UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission file number 0-565
ALEXANDER & BALDWIN, INC.
(Exact name of registrant as specified in its charter)
HAWAII 99-0032630
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
822 BISHOP STREET
POST OFFICE BOX 3440, HONOLULU, HAWAII 96801
(Address of principal executive offices and zip code)
808-525-6611
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, WITHOUT PAR VALUE
(Title of Class)
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AT FEBRUARY 14, 2000:
42,349,971
AGGREGATE MARKET VALUE OF COMMON STOCK HELD BY NON-AFFILIATES AT FEBRUARY 14,
2000:
$756,734,966
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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF REGISTRANT'S PROXY STATEMENT DATED MARCH 6, 2000 (PART III OF FORM
10-K).
PORTIONS OF REGISTRANT'S ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR ENDED
DECEMBER 31, 1999 (PARTS I, II AND IV OF FORM 10-K).
TABLE OF CONTENTS
PART I
Page
Items 1. & 2. Business and Properties .............................. 1
A. Ocean Transportation ....................................... 2
(1) Freight Services ..................................... 2
(2) Vessels .............................................. 3
(3) Terminals ............................................ 3
(4) Other Services ....................................... 5
(5) Competition .......................................... 5
(6) Labor Relations ...................................... 7
(7) Rate Regulation ...................................... 7
B. Property Development and Management ........................ 7
(1) General .............................................. 7
(2) Planning and Zoning .................................. 8
(3) Residential Projects ................................. 9
(4) Commercial and Industrial Properties ................. 11
C. Food Products .............................................. 15
(1) Production ........................................... 15
(2) Sugar Refining; Marketing of Sugar
and Coffee ........................................... 17
(3) Competition and Sugar Legislation .................... 17
(4) Properties and Water ................................. 20
D. Employees and Labor Relations .............................. 21
E. Energy ..................................................... 22
Item 3. Legal Proceedings .......................................... 23
Item 4. Submission of Matters to a Vote of
Security Holders ........................................... 23
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters ................................ 24
Item 6. Selected Financial Data .................................... 24
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of
Operations ................................................. 24
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk .......................................... 25
Item 8. Financial Statements and Supplementary Data ............... 26
Item 9. Changes in and Disagreements With
Accountants on Accounting and Financial
Disclosure ................................................ 26
PART III
Item 10. Directors and Executive Officers of
the Registrant ............................................ 26
A. Directors .............................................. 26
B. Executive Officers of the Registrant ...................... 27
Item 11. Executive Compensation .................................... 28
Item 12. Security Ownership of Certain Beneficial
Owners and Management ..................................... 28
Item 13. Certain Relationships and Related
Transactions ............................................. 29
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K ................................... 29
A. Financial Statements ...................................... 29
B. Financial Statement Schedules ............................. 29
C. Exhibits Required by Item 601 of
Regulation S-K ............................................. 30
D. Reports on Form 8-K ....................................... 38
Signatures ....................................................... 39
Independent Auditors' Report ........................................ 41
Schedule I ....................................................... 42
Independent Auditors' Consent ....................................... 46
[Page numbers reference printed version of Form 10-K.]
ALEXANDER & BALDWIN, INC.
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FORM 10-K
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ANNUAL REPORT FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1999
PART I
------
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
- ---------------------------------------
Alexander & Baldwin, Inc. ("A&B") is a diversified corporation with most
of its operations centered in Hawaii. It was founded in 1870 and incorporated
in 1900. Ocean transportation operations and related shoreside operations of
A&B are conducted by a wholly-owned subsidiary, Matson Navigation Company, Inc.
("Matson"), and several Matson subsidiaries, all of which are headquartered in
San Francisco. Real property and food products operations are conducted by A&B
and certain other wholly-owned subsidiaries of A&B.
The industry segments of A&B are as follows:
A. Ocean Transportation - carrying freight, primarily between various
--------------------
United States Pacific Coast ports, major Hawaii ports and Guam;
chartering vessels to third parties; providing terminal, stevedoring,
tugboat and container equipment maintenance services in Hawaii;
arranging intermodal transportation in North America; and providing
supply and distribution services.
B. Property Development and Management - developing real property; sell-
-----------------------------------
ing residential properties; and managing, leasing, selling and
purchasing commercial/industrial properties, all in Hawaii and on the
U.S. Mainland.
C. Food Products - growing sugar cane and coffee in Hawaii; producing
-------------
raw sugar, molasses and green coffee; marketing and distributing
roasted coffee and green coffee; providing sugar and molasses hauling
and storage, general freight and petroleum hauling in Hawaii; and
generating and selling electricity.
For information about the revenue, operating profits and identifiable
assets of A&B's industry segments for the three years ended December 31, 1999,
see "Industry Segment Information" on page 23 of the Alexander & Baldwin, Inc.
1999 Annual Report to Shareholders ("1999 Annual Report"), which information is
incorporated herein by reference.
DESCRIPTION OF BUSINESS AND PROPERTIES
A. OCEAN TRANSPORTATION
--------------------
(1) FREIGHT SERVICES
----------------
Matson's Hawaii Service offers containership freight services
between the ports of Los Angeles, Oakland, Seattle, and the major ports in
Hawaii, which are located on the islands of Oahu, Kauai, Maui and Hawaii.
Roll-on/roll-off service is provided between California and the major ports in
Hawaii. Container cargo also is received at and delivered to Portland, Oregon,
and moved overland between Portland and Seattle at no extra charge.
Matson is the principal carrier of ocean cargo between the
United States Pacific Coast and Hawaii. In 1999, a fiscal year which for
Matson consisted of 53 weeks, Matson carried 151,215 containers (compared with
143,431 in 1998, which consisted of 52 weeks) and 101,095 motor vehicles
(compared with 73,717 in 1998) between those destinations. Principal westbound
cargoes carried by Matson to Hawaii include dry containers of mixed commodi-
ties, refrigerated cargoes, packaged foods, building materials and motor
vehicles. Principal eastbound cargoes carried by Matson from Hawaii include
household goods, canned pineapple, refrigerated containers of fresh pineapple,
motor vehicles and molasses. The preponderance of Matson's Hawaii Service
revenue is derived from the westbound carriage of containerized freight and
motor vehicles.
Matson's Guam Service provides containership freight service
between the United States Pacific Coast and Guam and Micronesia. Matson's Guam
Service is a component of the Pacific Alliance Service, a strategic alliance
established in 1996 by Matson and American President Lines, Ltd. ("APL") to
provide freight service between the United States Pacific Coast and Hawaii,
Guam, and several Far East ports. In 1999, Matson carried 17,614 containers
(compared with 18,418 in 1998) and 2,215 automobiles (compared with 3,132 in
1998) in the Guam Service. The alliance currently utilizes five vessels (three
Matson vessels and two APL vessels) in a schedule which provides service from
the United States Pacific Coast to Guam and Micronesia, continuing through Far
East ports, and returning to California.
Matson's Pacific Coast Service provides containership freight
service between Los Angeles, Oakland, Seattle and Vancouver, Canada. In 1999,
Matson carried 33,626 containers (compared with 34,669 in 1998) in the Pacific
Coast Service.
Matson's Mid-Pacific Service offers container and conven-
tional freight service between the United States Pacific Coast and the ports of
Kwajalein, Ebeye and Majuro in the Republic of the Marshall Islands and
Johnston Island, all via Honolulu.
See "Rate Regulation" below with respect to Matson's freight
rates.
(2) VESSELS
-------
Matson's cargo fleet consists of eleven containerships, four
combination container/trailerships, one roll-on/roll-off barge, two container
barges equipped with cranes which serve the neighbor islands of Hawaii and one
container barge equipped with cranes in the Mid-Pacific Service. Currently,
three containerships are time-chartered to APL in connection with the Pacific
Alliance Service, and two container/trailerships are bareboat-chartered to Sea
Star Line, LLC, which operates the vessels in the Florida-Puerto Rico trade.
These nineteen vessels represent an investment of approximately $860,360,000
expended over the past 30 years. The majority of vessels in the Matson cargo
fleet have been acquired with the assistance of withdrawals from a Capital
Construction Fund established under Section 607 of the Merchant Marine Act,
1936, as amended.
Matson's fleet units are described on the list on the
following page.
As a complement to its fleet, Matson owns approximately
16,500 containers, 9,000 container chassis, 590 auto-frames and miscellaneous
other equipment. Capital expenditures by Matson in 1999 for vessels, equipment
and systems totaled approximately $18,300,000.
(3) TERMINALS
---------
Matson Terminals, Inc. ("Matson Terminals"), a wholly-owned
subsidiary of Matson, provides container stevedoring, container equipment
maintenance and other terminal services for Matson and other ocean carriers at
its 108-acre marine terminal in Honolulu. Matson Terminals owns and operates 7
cranes at the terminal, which handled 373,048 containers in 1999 (compared with
351,119 in 1998), and can accommodate three vessels at one time. Matson
Terminals' lease with the State of Hawaii runs until September 2016.
In July 1999, Matson and Stevedoring Services of America
("SSA") formed SSA Terminals, LLC ("SSAT"), a venture which assumed responsi-
bility for terminal and stevedoring operations at Matson Terminals' West Coast
terminal facilities in Los Angeles, Oakland and Seattle and at SSA's West Coast
facilities in Long Beach, Oakland and Seattle. Matson Terminals and SSA each
contributed the operating assets of their respective terminals to SSAT, and
SSAT assumed the stevedoring and terminal service contracts and underlying
lease obligations at those locations. In return, Matson and SSA received
ownership interests in SSAT in proportion to their respective contributions.
Capital expenditures for terminals and equipment totaled
approximately $1,000,000 in 1999.
MATSON NAVIGATION COMPANY, INC.
-------------------------------
FLEET - 3/1/00
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Usable Cargo Capacity
-----------------------------------------------------------
Containers Vehicles Molasses
Year Maximum Maximum ------------------------------- -------------- --------
Official Year Recon- Speed Deadweight Reefer
Vessel Name Number Built structed Length (Knots) (Long Tons) 20' 24' 40' Slots TEUs (1) Autos Trailers Short Tons
- -----------------------------------------------------------------------------------------------------------------------------------
Diesel-Powered Ships
- --------------------
R.J. PFEIFFER 979814 1992 713'6" 23.0 27,100 48 171 988 300 2,229 -- -- --
MOKIHANA (2) 655397 1983 860'2" 23.0 30,167 182 0 1,340 408 2,824 -- -- --
MAHIMAHI (2) 653424 1982 860'2" 23.0 30,167 182 0 1,340 408 2,824 -- -- --
MANOA (2) 651627 1982 860'2" 23.0 30,187 182 0 1,340 408 2,824 -- -- --
Steam-Powered Ships
- -------------------
KAUAI 621042 1980 1994 720'5-1/2" 22.5 26,308 -- 458 538 300 1,626 44 -- 2,600
MAUI 591709 1978 1993 720'5-1/2" 22.5 26,623 -- 458 538 300 1,626 -- -- 2,600
EL YUNQUE (3) 573223 1976 1990 790'9" 21.5 14,551 48 -- 420 120 960 323 112 --
EL MORRO (3) 557149 1974 1990 790'9" 21.5 14,976 48 -- 420 120 960 323 110 --
MATSONIA 553090 1973 1987 760'0" 21.5 22,501 16 128 771 285 1,712 450 56 4,300
LURLINE 549900 1973 1982 826'6" 21.5 22,213 6 162 713 292 1,379 220 81 2,100
EWA (4) 530140 1972 1978 787'8" 21.0 38,656 294 -- 861 180 2,015 -- -- --
CHIEF GADAO 530138 1971 1978 787'8" 21.0 37,346 230 464 597 274 1,981 -- -- --
LIHUE (4) 530137 1971 1978 787'8" 21.0 38,656 286 276 681 188 1,979 -- -- --
MANULANI 528400 1970 720'5-1/2" 22.5 27,165 -- 537 416 251 1,476 -- -- 5,300
MANUKAI (4) 524219 1970 720'5-1/2" 22.5 27,107 -- 537 416 251 1,476 -- -- 5,300
Tugs and Barges
- ---------------
WAIALEALE (5) 978516 1991 345'0" -- 5,621 -- -- -- 35 -- 230 45 --
ISLANDER (6) 933804 1988 372'0" -- 6,837 -- 276 24 70 380 -- -- --
MAUNA LOA (6) 676973 1984 350'0" -- 4,658 -- 144 72 84 316 -- -- 2,100
HALEAKALA (6) 676972 1984 350'0" -- 4,658 -- 144 72 84 316 -- -- 2,100
MAOI (7) 618705 1980 75'0" 10.0 --
JOE SEVIER (7) 500799 1965 80'0" 10.0 --
- ------------------------------------------------------
(1) "Twenty-foot Equivalent Units" (including trailers). TEU is a standard measure of cargo volume correlated to the volume of a
standard 20-foot dry cargo container.
