (66,648)
Proceeds (payments) of short-term commercial paper
borrowings, net 11,000 9,00047,000 (14,000)
Proceeds from issuances of capital stock 543 363853 1,017
Repurchases of capital stock (2,250) (3,169)(7,155)
Dividends paid (10,092) (9,974)(20,187) (19,933)
-------- --------
Net cash provided by (used in)
financing activities 622 14,04816,266 (72,219)
-------- --------
Net Increase (Decrease) in Cash and Cash
Equivalents $(10,578) $ 32,035(5,123) $ 8,342
======== ========
Other Cash Flow Information:
Interest paid, net of amounts capitalized $ 7,10313,317 $ 7,89216,728
Income taxes paid, net of refunds 4,311 1,07616,997 8,652
Other Non-Cash Information:
AccruedNet accrued deposits to Capital Construction
Fund net - 19,90320,325
Depreciation 21,951 22,72944,344 45,543
Tax-deferred property exchange 4,279 1,558exchanges 64,597 9,589
Change in unrealized holding gains (789) (3,819)(4,525) (337)
FINANCIAL NOTES
(Unaudited)
(a) The condensed balance sheet as of March 31,June 30, 1998, and the condensed statements
of income for the three months and six months ended June 30, 1998 and
1997, and the condensed statements of cash flows for the threesix months ended
March 31,June 30, 1998 and 1997 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 adopted Statement of Financial Accounting Standards (SFAS) No.
128, "Earnings Per Share," and SFAS No. 130, "Reporting Comprehensive
Income,"Income" during the year ended December 31,1997.31, 1997.
In accordance with SFAS No. 128, the Company renamed its Primary Earnings
per Share (EPS) to Basic EPSEarnings Per Share (Basic EPS) and disclosed its
Diluted EPS. Due to the immaterial impact of the potential exercise of the Company's stock options,
Basic EPS and Diluted EPS areround to the same amount.
In accordance with SFAS No. 130, the Company must disclose total non-owner
changes in shareholders' equity. For the Company, this consists of net
income plus unrealized holding gains on securities. On this basis,
comprehensive income for the first quarter ofthree months ended June 30, 1998 and 1997,
totaled $13$15 million and $17$23 million, respectively. Comprehensive income
for the six months ended June 30, 1998 and 1997, totaled $28 million and
$40 million, respectively.
(d) Results for the six months ended June 30, 1997 first quarter results for ocean transportation
include $20 million, pre-tax, from the settlement of a lawsuit that
involved insurance claims for earthquake damage to port facilities in
1989.
(e) Certain amounts have been reclassified to conform with the current year's
presentation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
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OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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FIRSTSECOND QUARTER EVENTS:
OPERATING RESULTS: Net income for the firstsecond quarter of 1998 was $13,774,000,$18,970,000,
or $0.31$0.42 per share. Net income for the comparable period of 1997 was
$21,225,000,$18,279,000, or $0.47$0.40 per share. Net income for the first half of 1998 was
$32,744,000, or $0.73 per share, including $12,361,000,versus $39,504,000, or $0.27$0.87 per share, in the
comparable 1997 period. Net income in the first half of 1997 included
$12,478,000, or $0.28 per share, resulting from the favorable settlement of
long-standinglongstanding insurance litigation. Excluding thisthe insurance settlement, after-taxnet
income rose 55 percent compared withfor the first quarterhalf of 1997.1998 increased 21 percent.
FINANCIAL CONDITION AND LIQUIDITY
The Company's principal liquid resources, which consist of cash and cash
equivalents, receivables, sugar and coffee inventories and unused lines of
credit, less accrued deposits to the Capital Construction Fund (CCF), totaled
$476,459,000$463,646,000 at March 31,June 30, 1998, a decrease of $7,217,000$20,030,000 from December 31,
1997. The decrease was due primarily to fewer amounts available under lines
of credit and to lower receivablescash and cashreceivable balances, partially offset by
increased sugar and coffee inventories and a slightly
higher amount available under lines of credit.inventories. There was no change in accrued
deposits to the CCF. ReceivablesAmounts available under lines of credit decreased
$17,174,000; this decrease was
mostly at Matson Navigation Company, Inc. ("Matson").$27,999,000, primarily due to increased borrowing for the purchase of raw sugar
and container equipment. Cash and cash equi-
valentsequivalents decreased by $10,578,000,$5,123,000,
due primarily to normal expenditures for container equipment, debt repayments
and operating cash requirements. Receivables decreased $4,806,000, primarily
the result of a decrease at Matson Navigation Company, Inc. ("Matson"). Sugar
and coffee inventories increased $17,535,000,$17,898,000, due principally to higher levels
of refined sugar inventory and higher sugar production costs carried in
inventory in the first quarter of 1998 and higher
levels of refined sugar inventory. Amounts available under lines of credit
increased just $3,000,000 in the first quarterhalf of 1998.
