ALEXANDER & BALDWIN 2000 AR
[Inside Front Cover]
CORPORATE PROFILE
Alexander & Baldwin, Inc. is a diversified corporation with most of its
operations centered in Hawaii. Its principal businesses are:
PROPERTY DEVELOPMENT & MANAGEMENT
Developing real property, primarily in Hawaii
Selling residential and commercial property
Managing a portfolio of commercial/industrial properties
OCEAN TRANSPORTATION
Carrying freight, primarily between Pacific Coast ports, Hawaii ports and Guam
Conducting related shoreside operations
Arranging domestic intermodal transportation
FOOD PRODUCTS
Growing sugar cane and producing raw sugar
Growing, marketing and distributing coffee
A&B was founded in 1870 and incorporated in 1900. Alexander & Baldwin's
corporate headquarters are located in Honolulu, Hawaii. Its common stock is
traded on The Nasdaq Stock MarketSM under the symbol ALEX.
FINANCIAL HIGHLIGHTS
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2000 1999 Change
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Revenue1 $1,068,646,000 $ 999,998,000 7%
Operating Profit $ 158,576,000 $ 142,931,000 11%
Net Income $ 90,574,000 $ 62,579,000 45%
Per Share $ 2.21 $ 1.45 52%
Cash Dividends $ 36,785,000 $ 38,899,000 -5%
Per Share $ 0.90 $ 0.90 _
Average Shares Outstanding 40,898,000 43,206,000 -5%
Total Assets $1,666,012,000 $1,561,460,000 7%
Shareholders' Equity $ 693,651,000 $ 670,963,000 3%
Per Share $ 17.19 $ 15.78 9%
Return on Beginning
Shareholders' Equity 13.5% 9.0% _
Debt/Debt + Equity 34% 31% _
1 In response to accounting guidance from the SEC, revenue for 1999 has been
restated. The change is explained in Footnote 2 of the financial statements.
Uniquely Strong
Growing in key markets
Matson's 110-acre Sand Island terminal in Honolulu
The Vintage at Kaanapali under construction
Committed to our Community
Resourceful On Land and Sea
Kukui'ula, A&B's Residential resort Development on Kauai
OUR UNIQUE STRENGTH
There is no other company exactly like Alexander & Baldwin, and we believe that
our uniqueness holds the key to our strength. Our strength is in our numbers,
with a consistently strong balance sheet and cash flow, and strong 2000
performance. Our growth is in our diverse business assets in transportation and
real estate. Our commitment is in our diversity, culturally and geographically.
Our assets lie in our rich heritage and long history of providing value for our
customers.
FELLOW SHAREHOLDERS
Alexander & Baldwin had a very good year. Before one-time items, earnings per
share increased 15 percent in 2000. This represents a second year of
significant growth for the Company, as earnings per share (again before
one-time items) have now increased 44 percent over a two-year span.
The Hawaii economy did strengthen in 2000, as anticipated. According to most
forecasts, the economy grew at about a three percent rate, with accompanying
growth in tourism, consumer spending, construction activity and job count.
Although psychology can be fragile, there is general optimism in Hawaii that
better days are ahead.
We noted in last year's annual report that fuel and sugar prices were a concern
entering into 2000. Both commodities did move in directions detrimental to the
Company's profitability during 2000, with fuel prices increasing 60 percent in
the year and sugar prices dropping to a 20-year low. Despite these challenges,
the Company was able to react quickly and recover to achieve positive results.
HIGHLIGHTS OF 2000
Matson had another strong year, carrying more cargo and successfully addressing
the dramatically higher fuel costs. Its operating profit was up 12 percent, to
$94 million.
A&B Properties had an exceptionally good year, with its sales generating the
highest profit in a decade. The real estate business's operating profit rose 21
percent to $54 million.
Although sharply lower sugar prices and drought conditions hurt our results in
food products, the sugar price problem eased during the second half of 2000.
This segment's operating profit of $8 million was off by a third.
Matson's Sand Island Terminal in Honolulu was the focus of attention during the
year. A $32 million investment program has been launched to substantially
improve the operating efficiency and capacity of this key terminal hub. This
follows the formation of a joint venture with Stevedoring Services of America
in 1999 to improve the efficiency and capacity of Matson's three major West
Coast terminals in Los Angeles, Oakland and Seattle. In two years, decisive
action has been taken to improve performance at each of Matson's key terminal
operations.
A&B Properties has also concluded a second year of significantly increased
acquisition activity in Hawaii. In just over two years, the Company has
acquired nine properties in the state of Hawaii -- six on Oahu and three on
Maui. Total capital investment in these properties will approximate $155
million. We are confident these acquisitions will add considerable value to
the Company.
FINANCIAL POSITION
A&B's financial position remains strong, with a year-end debt-to-capital ratio
of 34 percent and consistently positive free cash flow. Capital spending in the
year was up and there was a large increase in share repurchases, but the
Company continues to have the capacity to grow its businesses and provide
returns to its shareholders.
SHAREHOLDER RETURNS
During 2000, A&B paid $37 million to its shareholders in dividends and spent
$48 million to repurchase nearly 2.4 million shares. In all, A&B purchased 5.6
percent of the shares that had been outstanding at the start of the year. The
A&B share price also rose more than 15 percent in 2000 -- a year of difficulty
in most equity markets.
BUSINESS DIRECTION
OCEAN TRANSPORTATION
Matson has regained its operating momentum and its performance in 2000 placed
it in the top tier of shipping companies worldwide. As a result of modest
increases in container freight and substantial gains in automobile shipments,
Matson added a seventh ship to the Hawaii service in May and an eighth ship in
October. These increases in cargo capacity were a result of both competitive
success and a more robust Hawaii economy. However, they also represent a
"double-edged sword," as Matson and its principal competitor both added
shipping capacity at nearly the same time.
Matson maintains its strong market position in Hawaii because of its excellent
service. But, the market is mature and, as a result, there is unrelenting
pressure to control costs and improve efficiency. The main focus of this in
2001 will be the implementation of the previously mentioned Sand Island
initiative. Fuel price increases are always an issue, but Matson has been able
to recover most of the recent surge in energy costs.
Matson also is expanding its application of Internet technology and has just
introduced its new Virtual Customer Support Center at www.matson.com, providing
improved customer service. Matson's Western Pacific business to Guam remains
strong, and its large and growing intermodal transportation subsidiary expects
a year of increased profitability in 2001.
REAL ESTATE
The Company is highly active in the Hawaii real estate market. In addition to
over a dozen entitlement and development projects on the Company's 91,000 acres
of land, aggressive efforts continue to acquire other attractive Hawaii
properties. In the early part of 2001, the Pacific Guardian Life Building, a
well-located office building in Honolulu, was the first announced acquisition
of the year. There are still excellent opportunities for value-adding
acquisitions in Hawaii and we will continue to pursue them. At the same time,
we are particularly enthusiastic about the development of Kukui'Ula, A&B's
1,045-acre master planned residential-resort community in Poipu, Kauai.
Although there are a large number of competitors in the business, A&B
Properties' objective is to be the premier Hawaii real estate company. We are
well on our way to meeting this objective.
FOOD PRODUCTS
The historical "roots" of A&B have been in agriculture, but today this facet of
A&B represents just 12 percent of our capital. As noted, HC&S had a difficult
2000 because of depressed sugar prices and persistent drought. Because of
improved sugar prices and forward sales made by the Company, we are confident
that sugar prices will not drag down results in 2001. It is heartening to note
that Kauai Coffee, our small coffee growing and marketing company on Kauai,
achieved its first year of profitability after many years of losses. It is also
noteworthy that a difficult, but necessary, decision was made in 2000 to close
the Paia Mill at HC&S and process all sugar on Maui through the one mill
remaining at Puunene. This step will be a major one, as HC&S is positioning
itself to be among the most competitive producers of sugar in the United
States.
2001 OUTLOOK
As this letter is written, Hawaii continues to exhibit the healthy, but
moderate, growth experienced during 2000. There are no direct indications that
the Hawaii economy is being influenced by the recent but clear slow-down of
growth on the U.S. mainland. If Hawaii's economy remains at its current level
of strength, we do expect to achieve improved results in 2001.
2000 was a historical milestone for Alexander & Baldwin, Inc. as we
commemorated the 130th year of the founding of the organization and our 100th
year as a corporation. To use a somewhat worn but ever-so-true phrase, "you
only become old when you refuse to change." A&B has had a long and
distinguished history of changing with the times. Much has been accomplished,
ut even more remains. With the continued enthusiastic and energetic support of
our employees and the valued direction of our Board of Directors, we look
forward to a future of promise and much accomplishment.
We thank you, our shareholders, for your support.
/s/ Charles M. Stockholm /s/ W. Allen Doane
Charles M. Stockholm W. Allen Doane
Chairman of the Board President & Chief Executive Officer
February 16, 2001
Alexander & Baldwin -- A Unique Company That Defies Traditional Wall Street
Categories.