(2) Time-chartered to APL until February 2006.
(3) Formerly Kaimoku and Kainalu. Bareboat-chartered to Sea Star Line, LLC until 2005 and 2006, respectively.
(4) Reserve Status
(5) Roll-on/Roll-off Barge
(6) Container Barge
(7) Tug
(4) OTHER SERVICES
--------------
Matson Intermodal System, Inc. ("Matson Intermodal"), a
wholly-owned subsidiary of Matson, is an intermodal marketing company which
arranges North American rail and truck transportation for shippers and
carriers, frequently in conjunction with ocean transportation. Through volume
purchases of rail and motor carrier transportation services, augmented by such
services as shipment tracing and single-vendor invoicing, Matson Intermodal is
able to reduce transportation costs for customers. Matson Intermodal
currently has 17 offices and manages 30 equipment depots across the United
States Mainland.
Matson Services Company, Inc. ("Matson Services"), a
wholly-owned subsidiary of Matson, owns two tugboats, which are employed in
Hawaiian waters under operating agreements with various vessel operators or
their agents to provide harbor assistance to vessels calling at the islands of
Hawaii and Maui.
Matson Logistics Solutions, Inc. ("Matson Logistics"), a
wholly-owned subsidiary of Matson, provides supply and distribution services to
Matson customers and others.
(5) COMPETITION
-----------
Matson's Hawaii and Guam Services have one major container-
ship competitor which serves Long Beach, Oakland, Tacoma, Honolulu and Guam.
In an administrative proceeding in 1997, the purpose of which was to determine
the historic service levels to which that competitor would be limited as a
condition to its participation in the Maritime Security Program, the U.S.
Maritime Administration limited the annual capacity which the competitor may
offer in the Hawaii trade. The current limit on annual capacity is 162,378
TEUs (see footnote (1) on page 4 for an explanation of "TEU").
Other competitors in the Hawaii Service include two common
carrier barge services, unregulated proprietary and contract carriers of bulk
cargoes and air cargo services. Although air freight competition is intense
for time-sensitive or perishable cargoes, historic and projected inroads of
such competition in cargo volume are limited by the amount of cargo space
available in passenger aircraft and by generally higher air freight rates.
Competitors in the Pacific Coast Service include truck, rail and ocean carrier
services.
Matson vessels are operated on schedules which make available
to shippers and consignees regular day-of-the-week sailings from the United
States Pacific Coast and day-of-the-week arrivals in Hawaii. Under its current
schedule, Matson operates 156 Hawaii round-trip voyages per year, 50 percent
more than its closest competitor, and arranges additional voyages when cargo
volumes require additional capacity. This service is attractive to customers
because it decreases their overall distribution costs. In addition, Matson
competes by offering more comprehensive service to customers, supported by its
scope of equipment and its efficiency and experience in the handling of
containerized cargoes, and by competitive pricing.
The carriage of cargo between the United States Pacific Coast
and Hawaii on foreign-built or foreign-documented vessels is prohibited by
Section 27 of the Merchant Marine Act, 1920, frequently referred to as the
Jones Act. However, foreign-flag vessels carrying cargo to Hawaii from foreign
sources provide indirect competition for Matson's container freight service
between the United States Pacific Coast and Hawaii. Far East countries,
Australia and New Zealand have direct foreign-flag services to Hawaii.
In response to coordinated efforts by various interests to
convince Congress to repeal the Jones Act, Matson joined other businesses and
organizations in 1995 to form the Maritime Cabotage Task Force, which supports
the retention of the Jones Act and other cabotage laws. Repeal of the Jones
Act would allow all foreign-flag vessel operators, which do not have to abide
by U.S. laws and regulations, to sail between American ports in direct competi-
tion with Matson and other U.S. operators which must comply with such laws and
regulations. The Task Force seeks to inform elected officials and the public
about the economic, national security, commercial, safety and environmental
benefits of the Jones Act and similar cabotage laws. The principal organiza-
tion seeking repeal of the Jones Act, whose activities prompted the formation
of the Maritime Cabotage Task Force, ceased active operations in 1999.
Matson Intermodal competes for freight with a number of large
and small companies engaged in intermodal transportation. Matson Services
competes with several larger operators of tugboats in Hawaiian waters. Matson
Logistics competes with many larger providers of logistics services and with
transportation companies whose services include logistics.
(6) LABOR RELATIONS
---------------
The absence of strikes and the availability of labor through
hiring halls are important to the maintenance of profitable operations by
Matson. Matson's operations have not been disrupted significantly by strikes
in the past 28 years. However, in 1999, labor disruptions at some United
States Pacific Coast and Hawaii ports by longshore bargaining units of the
International Longshore and Warehouse Union, attributed to negotiations of
collective bargaining agreements in mid-1999, adversely affected many ocean
carriers, including Matson, calling at those ports. See "Employees and Labor
Relations" below for a description of labor agreements and certain unfunded
liabilities for multi-employer pension plans to which Matson and Matson
Terminals contribute.
(7) RATE REGULATION
---------------
Matson is subject to the jurisdiction of the Surface
Transportation Board with respect to its domestic rates. A rate in the
noncontiguous domestic trade is presumed reasonable and will not be subject to
investigation if the aggregate of increases and decreases is not more than 7.5
percent above, or more than 10 percent below, the rate in effect one year
before the effective date of the proposed rate. Matson filed a 2.5 percent
across-the-board increase in its Hawaii Service, which became effective on
February 14, 1999, and a 1.75 percent fuel-cost-related surcharge in its Hawaii
and Guam Services, which became effective on October 11, 1999. A 3.9 percent
across-the-board increase in the Hawaii Service became effective February
14, 2000, and an increase in the fuel-cost-related surcharge to 2.25 percent
became effective February 20, 2000.
B. PROPERTY DEVELOPMENT AND MANAGEMENT
-----------------------------------
(1) GENERAL
-------
A&B and its subsidiaries own approximately 91,200 acres of
land, consisting of approximately 91,000 acres in Hawaii and approximately 200
acres elsewhere, as follows:
LOCATION NO. OF ACRES
-------- ------------
Oahu ................................... 40
Maui ................................... 69,065
Kauai .................................. 21,906
California ............................. 70
Texas .................................. 64
Washington ............................. 24
Arizona ................................ 29
Nevada ................................. 19
Colorado ............................... 10
------
TOTAL ................................ 91,227
======
As described more fully in the table below, the bulk of this acreage currently
is used for agricultural and related activities, and includes pasture land
leased to ranchers, watershed and conservation reserves. The balance is used
or planned for development or other urban uses. An additional 3,200 acres on
Maui and Kauai are leased from third parties.
CURRENT USE NO. OF ACRES
----------- ------------
HAWAII
Fully-entitled urban (defined below) ............... 1,191
Agricultural, pasture and
miscellaneous .................................... 60,820
Watershed land/conservation ........................ 29,000
U.S. MAINLAND
Fully-entitled urban ............................... 216
------
TOTAL .......................................... 91,227
======
A&B and its subsidiaries are actively involved in the entire
spectrum of land development, including planning, zoning, financing,
constructing, purchasing, managing and leasing, and selling and exchanging real
property.
(2) PLANNING AND ZONING
-------------------
The entitlement process for development of property in Hawaii
is both time-consuming and costly, involving numerous State and County
regulatory approvals. For example, conversion of an agriculturally-zoned
parcel to residential zoning usually requires the following approvals:
- amendment of the County general plan to reflect the desired residential
use;
- approval by the State Land Use Commission to reclassify the parcel from
the "Agricultural" district to the "Urban" district;
- County approval to rezone the property to the precise residential use
desired; and,
- if the parcel is located in the Special Management Area, the granting of
a Special Management Area permit by the County.
The entitlement process is complicated by the conditions, restrictions and
exactions that are placed on these approvals, including, among others, the
construction of infrastructure improvements, payment of impact fees, restric-
tions on the permitted uses of the land, provision of affordable housing,
and/or mandatory fee sale of portions of the project.
A&B actively works with regulatory agencies, commissions and
legislative bodies at various levels of government to obtain zoning
reclassification of land to its highest and best use. A&B designates a parcel
as "fully-entitled" or "fully-zoned" when all necessary government land use
approvals have been obtained.
As described in more detail below, in 1999, work to obtain
entitlements for urban use focused on (i) the Kukui'Ula residential development
on Kauai, (ii) obtaining Community Plan designations for various A&B lands on
Maui, and (iii) obtaining State and County entitlements for two proposed
single-family subdivisions on Maui.
With regard to item (ii) in the preceding paragraph, A&B con-
tinues to participate actively in Maui County's decennial update of its
Community Plans, a process that began in 1992. The Community Plans serve to
guide planning and development activity over the next decade. A&B has obtained
and continues to seek various urban designations for its undeveloped lands
within the following four Community Plans, where most of its Maui lands are
located: Pa'ia-Haiku Community Plan, Kihei-Makena Community Plan, Wailuku-
Kahului Community Plan, and Makawao-Pukalani-Kula ("Upcountry") Community Plan.
The County Council completed the Pa'ia-Haiku, Upcountry and Kihei-Makena
Community Plans in 1995, 1996, and 1998, respectively. Adoption of the
Wailuku-Kahului Community Plan by the County Council is expected in 2000.
(3) RESIDENTIAL PROJECTS
--------------------
A&B is pursuing a number of residential projects in Hawaii,
including:
(a) KUKUI'ULA. The 1,045-acre Kukui'Ula project originally
---------
was conceived to be a planned residential community on the island of Kauai,
comprising up to 3,000 dwelling units, an 18-hole golf course, hotels,
commercial areas, schools and parks. Construction of the wastewater treatment
plant, mass grading and drainage and certain roadway improvements were
completed in 1993. Since 1993, however, construction of major infrastructure
to serve the Kukui'Ula project has been suspended because of weak economic
conditions on Kauai. A complete reevaluation of the Kukui'Ula project,
completed in 1998, led to a revised strategy for the project. The current
strategy focuses upon the early development of a major resort complex that
would create the activity needed to promote residential and commercial develop-
ment, as well as fund major infrastructure costs.
A concept plan for the resort area at Kukui'Ula was completed
in early 1998, and a petition to add 77 acres of land, comprising most of the
planned resort, to the State "Urban" district was approved by the State Land
Use Commission in June 1998.
In October 1998, three petitions were submitted to the Kauai
County Planning Department to complete the basic entitlements needed to proceed
with the resort component of the project. In May 1999, the Kauai County
Planning Commission recommended approval of the petitions to the Kauai County
Council and, in October 1999, the County Council approved the petitions. The
County Council's approvals allow 200 hotel rooms, up to 700 time-share units
and a four-acre resort commercial complex.