Working capital was $101,778,000$70,171,000 at March 31,June 30, 1998, a decrease of
$13,028,000$44,635,000 from the amount at the end of 1997. This decrease was due
primarily to the decreasesan increase in receivablesshort-term debt and cash balances,commercial paper borrowings,
partially offset by the increase in inventories.
RESULTS OF SEGMENT OPERATIONS -
FIRSTSECOND QUARTER 1998 COMPARED WITH THE FIRSTSECOND QUARTER 1997
OCEAN TRANSPORTATION revenue of $178,800,000$182,124,000 for the firstsecond quarter of 1998 was
one-percent lessfour-percent higher than the 1997 first-quartersecond quarter revenue. Operating profit inof
$16,787,000 for the firstsecond quarter of 1998 decreaseddeclined, however, by $16,680,000 to $17,370,000, primarily
because the first quarter 1997 results included $19,937,000 (pretax) for the
insurance settlement. Excluding that factor, 1998 first quarter operating
profit was $3,257,000 higher than in the first quarter of 1997, an improvement
of 2326 percent.
This increasedecrease was primarily the result of a small improvementlower cargo volume, lower average
revenue per container, and less interest income. The decline in cargo volume
resulted primarily from continued contraction in the Hawaii service revenuecargo market and
the startintroduction of a new barge competitor serving Hawaii during the strong
summer household-goods cycle. These factors more than offset the benefits of
a revised operating alliance with American President Lines, Ltd. Matson's
first-quartersecond-quarter 1998 Hawaii service container volume was two-percent higherseven-percent lower
than in the 1997 firstsecond quarter whileand automobile volume was two-percentone-percent lower.
PROPERTY DEVELOPMENT AND MANAGEMENT - LEASING revenue of $9,235,000$9,198,000 for the
firstsecond quarter of 1998 was one-percent higherfour-percent lower than the firstsecond quarter 1997
revenue, and operating profit of $5,899,000$5,589,000 was five-percent13-percent lower than the
1997 first-quarter amount. The reduction primarily reflected the weak Hawaii
economy, a lower lease rate on one property and the net effect of acquisitions
and sales of various income properties. First quarter 1998 occupancy levels
for Mainland properties averaged 96 percent, versus 99 percent in the first
quarter of 1997. Occupancy levels for Hawaii properties averaged 65 percent in
the first quarter of 1998, versus 82 percent in the
comparable period of 1997.
That1997 period. The decrease was due primarily to a temporary vacancy relatedthe timing of sales
and purchases of property and, to a former
Woolworth tenancylesser extent, to lower occupancy levels
and lease rates. In June 1998, the Company acquired three income properties
acquired recently at favorable prices that
have relatively low occupancy rates.on the U.S. Mainland, two in San Antonio, Texas and one in Sacramento,
California, using tax-deferred funds from previous property sales. The total
purchase price for the three properties was $36,199,000.
PROPERTY DEVELOPMENT AND MANAGEMENT - SALES revenue of $7,781,000 infor the firstsecond quarter of
1998 was $60,792,000, compared with $4,111,000$14,480,000 in sales recorded in the comparable periodsecond
quarter of 1997. OperatingIn the second quarter of 1998, operating profit from property
sales was $13,994,000. This was $10,914,000 higher than $3,080,000 in the
firstsecond quarter of 1998 was
$4,642,000, versus $1,580,0001997. Results in the same period in 1997. Sales in the firstsecond quarter of 1998 included threethe
sales of Ridgeview Court, a 246,000 square-foot R&D and office complex in
Cupertino, California and the Company's remaining interest in a 14-acre parcel
in Maui Business Park (MBP). These two sales, combined, contributed
$13,989,000 to operating profit. Other 1998 second-quarter sales included one
business parcelsparcel and ninefive residential properties. Sales in the firstsecond quarter
of 1997 included onean industrial warehouse, three developed business lotlots and
11sixteen residential properties.properties on Maui. Three of the second quarter 1998 and
one of the second quarter 1997 sales were completed 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 and subdivision lots generally provides a greater contribution margin than
does the sale of developed and commercial property, due to the low historical-costhistorical-
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 $94,874,000$112,994,000 for the firstsecond quarter of 1998 was six-four-
percent lower than the revenue reported for the comparable period of 1997.