OCEAN TRANSPORTATION
Identifiable Assets
$911 million
Operations / Hawaii
> Hawaii service:
> 208 annual voyages
> 8 ships
> 4 major container terminals
> Neighbor Islands service:
> 3 specialized barges
> hub & spoke system
Operations / Outside Hawaii
> Guam service: weekly via APL ships
> Mid-Pacific service: monthly barge
> Matson Intermodal:
all-modes service provider
> SSAT: West Coast terminals
> Pacific Coast Express
> Matson Logistics:
special transport services
> Sea Star: Puerto Rico liner service, two vessels chartered
Operating Profit / 2000
$94 Million
Operating Profit / vs 1999
+12%
2000 Accomplishments
> Neutralized fuel cost increases
> Attracted greater cargo volume
> Increased Hawaii fleet from 6 to 8 ships
> Regained profitability for Matson Intermodal
> Web-enabled customer interface
PROPERTY DEVELOPMENT & MANAGEMENT
Identifiable Assets
$440 million
Operations / Hawaii
> 91,100 acres of land
> Property development:
> residential
> commercial
> light industrial
> 1.2 M sq. ft. of income properties
> Entitlements process
Operations /Outside Hawaii
> 4 M sq. ft. of income properties in 6 Western states
Operating Profit / 2000
$54 Million
Operating Profit / vs 1999
+21%
2000 Accomplishments
> Earned decade-high operating profit
> Sold COSTCO fee parcel
> Sold Maui Business Park parcel to Home Depot
> Began development of The Vintage at Kaanapali
FOOD PRODUCTS
Identifiable Assets
$197 million
Operations / Hawaii
> Basic crops:
> 37,000 acres in sugar cane
> 3,800 acres in coffee
> Cogeneration of power
> Trucking
Operations /Outside Hawaii
> Sales of raw sugar to C&H for refining and marketing
> Major coffee sales to Japan
Operating Profit / 2000
$8 Million
Operating Profit / vs 1999
-33%
2000 Accomplishments
> Consolidated sugar processing into one mill
> Adapted operations to drought
> Coffee profitable for first time
INVESTMENTS, OTHER
Identifiable Assets
$117 million
Operations / Hawaii
> BancWest
> Pacific Century Financial
Operating Profit / 2000
$3 Million
Operating Profit / vs 1999
+1%
CONSOLIDATED
Identifiable Assets
$1,666 million
Operating Profit / 2000
$159 Million
Operating Profit / vs 1999
+11%
2000 Accomplishments
> Grew recurring eps 15%
> Raised ROE
> Repurchased 2.4 m shares
> Lowered corporate expenses 18%
> $107 M in consolidated capex
REVIEW OF OPERATIONS
REAL ESTATE
At year-end 2000, the Company owned a total of about 91,100 acres. Of these,
1,549 acres were fully zoned for urban use. At least one step in the
entitlement process has been completed for an additional 1,710 acres, and
8,714 acres have long-term urban-use potential. Most of the remaining acreage
will be in agricultural or conservation use for the foreseeable future.
The Company creates value through an integrated program of entitlement,
development and asset management. It realizes value through sales and invests
for growth, with a priority on investments in Hawaii real estate.
DEVELOPMENTS & SALES In June 2000, the Company sold a 13-acre ground lease
under a Costco Wholesale Corporation store in Kahului, Maui.
Nearby, at the Company's Maui Business Park, onsite improvements for the
34-acre phase IB were substantially completed in November 2000. In August 2000,
A&B sold 12.7 acres in phase IB to Home Depot for a planned 135,000-square-foot
store, anticipated to open in spring 2001. In early February 2001, the Company
announced that Wal-Mart Stores, Inc. purchased a 14-acre parcel in phase IB for
a 142,000-square-foot store planned to open in fall 2001. Ten half-acre lots in
phase IB remain available for sale. In addition, three lots in Maui Business
Park phase IA were sold in 2000 and 15 remain available for sale.
In October 1999, the Company purchased 17 acres at Kaanapali, Maui, to develop
single-family residential resort condominiums. At year-end 2000, 69 of the 73
homes planned at The Vintage were under construction and 70 already were sold
or in escrow, at an average price of $580,000. A&B purchased a second 17-acre
parcel nearby in January 2000. Site work for this project, called The Summit,
is under way for the construction of 55 residential units. A&B also acquired
3.2 acres in the same community for development of a 35,500-square-foot retail
center.
A&B'S LANDHOLDINGS, BY CATEGORY
Hawaii
--------------------------------
(acres) Maui Kauai Oahu Total Mainland Total
Fully Entitled Urban 332 922 38 1,292 257 1,549
Agric./Pasture/Misc 52,554 7,641 _ 60,195 10 60,205
Conservation 16,012 13,335 _ 29,347 _ 29,347
----------------------------------------------------
Total 68,898 21,898 38 90,834 267 91,101
Designated Urban 1,472 238 _ 1,710 _ 1,710
Urban Potential 5,264 3,450 _ 8,714 _ 8,714
At Kahului, Maui, A&B is constructing two buildings at its Triangle Square
development. One will be a 15,000-square-foot commercial building and the other
a 6,200-square-foot automobile dealership.
On the island of Kauai, A&B is pursuing planning and engineering for
development of its 1,045-acre Kukui'Ula project. The development has full
entitlements for more than 200 hotel rooms, 700 vacation-ownership units,
commercial uses and up to 3,000 residential units. Initial development
contemplates a small four-star hotel, a championship golf course, vacation
ownership projects, resort residential home sites and condominiums. Discussions
are being held with potential joint venture partners, as well as hotel, time-
share and golf course developers. Sales of lots at Koloa Estates, the initial
residential development at Kukui'Ula, continued in 2000, with 17 of the
remaining 27 lots being sold.
On Oahu, only four lots were sold during 2000 in the 14-acre first phase of the
Mill Town business center, but interest in the project is high. A&B will
construct infrastructure for the 23-acre second phase early in 2001.
ENTITLEMENTS A&B strives to put its land to the highest and best use that is
consistent with community needs.
On Maui, final approval of plans for development of a 196-unit, single-family
subdivision on 67 acres at Haliimaile awaits resolution of water source and
road access issues. In spite of several votes in 2000, the Wailuku-Kahului
Community Plan still is not final. The update process began in 1993. A number
of A&B residential and industrial projects are being proposed for inclusion in
the Plan.
In response to significant growth of boating tour activity at Port Allen,
Kauai, the Company is pursuing a conceptual plan for phased long-term
development of 80 acres for a variety of commercial and residential uses.
ASSET AND PROPERTY MANAGEMENT
MAINLAND PORTFOLIO At year-end 2000, A&B's portfolio of 19 income properties in
six Western states consisted of 4 million square feet of leasable space.
Occupancies averaged 96 percent throughout 2000. Twelve mainland properties had
100 percent occupancy rates at year-end 2000. In August 2000, an
895,500-square-foot warehouse distribution facility was acquired in Ontario,
Calif.
STATUS OF A&B'S RESIDENTIAL PROJECTS IN HAWAII
Total Available Sold Available Sold Available
Project Units In 1999 In 1999 In 2000 In 2000 In 2001
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Kahului Ikena 102 20 13 7 7 Sold Out
Koloa Estates 32 32 5 27 17 10
The Vintage At Kaanapali 73 _ _ _ 3 70
The Summit At Kaanapali 55 _ _ _ _ 55
HAWAII PORTFOLIO At the end of 2000, A&B's Hawaii property portfolio consisted
of 1.2 million square feet of leasable commercial space, plus ground leases
totaling 271 acres for commercial uses and 11,776 acres for agricultural uses.
Occupancy of the commercial properties averaged 86 percent throughout 2000.
INVESTMENTS During 2000, a total of $34 million was invested in the acquisition
of improved properties and development projects. Of the $34 million, $23
million was funded through Internal Revenue Code Section 1031 reinvestments of
proceeds from property sales in 2000. The purchases included three income-
producing properties, comprising 924,200 square feet of leasable space and the
leasehold interest in a three-acre site for commercial development.
PROPERTY DEVELOPMENT & MANAGEMENT OUTLOOK Assuming there is no major U.S.
economic downturn, 2001 segment operating profit is likely to be moderately
lower than the unusually strong results of 2000. Property leasing activity is
forecast to step up moderately, primarily on the contributions of recently
acquired properties and higher lease rates. Revenue from projected property
sales likely will be higher, but the anticipated mix of sales has lower profit
margins than did the properties sold during 2000. Efforts to conclude long-
pending entitlements on Maui will continue, and investment opportunities,
especially in Hawaii, will remain a primary focus.
STATUS OF A&B'S COMMERCIAL/INDUSTRIAL PROJECTS IN HAWAII
Total Available Sold Available Sold Available
Project Units In 1999 In 1999 In 2000 In 2000 In 2001
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Maui Business Park IA 32 19 1 18 3 15
Maui Business Park IB 10 _ _ _ _ 10
Mill Town Center IA 23 23 7 16 4 12
Mill Town Center IB 40 _ _ _ _ 40
OCEAN TRANSPORTATION
HAWAII SERVICE The historical core business of Matson Navigation Company, Inc.
(Matson) is its Hawaii service. In 2000, economic growth in Hawaii led to
strengthened cargo demand. Container volume rose slightly, but automobile
volume was 31 percent higher. Within the total, construction materials stood
out as a growing portion of westbound cargo. Matson currently measures and
reports its freight demand in terms of the absolute number of containers
carried, no matter what size. If the size of the containers had been
considered, however, westbound container volume in 2000 was nearly two
percent above the previous high in 1994. Additional auto carriage resulted
principally from increased market share, strong tourist demand for rental cars
and higher sales by Hawaii dealers.
In response to growing cargo levels, Matson added a seventh ship to its Hawaii
service fleet in May 2000, and an eighth ship in October. With the eight-ship
fleet, Matson now offers four arrivals in Hawaii weekly from the West Coast,
with two direct arrivals each from Los Angeles and Oakland. One of the Oakland
ships each week makes a prior call at Seattle.
Operating costs again were affected adversely by rapid, steady increases in
bunker fuel costs during 2000. The fleet consumed about 1.8 million barrels of
fuel in 2000 and the cost per barrel was 60 percent above that of 1999. In
response, Matson was forced three times during 2000 to add to the 1.75 percent
bunker surcharge in place at the start of the year. At the start of 2001, the
surcharge was 4.25 percent.