Construction of subdivision improvements at Koloa Estates,
Kukui'Ula's initial residential project, was completed in July 1999. Koloa
Estates features large lots of at least one-half acre in size, underground
utilities and common area landscaping. Interest in these 32 lots has come
primarily from U.S. Mainland purchasers, including second home buyers and
retirees. Five lots closed in 1999 and, as of March 15, 2000, an additional
five lots have closed.
(b) KU'AU BAYVIEW AT PA'IA. The remaining eight homes in
----------------------
this 92-lot single-family subdivision on Maui were sold in 1999.
(c) KAHULUI IKENA. Since the completion of the 102-unit
-------------
Maui condominium project in June 1995, a total of 98 units have been sold to
date (13 units in 1999). As of March 15, 2000, 3 units were in escrow.
(d) THE VINTAGE AT KAANAPALI. In October 1999, A&B
------------------------
acquired 17 acres in the Kaanapali Golf Estates project in Kaanapali, Maui.
This land is intended to be developed with 73 detached single-family homes
under a condominium regime. Excellent pre-sale interest has been received to
date. Construction commenced in the first quarter of 2000, with the first home
closings scheduled for the fourth quarter.
(e) OTHER MAUI SUBDIVISIONS. In January 2000, A&B acquired
-----------------------
an additional 17 acres in the Kaanapali Golf Estates project in Kaanapali,
Maui. This land is intended to be developed into 55 single-family homes or
house lots. Construction is expected to start in the third quarter of 2000,
with the first lot closings anticipated for the end of the fourth quarter.
Three agricultural subdivisions, which consist of a minimum
lot size of two acres per lot, were in various stages of design, development
and sale in 1999. At the nine-lot Kauhikoa Hill Ranch subdivision (located in
Haiku), the remaining two lots were sold in 1999. The last three lots in the
28-lot Haiku Makai subdivision (also located in Haiku) also were sold in 1999.
Progress was made in 1999 on the development of the 37-lot Maunaolu subdivision
(located in Haliimaile), with initial County review and comments on construc-
tion plans, the resolution of offsite water storage requirements, and sub-
mission of revised subdivision construction plans to the County. Nevertheless,
development continues to be delayed, due to offsite water issues that need to
be resolved with the County Board of Water Supply.
In addition, A&B continues to seek entitlements for two
single-family subdivisions on Maui: (i) an approximately 200-unit subdivision
on 67 acres in Haliimaile, and (ii) an approximately 400-unit subdivision on
210 acres in Spreckelsville, which includes the possible development of nine
holes of golf in order to expand the nearby nine-hole Maui Country Club golf
course into an 18-hole course. In 1999, the zoning application for the
Haliimaile project was recommended for approval by the County Planning
Commission. County Council action on this project is anticipated in the second
or third quarter of 2000. Also in 1999, A&B received State "Urban" designation
for the Spreckelsville project. Residential designation for that project is
now being sought from the County Council as part of its update of the Wailuku-
Kahului Community Plan. Final action by the County Council also is anticipated
in the second or third quarter of 2000.
On the U.S. Mainland, an 1,800-acre undeveloped parcel
located in El Dorado County, near Sacramento, California, referred to as Pilot
Hill Ranch and originally conceived to be a planned residential community, was
sold in July 1999 for approximately $4 million.
(4) COMMERCIAL AND INDUSTRIAL PROPERTIES
------------------------------------
An important source of property revenue is the lease rental
income A&B and its subsidiaries receive from nearly 4.3 million leasable square
feet of industrial and commercial building space, ground leases on 286 acres
for commercial/industrial use, and leases on 11,600 acres for agricultural/
pasture use.
(a) HAWAII COMMERCIAL/INDUSTRIAL PROPERTIES
---------------------------------------
In Hawaii, most of the nearly 1.2 million square feet of
income-producing commercial and industrial properties owned by A&B and its
subsidiaries are located in the central Kahului/Wailuku area of Maui. They
consist primarily of two shopping centers and four office buildings, as well as
several improved commercial and industrial properties.
In September 1999, the majority of the proceeds from the June
1999 disposition of the 4225 Roosevelt Building located in Seattle, WA were
reinvested in two office buildings in downtown Honolulu (Haseko Center and
Ocean View Center), having a combined leaseable area of 183,300 square feet.
The buildings are well located, have a combined occupancy rate of 92%, and are
expected to benefit from anticipated increases in rental rates.
The Company acquired Hawaii Business Park, located in Pearl
City, Oahu, Hawaii, in November 1999. This well-constructed, 94%-occupied
warehouse property is located in Central Oahu near the intersection of the
island's two major freeways.
The 1999 average occupancy for A&B's Hawaii improved
commercial properties increased to 81% in 1999, from 68% in 1998. The
improvement was due to the high occupancy rates of properties acquired in 1999
and increased tenancies in the Company's Maui properties.
The primary Hawaii commercial/industrial properties are as
follows:
LEASABLE AREA
PROPERTY LOCATION TYPE (SQUARE FT.)
-------- -------- ---- -------------
Maui Mall Kahului, Maui Retail 190,200
P&L Warehouse Kahului, Maui Warehouse 104,100
Kahului Shopping Kahului, Maui Retail 99,700
Center
Ocean View Center Honolulu, Oahu Office 99,200
One Main Plaza Wailuku, Maui Office 85,300
Hawaii Business Park Pearl City, Oahu Warehouse 85,200
Haseko Center Honolulu, Oahu Office 84,100
Wakea Business Center Kahului, Maui Warehouse/Retail 61,500
Kahului Office Kahului, Maui Office 53,900
Building
Kahului Office Center Kahului, Maui Office 29,800
Stangenwald Building Honolulu, Oahu Office 28,200
Apex Building Kahului, Maui Retail 28,000
In addition to the above-described properties, a number of
other commercial and industrial projects are being developed on Maui, Oahu and
Kauai, including:
(i) TRIANGLE SQUARE. Development and marketing
---------------
efforts are continuing for this 10.6-acre, light industrial zoned, commercial
subdivision in Kahului, Maui. Three lots have been leased, and the 28,000-
square-foot Apex Building is 100% occupied by retail users. A County Special
Management Area permit has been secured to build a proposed 15,000-square-foot,
multi-tenant retail center and a 6,200-square-foot commercial building on two
of the six remaining lots available for ground leases and retail development,
and efforts are underway to obtain preleasing commitments.
(ii) MAUI BUSINESS PARK. The 42-acre initial phase
------------------
(Phase IA) of Maui Business Park was completed in 1995. The Maui Marketplace
retail center, owned by a third party, occupies 20.3 acres of Phase IA's 37.4
saleable acres, and includes such anchor tenants as Eagle Hardware and Garden,
Office Max, Sports Authority and Border's Books and Music. In addition, 14
Maui Business Park lots (22,920 square feet average lot size) have been sold to
various commercial and retail businesses. There are 16 lots (8.8 salable
acres) remaining for sale or lease in Phase IA.
Planning and design of the 32-acre Phase IB have been
completed. Construction plans have been submitted to government authorities
for review, and construction is expected to start by mid-year 2000. Planned
roadway and infrastructure improvements will support the needs of both large
and small commercial and retail businesses.
The entire Maui Business Park development consists of a
planned total of approximately 250 acres, and is expected to be developed in
four phases. The overall absorption of the property is expected to take 20
years.
(iii) MILL TOWN. Located in Waipahu, Oahu, near
---------
Honolulu, this 40-acre parcel of light-industrial zoned land was acquired in
November 1998 for $8 million. The infrastructure improvements for the 17-acre
first phase (Phase IA) were completed in June 1999. Phase IA consists of 23
lots, ranging in size from 14,300 square feet to 40,500 square feet. Sales
activities commenced in December 1998, and 7 of the 23 lots were sold in 1999.
The strong market interest in Phase IA has resulted in the
acceleration of planning and design of the 23-acre Phase IB. Planning and
design of this phase were completed in early 2000 and submitted to government
agencies for review and approval. Construction is expected to commence on
roadway and infrastructure improvements by mid-2000. Phase IB consists of 41
light-industrial lots of similar size as those in Phase IA. The configuration
of the site also may support the needs of larger users. Sales activity is
expected to commence in 2001.
(b) U.S. MAINLAND COMMERCIAL/INDUSTRIAL PROPERTIES
----------------------------------------------
On the U.S. Mainland, A&B and its subsidiaries own a
portfolio of commercial and industrial properties, acquired primarily by way of
tax-deferred exchanges under Section 1031 of the Internal Revenue Code, as
amended ("IRC"), comprising a total of approximately 3.1 million square feet of
leasable area, as follows:
LEASABLE AREA
PROPERTY LOCATION TYPE (SQUARE FT.)
-------- -------- ---- -------------
Great Southwest Dallas, TX Industrial 842,900
Industrial
Ontario-Pacific Ontario, CA Warehouse/ 246,700
Business Centre Industrial
Valley Freeway Kent, WA Industrial 229,100
Corporate Park
Airport Square Reno, NV Retail 170,800
2868 Prospect Park Sacramento, CA Office 162,200
San Pedro Plaza San Antonio, TX Office 161,400
Day Creek Ontario, CA Warehouse/ 147,300
Industrial Industrial
Arbor Park San Antonio, TX Retail 139,600
Moulton Plaza Laguna Hills, CA Retail 134,000
Mesa South Center Phoenix, AZ Retail 133,600
San Jose Avenue City of Industrial 126,000
Warehouse Industry, CA
Southbank II Phoenix, AZ Office 120,800
Bainbridge Bainbridge Retail 114,600
Properties Island, WA
Village at Indian Wells, CA Retail 104,600
Indian Wells
2450 Venture Oaks Sacramento, CA Office 98,100
Northwest Business San Antonio, TX Service Center/ 87,000
Center Warehouse
Wilshire Center Greeley, CO Retail 46,700
Market Square Greeley, CO Retail 43,300
---------
TOTAL: 3,108,700
=========
In June 1999, A&B acquired the Day Creek Industrial warehouse
facility located in Ontario, CA, completing an IRC 1031 exchange initiated with
the sale of several small land parcels in Kahului, HI earlier in the year.
This warehouse is fully leased to two tenants.
A&B sold the 4225 Roosevelt Building, located in Seattle, WA,
in June 1999 for $26 million, taking advantage of Seattle's strong demand for
office investment. The proceeds were invested in two Hawaii properties and one
Mainland property by way of IRC 1031 exchanges. The Mainland property is a
shopping center in Phoenix, AZ (Mesa South Center), which was acquired in
September 1999. Mesa South Center is situated at the intersection of two major
thoroughfares in a densely populated area having favorable age demographics.
In December 1999, A&B acquired Ontario-Pacific Business
Centre, a 246,700-square-foot, multi-tenant warehouse complex in Ontario, CA,
near the Company's Day Creek Industrial warehouse property. Ontario-Pacific
Business Centre is strategically located near the intersection of the I-10 and
I-15 freeways, two major Southern California highways. This property is
expected to benefit from the continuing residential and business growth in
Southern California's Inland Empire region.
Two major office lease transactions occurred in 1999. A
twelve-year lease for 28,000 square feet of space was finalized at the 2868
Prospect Park office building (Sacramento, CA) and a ten-year lease was signed
for 67,000 square feet of space at San Pedro Plaza (San Antonio, TX).
A&B's Mainland commercial properties performed well in 1999,
achieving an average occupancy rate of 94%, as compared to the 1998 average of
91%. The increase resulted from the leasing of several large warehouse spaces
in the City of Industry, CA and Dallas, TX, as well as the addition of new
properties with high occupancy rates.