However,Second quarter 1998 operating profit of $3,047,000 decreased significantly from
the $6,949,000 operating profit in the same period in 1997. This decrease was
due primarily to lower refined sugar prices and margins at C&H, offset, in
part, by greater volume and lower costs of raw sugar production. In June 1998,
five-year labor agreements were reached with the two unions at the Company's
sugar refinery in Crockett, California.
RESULTS OF SEGMENT OPERATIONS -
FIRST SIX MONTHS 1998 COMPARED WITH THE FIRST SIX MONTHS OF 1997
OCEAN TRANSPORTATION revenue of $360,924,000 for the first half of 1998 rose
just one percent from the results in the first half of 1997. First half 1998
operating profit of $34,157,000 decreased $22,700,000, or 40 percent, from
$56,857,000 in the first half of 1997. The primary reason for the decrease was
the favorable insurance settlement included in the first-half 1997 results.
Excluding that factor ($19,965,000, pretax), 1998 first half operating profit
was $2,998,000$2,735,000 lower than in 1997. For the first half of 1998, Matson's Hawaii
service container volume was two-percent lower than in the 1997 first half and
its automobile volume was one-percent lower.
PROPERTY DEVELOPMENT AND MANAGEMENT - LEASING revenue of $18,433,000 for the
first quarterhalf of 1998 versus
$2,443,000 a year earlier. Hawaii agribusinesswas two-percent lower than the results were higher for both
sugar production and coffee. Refined sugar sales and refiners' margins werein the comparable
1997 period. First half 1998 operating profit of $11,488,000 was nine-percent
lower at California and Hawaiian Sugar Company, Inc.,than in the first half of 1997. This decrease was due to greater supplies
of refined beet and cane sugarthe same
reasons cited for the second quarter decline. Year-to-date 1998 occupancy
levels for Mainland properties averaged 93 percent, versus 98 percent in the
domestic market.first half of 1997. Year-to-date 1998 occupancy levels for Hawaii properties
averaged 66 percent, versus 78 percent in the comparable period of 1997. That
decrease was primarily due to a temporary vacancy related to a former Woolworth
tenancy and properties acquired recently at favorable prices that have
relatively low occupancy rates. A portion of the former Woolworth space is
being redeveloped into a multi-screen theater complex.
PROPERTY DEVELOPMENT AND MANAGEMENT - SALES revenue of $68,573,000 in the first
half of 1998 compared with $18,591,000 recorded in the first half of 1997.
Operating profit of $18,636,000 from property sales in the first half of 1998
was $13,976,000 higher than $4,660,000 in the first half of 1997. The two
large sales in the 1998 second quarter were the primary reason for the
increase. Among the first half 1998 sales were the previously mentioned sales
of the R&D and office complex and the 14-acre parcel in MBP, plus five other
business parcels and 14 residential properties. Sales in the comparable period
of 1997 included a one-acre developed lot and an industrial warehouse, plus 27
residential and three developed business lot sales. Seven of the 1998 and two
of the 1997 sales were completed on a tax-deferred basis.
FOOD PRODUCTS revenue of $207,868,000 for the first half of 1998 was five-
percent lower than the revenue reported for the comparable period of 1997.
Operating profit of $6,045,000 for the first half of 1998 compared with
$9,392,000 during the comparable period of 1997. This decrease was due to the
same reasons cited for the second quarter decline.
OTHER
INSURANCE LITIGATION: Matson received a favorable cash settlement of
$33,650,000 on February 13, 1997 for a contested insurance claim in connection
with repairing port facilities damaged by a 1989 earthquake. As noted
previously, this settlement resulted in additional net income of $12,361,000$12,478,000 in
the first quarterhalf of 1997.
LEGISLATION: In September 1997, the Secretary of Agriculture established, under the
Federal Agriculture Improvement and Reform Act and in accordance with the
Harmonized Tariff Schedule, the aggregate quantity of sugars and syrups that
can be imported into the United States. The maximum import quantity for fiscal
year 1998 was set at 1,800,000 metric tons raw value (mtrv), with an initial
release of 1,200,000 mtrv and the remaining 600,000 mtrv to be released in
200,000 mtrv increments in January, March, and May, if, in those months, the
stocks-to-use ratio, as published in the World Agricultural Supply and Demand
Estimate (WASDE), is not greater than 15.5 percent. In January 1998, the WASDE
stocks-to-use ratio was 15.7 percent and, as a result, the first 1998 increment
was cancelled. In March and May 1998, the WASDE stocks-to-use ratio was 14.5
percent.and 14.2 percent, respectively. As a result, the second and third 1998
increment was released and theincrements were released. The maximum import quantity for fiscal year 1998 is
still atcurrently 1,600,000 mtrv. The approved import
quantity is now 1,400,000 mtrv and the final increment of 200,000 mtrv will be
cancelled or released in May 1998.