Separately, Matson also increased shipping rates by 3.5 percent, effective
February 14, 2001, in order to offset ongoing cost increases and to support
necessary capital investments, especially in container equipment and
information technology.
During 2000, Matson prepared to introduce a new Virtual Customer Service Center
at www.matson.com. First offered for use of shippers in February 2001, this
substantial addition to the Matson Web site offers customers the option of
booking, tracking and handling all of their shipment information needs via the
Internet. Other online features include secure account balance information,
tariffs, vessel schedules, submission of billing instructions and retrieval of
billing documents. Customers may utilize customized booking templates to reduce
the necessary number of "clicks" for routine transactions. The site also gives
online customers the option of contacting a "live" service representative to
assist with a transaction. With the new features developed largely from
customers' input, the new Virtual Customer Support Center will continue to
evolve to reflect their interests and needs.
GUAM SERVICE Matson and American President Lines, Ltd. serve Guam through a
trans-Pacific operating alliance. Guam's economy remained relatively weak in
2000, and that factor was reflected in modestly lower import cargo volume.
Westbound auto volume was higher, however, due to competitive gains. Eastbound
container cargo also rose, due to increased shipments of garments and
competitive gains.
PACIFIC COAST SERVICE Matson replaced its single-vessel coastwise service in
October 2000 with a twice weekly, fixed-day, rail-based service in conjunction
with the Burlington Northern Santa Fe Corporation. The added frequency allows
customers more flexibility in scheduling their shipments. Matson Intermodal
System is managing the new service.
MATSON TERMINALS, INC. (MTI) During 2000, MTI carried out planning and design
work in preparation for the conversion of its Sand Island container terminal in
Honolulu from a straddle carrier-based container-handling system to a chassis-
based system. The $32 million project, to be substantially completed during
2001, will increase the terminal's capacity to handle future growth, improve
customer service and reduce cargo-handling costs.
MATSON INTERMODAL SYSTEM, INC. (MIS) MIS links Matson's and other companies'
seagoing services with inland shippers. During 2000, MIS focused on both
improved operating performance and growth. Its revenue grew 11 percent, to $132
million. MIS acquired Paragon Transportation Group, a diversified
transportation services marketing company.
JOINT VENTURES, INVESTMENTS Matson's West Coast terminal operating joint
venture, SSA Terminals, LLC, operated efficiently and profitably in 2000. Plans
are proceeding for moving to new, larger terminals in Seattle, Oakland and Long
Beach in 2002 and 2003. Matson also has a minority ownership in Sea Star Line,
LLC, serving the Puerto Rico trade. That trade presently suffers from
overcapacity but, fortunately, Sea Star enjoys certain operating cost
advantages.
OCEAN TRANSPORTATION OUTLOOK The performance of this segment is expected to
improve again in 2001, with a modest increase in operating profit. The steady
economic growth projected for Hawaii is, however, highly dependent on the
performance of the U.S. mainland economy.
HAWAII SERVICE CARGO STATISTICS
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(Units) 2000 1999 1998
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Freight 151,500 151,200 143,400
Automobiles 132,200 101,100 73,700
FOOD PRODUCTS
SEGMENT COMPOSITION In December 1998, the Company sold approximately 60 percent
of its equity interest in California and Hawaiian Sugar Company, Inc. (C&H) to
an investor group. Food products results in 1999 and 2000 reflect primarily
A&B's sugar- and coffee-growing activities.
RAW SUGAR PRODUCTION Hawaiian Commercial & Sugar Company (HC&S), located on
Maui, is Hawaii's largest producer of raw cane sugar, growing 70 percent of the
state's 2000 crop. HC&S' total production in 2000 -- 210,000 tons of raw sugar
- -- was about eight percent below that of 1999, primarily due to prolonged
drought conditions. Low raw sugar prices prevailed for much of the year, until
forfeitures of sugar under federal loans reduced excess domestic supplies.
HC&S permanently closed one of its two sugar mills in September 2000.
Consolidating sugar processing in one factory will save about $5 million
annually, beginning in 2001. During 2000, investments were made to produce
environment-friendly panelboard made from sugarcane bagasse, a residual
commodity, and to produce and package more food-grade specialty sugar products.
COFFEE PRODUCTION AND MARKETING Kauai Coffee Company, Inc. achieved profitable
operations during 2000, the result of successful marketing and sales efforts,
and aggressive cost controls. The 2000 harvest was unusually small, at 2.8
million pounds, but its quality mix was favorable.
POWER, TRUCKING The Company's hydroelectric plants on Maui and Kauai, as well
as cogeneration units on Maui, generate surplus electricity, which is sold to
the local public utilities. During 2000, drought conditions reduced hydropower
output and increased internal power demands for irrigation pumping. The Company
also has trucking operations on both Maui and Kauai that support its
agricultural operations and serve independent customers in each community.
SUGAR REFINING AND MARKETING Raw sugar produced by HC&S continues to be sold to
C&H under a long-term contract.
FOOD PRODUCTS OUTLOOK Despite the likelihood of continued drought-induced lower
production, the present improved level of raw sugar prices and the forward sale
of a substantial portion of the 2001 harvest, coupled with aggressive cost
reductions, should provide better segment results in 2001 than in 2000.
[DIRECTORS' PHOTOGRAPHS]
FINANCIAL REPORT
24 Management's Report
25 Independent Auditors' Report
26 Industry Segment Information
27 Five-Year Summary of Selected Financial Data
28 Management's Discussion and Analysis
32 Statements of Income
33 Statements of Cash Flows
34 Balance Sheets
36 Statements of Shareholders' Equity
37 Notes to Financial Statements
53 Quarterly Results
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The management of Alexander & Baldwin, Inc. has the responsibility for
preparing the accompanying consolidated financial statements and related
notes accurately and objectively. The statements have been prepared in
accordance with accounting principles generally accepted in the United States
of America, consistently applied, and necessarily include amounts based on
judgments and estimates made by management. Management also prepared the other
information in this annual report and is responsible for its accuracy and
consistency with the financial statements.
The Company maintains internal control systems, and related policies and
procedures, designed to provide reasonable assurance that assets are
safeguarded, that transactions are properly executed and recorded in accordance
with management's authorization, and that underlying accounting records may be
relied upon for the accurate preparation of financial statements and other
financial information. The design, monitoring and revision of internal control
systems involve, among other things, management's judgment with respect to the
relative cost and expected benefits of specific control measures. The Company
maintains an internal auditing function that evaluates and formally reports on
the adequacy and effectiveness of internal controls, policies and procedures.
The Company's financial statements have been audited by Deloitte & Touche LLP,
its independent auditors, who have expressed their opinion with respect to the
fairness, in all material aspects, of the presentation of financial position,
results of operations and cash flows under accounting principles generally
accepted in the United States of America. Management has made available to
Deloitte & Touche LLP all of the Company's financial records and related data.
Furthermore, management believes that all representations made to Deloitte &
Touche LLP during its audit were valid and appropriate.
The Board of Directors, through its Audit Committee (composed of non-employee
directors), oversees management's responsibilities in the preparation of the
financial statements and nominates the independent auditors, subject to
shareholder election. The Audit Committee meets regularly with the external
and internal auditors to evaluate the effectiveness of their work in
discharging their respective responsibilities and to assure their independent
and free access to the Committee.
/s/ W. Allen Doane
W. Allen Doane
President and Chief Executive Officer
/s/ James S. Andrasick
James S. Andrasick
Senior Vice President and Chief Financial Officer
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS OF ALEXANDER & BALDWIN, INC.:
We have audited the accompanying balance sheets of Alexander & Baldwin, Inc.
and its subsidiaries as of December 31, 2000 and 1999 , and the related
statements of income, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 2000 (pages 26 and 32 to 52).
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Alexander & Baldwin, Inc. and its
subsidiaries at December 31, 2000 and 1999, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 2000 in conformity with accounting principles generally accepted in the
United States of America.
As discussed in Note 2 to the financial statements, the Company changed its
method of accounting for vessel drydocking costs in 2000 and changed its method
of accounting for assessments from a second injury workers' compensation fund
in 1998.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Honolulu, Hawaii
January 25, 2001
INDUSTRY SEGMENT INFORMATION
(In thousands)
- ---------------------------------------------------------------------------------------------------------------
For the Year 2000 1999 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------
REVENUE:
Ocean transportation $ 850,692 $ 778,535 $ 748,121 $ 720,962 $ 686,637
Property development and management:
Leasing 62,105 53,910 44,433 43,606 41,553
Sales 46,322 48,036 82,382 35,916 31,909
Food products 106,341 116,362 465,661 486,912 506,909
Other 3,186 3,155 2,878 2,815 3,490
- ---------------------------------------------------------------------------------------------------------------
Total revenue $1,068,646 $ 999,998 $1,343,475 $1,290,211 $1,270,498
===============================================================================================================
OPERATING PROFIT:
Ocean transportation $ 93,732 $ 83,778 $ 66,298 $ 80,385 $ 81,618
Property development and management:
Leasing 30,120 27,497 22,634 24,559 23,875
Sales 24,228 17,402 21,663 13,262 15,307
Food products 7,522 11,310 21,327 27,083 26,863
Other 2,974 2,944 2,696 2,639 3,220
- ---------------------------------------------------------------------------------------------------------------
Total operating profit 158,576 142,931 134,618 147,928 150,883
Write-down of long-lived assets -- (15,410) (20,216) -- --
Loss on partial sale of subsidiary -- -- (19,756) -- --
Insurance settlement -- -- -- 19,965 --
Interest expense, net (24,252) (17,774) (24,799) (28,936) (34,081)
General corporate expenses (11,609) (14,207) (14,552) (11,745) (12,769)
- ---------------------------------------------------------------------------------------------------------------
Income before income taxes
and accounting changes $ 122,715 $ 95,540 $ 55,295 $ 127,212 $ 104,033
===============================================================================================================
IDENTIFIABLE ASSETS:
Ocean transportation $ 911,109 $ 894,607 $ 898,277 $ 930,636 $1,005,741
Property development and management 440,416 384,515 338,090 317,622 312,829
Food products 197,143 173,069 261,712 382,109 386,986
Other 117,344 109,269 107,561 74,431 90,559
- ---------------------------------------------------------------------------------------------------------------
Total assets $1,666,012 $1,561,460 $1,605,640 $1,704,798 $1,796,115
===============================================================================================================
CAPITAL EXPENDITURES:
Ocean transportation $ 40,190 $ 19,232 $ 60,403 $ 20,828 $ 171,110
Property development and management1 44,821 66,752 107,408 30,790 7,275
Food products 21,677 17,271 18,237 18,806 12,058
Other 216 258 441 242 412
- ---------------------------------------------------------------------------------------------------------------
Total capital expenditures $ 106,904 $ 103,513 $ 186,489 $ 70,666 $ 190,855
===============================================================================================================
DEPRECIATION AND AMORTIZATION:
Ocean transportation $ 54,586 $ 56,174 $ 61,543 $ 62,192 $ 62,055
Property development and management 8,972 7,299 6,357 6,281 6,214
Food products 8,285 9,962 20,086 19,538 20,144
Other 461 466 514 547 538
- ---------------------------------------------------------------------------------------------------------------
Total depreciation and
amortization $ 72,304 $ 73,901 $ 88,500 $ 88,558 $ 88,951
===============================================================================================================
See Note 2 for information regarding changes in presentation for certain revenues and expenses.