C. FOOD PRODUCTS
-------------
(1) PRODUCTION
----------
A&B has been engaged in activities relating to the production
of cane sugar and molasses in Hawaii since 1870. A&B's current food products
operations consist of a sugar plantation on the island of Maui, operated by its
Hawaiian Commercial & Sugar Company ("HC&S") division, and a coffee farm on the
island of Kauai, operated by its Kauai Coffee Company, Inc. ("Kauai Coffee")
subsidiary.
HC&S is Hawaii's largest producer of raw sugar, producing
227,832 tons of raw sugar in 1999, or 62% of the raw sugar produced in Hawaii,
compared with 216,188 tons of raw sugar in 1998. Total Hawaii sugar
production, in turn, amounted to approximately four percent of total United
States sugar production. HC&S harvested 17,278 acres of sugar cane in 1999,
compared with 17,210 acres in 1998. Yields averaged 13.2 tons of sugar per
acre in 1999, compared with 12.7 tons per acre in 1998. The average cost per
ton of sugar produced at HC&S was $360.00 in 1999, compared with $373.89 in
1998. The decrease in cost per ton is attributable to the five percent
increase in sugar production and to improved farming practices. As a
by-product of sugar production, HC&S also produced 92,246 tons of molasses in
1999, compared with 80,915 tons in 1998.
In 1999, 3,590 tons of HC&S's raw sugar were produced as
food-grade raw sugars under HC&S's "Maui Brand" trademark. A $2 million
expansion of its production facilities for these sugars, expected to be
completed in April 2000, is anticipated to increase production to approxi-
mately 10,000 tons annually.
During 1999, Kauai Coffee had approximately 3,400 acres of
coffee trees under cultivation. The harvest of the 1999 coffee crop is
expected to yield approximately 4.6 million pounds of green coffee, compared
with 4.1 million pounds in 1998. The increase is attributable to the natural
cyclicality of coffee yields.
In October 1999, HC&S entered into an agreement to build a
$10 million facility that is expected to produce approximately 15 million
square feet a year of a premium composite panel board. The panel board will be
produced from bagasse (sugarcane fiber), and will be a strong, light, moisture-
resistant and environmentally-friendly substitute for conventional particle
board and medium density fiberboard in a variety of applications. The plant is
expected to be in production by the fall of 2000.
HC&S and McBryde Sugar Company, Limited ("McBryde"), the
parent company of Kauai Coffee, produce electricity for internal use and for
sale to the local electric utility companies. HC&S's power is produced by
burning bagasse, by hydroelectric power generation and, when necessary, by
burning fossil fuels, whereas McBryde produces power solely by hydroelectric
generation. The price for the power sold by HC&S and McBryde is equal to the
utility companies' "avoided cost" of not producing such power themselves. In
addition, HC&S receives a capacity payment to provide a guaranteed power
generation capacity to the local utility. (See "Energy" below.)
Kahului Trucking & Storage, Inc., a subsidiary of A&B,
provides sugar and molasses hauling and storage, petroleum hauling, mobile
equipment maintenance and repair services, and self-service storage facilities
on Maui. Kauai Commercial Company, Incorporated, another subsidiary of A&B,
provides similar services on Kauai, as well as general trucking services.
(2) MARKETING OF SUGAR AND COFFEE
-----------------------------
Virtually all of the raw sugar produced in Hawaii is
purchased, refined and marketed by C&H Sugar Company, Inc. ("C&H"), of which
A&B owns a 36 percent common stock interest. The results of A&B's equity
investment in C&H are reported in A&B's financial statements as an investment
in an affiliate. C&H processes the raw cane sugar at its refinery at Crockett,
California, and markets the refined products primarily in the western and
central United States. HC&S markets its food-grade raw sugars to food and
beverage producers and to retail stores under its "Maui Brand" label, and to
distributors which repackage the sugars under their own labels.
Hawaiian Sugar & Transportation Cooperative ("HS&TC"), a
cooperative consisting of the three major sugarcane growers in Hawaii
(including HC&S), has a ten-year supply contract with C&H, ending in 2003,
pursuant to which the growers sell their raw sugar to C&H at a price equal
to the No. 14 Contract settlement price, less a discount and less costs of
sugar vessel discharge and stevedoring. This price, after deducting the
marketing, operating, distribution, transportation and interest costs of
HS&TC, reflects the gross revenue to the Hawaii sugar growers, including HC&S.
The No. 14 price is established by, among other things, the supply of and
demand for all forms of domestically-produced sweeteners, government policies
regarding the U.S. sugar import quota, and potential changes in international
trade programs which might affect the U.S. sugar program.
At Kauai Coffee, coffee marketing efforts currently are being
directed toward developing a market for premium-priced, estate-grown Kauai
green coffee. Most of the 1999 coffee crop is being marketed on the U.S.
Mainland and in Asia as green (unroasted) coffee. In addition to the sale of
green coffee, Kauai Coffee produces and sells a roasted, packaged coffee
product in Hawaii under the "Kauai Coffee" trademark.
(3) COMPETITION AND SUGAR LEGISLATION
---------------------------------
Hawaii sugar growers produce more sugar per acre than other
major producing areas of the world, but that advantage is partially offset
by Hawaii's high labor costs and the distance to the U.S. Mainland market.
Hawaiian refined sugar is marketed primarily west of Chicago. This is
also the largest beet sugar growing and processing area and, as a result,
the only market area in the United States which produces more sugar than
it consumes. Sugar from sugar beets is the greatest source of competition
for the Hawaiian sugar industry.
The overall U.S. caloric sweetener market continues to grow.
Domestic consumption of caloric sweeteners comprised the following:
Refined sugar . . . . . . . 43%
High fructose corn syrup. . 41%
Other corn sweeteners . . . 15%
Other . . . . . . . . . . . 1%
----
TOTAL 100%
====
Source: 1998 Preliminary Data, Economic Research Service, USDA.
The use of non-caloric (artificial) sweeteners accounts for a relatively small
percentage of the domestic sweetener market. Although the use of high fructose
corn syrup and artificial sweeteners is expected to continue to grow, such in-
creased use is not expected to affect sugar markets significantly in the near
future.
Worldwide, most sugar is consumed in the country of origin.
Only about a quarter of world sugar is involved in international trade.
A much smaller amount is traded at the world sugar market price (the
other sugar involved in international trade is traded at negotiated
prices under bilateral trade agreements). Due to protective legislation,
raw cane sugar prices in the U.S. normally are substantially higher than
the world price, and the amount of foreign sugar allowed into the U.S.
under import quotas is regulated by the U.S. government. Such foreign
sugar sells at U.S. domestic prices. As a result, the world sugar price
does not have material relevance to U.S. sugar producers and refiners.
The U.S. Congress historically has sought, through legisla-
tion, to assure a reliable domestic supply of sugar at stable and
reasonable prices. Congress's most recent renewal of protective legis-
lation for domestic sugar, the Federal Agriculture Improvement and Reform
Act (the "1996 Act"), provides a sugar loan program for the 1996 through
2002 crops, with a loan rate (support price) of 18 cents per pound for raw
sugar. When the import quota is 1.5 million tons or less, the loans are
recourse, meaning the producer is liable for any losses the government
incurs in remarketing any sugar forfeited by the producer. When the
import quota is greater than 1.5 million tons, the loans are non-recourse,
but in the event of forfeiture, the producer must pay a one-cent-per-pound
penalty for the sugar forfeited to the government. The 1996 Act also
eliminated marketing allotments, thereby removing the means of limiting
domestic production. The 1.25-million-ton minimum import quota set under
the General Agreement on Tariff and Trade ("GATT") is retained in the 1996
Act.
The loan rate represents the value of sugar given as
collateral for government price-support loans. The government is required
to administer the sugar program at no net cost, and this is accomplished
by adjusting fees and quotas for imported sugar to maintain the domestic
price at a level that discourages producers from defaulting on loans. The
target price established by the government is known as the market
stabilization price and is based on the loan rate plus transportation
costs, interest and an incentive factor. The market stabilization price
was 21.8 cents per pound in 1988-89 and 21.9 cents per pound in 1990-91.
No market stabilization price has been announced since 1990-91.
Beginning in mid-1999, U.S. raw sugar prices fell to 20-year
lows, dropping below 17 cents per pound in the months of November and December,
and they have remained very low. In contrast, the U.S. domestic raw sugar
price (measured by the closing price of the quoted spot contract) averaged
22.07 cents per pound in 1998. A chronological chart of the average U.S.
domestic raw sugar prices, based on the average daily New York Contract #14
price for domestic raw sugar, is shown below:
[The printed document includes a graph of the prices; the data points for this
graph are shown below.]
U.S. Raw Sugar Prices
(New York Contract #14)
(Average cents per pound)
1997 1998 1999
---- ---- ----
January 21.88 22.11 22.41
February 21.87 21.79 22.34
March 21.81 21.74 22.55
April 21.73 22.20 22.58
May 21.70 22.28 22.65
June 21.63 22.30 22.63
July 22.04 22.32 22.61
August 22.26 22.30 21.31
September 22.30 22.25 20.10
October 22.25 22.15 20.51
November 21.90 22.03 17.45
December 21.89 21.97 17.67
Excess supplies of raw cane sugar, as well as excess refined
products made from cane and beet sugar, are responsible for the unusually low
prices. The current situation is harmful even to efficient producers like
HC&S. At present, it is unclear how more favorable long-term price levels can
be restored.
Liberalized international trade agreements, such as the GATT,
include provisions relating to agriculture, but these agreements will not
affect the U.S. sugar or sweetener industries materially. A "side" agreement
that modified the North American Free Trade Agreement ("NAFTA") alleviated some
of the sugar producers' concerns by limiting Mexico's exports of sugar to the
U.S. under NAFTA. However, the export ceiling provided for in the side
agreement increased to 250,000 tons of sugar in the year 2000, and will be
eliminated in the year 2007. The increased sugar supply could adversely affect
domestic sugar prices further.
Kauai Coffee competes with coffee growers located worldwide,
including Hawaii. Due to an oversupply of coffee in the marketplace, coffee
commodity prices dropped significantly in 1999. As a result of its continuing
operating losses and negative cash flows, Kauai Coffee significantly reduced
its workforce in the second half of 1999.
(4) PROPERTIES AND WATER
--------------------
The HC&S sugar plantation, the largest in Hawaii, consists of
approximately 43,300 acres of land, including 2,000 acres leased from the State
of Hawaii and 1,300 acres under lease from private parties. Approximately
36,700 acres are under cultivation, and the balance either is used for
contributory purposes, such as roads and plant sites, or is not suitable for
cultivation.
McBryde owns approximately 9,500 acres of land on Kauai, of
which approximately 2,400 acres are used for watershed and other conservation
uses, approximately 3,900 acres are used by Kauai Coffee, and the remaining
acreage is leased to various agricultural enterprises for cultivation of a
variety of crops and for pasturage.
Large quantities of water are necessary to grow sugar cane
and coffee. Because of the importance of water, access to water, reliable
sources of supply and efficient irrigation systems are crucial for the
successful growing of sugar cane and coffee. A&B's plantations use a "drip"
irrigation system that distributes water to the roots through small holes in
plastic tubes. All of the cultivated cane land owned by HC&S is drip
irrigated. All of Kauai Coffee's fields also are drip irrigated.
A&B owns 16,000 acres of watershed lands on Maui which
supply a portion of the irrigation water used by HC&S. A&B also held four
water licenses to 38,000 acres owned by the State of Hawaii, which over the
years supplied approximately one-third of the irrigation water used by HC&S.
The last of these water license agreements expired in 1986, and all four
agreements have been extended as revocable permits that are renewable annually.
The State Board of Land and Natural Resources has indicated its intention to
replace these four permits with long-term licenses. The issuance of such
licenses currently is pending a hearing before the Board.