TAX-DEFERRED REAL ESTATE EXCHANGES: In the first quarterhalf of 1998, the Company
sold fiveseven parcels of land on Maui for $4,279,000$64,597,000 (net reinvestment proceeds). The
proceeds from these sales are reflected in the Condensed Statements of Cash
Flows under the caption "Other Non-Cash Information" and are expected to beInformation." During the first half of
1998, the Company reinvested proceeds of $36,199,000 on a tax-deferred basis.basis
from sales completed in 1998 and 1997.
SHARE REPURCHASES: During the first quarterhalf of 1998, the Company repurchased
85,000 shares of its common stock for an aggregate of $2,250,000 (average of
$26.47 per share).
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.
SUBSEQUENT EVENT: On August 10, 1998, the Company announced that it has
entered into a definitive agreement providing for the recapitalization of
California and Hawaiian Sugar Company, Inc. (C&H) in partnership with an
investor group including Citicorp Venture Capital, Ltd. In the transaction,
A&B will receive approximately $55 million in cash, after the repayment of
certain C&H indebtedness, $25 million in senior preferred stock, and will
retain a 40 percent common stock interest in the recapitalized C&H. The trans-
action, expected to close within ninety days, is not expected to have a
material impact on the Company's income.
ECONOMIC CONDITIONS: Very lowNo fundamental change in Hawaii economic conditions is
visible at midyear 1998. The outlook remains unchanged, for zero to one-
percent real growth continues to be the immediate outlook
for Hawaii's economy. No catalyst for better performance appears evident.this year. The state's importantState's prominent visitor industry
is expectedcontinues to benefit from increasing westbound arrivals, but this improvement
is being offset by declines in eastbound visitors, due to continuing economic
uncertainty in Asia. These trends are affecting various visitor destinations
in the continuing strong economic performanceState in different ways. Oahu tourism is down because of its dependence
on eastbound visitors; recent new eastbound air service to the Kona area (on
the west side of the U.S. mainland statesIsland of Hawaii), however, has steadily boosted arrivals
there; and resulting expectations of strong 1998 summerother neighbor island areas are benefiting from the westbound trend.
Local real estate industry analysts have noted an increase in condominium sales
on the neighbor islands, with Mainland visitors from West Coast areas acquiring
vacation travel and spending. Although Asia's financial turmoil is a concern, the most
immediate and direct effect on Hawaii is likely to be realized through the
volatility in currency exchange. If the yen weakens further, as many expect,
eastbound visitors will spend less and shorten the lengths of their stays in
Hawaii, likely reducing tourism expenditures. The net effect of a favorable
westbound visitor outlook and an unfavorable eastbound one is for modest growth
in total expenditures, at best. Separately, passage by the Hawaii state
legislature of key initiatives to support economic revitalization remains
uncertain.properties.
YEAR 2000: Beginning in 1996, the Company initiated an evaluation of its
computer systems and applications to prepare for the Year 2000. Following this
evaluation, implementation plans for all business segments were prepared and
are currently being executed. Areas which have the greatest risk of impacting
operations are being corrected first; however, all work related to primary
systems and applications is expected to be completed substantially by the end
of 1998. Many of the primary systems are already Year 2000 compliant. The
plans consist of upgrading, modifying or replacing various systems for
approximately $6,000,000 to $8,000,000. The costs incurred in connection with
the Year 2000 compliance are being treated as an operating expense, unless a
system is being replaced for operating reasons as well as Year 2000 compliance,
in which case costs are being capitalized. The Company believes that its
systems and applications necessary to operate and manage its businesses will be
replaced, modified or upgraded in advance of the Year 2000 and that the related
costs will not have a material impact on the operations, cash flows, financial
condition or segment results of future periods.