See Notes 3 and 4 for discussion of the write-down of long-lived assets in 1999
and 1998 and the partial sale of California and Hawaiian Sugar Company, Inc. in 1998.
1Includes tax-deferred property purchases which are considered non-cash
transactions in the Statements of Cash Flows; excludes capital expenditures for
real estate developments held for sale.
Five-Year Summary of Selected Financial Data
(Dollars and shares in thousands, except per-share amounts)
Alexander & Baldwin Inc. and Subsidiaries
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
ANNUAL OPERATIONS
Net sales and other operating revenue* $1,068,646 $ 999,998 $1,343,475 $1,310,176 $1,270,498
Deduct:
Cost of goods sold and operating expenses* 849,375 812,783 1,174,881 1,065,470 1,043,433
Depreciation and amortization 72,304 73,901 88,500 88,558 88,951
Interest expense 24,252 17,774 24,799 28,936 34,081
Income taxes 44,391 32,961 24,352 45,825 38,748
---------- ---------- ---------- ---------- ----------
Income before accounting changes 78,324 62,579 30,943 81,387 65,285
Cumulative effect of change
in accounting methods 12,250 - (5,801) - -
---------- ---------- ---------- ---------- ----------
Net income $ 90,574 $ 62,579 $ 25,142 $ 81,387 $ 65,285
========== ========== ========== ========== ==========
Comprehensive income $ 103,050 $ 48,711 $ 33,327 $ 88,326 $ 73,660
========== ========== ========== ========== ==========
Earnings per share before accounting changes:
Basic $ 1.92 $ 1.45 $ 0.69 $ 1.80 $ 1.44
Diluted $ 1.91 $ 1.45 $ 0.69 $ 1.80 $ 1.44
Return on beginning equity 13.5% 9.0% 3.5% 11.9% 10.0%
Cash dividends per share $ 0.90 $ 0.90 $ 0.90 $ 0.88 $ 0.88
Average number of shares outstanding 40,898 43,206 44,760 45,182 45,303
Gross profit percentage* 23.0% 22.1% 17.0% 20.1% 19.8%
Effective income tax rate 36.5% 34.5% 45.4% 36.0% 37.3%
MARKET PRICE RANGE PER SHARE
High $ 28.250 $ 27.125 $ 31.125 $ 29.375 $ 29.250
Low 17.938 18.625 18.813 24.375 22.500
Close 26.250 22.813 23.250 27.313 25.000
AT YEAR END
Shareholders of record 4,438 4,761 5,125 5,481 5,881
Shares outstanding 40,353 42,526 44,028 44,881 45,339
Shareholders' equity $ 693,651 $ 670,963 $ 694,642 $ 719,588 $ 684,328
Per-share 17.19 15.78 15.78 16.03 15.09
Total assets 1,666,012 1,561,460 1,605,640 1,704,798 1,796,115
Working capital 55,861 59,805 67,113 114,806 95,579
Cash and cash equivalents 3,451 3,333 86,818 21,623 23,824
Real estate developments - noncurrent 62,628 60,810 57,690 68,056 70,144
Investments - noncurrent 183,141 158,726 159,068 102,813 91,602
Capital Construction Fund 150,405 145,391 143,303 148,610 178,616
Long-term debt - noncurrent 330,766 277,570 255,766 292,885 357,657
Current ratio 1.4 to 1 1.4 to 1 1.4 to 1 1.7 to 1 1.4 to 1
Capital stock price/earnings
ratio at December 31 11.9 to 1 15.7 to 1 41.5 to 1 15.2 to 1 17.4 to 1
*Current and prior year values have been restated. See Note 2 for information regarding changes in presentation for
certain revenues and expenses.
MANAGEMENT'S DISCUSSION AND ANALYSIS
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS
Consolidated Earnings and Revenue: Net income in 2000 was $90,574,000 or $2.21
per basic share, versus $62,579,000, or $1.45 per basic share, in 1999 and
$25,142,000, or $0.56 per basic share, in 1998. Revenue in 2000 was
$1,068,646,000, compared with revenue of $999,998,000 in 1999 and
$1,343,475,000 in 1998.
Accounting Changes and Significant Charges: During 2000, the Company made two
changes in accounting methods (See Note 2 to the Financial Statements). The
first change was for vessel drydocking costs at Matson Navigation Company, Inc.
("Matson"), the Company's ocean transportation subsidiary. Previously, the
estimated costs for future drydocking of vessels were accrued in advance of the
drydocking. Subsequent payments were charged against the accrued liability.
Under the new method, drydocking expenditures which benefit future periods are
capitalized and depreciated. This change increased 2000 net income by
$12,250,000 (net of income tax expense of $7,668,000) or $0.29 per basic share.
The second change was for the presentation of certain costs recorded in the
ocean transportation and property leasing segments, which previously were
recorded as an offset to revenue. This accounting change had no impact on
segment operating profit, but did increase both revenue and operating costs by
$49,305,000, $40,726,000 and $31,855,000 in 2000, 1999 and 1998, respectively.
This change was made in response to guidance provided by the Securities and
Exchange Commission's Staff Accounting Bulletin No. 101, "Revenue Recognition
in Financial Statements."
In 1999, following continuing operating losses, depressed coffee prices and
negative cash flows at Kauai Coffee Company, Inc. ("Kauai Coffee"), the
Company's coffee plantation, the Company recorded an after-tax charge of
$9,571,000, or $0.22 per basic share, to write down the recorded value of
orchards and other non-current assets to their estimated fair values.
During 1998, net income was reduced by three one-time items. First, the sale
of the Company's majority interest in C&H resulted in an after-tax loss of
$15,955,000, or $0.36 per basic share. Second, changes in development plans
for a real estate project on Kauai that resulted from extended weak real estate
market conditions, led to an after-tax charge of $12,837,000, or $0.29 per
basic share. This reduced the carrying value of certain assets associated with
that project to fair value. Third, the cumulative effect of a required
accounting change, related to federal workers' compensation assessments,
resulted in an after-tax charge of $5,801,000, or $0.13 per basic share.
2000 COMPARED WITH 1999
Ocean Transportation revenue of $850,692,000 was nine percent higher than 1999
revenue of $778,535,000. Operating profit of $93,732,000 showed a 12 percent
improvement over 1999 operating profit of $83,778,000. Hawaii service
container volume was flat compared with 1999 and automobile volume was 31
percent higher. The primary revenue gains occurred in the lower margin
intermodal business. Operating results for 2000 benefited from improved
performance by the Company's SSAT terminal operating joint venture and its
Intermodal Systems subsidiary. Operating results for 1999 were adversely
affected by lower productivity, due to disruptions related to the 1999
renegotiation of longshore labor agreements.
Matson's total Hawaii Service container volume was 151,500 units in 2000,
compared with 151,200 units in 1999. Matson's total Hawaii Service automobile
volume, at 132,200 units, was 31 percent higher than 1999 automobile volume of
101,100 units.
In November 2000, Matson announced a 3.5 percent increase in Hawaii Service
rates, effective in February 2001. A 3.9 percent increase in Hawaii Service
rates announced in 1999 took effect in February 2000. To mitigate partially
the effect of rising fuel prices, the 1.75 percent fuel surcharge in effect at
the end of 1999 was increased, in three steps, to 4.25 percent during 2000.
Total fuel costs increased by $17,900,000 in 2000 versus 1999, partially offset
by increased fuel surcharges of $15,600,000.
Property Leasing revenue of $62,105,000 was 15 percent higher than 1999 revenue
of $53,910,000 and operating profit of $30,120,000 improved ten percent
compared with 1999 operating profit of $27,497,000. These improvements were
due to higher occupancy levels, increased rents and newly acquired properties.
Occupancy rates for the Mainland properties averaged 96 percent in 2000, versus
94 percent in 1999. The Company owned four million square feet of leasable
property on the Mainland at year-end 2000, compared with 3.1 million square
feet at year-end 1999. Occupancy levels for the Hawaii properties averaged 86
percent in 2000, versus 81 percent in 1999. The Company owned 1.2 million
square feet of leasable property in Hawaii at the end of both 2000 and 1999.