D. EMPLOYEES AND LABOR RELATIONS
-----------------------------
As of December 31, 1999, A&B and its subsidiaries had approximately
2,050 regular full-time employees. About 1,006 regular full-time employees
were engaged in the growing of sugar cane and coffee and the production of raw
sugar and green coffee, 835 were engaged in ocean transportation, 38 were
engaged in property development and management, and the balance was in adminis-
tration and miscellaneous operations. Approximately 55% were covered by
collective bargaining agreements with unions.
As of December 31, 1999, Matson and its subsidiaries had approxi-
mately 835 regular full-time employees and 300 seagoing employees. Approxi-
mately 27% of the regular full-time employees and all of the seagoing employees
were covered by collective bargaining agreements. A reduction in the number of
full-time employees and the elimination of casual employees in 1999 were the
result principally of the transfer by Matson Terminals of its West Coast
operations to the SSA Terminals, LLC, as described under "Ocean
Transportation - Terminals" above.
Matson's seagoing employees are represented by six unions. Matson
and Matson Terminals shoreside bargaining unit employees are represented by
four locals of the International Longshore and Warehouse Union ("ILWU") and by
three unions which also represent the seagoing employees. Matson Terminals is
a member of the Hawaii Stevedoring Industry Committee and the Hawaii Employers
Council, organizations through which two Hawaii collective bargaining agree-
ments are negotiated.
Historically, collective bargaining with the longshore and seagoing
unions has been complex and difficult. However, Matson and Matson Terminals
consider their respective relations with the ILWU, other unions, and their
non-union employees generally to be satisfactory.
During 1999, collective bargaining agreements with two ILWU locals
in Hawaii and the three unions representing unlicensed crew members were
renewed for three-year terms. Collective bargaining agreements with the ILWU
on the Pacific Coast and with the ILWU clerical bargaining unit in Oakland also
were renewed, but Matson Terminals was not a party to these renewals as a
result of the transfer of Matson Terminals' West Coast operations to SSA
Terminals, LLC.
Matson contributed during 1999 to multi-employer pension plans for
vessel crews. If Matson were to withdraw from or significantly reduce its
obligation to contribute to one of the plans, Matson would review and evaluate
data, actuarial assumptions, calculations and other factors used in determining
its withdrawal liability, if any, and, in the event of material disagreement
with such determination, would pursue the various means available to it under
federal law for the adjustment or removal of its withdrawal liability. Matson
Terminals participates in a multi-employer pension plan for its Hawaii long-
shore employees. For a discussion of withdrawal liabilities under the Hawaii
longshore and seagoing plans, see Note 6 to A&B's financial statements on
pages 40 and 41 of the 1999 Annual Report, which Note is incorporated herein by
reference.
Bargaining unit employees of HC&S are covered by two collective
bargaining agreements with the ILWU. The agreement with the HC&S production
unit employees has been renegotiated and will expire January 31, 2002. The
agreement with the HC&S clerical bargaining unit employees currently is being
renegotiated. The collective bargaining agreements covering the three ILWU
bargaining units at Kahului Trucking & Storage, Inc. have been renegotiated,
with two expiring June 30, 2002 and the third expiring March 31, 2001. The two
collective bargaining agreements with Kauai Commercial Company, Incorporated
employees represented by the ILWU were renegotiated and will expire April 30,
2001. The collective bargaining agreement with the ILWU for the production
unit employees of Kauai Coffee has been renegotiated and will expire on January
31, 2001.
E. ENERGY
------
Matson and Matson Terminals purchase residual fuel oil, lubricants,
gasoline and diesel fuel for their operations. Residual fuel oil is by far
Matson's largest energy-related expense. In 1999, Matson vessels consumed
approximately 1.8 million barrels of residual fuel oil, compared with
2.0 million barrels in 1998.
Residual fuel oil prices paid by Matson started 1999 at $69.38 per
metric ton and ended the year at $144.00 per metric ton. A high of $156.00 per
metric ton occurred in October, and a low of $59.01 per metric ton occurred in
February. Sufficient fuel for Matson's requirements is expected to be
available in 2000.
As has been the practice with sugar plantations throughout Hawaii,
HC&S uses bagasse, the residual fiber of the sugarcane plant, as a fuel to
generate steam for the production of most of the electrical power for sugar
milling and irrigation pumping operations. In addition to bagasse, HC&S uses
No. 6 (heavy) oil and coal to produce power, principally for pumping irrigation
water during the factory shutdown period when bagasse is not being produced.
Since 1992, when suppliers of No. 6 oil to HC&S discontinued regular shipments
as a result of unlimited liability concerns arising from federal and state
environmental laws, heavy oil has been provided to HC&S on a space-available
basis. In 1999, HC&S produced 222,115 MWH of electric power and sold
70,210 MWH, compared with 203,755 MWH produced and 72,589 MWH sold in 1998.
The reduction in power sold was due to HC&S's increased need to pump irrigation
water, due to drought conditions during part of 1999. HC&S's oil use increased
to 185,250 barrels in 1999, from the 155,966 barrels used in 1998. Coal use
for power generation decreased, from 43,614 short tons in 1998 to 24,216 short
tons in 1999.
In 1999, McBryde produced 35,861 MWH of hydroelectric power,
compared with 34,400 MWH of hydroelectric power produced in 1998. Power sales
in 1999 amounted to 24,555 MWH, compared with 21,975 MWH sold in 1998.
ITEM 3. LEGAL PROCEEDINGS
- --------------------------
See "Business and Properties - Ocean Transportation - Rate Regulation"
above for a discussion of rate and other regulatory matters in which Matson is
routinely involved.
On September 14, 1998, Matson was served with a complaint filed by the
Government of Guam with the Surface Transportation Board, alleging that Sea-
Land Services, Inc. ("Sea-Land"), American President Lines, Ltd. ("APL") and
Matson charged unreasonable rates in the Guam trade from January 1991 to the
present. Matson did not enter the trade until February of 1996. On November
12, 1998, Matson filed an answer, denying that its rates have been
unreasonable. Matson, Sea-Land and APL filed a joint motion to dismiss the
complaint on February 16, 1999. The Government of Guam filed an answer to the
motion on April 1, 1999. On April 15, 1999, Matson, Sea-Land and APL filed a
reply brief. The Government of Guam filed a surreply on April 22, 1999. To
date, the Surface Transportation Board has not ruled on the motion.
A&B and its subsidiaries are parties to, or may be contingently liable in
connection with, other legal actions arising in the normal conduct of their
businesses, the outcomes of which, in the opinion of management after consulta-
tion with counsel, would not have a material adverse effect on A&B's results of
operations or financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
For the information about executive officers of A&B required to be
included in this Part I, see paragraph B of "Directors and Executive Officers
of the Registrant" in Part III below, which is incorporated into Part I by
reference.
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- ------------------------------------------------------------------------------
This information is contained in the sections captioned "Common Stock"
and "Dividends" on the inside back cover of the 1999 Annual Report, which
sections are incorporated herein by reference.
At February 14, 2000, there were 4,734 record holders of A&B common
stock. In addition, Cede & Co., which appears as a single record holder,
represents the holdings of thousands of beneficial owners of A&B common stock.
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
Information for the years 1989 through 1999 is contained in the
comparative table captioned "Eleven-Year Summary of Selected Financial Data" on
pages 24 and 25 of the 1999 Annual Report, which information is incorporated
herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
A&B's financial statements, including the results of operations discussed
herein, are based on the historical-cost method of accounting, in accordance
with generally accepted accounting principles. If estimated current costs of
property and inventory were applied to reflect the effects of inflation on
A&B's businesses, total assets would be higher and net income lower than shown
by the historical-cost financial statements. Additional information regarding
the fair values of A&B's assets and liabilities is included in Notes 1, 2, 4,
and 5 on pages 35 through 39 of the 1999 Annual Report, which Notes are
incorporated herein by reference.
Additional information applicable to this Item 7 is contained in the
section captioned "Management's Discussion and Analysis" on pages 26 through 29
of the 1999 Annual Report, which section is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- --------------------------------------------------------------------
A&B, in the normal course of doing business, is exposed to the risks
associated with fluctuations in the market value of certain financial
instruments. A&B maintains a portfolio of marketable equity securities
available for sale, preferred stock investments in an affiliated company, and
an investment in mortgage-backed securities. Details regarding these financial
instruments are described in Notes 2 and 5 on pages 36 and 38, respectively, of
the 1999 Annual Report, which Notes are incorporated herein by reference. A&B
believes that, as of December 31, 1999, its exposure to market risk
fluctuations for these financial instruments is not material.
A&B also is exposed to changes in U.S. interest rates, primarily as a
result of its borrowing and investing activities used to maintain liquidity and
to fund business operations. In order to manage its exposure to changes in
interest rates, A&B utilizes a balanced mix of debt maturities, along with both
fixed-rate and variable-rate debt. A&B does not hedge its interest rate
exposure. The nature and amount of A&B's long-term and short-term debt can be
expected to fluctuate as a result of future business requirements, market
conditions and other factors. The following tables summarize A&B's debt
obligations at December 31, 1999 and 1998, presenting principal cash flows and
related interest rates by expected fiscal year of maturity. Variable interest
rates represent the weighted-average rates of the portfolio at December 31,
1999 and 1998. A&B estimates that the carrying value of its debt is not
materially different from its fair value. The information presented below
should be read in conjunction with Note 7 on page 42 of the 1999 Annual Report,
which Note is incorporated herein by reference.
Expected Fiscal Year of Maturity at December 31, 1999
-----------------------------------------------------
2000 2001 2002 2003 2004 Thereafter Total
---- ---- ---- ---- ---- ---------- -----
(dollars in thousands)
----------------------
Fixed rate $17,500 $15,000 $7,500 $9,643 $9,643 $63,214 $122,500
Average interest rate 7.38% 7.35% 7.34% 7.35% 7.37% 7.47%
Variable rate $5,000 -- -- -- -- $172,570 $177,570
Average interest rate 6.34% -- -- -- -- 6.16%
Expected Fiscal Year of Maturity at December 31, 1998
-----------------------------------------------------
1999 2000 2001 2002 2003 Thereafter Total
---- ---- ---- ---- ---- ---------- -----
(dollars in thousands)
----------------------
Fixed rate $30,533 $17,000 $15,000 $7,500 $7,500 $45,000 $123,033
Average interest rate 7.55% 7.32% 7.26% 7.23% 7.24% 7.27%
Variable rate $57,000 -- -- -- -- $163,266 $220,266
Average interest rate 5.5% -- -- -- -- 5.5%
A&B's sugar plantation, HC&S, has a contract to sell its raw sugar
production to HS&TC until 2003. Under that contract, the price paid will
fluctuate with the #14 contract settlement price for domestic raw sugar, less a
fixed discount. A&B is not exposed to foreign currency exchange rate risk.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
This information is contained in the financial statements and
accompanying notes on pages 30 through 47 of the 1999 Annual Report, the
Independent Auditors' Report on page 22 of the 1999 Annual Report, the Industry
Segment Information for the years ended December 31, 1999, 1998 and 1997
appearing on page 23 of the 1999 Annual Report and incorporated into the
financial statements by Note 12 thereto, and the section captioned "Quarterly
Results (Unaudited)" on page 48 of the 1999 Annual Report, all of which are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
Not applicable.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
A. DIRECTORS
---------
For information about the directors of A&B, see the section
captioned "Election of Directors" on pages 2 through 4 of A&B's proxy
statement dated March 6, 2000 ("A&B's 2000 Proxy Statement"), which section
is incorporated herein by reference.
B. EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------
The name of each executive officer of A&B (in alphabetical order),
age (in parentheses) as of March 31, 2000, and present and prior positions with
A&B and business experience for the past five years are given below.