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-Q, press releases made by the Company and oral statements made by
the officers of the Company. Except for historical information contained in
these written or oral communications, such communications contain forward-
looking statements. These forward-looking statements involve a number of risks
and uncertainties that could cause actual results to differ materially from
those projected in the statements, including, but not limited to: (1) economic
conditions in Hawaii and elsewhere; (2) market demand; (3) competitive factors
and pricing pressures in the Company's primary markets; (4) legislative and
regulatory environment at the federal, state and local levels, such as
government rate regulations, land-use regulations, government administration of
the U.S. sugar program, and retention of cabotage laws; (5) dependence on raw
sugar suppliers and other third-party suppliers; (6) fuel prices; (7) labor
relations; and (8) other risk factors described elsewhere in these
communications and from time to time in the Company's filings with the SEC.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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At the Annual Meeting of Shareholders of the Company held on April 23, 1998,
the Company's shareholders voted in favor of: (i) the election of nine
directors to the Company's Board of Directors, (ii) the approval of the 1998
Stock Option/Stock Incentive Plan, (iii) the approval of the 1998 Non-Employee
Director Stock Option Plan, and (iv) 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 40,936,630 328,603
John C. Couch 40,924,480 340,753
Leo E. Denlea, Jr. 40,930,089 335,144
Walter A. Dods, Jr. 40,939,287 325,946
Charles G. King 40,940,480 324,753
Carson R. McKissick 40,940,323 324,910
C. Bradley Mulholland 40,937,824 327,409
Maryanna G. Shaw 40,937,324 327,909
Charles M. Stockholm 40,934,525 330,708
(ii) Proposal to Approve the 1998 For Against Abstain
--- ------- -------
Stock Option/Stock Incentive
Plan 37,112,821 3,878,210 273,635
(iii) Proposal to Approve the 1998 For Against Abstain
--- ------- -------
Non-Employee Director Stock
Option Plan 38,863,007 2,067,100 334,438
(iv) Election of Auditors For Against Abstain
--- ------- -------
41,016,283 47,089 201,294
There were no broker non-votes at the Annual Meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------------------------------------------
(a) Exhibits
--------
3. Articles of incorporation and bylaws.
3.c. Revised Bylaws of Alexander & Baldwin, Inc., as amended
effective June 25, 1998.
10. Material contracts.
10.b.1.(xxxii)(xxxiv) Alexander & Baldwin, Inc. 1998Non-Employee Director
Stock Option/Stock Incentive Plan.Retainer Plan, dated June 25, 1998.
10.b.1.(xxxiii)(xxxv) Amendment No. 3 to the A&B Excess Benefits Plan,
dated April 23, 1998.
10.b.1.(xxxvi) Amendment No. 4 to the A&B Excess Benefits plan,
dated June 25, 1998.
10.b.1.(xxxvii) Amendment No. 2 to the Alexander & Baldwin,
Inc. 1998 Non-Employee
DirectorDeferred Compensation Plan, dated June 25, 1998.
10.b.1.(xxxviii) Amendment No. 2 to the Alexander & Baldwin,
Inc. Restricted Stock Option Plan.Bonus Plan, dated June 25, 1998.
11. Statement re computation of per share earnings.
27. Financial Data Schedule.
(b) Reports on Form 8-K
No reports-------------------
A report on Form 8-K werewas filed duringon July 16, 1998 to report, under
Item 5 thereof, the quarter.declaration by the Board of Directors of
Alexander & Baldwin, Inc. ("A&B") on June 25, 1998 of a dividend
distribution, pursuant to a newly-adopted shareholder rights plan, of
one right, for each outstanding share of common stock of A&B, to
shareholders of record at the close of business on December 19,
1998, or on such earlier date as existing common stock purchase
rights may be redeemed in accordance with A&B's shareholder rights
plan adopted December 8, 1988.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of l934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALEXANDER & BALDWIN, INC.
------------------------------------------------------
(Registrant)
Date: May 14,August 12, 1998 /s/ Glenn R. Rogers
---------------------------
Glenn R. Rogers
Executive Vice President and
Chief Financial Officer
Date: May 14,August 12, 1998 /s/ Thomas A. Wellman
---------------------------
Thomas A. Wellman
Controller
EXHIBIT INDEX
-------------
3. Articles of incorporation and bylaws.
3.c. Revised Bylaws of Alexander & Baldwin, Inc., as amended effective
June 25, 1998.
10. Material contracts.
10.b.1.(xxxii)(xxxiv) Alexander & Baldwin, Inc. 1998Non-Employee Director Stock
Option/Stock
Incentive Plan.Retainer Plan, dated June 25, 1998.
10.b.1.(xxxiii)(xxxv) Amendment No. 3 to the A&B Excess Benefits Plan, dated
April 23, 1998.
10.b.1.(xxxvi) Amendment No. 4 to the A&B Excess Benefits plan, dated
June 25, 1998.
10.b.1.(xxxvii) Amendment No. 2 to the Alexander & Baldwin, Inc. 1998 Non-Employee DirectorDeferred
Compensation Plan, dated June 25, 1998.
10.b.1.(xxxviii) Amendment No. 2 to the Alexander & Baldwin, Inc.
Restricted Stock Option Plan.Bonus Plan, dated June 25, 1998.
11. Statement re computation of per share earnings.
27. Financial Data Schedule.