Property Sales revenue of $46,322,000 was down slightly from the $48,036,000 in
sales recorded in 1999, while operating profit of $24,228,000 was 39 percent
higher than the $17,402,000 achieved in 1999, due to mix. Property sales in
2000 included the ground lease for a Costco store, a 13-acre parcel at Maui
Business Park to Home Depot, 16 business parcels and 28 residential properties.
Sales in 1999 included an office/research building in Seattle, two developed
business parcels, three undeveloped parcels and 41 residential properties.
The mix of property sales in any year can be diverse. Sales can include
property sold under threat of condemnation, developed residential real estate,
commercial properties, developable subdivision lots and undeveloped land. The
sale of undeveloped land and vacant parcels generally provides a greater
contribution margin than does the sale of developed and commercial property,
due to the low historical-cost basis of the Company's Hawaii land.
Consequently, property sales revenue trends and the amount of real estate held
for sale on the balance sheets do not necessarily indicate future profitability
for this segment.
Food Products revenue of $106,341,000 in 2000 compared with revenue of
$116,362,000 in 1999. Operating profit of $7,522,000 in 2000 was 33 percent
lower than the $11,310,000 earned in 1999. The primary reasons for the
declines were U.S. raw sugar prices which were 20 percent below historical
levels, lower raw sugar production that resulted from continuing drought
conditions on the island of Maui, and the write down of certain assets
associated with the closure of the Company's raw sugar processing factory in
Paia, Maui, which consolidated the processing operation into one factory.
These factors were offset partially by benefit plan settlement gains,
insurance-related gains at Hawaiian Commercial & Sugar Company ("HC&S"), the
Company's raw sugar producing unit on Maui, and a profit turn around at Kauai
Coffee.
Although HC&S harvested about the same number of acres, sugar production of
approximately 210,000 tons in 2000 was eight percent lower than the prior
year's production of 228,000 tons. Lower production was due to the drought
conditions noted earlier.
As described in the 1999 Annual Report to Shareholders, the outlook for raw
sugar prices in 2000 was not favorable and significantly lower earnings were
expected. The average No. 14 domestic raw sugar price for 2000 was $19.10/cwt.
This was $3.08/cwt. below 1999's price of $22.18/cwt. and was the lowest level
in 20 years. For 2001, HC&S has forward-priced 70 percent of its crop, which
is expected to stabilize its raw sugar prices at approximately $21/cwt.
HC&S' labor contract with the ILWU, which expired in January 2000, was
renegotiated and extended for two years.
Results from Kauai Coffee showed a small profit for 2000, following a
successful business re-engineering in 1999, which included the write-down of
its orchards and processing equipment to fair values and the implementation
of other business process improvements. In addition, sales and marketing
efforts were improved during 2000.
1999 COMPARED WITH 1998
Ocean Transportation revenue of $778,535,000 increased four percent and
operating profit of $83,778,000 increased 26 percent in 1999, compared with
1998. Both increases were due primarily to higher container and automobile
volume in the Hawaii Service. The increased revenue was offset partially by
handling costs associated with the higher volume and by the adverse impact, in
late 1999, of longshore labor disruptions on the West Coast and in Hawaii.
For the year, Matson's total Hawaii Service container volume, at 151,200 units
in 1999, was five percent higher than 1998 container volume of 143,400 units.
Matson's total Hawaii Service automobile volume, at 101,100 units, was 37
percent higher than 1998 automobile volume of 73,700 units.
Operating costs were higher in 1999 than in 1998, primarily reflecting higher
freight volume, higher fuel and labor costs and lower productivity, due to
labor disruptions. The longshore labor agreements on the West Coast and in
Hawaii were renegotiated in 1999. The negotiation process involved work
slowdowns, and in some instances work stoppages, that resulted in significant
increases in operating expenses. New agreements were reached without any
strikes; however, the new contracts contain significant wage and pension
benefit increases during their three-year term.
Property Leasing revenue of $53,910,000 for 1999 rose 21 percent compared with
1998 and operating profit of $27,497,000 for 1999 increased 21 percent compared
with 1998. The increase was due primarily to the contributions from properties
acquired in 1999 and late in 1998, as well as higher occupancy rates. The
full-year results in 1999 also benefited from a one-time buyout of a long-term
ground lease. Occupancy rates for the Mainland properties averaged 94 percent
in 1999, versus 91 percent in 1998. Occupancy levels for the Hawaii properties
averaged 81 percent in 1999, versus 68 percent in 1998.
Property Sales revenue of $48,036,000 for 1999 was considerably lower than the
$82,382,000 in sales recorded in 1998. Operating profit from property sales in
1999 of $17,402,000 was 20 percent lower than the $21,663,000 achieved in 1998.
In context, however, 1998 represented the Company's highest level of property
sales since 1989. Significant sales in 1999 included an office/research
building in Seattle with net proceeds of $25,130,000, two developed business
parcels, three undeveloped parcels and 41 residential properties. Sales in
1998 included a large R&D and office complex in Cupertino, California, a
remaining interest in a 14-acre parcel at Maui Business Park, five developed
business parcels and 64 residential properties.
Food Products revenue of $116,362,000 in 1999 compared with revenue of
$465,661,000 in 1998. Operating profit of $11,310,000 in 1999 was 47 percent
lower than the $21,327,000 earned in 1998. Both reductions were due primarily
to the December 1998 sale of the Company's majority interest in C&H and to
operating losses at Kauai Coffee, partially offset by better performance at
HC&S. Sugar production of about 228,000 tons in 1999, the highest level in a
decade, was about 6 percent higher than in 1998.
FINANCIAL CONDITION AND LIQUIDITY
Liquid resources of the Company, comprising cash and cash equivalents,
receivables, inventories and unused lines of credit, less accrued deposits to
the Capital Construction Fund (CCF), totaled $245,072,000 at December 31, 2000,
a decrease of $8,289,000 from December 31, 1999. This net reduction was
primarily due to larger balances drawn on revolving credit facilities and
higher accrued deposits to the CCF, partially offset by the renewal of a $25
million credit facility which had expired in late 1999 and increased trade
receivable balances.
Working capital was $55,861,000 at December 31, 2000, a decrease of $3,944,000
from a year earlier. The lower working capital was due primarily to higher
current portion of debt and accrued liabilities and lower prepaid assets,
partially offset by a larger inventory of real estate held for sale and higher
trade receivables. The higher debt was the result of increased short-term
borrowing on a working capital facility. The increased inventory of real estate
held for sale was due to the completion of a residential development project on
Maui. Trade receivables were higher than in the previous year, due to
increased ocean transportation revenue and to the timing of billing cycles
which overlap year-end. The fluctuations in accrued liabilities and prepaid
assets were in the ordinary course of business.
Net cash provided by operations was $104,278,000 and $109,379,000 for 2000 and
1999, respectively. Net operating cash flows were used principally for capital
expenditures, payments of debt, dividends, repurchases of capital stock and
deposits into the CCF. Withdrawals from the CCF in 2000 were used principally
for vessel modifications and equipment purchases.
Capital additions during 2000 were $106,904,000, compared with $103,513,000 in
1999. Ocean transportation capital additions in 2000 of $40,190,000 were
primarily for vessel modifications, technology investments and the acquisition
of container and terminal equipment. Property development and management
capital additions in 2000 of $44,821,000, which included the reinvestment of
$22,703,000 of tax-deferred sales proceeds, were for development of commercial
and residential real estate property, for the purchase of developed commercial
property, and for improvements to leased properties. Food products capital
additions in 2000 of $21,677,000 were primarily for a panelboard processing
facility, power generation, field equipment, and factory modifications.
Capital expenditures approved but not yet spent were $92,679,000 at December
31, 2000. These expenditures are primarily for the conversion of the Company's
leased Honolulu terminal facility to a partially wheeled operation, real estate
developments held for investment purposes, containers and operating equipment
and vessel modifications. For 2001, internal cash flows and short-term
borrowing facilities are expected to be sufficient to finance working capital
needs, dividends, capital expenditures and debt service.
OTHER MATTERS
Tax-Deferred Real Estate Exchanges: In 2000, the Company sold, on a tax-
deferred basis, nine land parcels for $35,569,000, the most significant of
which were the Costco and Home Depot sites noted earlier. During the year, the
Company reinvested $22,703,000 in three replacement properties. At the end of
2000, approximately $12,900,000 of tax-deferred sales had not been reinvested.
These funds are held by a third party agent and are included in other non-
current assets on the Balance Sheets. The proceeds from tax-deferred sales and
the subsequent purchases of replacement property are reported in the Statement
of Cash Flows under the caption "Non-cash Activities."
Share Repurchases: In 2000, the Company repurchased 2,378,195 shares of its
common stock for an aggregate price of $48,260,000 (average of $20.29 per
share). During 1999, it repurchased 1,564,500 shares of its common stock for
about $34,824,000 (average of $22.26 per share). In January 2001, the Board of
Directors authorized the repurchase of up to 1,000,000 additional shares of the
Company's stock.
Environmental Matters: As with most industrial and land-development companies
of its size, the Company's operations have certain risks which could result in
expenditures for environmental remediation. The Company believes that it is in
compliance, in all material respects, with applicable environmental laws and
regulations, and works proactively to identify potential environmental
concerns. Management believes that appropriate liabilities have been accrued
for environmental matters.
Outlook: Information about the Company's outlook for 2001 and its plans to
address issues affecting primary business units are included in the Letter to
Shareholders on pages 9 through 11 and in the business unit discussions
included on pages 14 through 21 of the Annual Report to Shareholders, which
sections are incorporated herein by reference.