Generally, the term of office of executive officers is at the
pleasure of the Board of Directors. For a discussion of compliance with
Section 16(a) of the Securities Exchange Act of 1934 by A&B's directors and
executive officers, see the subsection captioned "Section 16(a) Beneficial
Ownership Reporting Compliance" on page 7 of A&B's 2000 Proxy Statement, which
subsection is incorporated herein by reference. For a discussion of severance
agreements between A&B and certain of A&B's executive officers, see the
subsection captioned "Severance Agreements" on page 13 of A&B's 2000 Proxy
Statement, which subsection is incorporated herein by reference.
Meredith J. Ching (43)
- ----------------------
Vice President (Government & Community Relations) of A&B, 10/92-present;
Vice President of A&B-Hawaii, Inc. ("ABHI") (Government & Community Relations),
10/92-12/99; first joined A&B or a subsidiary in 1982.
W. Allen Doane (52)
- -------------------
President and Chief Executive Officer of A&B, and Director of A&B and
Matson, 10/98-present; Vice Chairman of Matson, 12/98-present; Executive Vice
President of A&B, 8/98-10/98; Director of ABHI, 4/97-12/99; Chief Executive
Officer of ABHI, 1/97-12/99; President of ABHI, 4/95-12/99; Chief Operating
Officer of ABHI, 4/91-12/96; Executive Vice President of ABHI, 4/91-4/95; first
joined A&B or a subsidiary in 1991.
Raymond J. Donohue (63)
- -----------------------
Senior Vice President of Matson, 4/86-present; Chief Financial Officer of
Matson, 2/81-present; first joined Matson in 1980.
John F. Gasher (66)
- -------------------
Vice President (Human Resources) of A&B, 12/99-present; Vice President
(Human Resources Development) of ABHI, 1/97-12/99; first joined A&B or a
subsidiary in 1960.
G. Stephen Holaday (55)
- -----------------------
Acting Chief Financial Officer of A&B, 1/00-present; Vice President of
A&B, 12/99-present; Senior Vice President of ABHI, 4/89-12/99; Vice President
and Controller of A&B, 4/93-1/96; Chief Financial Officer and Treasurer of
ABHI, 4/89-1/96; first joined A&B or a subsidiary in 1983.
John B. Kelley (54)
- -------------------
Vice President (Investor Relations, Corporate Planning & Development) of
A&B, 10/99-present; Vice President (Investor Relations) of A&B, 1/95-10/99;
Vice President of ABHI, 9/89-12/99; first joined A&B or a subsidiary in 1979.
Stanley M. Kuriyama (46)
- ------------------------
Vice President of A&B, 2/99-present; Chief Executive Officer and Vice
Chairman of A&B Properties, Inc., 12/99-present; Executive Vice President of
ABHI, 2/99-12/99; Vice President of ABHI, 1/92-1/99; first joined A&B or a sub-
sidiary in 1992.
Michael J. Marks (61)
- ---------------------
Vice President and General Counsel of A&B, 9/80-present; Secretary of
A&B, 8/84-1/99; Senior Vice President and General Counsel of ABHI, 4/89-12/99;
first joined A&B or a subsidiary in 1975.
C. Bradley Mulholland (58)
- --------------------------
Executive Vice President of A&B, 8/98-present; President of Matson,
5/90-present; Chief Executive Officer of Matson, 4/92-present; Chief Operating
Officer of Matson, 7/89-4/92; Director of A&B, 4/91-present; Director of
Matson, 7/89-present; Director of ABHI, 4/91-12/99; first joined Matson in
1965.
Alyson J. Nakamura (34)
- -----------------------
Secretary of A&B, 2/99-present; Assistant Secretary of A&B, 6/94-1/99;
Secretary of ABHI, 6/94-12/99; first joined A&B or a subsidiary in 1994.
Thomas A. Wellman (41)
- ----------------------
Controller of A&B, 1/96-present; Treasurer of A&B, 1/00-present;
Assistant Controller of A&B, 4/93-1/96; Vice President of ABHI, 1/96-12/99;
Controller of ABHI, 11/91-12/99; first joined A&B or a subsidiary in 1989.
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
See the section captioned "Executive Compensation" on pages 7 through 16
of A&B's 2000 Proxy Statement, which section is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
See the section titled "Security Ownership of Certain Shareholders" and
the subsection titled "Security Ownership of Directors and Executive Officers"
on pages 5 through 7 of A&B's 2000 Proxy Statement, which section and
subsection are incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
See the subsection titled "Certain Relationships and Transactions" on
page 7 of A&B's 2000 Proxy Statement, which subsection is incorporated herein
by reference.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------
A. FINANCIAL STATEMENT
-------------------
Financial Statements of Alexander & Baldwin, Inc. and Subsidiaries
and Independent Auditors' Report (incorporated by reference to the pages of the
1999 Annual Report shown in parentheses below):
Balance Sheets, December 31, 1999 and 1998
(pages 32 and 33).
Statements of Income for the years ended
December 31, 1999, 1998 and 1997 (page 30).
Statements of Shareholders' Equity for the
years ended December 31, 1999, 1998 and
1997(page 34).
Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 (page 31).
Notes to Financial Statements (pages 35 through
47 and page 23 to the extent incorporated by
Note 12).
Independent Auditors' Report (page 22).
B. FINANCIAL STATEMENT SCHEDULES
-----------------------------
Financial Schedules of Alexander & Baldwin, Inc. and Subsidiaries
as required by Rule 5-04 of Regulation S-X (filed herewith):
I - Condensed Financial Information of
Registrant - Balance Sheets, December 31,
1999 and 1998; Statements of Income and
Cash Flows for the years ended December 31,
1999, 1998 and 1997; Notes to Condensed
Financial Statements.
NOTE: All other schedules are omitted because of the absence of the conditions
under which they are required or because the information called for is included
in the financial statements or notes thereto.
C. EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K
-----------------------------------------------
Exhibits not filed herewith are incorporated by reference to the
exhibit number and previous filing shown in parentheses. All previous exhibits
were filed with the Securities and Exchange Commission in Washington, D.C.
Exhibits filed pursuant to the Securities Exchange Act of 1934 were filed under
file number 0-565. Shareholders may obtain copies of exhibits for a copying
and handling charge of $0.15 a page by writing to Alyson J. Nakamura,
Secretary, Alexander & Baldwin, Inc., P. O. Box 3440, Honolulu, Hawaii 96801.
3. Articles of incorporation and bylaws.
3.a. Restated Articles of Association of Alexander & Baldwin, Inc., as
restated effective May 5, 1986, together with Amendments dated April 28,
1988 and April 26, 1990 (Exhibits 3.a.(iii) and (iv) to A&B's Form 10-Q
for the quarter ended March 31, 1990).
3.b. Revised Bylaws of Alexander & Baldwin, Inc. (as Amended Effective
June 25, 1998) (Exhibit 3.c.(i) to A&B's Form 10-Q for the quarter ended
June 30, 1998).
4. Instruments defining rights of security holders, including indentures.
4.a. Equity.
4.a. Rights Agreement, dated as of June 25, 1998 between Alexander &
Baldwin, Inc. and ChaseMellon Shareholder Services, L.L.C. and Press
Release of Alexander & Baldwin, Inc. (Exhibits 4 and 99 to A&B's Form 8-K
dated June 25, 1998).
4.b. Debt.
4.b. (i) Second Amended and Restated Revolving Credit and Term Loan
Agreement, effective as of December 31, 1996, among Alexander & Baldwin,
Inc. and A&B-Hawaii, Inc. and First Hawaiian Bank, Bank of America
National Trust & Savings Association, Credit Lyonnais Los Angeles Branch,
Bank of Hawaii and The Union Bank of California, N.A. (Exhibit 4.b to
A&B's Form 10-K for the year ended December 31, 1996).
(ii) First Amendment to Second Amended and Restated Revolving
Credit and Term Loan Agreement, effective as of December 10, 1997, among
Alexander & Baldwin, Inc. and A&B-Hawaii, Inc. and First Hawaiian Bank,
Bank of America National Trust & Savings Association, Credit Lyonnais
Los Angeles Branch, Bank of Hawaii, The Union Bank of California, N.A.
and The Bank of New York (Exhibit 4.b.(ii) to A&B's Form 10-K for the
year ended December 31, 1997).
(iii) Second Amendment to Second Amended and Restated Revolving
Credit and Term Loan Agreement, effective as of November 30, 1998, among
Alexander & Baldwin, Inc. and A&B-Hawaii, Inc. and First Hawaiian Bank,
Bank of America National Trust & Savings Association, Bank of Hawaii,
The Union Bank of California, N.A. and The Bank of New York (Exhibit
4.b.(iii) to A&B's Form 10-K for the year ended December 31, 1998).
(iv) Third Amendment to Second Amended and Restated Revolving
Credit and Term Loan Agreement, effective as of November 30, 1999, among
Alexander & Baldwin, Inc. and A&B-Hawaii, Inc. and First Hawaiian Bank,
Bank of America National Trust & Savings Association, Bank of Hawaii
and The Bank of New York.
10. Material contracts.
10.a. (i) Issuing and Paying Agent Agreement between Matson Navigation
Company, Inc. and U.S. Bank National Association, as successor-in-interest
to Security Pacific National Trust (New York), with respect to Matson
Navigation Company, Inc.'s $150 million commercial paper program dated
September 18, 1992 (Exhibit 10.b.1.(xxviii) to A&B's Form 10-Q for the
quarter ended September 30, 1992).
(ii) Note Agreement among Alexander & Baldwin, Inc., A&B-Hawaii,
Inc. and The Prudential Insurance Company of America, effective as of
December 20, 1990 (Exhibit 10.b.(ix) to A&B's Form 10-K for the year ended
December 31, 1990).
(iii) Note Agreement among Alexander & Baldwin, Inc., A&B-Hawaii,
Inc. and The Prudential Insurance Company of America, dated as of June 4,
1993 (Exhibit 10.a.(xiii) to A&B's Form 8-K dated June 4, 1993).
(iv) Amendment dated as of May 20, 1994 to the Note Agreements
among Alexander & Baldwin, Inc., A&B-Hawaii, Inc. and The Prudential
Insurance Company of America, dated as of December 20, 1990 and June 4,
1993 (Exhibit 10.a.(xviv) to A&B's Form 10-Q for the quarter ended June
30, 1994).
(v) Amendment dated January 23, 1995 to the Note Agreement among
Alexander & Baldwin, Inc., A&B-Hawaii, Inc. and The Prudential Insurance
Company of America, dated as of December 20, 1990 (Exhibit 10.a.(xvi) to
A&B's Form 10-K for the year ended December 31, 1994).
(vi) Amendment dated as of June 30, 1995 to the Note Agreements,
among Alexander & Baldwin, Inc., A&B-Hawaii, Inc. and The Prudential
Insurance Company of America, dated as of December 20, 1990 and June 4,
1993 (Exhibit 10.a.(xxvii) to A&B's Form 10-Q for the quarter ended
June 30, 1995).
(vii) Amendment dated as of November 29, 1995 to the Note
Agreements among Alexander & Baldwin, Inc., A&B-Hawaii, Inc. and The
Prudential Insurance Company of America, dated as of December 20, 1990 and
June 4, 1993 (Exhibit 10.a.(xvii) to A&B's Form 10-K for the year ended
December 31, 1995).
(viii) Revolving Credit Agreement between Alexander & Baldwin,
Inc., A&B-Hawaii, Inc., and First Hawaiian Bank, dated December 30, 1993
(Exhibit 10.a.(xx) to A&B's Form 10-Q for the quarter ended September 30,
1994).
(ix) Amendment dated August 31, 1994 to the Revolving Credit
Agreement between Alexander & Baldwin, Inc., A&B-Hawaii, Inc., and First
Hawaiian Bank dated December 30, 1993 (Exhibit 10.a.(xxi) to A&B's
Form 10-Q for the quarter ended September 30, 1994).