Year 2000: Between 1997 and 2000, the Company expended approximately
$6,200,000 for remediation, replacements and other computer-related work in
preparation for the year 2000 ("Y2K"). As a result of the Company's advance
preparations and its execution of remedial plans, the Company did not
experience any Y2K problems.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Company, from time to time, may make or may have made certain forward-
looking statements, whether orally or in writing, such as forecasts and
projections of the Company's future performance or statements of management's
plans and objectives. Such forward-looking statements may be contained in,
among other things, Securities and Exchange Commission (SEC) filings, such as
the Forms 10-K, press releases made by the Company, the Company's Internet Web
sites (including Web sites of its subsidiaries), and oral statements made by
the officers of the Company. Except for historical information contained in
these written or oral communications, such communications contain forward-
looking statements. These forward-looking statements involve a number of risks
and uncertainties that could cause actual results to differ materially from
those projected in the statements, including, but not limited to: (1) economic
conditions in Hawaii and elsewhere; (2) market demand; (3) competitive factors
and pricing pressures in the Company's primary markets; (4) legislative and
regulatory environments at the federal, state and local levels, such as
government rate regulations, land-use regulations, government administration of
the U.S. sugar program, and modifications to or retention of cabotage laws; (5)
dependence on third-party suppliers; (6) fuel prices; (7) raw sugar prices; (8)
labor relations; (9) risks associated with current or future litigation; and
(10) other risk factors described elsewhere in these communications and from
time to time in the Company's filings with the SEC.
STATEMENTS OF INCOME
(In thousands, except per-share amounts)
- --------------------------------------------------------------------------------------------
Year Ended December 31, 2000 1999 1998
- --------------------------------------------------------------------------------------------
REVENUE:
Ocean transportation $ 839,535 $ 768,414 $ 738,017
Property leasing 61,710 53,416 43,702
Property sales 46,158 47,894 82,167
Food products 102,229 113,680 465,433
Interest and dividends 19,014 16,594 14,156
- --------------------------------------------------------------------------------------------
Total revenue 1,068,646 999,998 1,343,475
- --------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Cost of transportation services 687,223 628,104 612,856
Cost of property sales and leasing services 47,366 51,764 77,838
Cost of goods and agricultural services 98,820 105,052 429,329
Selling, general and administrative 88,270 86,354 103,386
Write-down of long-lived assets -- 15,410 20,216
Loss on partial sale of subsidiary -- -- 19,756
Interest 24,252 17,774 24,799
- --------------------------------------------------------------------------------------------
Total costs and expenses 945,931 904,458 1,288,180
- --------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING METHODS 122,715 95,540 55,295
Income taxes 44,391 32,961 24,352
- --------------------------------------------------------------------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING METHODS 78,324 62,579 30,943
Cumulative effect of change in accounting
methods (see Note 2) (net of income taxes
of $7,668 in 2000 and of $3,481 in 1998) 12,250 -- (5,801)
- --------------------------------------------------------------------------------------------
NET INCOME 90,574 62,579 25,142
Unrealized holding gains (losses) on
securities (net of income taxes of $7,525
in 2000, $8,088 in 1999 and $5,337 in 1998) 12,476 (13,868) 8,185
- --------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME $ 103,050 $ 48,711 $ 33,327
============================================================================================
BASIC EARNINGS PER SHARE OF COMMON STOCK:
Before cumulative effect of accounting changes $ 1.92 $ 1.45 $ 0.69
Accounting changes 0.29 -- (0.13)
- --------------------------------------------------------------------------------------------
Net income $ 2.21 $ 1.45 $ 0.56
============================================================================================
DILUTED EARNINGS PER SHARE OF COMMON STOCK:
Before cumulative effect of accounting changes $ 1.91 $ 1.45 $ 0.69
Accounting changes 0.30 -- (0.13)
- --------------------------------------------------------------------------------------------
Net income $ 2.21 $ 1.45 $ 0.56
============================================================================================
AVERAGE COMMON SHARES OUTSTANDING 40,898 43,206 44,760
See notes to financial statements.
STATEMENTS OF CASH FLOWS
(In thousands)
- -----------------------------------------------------------------------------------------------
Year Ended December 31, 2000 1999 1998
- -----------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATIONS:
Net income $ 90,574 $ 62,579 $ 25,142
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization 72,304 73,901 88,500
Gains on disposal of assets (20,407) (10,661) (10,259)
Equity in (income) loss of affiliates (6,859) (3,002) 276
Write-down of long-lived assets -- 15,410 20,216
Loss on partial sale of subsidiary -- -- 19,756
Change in accounting methods (Note 2) (12,250) -- 5,801
Changes in assets and liabilities:
Accounts and notes receivable (4,161) (6,007) 7,859
Inventories (1,219) (1,326) 4,605
Prepaid expenses and other assets (7,933) (8,852) (9,213)
Pension and post-retirement assets and obligations (26,169) (18,174) (16,376)
Accounts and income taxes payable 9,305 10,436 5,345
Deferred income taxes payable 17,358 8,465 (8,248)
Other liabilities 10,235 (3,408) 3,840
Capital expenditures for real estate developments
held for sale (16,500) (9,982) (13,116)
- -----------------------------------------------------------------------------------------------
Net cash provided by operations 104,278 109,379 124,128
- -----------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for property and developments (84,201) (68,606) (100,593)
Receipts from disposal of income producing
property, investments and other assets 3,877 3,688 4,818
Proceeds from recapitalization of subsidiary -- -- 83,841
Proceeds from partial sale of subsidiary -- -- 14,940
Deposits into Capital Construction Fund (12,220) (19,464) (10,000)
Withdrawals from Capital Construction Fund 8,574 11,458 14,377
(Increase) decrease in investments - net 894 (3,285) (7,745)
- -----------------------------------------------------------------------------------------------
Net cash used in investing activities (83,076) (76,209) (362)
- -----------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 98,500 39,500 30,000
Payments of long-term debt (48,000) (30,533) (68,985)
Proceeds (payments) from short-term
borrowings - net 10,500 (52,000) 40,000
Repurchases of capital stock (48,260) (34,824) (20,838)
Proceeds from issuance of capital stock 2,961 101 1,575
Dividends paid (36,785) (38,899) (40,323)
- -----------------------------------------------------------------------------------------------
Net cash used in financing activities (21,084) (116,655) (58,571)
- -----------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS:
Net increase (decrease) for the year 118 (83,485) 65,195
Balance, beginning of year 3,333 86,818 21,623
- -----------------------------------------------------------------------------------------------
Balance, end of year $ 3,451 $ 3,333 $ 86,818
- -----------------------------------------------------------------------------------------------
OTHER CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized $ 24,663 $ 17,772 $ 26,890
Income taxes paid, net of refunds 31,807 34,213 34,672
NON-CASH ACTIVITIES:
Tax-deferred property sales 35,569 34,883 67,258
Tax-deferred property purchases 22,703 34,907 85,896
Transfer of assets to joint venture -- 16,438 --
Securities retained in connection with
partial sale of subsidiary -- -- 34,960
See notes to financial statements.
BALANCE SHEETS
(In thousands, except per-share amount)
- ----------------------------------------------------------------------------------------
December 31, 2000 1999
- ----------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,451 $ 3,333
Accounts and notes receivable:
Trade, less allowances of $6,579 and $7,860 129,373 122,604
Other 12,180 14,033
Inventories:
Sugar and coffee 4,435 4,543
Materials and supplies 12,702 11,384
Real estate held for sale 19,324 12,706
Deferred income taxes 13,186 16,260
Prepaid expenses and other assets 18,736 20,739
Accrued deposits to Capital Construction Fund (4,520) (3,152)
- ----------------------------------------------------------------------------------------
Total current assets 208,867 202,450
- ----------------------------------------------------------------------------------------
INVESTMENTS 183,141 158,726
- ----------------------------------------------------------------------------------------
REAL ESTATE DEVELOPMENTS 62,628 60,810
- ----------------------------------------------------------------------------------------
PROPERTY:
Land 95,195 86,421
Buildings 271,314 241,009
Vessels 770,352 766,525
Machinery and equipment 534,894 510,407
Water, power and sewer systems 80,084 83,980
Other property improvements 56,355 60,244
- ----------------------------------------------------------------------------------------
Total 1,808,194 1,748,586
Less accumulated depreciation and amortization 853,502 819,959
- ----------------------------------------------------------------------------------------
Property - net 954,692 928,627
- ----------------------------------------------------------------------------------------
CAPITAL CONSTRUCTION FUND 150,405 145,391
- ----------------------------------------------------------------------------------------
PENSION ASSETS 50,476 40,987
- ----------------------------------------------------------------------------------------
OTHER ASSETS - NET 55,803 24,469
- ----------------------------------------------------------------------------------------
Total $1,666,012 $1,561,460
========================================================================================
See notes to financial statements.