(x) Second Amendment dated March 29, 1995 to the Revolving
Credit Agreement between Alexander & Baldwin, Inc., A&B-Hawaii, Inc., and
First Hawaiian Bank, dated December 30, 1993 (Exhibit 10.a.(xxiii) to
A&B's Form 10-Q for the quarter ended March 31, 1995).
(xi) Third Amendment dated November 30, 1995 to the Revolving
Credit Agreement between Alexander & Baldwin, Inc., A&B-Hawaii, Inc., and
First Hawaiian Bank, dated December 30, 1993 (Exhibit 10.a.(xvii) to A&B's
Form 10-K for the year ended December 31, 1996).
(xii) Fourth Amendment dated November 25, 1996 to the Revolving
Credit Agreement between Alexander & Baldwin, Inc., A&B-Hawaii, Inc., and
First Hawaiian Bank, dated December 30, 1993 (Exhibit 10.a.(xviii) to
A&B's Form 10-K for the year ended December 31, 1996).
(xiii) Fifth Amendment dated November 28, 1997 to the Revolving
Credit Agreement between Alexander & Baldwin, Inc., A&B-Hawaii, Inc., and
First Hawaiian Bank, dated December 30, 1993 (Exhibit 10.a.(xix) to A&B's
Form 10-K for the year ended December 31, 1997).
(xiv) Sixth Amendment dated November 30, 1998 to the Revolving
Credit Agreement between Alexander & Baldwin, Inc., A&B-Hawaii, Inc., and
First Hawaiian Bank, dated December 10, 1993 (Exhibit 10.a.(xiv) to A&B's
Form 10-K for the year ended December 31, 1998).
(xv) Seventh Amendment dated November 23, 1999 to the Revolving
Credit Agreement between Alexander & Baldwin, Inc., A&B-Hawaii, Inc., and
First Hawaiian Bank, dated December 10, 1993.
(xvi) Note Agreement between Matson Leasing Company, Inc. and The
Prudential Insurance Company of America, dated as of June 28, 1991
(Exhibit 10.b.(x) to A&B's Form 10-Q for the quarter ended June 30, 1991).
(xvii) Amendment dated March 11, 1992 to the Note Agreement between
Matson Leasing Company, Inc. and The Prudential Insurance Company of
America, dated as of June 28, 1991 (Exhibit 10.a.(vii) to A&B's Form 10-K
for the year ended December 31, 1992).
(xviii) Second Amendment dated as of August 31, 1993 to the Note
Agreement between Matson Leasing Company, Inc. and The Prudential
Insurance Company of America, dated as of June 28, 1991 (Exhibit
10.a.(viii) to A&B's Form 10-K for the year ended December 31, 1993).
(xix) Note Agreement between Matson Leasing Company, Inc. and The
Prudential Insurance Company of America, dated as of March 11, 1992
(Exhibit 10.a.(x) to A&B's Form 10-Q for the quarter ended March 31,
1992).
(xx) First Amendment dated as of August 1, 1993 to the Note
Agreement between Matson Leasing Company, Inc. and The Prudential
Insurance Company of America, dated as of March 11, 1992 (Exhibit
10.a.(xi) to A&B's Form 10-K for the year ended December 31, 1993).
(xxi)(a) Assignment and Assumption Agreement dated as of June 30,
1995, among Matson Leasing Company, Inc., Matson Navigation Company, Inc.
and The Prudential Insurance Company of America, with respect to the Note
Agreements between Matson Leasing Company, Inc. and The Prudential
Insurance Company of America dated as of June 28, 1991 and March 11, 1992
(Exhibit 10.a.(xxviii)(a) to A&B's Form 10-Q for the quarter ended June
30, 1995).
(xxi)(b) Consent and Amendment Agreement dated as of June 30, 1995,
among Matson Leasing Company, Inc., Matson Navigation Company, Inc. and
The Prudential Insurance Company of America, with respect to the Note
Agreements between Matson Leasing Company, Inc. and The Prudential
Insurance Company of America dated as of June 28, 1991 and March 11, 1992
(Exhibit 10.a.(xxviii)(b) to A&B's Form 10-Q for the quarter ended June
30, 1995).
(xxii) Private Shelf Agreement between Alexander & Baldwin, Inc.,
A&B-Hawaii, Inc., and Prudential Insurance Company of America, dated as of
August 2, 1996 (Exhibit 10.a.(xxxiii) to A&B's Form 10-Q for the quarter
ended September 30, 1996).
(xxiii) First Amendment, dated as of February 5, 1999, to the
Private Shelf Agreement between Alexander & Baldwin, Inc., A&B-Hawaii,
Inc., and Prudential Insurance Company of America, dated as of August 2,
1996 (Exhibit 10.a.(xxii) to A&B's Form 10-K for the year ended
December 31, 1998).
(xxiv) Amended and Restated Asset Purchase Agreement, dated as of
December 24, 1998, by and among California and Hawaiian Sugar Company,
Inc., A&B-Hawaii, Inc., McBryde Sugar Company, Limited and Sugar
Acquisition Corporation (without exhibits or schedules) (Exhibit
10.a.1.(xxxvi) to A&B's Form 8-K dated December 24, 1998).
(xxv) Amended and Restated Stock Sale Agreement, dated as of
December 24, 1998, by and between California and Hawaiian Sugar Company,
Inc. and Citicorp Venture Capital, Ltd. (without exhibits)(Exhibit
10.a.1.(xxxvii) to A&B's Form 8-K dated December 24, 1998).
(xxvi) Pro forma financial information relative to the Amended
and Restated Asset Purchase Agreement, dated as of December 24, 1998, by
and among California and Hawaiian Sugar Company, Inc., A&B-Hawaii, Inc.,
McBryde Sugar Company, Limited and Sugar Acquisition Corporation, and the
Amended and Restated Stock Sale Agreement, dated as of December 24, 1998,
by and between California and Hawaiian Sugar Company, Inc. and Citicorp
Venture Capital, Ltd. (Exhibit 10.a.1.(xxxviii) to A&B's Form 8-K dated
December 24, 1998).
*10.b.1. (i) Alexander & Baldwin, Inc. 1989 Stock Option/ Stock Incentive
Plan (Exhibit 10.c.1.(ix) to A&B's Form 10-K for the year ended
December 31, 1988).
(ii) Amendment No. 1 to the Alexander & Baldwin, Inc. 1989 Stock
Option/Stock Incentive Plan (Exhibit 10.b.1.(xxvi) to A&B's Form 10-Q for
the quarter ended June 30, 1992).
_______________
* All exhibits listed under 10.b.1. are management contracts or compensatory
plans or arrangements.
(iii) Amendment No. 2 to the Alexander & Baldwin, Inc. 1989 Stock
Option/Stock Incentive Plan, effective as of January 27, 1994
(Exhibit 10.b.1.(iv) to A&B's Form 10-Q for the quarter ended March 31,
1994).
(iv) Amendment No. 3 to the Alexander & Baldwin, Inc. 1989 Stock
Option/Stock Incentive Plan, effective as of October 27, 1994
(Exhibit 10.b.1.(ix) to A&B's Form 10-K for the year ended December 31,
1994).
(v) Alexander & Baldwin, Inc. 1989 Non-Employee Director Stock
Option Plan (Exhibit 10.c.1.(x) to A&B's Form 10-K for the year ended
December 31, 1988).
(vi) Amendment No. 1 to the Alexander & Baldwin, Inc. 1989 Non-
Employee Director Stock Option Plan (Exhibit 10.b.1.(xxiv) to A&B's Form
10-K for the year ended December 31, 1991).
(vii) Amendment No. 2 to the Alexander & Baldwin, Inc. 1989
Non-Employee Director Stock Option Plan (Exhibit 10.b.1.(xxvii) to A&B's
Form 10-Q for the quarter ended June 30, 1992).
(viii) Alexander & Baldwin, Inc. 1998 Stock Option/Stock Incentive
Plan (Exhibit 10.b.1.(xxxii) to A&B's Form 10-Q for the quarter ended
March 31, 1998).
(ix) Alexander & Baldwin, Inc. 1998 Non-Employee Director Stock
Option Plan (Exhibit 10.b.1.(xxxiii) to A&B's Form 10-Q for the quarter
ended March 31, 1998).
(x) Alexander & Baldwin, Inc. Non-Employee Director Stock
Retainer Plan, dated June 25, 1998 (Exhibit 10.b.1.(xxxiv) to A&B's Form
10-Q for the quarter ended June 30, 1998).
(xi) Amendment No. 1 to Alexander & Baldwin, Inc. Non-Employee
Director Stock Retainer Plan, effective December 9, 1999.
(xii) Second Amended and Restated Employment Agreement between
Alexander & Baldwin, Inc. and R. J. Pfeiffer, effective as of October 25,
1990 (Ex-hibit 10.c.1.(xiii) to A&B's Form 10-K for the year ended
December 31, 1990).
(xiii) Employment Agreement between Alexander & Baldwin, Inc. and
Robert J. Pfeiffer, dated as of July 27, 1998 (Exhibit 10.b.1.(xli) to
A&B's Form 10-Q for the quarter ended September 30, 1998).
(xiv) Amendment, dated as of October 22, 1998, to Employment
Agreement between Alexander & Baldwin, Inc. and Robert J. Pfeiffer, dated
as of July 27, 1998 (Exhibit 10.b.1.(xiii) to A&B's Form 10-K for the year
ended December 31, 1998).
(xv) Agreement between Alexander & Baldwin, Inc. and Miles B.
King, dated as of February 24, 1999 (Exhibit 10.b.1.(xxxvii) to A&B's
Form 10-Q for the quarter ended March 31, 1999).
(xvi) Agreement between Alexander & Baldwin, Inc. and John C.
Couch dated August 10, 1999 (Exhibit 10.b.1.(xxxviii) to A&B's Form 10-Q
for the quarter ended September 30, 1999).
(xvii) Agreement between Alexander & Baldwin, Inc. and Glenn R.
Rogers dated October 7, 1999.
(xviii) A&B Deferred Compensation Plan for Outside Directors
(Exhibit 10.c.1.(xviii) to A&B's Form 10-K for the year ended December 31,
1985).
(xix) Amendment No. 1 to A&B Deferred Compensation Plan for
Outside Directors, effective October 27, 1988 (Exhibit 10.c.1.(xxix) to
A&B's Form 10-Q for the quarter ended September 30, 1988).
(xx) A&B Life Insurance Plan for Outside Directors
(Exhibit 10.c.1.(xix) to A&B's Form 10-K for the year ended December 31,
1985).
(xxi) A&B Excess Benefits Plan, Amended and Restated effective
February 1, 1995 (Exhibit 10.b.1.(xx) to A&B's Form 10-K for the year
ended December 31, 1994).
(xxii) Amendment No. 1 to the A&B Excess Benefits Plan, dated
June 26, 1997 (Exhibit 10.b.1.(xxxi) to A&B's Form 10-Q for the quarter
ended June 30, 1997).
(xxiii) Amendment No. 2 to the A&B Excess Benefits Plan, dated
December 10, 1997 (Exhibit 10.b.1.(xx) to A&B's Form 10-K for the year
ended December 31, 1997).
(xxiv) Amendment No. 3 to the A&B Excess Benefits Plan, dated
April 23, 1998 (Exhibit 10.b.1.(xxxv) to A&B's Form 10-Q for the quarter
ended June 30, 1998).
(xxv) Amendment No. 4 to the A&B Excess Benefits plan, dated
June 25, 1998 (Exhibit 10.b.1.(xxxvi) to A&B's Form 10-Q for the quarter
ended June 30, 1998).
(xxvi) Amendment No. 5 to the A&B Excess Benefits Plan, dated
December 9, 1998 (Exhibit 10.b.1.(xxii) to A&B's Form 10-K for the year
ended December 31, 1998).