- ----------------------------------------------------------------------------------------
2000 1999
- ----------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and current portion of long-term debt $ 30,500 $ 22,500
Accounts payable 63,075 55,655
Payrolls and vacation due 18,170 16,699
Uninsured claims 11,514 12,742
Taxes other than income 3,456 4,414
Post-retirement benefit obligations - current portion 2,213 2,878
Accrued and other liabilities 24,078 27,757
- ----------------------------------------------------------------------------------------
Total current liabilities 153,006 142,645
- ----------------------------------------------------------------------------------------
LONG-TERM LIABILITIES:
Long-term debt 330,766 277,570
Post-retirement benefit obligations 44,752 60,767
Uninsured claims 20,857 16,780
Other 35,841 34,381
- ----------------------------------------------------------------------------------------
Total long-term liabilities 432,216 389,498
- ----------------------------------------------------------------------------------------
DEFERRED INCOME TAXES 387,139 358,354
- ----------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Capital stock - common stock without par value;
authorized, 150,000 shares ($.75 stated value
per share); outstanding, 40,353 shares in 2000
and 42,526 shares in 1999 33,248 34,933
Additional capital 58,007 53,124
Unrealized holding gains on securities 61,937 49,461
Retained earnings 552,637 545,849
Cost of treasury stock (12,178) (12,404)
- ----------------------------------------------------------------------------------------
Total shareholders' equity 693,651 670,963
- ----------------------------------------------------------------------------------------
Total $1,666,012 $1,561,460
========================================================================================
STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except per-share amounts)
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
Three Years Ended December 31, 2000
- --------------------------------------------------------------------------------------------------------------------
Capital Stock
------------------------------------------
Issued In Treasury
--------------------- ------------------
Unrealized
Additional Holding Retained
Shares Stated Value Shares Cost Capital Gains Earnings
- --------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 49,026 $ 36,769 4,145 $(12,897) $ 49,437 $ 55,144 $591,135
Changes in 1998:
Shares repurchased and retired (969) (727) (20,111)
Stock options exercised 67 50 1,558 (23)
Issued--incentive plans 8 6 (41) 346 951
Unrealized holding gain on
securities 8,185
Net income 25,142
Cash dividends, $0.90 per share (40,323)
- --------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 48,132 36,098 4,104 (12,551) 51,946 63,329 555,820
Changes in 1999:
Shares repurchased and retired (1,565) (1,173) (33,651)
Stock options exercised 5 4 97
Issued--incentive plans 7 4 (51) 147 1,081
Unrealized holding loss on
securities (13,868)
Net income 62,579
Cash dividends, $0.90 per share (38,899)
- --------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 46,579 34,933 4,053 (12,404) 53,124 49,461 545,849
CHANGES IN 2000:
Shares repurchased and retired (2,378) (1,783) (46,477)
Stock options exercised 126 94 3,378 (524)
Issued--incentive plans 4 4 (75) 226 1,505
Unrealized holding gain on
securities 12,476
Net income 90,574
Cash dividends, $0.90 per share (36,785)
- --------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2000 44,331 $ 33,248 3,978 $(12,178) $ 58,007 $ 61,937 $552,637
====================================================================================================================
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
ALEXANDER & BALDWIN, INC.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include the
accounts of Alexander & Baldwin, Inc. and all wholly owned subsidiaries
("Company"), after elimination of significant intercompany amounts.
Significant investments in businesses, partnerships and joint ventures in which
the Company does not have control are accounted for under the equity method.
Generally, these are investments in 20 to 50 percent owned businesses.
Segment Information: The Company has three operating segments: Ocean
Transportation, Real Estate Development and Management, and Food Products. The
Company reports segment information in the same way that management assesses
segment performance. Additional information regarding these segments is found
on page 26 and in Note 12.
Cash and Cash Equivalents: Cash equivalents are composed of all highly liquid
investments with an original maturity of three months or less and which have no
significant risk of change in value.
Inventories: Raw sugar and coffee inventories are stated at the lower of cost
(first-in, first-out basis) or market. Other inventories, composed principally
of materials and supplies, are stated at the lower of cost (principally average
cost) or market. Materials and supplies inventories are carried at historical
cost, which is not greater than replacement cost.
Property: Property is stated at cost. Expenditures for major renewals and
betterments are capitalized. Replacements, maintenance and repairs, which do
not improve or extend asset lives, are charged to expense as incurred. Gains
or losses from property disposals are included in the determination of net
income.
As discussed in Note 2, the Company changed its accounting for drydocking costs
in 2000. Costs of regularly scheduled drydocking of vessels and planned major
vessel repairs performed during drydocking are capitalized and amortized over
the periods benefited.
Coffee Orchards: Costs of developing coffee orchards are capitalized during
the development period and depreciated over the estimated productive lives. In
1999, following the provisions of Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," the Company reduced the carrying value of its coffee
orchards and field and factory processing equipment. This is described further
in Note 3.
Capitalized Interest: Interest costs incurred in connection with significant
expenditures for real estate developments or the construction of assets are
capitalized. Interest expense is shown net of capitalized interest on the
Statements of Income, because the amounts are not significant.
Construction Expenditures: Expenditures for real estate developments are
capitalized during construction and are classified as Real Estate Developments
on the Balance Sheets. When construction is complete, the costs are
reclassified as either Real Estate Held for Sale or Property, based upon the
Company's intent to sell the completed asset or to hold it as an investment.
Cash flows related to real estate developments are classified as either
operating or investing activities, based upon the Company's intention to sell
the property or to retain ownership of the property as an investment following
completion of construction.
Depreciation: Depreciation is computed using the straight-line method.
Estimated useful lives of property are as follows:
--------------------------------------------
Range of Life
Classification (in years)
--------------------------------------------
Buildings 10 to 50
Vessels 10 to 40
Marine containers 2 to 25
Terminal facilities 3 to 35
Machinery and equipment 3 to 35
Utility systems and other 5 to 60
--------------------------------------------
Fair Values: The carrying values of current assets (other than inventories,
real estate held for sale, deferred income taxes, and prepaid and other current
assets) and of debt instruments are reasonable estimates of their fair values.
Real estate is carried at the lower of cost or fair value. Fair values are
generally determined using the expected market value for the property, less
sales costs. For residential units and lots held for sale, market value is
determined by reference to the sales of similar property, market studies, tax
assessments and cash flows. For commercial property, market value is
determined using recent comparable sales, tax assessments and cash flows. A
large portion of the Company's real estate is undeveloped land located in
Hawaii. This land has a cost basis which averages approximately $150 per
acre, a value which is much lower than fair value.
Impairments of Long-lived Assets: Long-lived assets are reviewed for possible
impairment when events or circumstances indicate that the carrying value may
not be recoverable. In such evaluation, the estimated future undiscounted cash
flows generated by the asset are compared with the amount recorded for the
asset to determine if a write-down may be required. If this review determines
that the recorded value will not be recovered, the amount recorded for the
asset is reduced to estimated fair value. (See Note 3.)
Voyage Revenue Recognition: Voyage revenue and variable costs and expenses
associated with voyages are included in income at the time each voyage leg
commences. This method of accounting does not differ materially from other
acceptable accounting methods. Freight rates are provided in tariffs filed
with the Surface Transportation Board of the U.S. Department of Transportation.
Real Estate Sales Revenue Recognition: Sales are recorded when the risks and
benefits of ownership have passed to the buyers (generally on closing dates),
adequate down payments have been received, and collection of remaining balances
is reasonably assured.
Sugar and Coffee Revenue Recognition: Revenue from bulk raw sugar sales is
recorded when delivered to the cooperative of Hawaiian producers, based on the
estimated net return to producers in accordance with contractual agreements.
Revenue from coffee is recorded when the title to the product and risk of loss
passes to third parties and when collection is reasonably assured.
Non-voyage Ocean Transportation Costs: Vessel depreciation, charter hire,
terminal operating overhead and general and administrative expenses are charged
to expense as incurred.
Agricultural Costs: Costs of growing and harvesting sugar cane are charged to
the cost of production in the year incurred and to cost of sales as raw sugar
is delivered to the cooperative of Hawaiian producers as allowed in Statement
of Position No. 85-3. Costs of growing coffee are charged to inventory in the
year incurred and to cost of sales as coffee is sold.
Employee Benefit Plans: Certain ocean transportation subsidiaries are members
of the Pacific Maritime Association (PMA) and the Hawaii Stevedoring Industry
Committee, which negotiate multi-employer pension plans covering certain
shoreside bargaining unit personnel. The subsidiaries directly negotiate
multi-employer pension plans covering other bargaining unit personnel. Pension
costs are accrued in accordance with contribution rates established by the PMA,
the parties to a plan or the trustees of a plan. Several trusteed, non-
contributory, single-employer defined benefit plans, a profit sharing plan and
an individual deferred contribution plan cover substantially all other
employees.
Stock-based Compensation: In 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting
for Stock-Based Compensation." As allowed by that standard, the Company has
elected to continue to apply the principles of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," as discussed in
Note 10.
Income Taxes: Deferred tax assets and liabilities are established for
temporary differences between the way certain income and expense items are
reported for financial reporting and tax purposes. Deferred tax assets and
liabilities are adjusted to the extent necessary to reflect tax rates expected
to be in effect when the temporary differences reverse. A valuation allowance
is established for deferred tax assets for which realization is not likely.
Basic and Diluted Earnings per Share of Common Stock: Basic Earnings per Share
is determined by dividing Net Income by the weighted-average common shares
outstanding during the year. The impact on Earnings per Share of the Company's
stock options is immaterial; consequently, Diluted Earnings per Share is
generally the same amount as Basic Earnings per Share.
Comprehensive Income: Comprehensive Income includes changes from either
recognized transactions or other economic events, excluding capital stock
transactions, which impact Shareholders' Equity. For the Company, the only
difference between Net Income and Comprehensive Income is the unrealized
holding gains on securities available for sale. Comprehensive Income is not
used in the calculation of Earnings per Share.
Environmental Costs: Environmental expenditures that relate to current
operations are expensed or capitalized, as appropriate. Expenditures that
relate to an existing condition caused by past operations or events, and which
do not contribute to current or future revenue generation, are charged to
expense. Liabilities are recorded when environmental assessments or remedial
efforts are probable and the costs can be estimated reasonably.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Future actual amounts could differ from those
estimates.
Impact of Newly Issued Accounting Standards: SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended, establishes the
accounting and reporting standards for derivative instruments and hedging
activities. Adoption of the standard was required on January 1, 2001. The
Company has reviewed its contracts and agreements, and has determined that
adoption of this standard will not have a material effect on the financial
statements.