(xxvii) Restatement of the A&B Executive Survivor/Retirement Benefit
Plan, effective February 1, 1995 (Exhibit 10.b.1.(xxii) to A&B's Form 10-K
for the year ended December 31, 1994).
(xxviii) Restatement of the A&B 1985 Supplemental Executive
Retirement Plan, effective February 1, 1995 (Exhibit 10.b.1.(xxiv) to
A&B's Form 10-K for the year ended December 31, 1994).
(xxix) Amendment No. 1 to the A&B 1985 Supplemental Executive
Retirement Plan, dated August 27, 1998 (Exhibit 10.b.1.(xliii) to A&B's
Form 10-Q for the quarter ended September 30, 1998).
(xxx) Restatement of the A&B Retirement Plan for Outside
Directors, effective February 1, 1995 (Exhibit 10.b.1.(xxvi) to A&B's
Form 10-K for the year ended December 31, 1994).
(xxxi) Amendment No. 1 to the A&B Retirement Plan for Outside
Directors, dated August 27, 1998 (Exhibit 10.b.1.(xlii) to A&B's Form
10-Q for the quarter ended September 30, 1998).
(xxxii) Form of Severance Agreement entered into with certain
executive officers, as amended and restated effective August 22, 1991
(Exhibit 10.c.1.(xxiv) to A&B's Form 10-Q for the quarter ended
September 30, 1991).
(xxxiii) Alexander & Baldwin, Inc. One-Year Performance Improvement
Incentive Plan, as restated effective October 22, 1992
(Exhibit 10.b.1.(xxi) to A&B's Form 10-K for the year ended December 31,
1992).
(xxxiv) Alexander & Baldwin, Inc. Three-Year Performance Improvement
Incentive Plan, as restated effective October 22, 1992
(Exhibit 10.b.1.(xxii) to A&B's Form 10-K for the year ended December 31,
1992).
(xxxv) Alexander & Baldwin, Inc. Deferred Compensation Plan
effective August 25, 1994 (Exhibit 10.b.1.(xxv) to A&B's Form 10-Q for the
quarter ended September 30, 1994).
(xxxvi) Amendment No. 1 to the Alexander & Baldwin, Inc. Deferred
Compensation Plan, effective July 1, 1997 (Exhibit 10.b.1.(xxxii) to A&B's
Form 10-Q for the quarter ended June 30, 1997).
(xxxvii) Amendment No. 2 to the Alexander & Baldwin, Inc. Deferred
Compensation Plan, dated June 25, 1998 (Exhibit 10.b.1.(xxxvii) to A&B's
Form 10-Q for the quarter ended June 30, 1998).
(xxxviii) Alexander & Baldwin, Inc. Restricted Stock Bonus Plan, as
restated effective April 28, 1988 (Exhibit 10.c.1.(xi) to A&B's Form 10-Q
for the quarter ended June 30, 1988).
(xxxix) Amendment No. 1 to the Alexander & Baldwin, Inc. Restricted
Stock Bonus Plan, effective December 11, 1997 (Exhibit 10.b.1.(ii) to
A&B's Form 10-K for the year ended December 31, 1997).
(xl) Amendment No. 2 to the Alexander & Baldwin, Inc. Restricted
Stock Bonus Plan, dated June 25, 1998 (Exhibit 10.b.1.(xxxviii) to A&B's
Form 10-Q for the quarter ended June 30, 1998).
11. Statement re computation of per share earnings.
13. Annual report to security holders.
13. Alexander & Baldwin, Inc. 1999 Annual Report.
21. Subsidiaries.
21. Alexander & Baldwin, Inc. Subsidiaries as of February 29, 2000.
23. Consent of Deloitte & Touche LLP dated March 27, 2000 (included as last
page of A&B's Form 10-K for the year ended December 31, 1999).
27. Financial data schedule.
D. REPORTS ON FORM 8-K
-------------------
No reports on Form 8-K were filed during the quarter ended
December 31, 1999.
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ALEXANDER & BALDWIN, INC.
(Registrant)
Date: March 27, 2000 By /s/ W. Allen Doane
-----------------------------
W. Allen Doane, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ W. Allen Doane President and March 27, 2000
W. Allen Doane Chief Executive
Officer and
Director
/s/ G. Stephen Holaday Vice President March 27, 2000
G. Stephen Holaday and Acting Chief
Financial Officer
/s/ Thomas A. Wellman Controller March 27, 2000
Thomas A. Wellman and Treasurer
/s/ Charles M. Stockholm Chairman of March 27, 2000
Charles M. Stockholm the Board and
Director
/s/ Michael J. Chun Director March 27, 2000
Michael J. Chun
/s/ Leo E. Denlea, Jr. Director March 27, 2000
Leo E. Denlea, Jr.
/s/ Walter A. Dods, Jr. Director March 27, 2000
Walter A. Dods, Jr.
/s/ Charles G. King Director March 27, 2000
Charles G. King
/s/ Carson R. McKissick Director March 27, 2000
Carson R. McKissick
/s/ C. Bradley Mulholland Director March 27, 2000
C. Bradley Mulholland
/s/ Lynn M. Sedway Director March 27, 2000
Lynn M. Sedway
/s/ Maryanna G. Shaw Director March 27, 2000
Maryanna G. Shaw
INDEPENDENT AUDITORS' REPORT
Alexander & Baldwin, Inc.:
We have audited the consolidated financial statements of Alexander & Baldwin,
Inc. and its subsidiaries as of December 31, 1999 and 1998, and for each of
the three years in the period ended December 31, 1999, and have issued our
report thereon dated January 27, 2000; such financial statements and report
are included in your 1999 Annual Report to Shareholders and are incorporated
herein by reference. Our audits also included the financial statement
schedules of Alexander & Baldwin, Inc. and its subsidiary, listed in Item
14.B. These financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion based on
our audits. In our opinion, such financial statement schedules, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Honolulu, Hawaii
January 27, 2000
ALEXANDER & BALDWIN, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ALEXANDER & BALDWIN, INC. (Parent Company)
CONDENSED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(In thousands)
1999 1998
---- ----
ASSETS
Current Assets:
Cash and cash equivalents $ 253 $ 885
Income tax receivable 1,918 --
Accounts and notes receivable, net 64 220
Prepaid expenses and other 1,330 1,262
--------- ---------
Total current assets 3,565 2,367
--------- ---------
Investments:
Subsidiaries consolidated, at equity 612,958 602,368
Other 91,828 115,144
--------- ---------
Total investments 704,786 717,512
--------- ---------
Property, at Cost 95,005 94,052
Less accumulated depreciation and amortization 13,682 11,536
--------- ---------
Property -- net 81,323 82,516
--------- ---------
Other Assets 4,495 549
--------- --------
Total $ 794,169 $ 802,944
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 514 $ 493
Other 4,616 4,730
--------- ---------
Total current liabilities 5,130 5,223
--------- ---------
Long-term Liabilities 5,149 7,649
--------- ---------
Due to Subsidiaries 56,243 35,486
--------- ---------
Deferred Income Taxes 56,684 59,944
--------- ---------
Commitments and Contingencies
Shareholders' Equity:
Capital stock 34,933 36,098
Additional capital 53,124 51,946
Unrealized holding gains on securities 49,461 63,329
Retained earnings 545,849 555,820
Cost of treasury stock (12,404) (12,551)
--------- ---------
Total shareholders' equity 670,963 694,642
--------- ---------
Total $ 794,169 $ 802,944
========= =========
See accompanying notes.
ALEXANDER & BALDWIN, INC. (Parent Company)
CONDENSED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(In thousands)
1999 1998 1997
---- ---- ----
Revenue:
Net revenue from goods and services $ 11,802 $ 20,708 $ 17,784
Interest, dividends and other 3,180 3,958 4,510
--------- --------- ---------
Total revenue 14,982 24,666 22,294
--------- --------- ---------
Costs and Expenses:
Cost of goods and services 4,808 11,390 10,013
Selling, general and administrative 9,686 9,303 7,055
Interest and other 1,770 774 872
Income taxes (3,271) 462 239
--------- --------- ---------
Total costs and expenses 12,993 21,929 18,179
--------- --------- ---------
Income Before Equity in Net Income
of Subsidiaries Consolidated 1,989 2,737 4,115
Equity in Net Income of Subsidiaries
Consolidated 60,590 22,405 77,272
--------- --------- ---------
Net Income 62,579 25,142 81,387
Unrealized holding gains (losses) on securities
(Net of income taxes) (13,868) 8,185 6,939
--------- --------- ---------
Comprehensive Income $ 48,711 $ 33,327 $ 88,326
========= ========= =========
See accompanying notes.
ALEXANDER & BALDWIN, INC. (Parent Company)
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(In thousands)
1999 1998 1997
---- ---- ----
Cash Flows from Operations $ 3,579 $ 9,664 $ 25,495
-------- -------- --------
Cash Flows from Investing Activities:
Capital expenditures (1,346) (1,437) (4,002)
Dividends received from subsidiaries 50,000 40,000 50,000
-------- -------- --------
Net cash provided by investing activities 48,654 38,563 45,998
-------- -------- --------
Cash Flows from Financing Activities:
Increase (decrease) in due to subsidiaries 20,757 13,180 (18,171)
Proceeds from issuances of capital stock 101 1,575 2,132
Repurchases of capital stock (34,824) (20,838) (16,585)
Dividends paid (38,899) (40,323) (39,789)
-------- -------- --------
Net cash used in financing activities (52,865) (46,406) (72,413)
-------- -------- --------
Cash and Cash Equivalents:
Net increase (decrease) for the year (632) 1,821 (920)
Balance, beginning of year 885 (936) (16)
-------- -------- --------
Balance, end of year $ 253 $ 885 $ (936)
======== ======== ========
Other Cash Flow Information:
Interest paid, net of amounts capitalized $ 303 $ 263 $ 197
Income taxes paid, net of refunds 34,213 34,672 29,775
Other Non-cash Information:
Depreciation 2,550 2,396 1,019
See accompanying notes.
ALEXANDER & BALDWIN, INC. (Parent Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
- ---------------------------------------
(a) ORGANIZATION AND OPERATIONS
Alexander & Baldwin, Inc. is the parent company of A&B-Hawaii, Inc. (ABHI) and
Matson Navigation Company, Inc. (Matson). ABHI has principal business
operations of Food Products and Property Development and Management. Matson's
principal business operation is Ocean Transportation.
Beginning January 1, 2000, ABHI no longer exists as a separate legal entity,
having been merged into the Parent Company at the end of 1999.
On December 24, 1998, ABHI sold a majority of its equity in a subsidiary
California and Hawaiian Sugar Company, Inc. ("C&H") to an investor group. ABHI
received approximately $45,000,000 in cash, after the repayment of certain C&H
indebtedness, $25,000,000 in senior preferred stock, $9,600,000 in junior
preferred stock, and retained an approximately 36 percent common stock interest
in the recapitalized C&H.
(b) INVESTMENTS
Subsidiaries consolidated, at equity consisted of ABHI and Matson at December
31, 1999 and 1998.
Investments - other consisted principally of marketable equity securities at
December 31, 1999 and 1998.
(c) LONG-TERM LIABILITIES
At December 31, 1999 and 1998, long-term liabilities of $5,149,000 and
$7,649,000, respectively, consisted principally of deferred compensation and
executive benefit plans.
(d) COMMITMENTS AND CONTINGENCIES
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. At December 31,
1999, the Company did not have any significant firm commitments.
(e) INCOME TAXES
In 1999, the Company reached an agreement with the Internal Revenue Service
settling certain valuation issues relating to the Company's tax returns through
1995. As a result, previously accrued income tax liabilities were reversed,
resulting in a one-time reduction of income tax expense of $2.8 million.