The Company has adopted SFAS No. 140, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishment of Liabilities." SFAS No. 140 provides
standards for transfers and servicing of financial assets and extinguishments
of liabilities using a financial-components approach that focuses on control.
While application of this standard is prospective, no significant changes in
the Company's accounting practices are expected to result from its adoption.
Reclassifications: Certain amounts in the 1999 and 1998 financial statements
have been reclassified to conform with the 2000 presentation.
2. CHANGE IN ACCOUNTING METHODS
2000 - Change in Accounting Method for Vessel Drydocking Costs: The Company
changed its method of accounting for vessel drydocking costs, as of January 1,
2000, from the accrual method to the deferral method. Drydocking costs had
been accrued as a liability and an expense on an estimated basis, in advance
of the next scheduled drydocking. Subsequent payments for drydocking were
charged against the accrued liability. Under the deferral method, actual
drydocking costs are capitalized when incurred and amortized over the period
benefited; generally, this is the period between scheduled drydockings. This
method eliminates the uncertainty of estimating these costs. This change was
made to conform with prevailing industry accounting practices. The cumulative
effect of this accounting change, as of January 1, 2000, is shown separately in
the Statements of Income and resulted in net income of $12,250,000 (net of
income tax expense of $7,668,000) or $0.29 per basic share.
The effect of this change in accounting method on the balance sheets was to
increase other assets by $4,765,000, eliminate drydocking reserves of
$15,153,000, increase deferred taxes by $7,668,000, and increase total
shareholders' equity by $12,250,000. Had this change been applied
retroactively, the impact on net income for 1999 and 1998 would not have been
materially different from reported net income.
2000 - Change in Accounting for Certain Revenues and Expenses: The Company
changed its method of presentation for certain freight services that are
performed by third parties and billed by the Company to its customers. The
expenses and related revenue for these services were previously reported on a
net basis and were not reflected on the Statements of Income. Accordingly,
operating revenue and expenses have been increased by $38,059,000, $31,874,000
and $25,377,000 for 2000, 1999 and 1998, respectively.
The Company also changed its method of presentation for common area maintenance
(CAM) costs. These costs, which are incurred by the Company but which are
charged to tenants under various lease arrangements, were previously netted
against Property Leasing Revenue. The Company now records CAM amounts in Costs
of Leasing Services in the Statements of Income. Accordingly, Property Leasing
Revenue and Costs of Leasing Services have been increased by $11,246,000,
$8,852,000 and $6,478,000 for 2000, 1999 and 1998, respectively.
These two changes were in response to the Securities and Exchange Commission's
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements," which provides guidance about the classification, on a gross
basis, of revenues and expenses. These changes had no effect on earnings or
segment operating profit. Revenue on pages 26 and 32 for Ocean Transportation
and Property Leasing have been restated to reflect this change.
1998 - Change in Accounting Method for Insurance-related Assessments: The
Company self-insures a portion of its federal workers' compensation liability.
As such, the Company utilized the U.S. Department of Labor (DOL) second injury
fund, as authorized by Section 8(f) of the U.S. Longshore and Harborworkers'
Compensation Act. Under this Act, the DOL annually assesses self-insurers for
their share of the related costs. Through 1997, these assessments were
recorded as an expense in the years the amounts were assessed and paid.
Effective January 1, 1998, the Company adopted the provisions of the American
Institute of Certified Public Accountants Statement of Position 97-3,
"Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments." This statement requires that the Company record, as a liability,
the expected cost of future assessments relating to existing compensation
claims made prior to the end of the fiscal year. In adopting this statement,
the Company recorded a one-time, non-cash charge to 1998 earnings of $5,801,000
(net of income tax benefit of $3,481,000) or $0.13 per basic share. The effect
of the change on operating costs was not significant for the current or prior
years. The discount rate, discounted liability, and undiscounted liability at
December 31, 2000, 1999 and 1998 were as follows (amounts in thousands):
---------------------------------------------------------
2000 1999 1998
---------------------------------------------------------
Discount Rate 6% 6.76% 5.43%
Discounted Liability $ 9,956 $ 9,862 $ 9,282
Undiscounted Liability $14,753 $15,364 $13,869
---------------------------------------------------------
3. WRITE-DOWN OF LONG-LIVED ASSETS
1999 - The Company began growing coffee in Hawaii in 1987 as an alternative
crop to sugar cane. Since inception, the Company's coffee operation
continually has generated operating losses and negative cash flows. During the
second half of 1999, the Company significantly reduced the coffee workforce and
changed its coffee marketing and selling plans. To exacerbate the problem,
coffee commodity prices dropped significantly in 1999 due to an oversupply of
coffee in the marketplace. Because of continuing cash-flow losses, the ongoing
viability of the coffee operation was evaluated again. As a result, the
Company determined that the estimated future cash flows of the coffee operation
were less than the carrying value of its productive assets, consisting mainly
of orchards and field and processing equipment. Accordingly, a $15,410,000
(pre-tax) charge was recorded to write down these productive assets to their
fair value (i.e., present value of estimated future cash flows).
1998 - The Company changed the strategic direction of its 1,045-acre Kukui'Ula
real estate development, from a single master-planned residential community to
a series of individual subdivisions with fewer units, as a result of continued
weaknesses in the State's and Kauai's economy and real estate markets. As a
result, the Company determined that its investment in a waste water treatment
plant (WWTP) could not be recovered through the WWTP's future cash flows;
accordingly, the costs of the WWTP were reduced by $15,900,000, to the plant's
fair value, which was based on the present value of estimated future cash
flows. Under the original higher-density Kukui'Ula development plan, the cost
of the WWTP would have been recoverable from its future cash flows. The
changes in the development plan also resulted in the write-off of $4,316,000
for design and study costs, which were determined to have no future economic
benefit. The remaining carrying cost of the Kukui'Ula project is approximately
$29,650,000 and, based on current development plans, the Company has determined
that this amount is recoverable from the project's future cash flows.
4. INVESTMENTS AND PARTIAL SALE OF SUBSIDIARY
At December 31, 2000 and 1999, investments consisted principally of marketable
equity securities, equity in affiliated companies, limited partnership
interests and purchase-money mortgages, as follows (in thousands):
- ---------------------------------------------------------------------------
2000 1999
- ---------------------------------------------------------------------------
Marketable equity securities $108,069 $ 88,485
Equity in affiliated companies:
California and Hawaiian Sugar Company, Inc. (C&H) 41,705 37,591
SSA Terminals, LLC (SSAT) 21,867 18,278
Sea Star Line, LLC (Sea Star) 7,586 8,429
Other 300 300
Limited partnership interests, purchase-money
mortgages and other 3,614 5,643
- ---------------------------------------------------------------------------
Total Investments $183,141 $158,726
===========================================================================
Marketable Equity Securities: The marketable equity securities are classified
as "available for sale" and are stated at quoted market values as traded on
national exchanges. The unrealized holding gains on these securities, net of
deferred income taxes, have been recorded as a separate component of
Shareholders' Equity and Comprehensive Income.
The components of the net unrealized holding gains at December 31, 2000 and
1999 were as follows (in thousands):
- ---------------------------------------------------------------------------
2000 1999
- ---------------------------------------------------------------------------
Market value $108,069 $ 88,485
Less historical cost 9,761 10,173
- ---------------------------------------------------------------------------
Unrealized holding gains 98,308 78,312
Less deferred income taxes 36,371 28,851
- ---------------------------------------------------------------------------
Net unrealized holding gains $ 61,937 $ 49,461
===========================================================================
Equity in Affiliated Companies: On December 24, 1998, the Company recognized a
loss of $19,756,000 on the sale of a majority of its equity interest in its
sugar refining and marketing unit, C&H. The Company received approximately
$45,000,000 in cash, after the repayment of certain C&H indebtedness,
$25,000,000 in senior preferred stock, and $9,600,000 in junior preferred
stock. The Company retained an approximately 36-percent common stock interest
in the recapitalized C&H. The Company continues to hold all of C&H's senior
preferred stock and 40 percent of C&H's junior preferred stock. Dividends on
the senior and junior preferred stocks are cumulative. Through December 2003,
dividends on the senior preferred stock may be paid either in cash or by
issuance of additional shares of senior preferred stock. Shares of senior
preferred stock received as dividends are valued at their estimated realizable
values. C&H must redeem from the Company, at one thousand dollars per share,
the outstanding senior preferred stock in December 2009 and outstanding junior
preferred stock in December 2010. C&H is included in the consolidated results
of the Company up to the date of the sale. The Company accounts for its
investment in C&H under the equity method. Financial information for C&H as of
and for the years ended December 31, 2000 and 1999 follows (in thousands):
- ---------------------------------------------------------------------------
CONDENSED BALANCE SHEETS 2000 1999
- ---------------------------------------------------------------------------
ASSETS:
Current $117,687 $ 82,707
Property and other 133,056 136,941
- ---------------------------------------------------------------------------
Total $250,743 $219,648
===========================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current $ 62,702 $ 39,044
Long-term debt and other 120,797 117,064
Shareholders' equity, including preferred stock 67,244 63,540
- ---------------------------------------------------------------------------
Total $250,743 $219,648
===========================================================================
- ---------------------------------------------------------------------------
CONDENSED STATEMENTS OF INCOME 2000 1999
- ---------------------------------------------------------------------------
Revenue $413,250 $470,838
Cost and Expenses 409,545 463,454
- ---------------------------------------------------------------------------
Net Income $ 3,705 $ 7,384
===========================================================================
The Company has an investment in a limited liability corporation (LLC) with
Saltchuk Resources, Inc. and International Shipping Agency, Inc., named Sea
Star Line, LLC, which operates an ocean transportation service between Florida
and Puerto Rico. The Company charters two vessels to Sea Star Line, LLC. This
investment represents a minority interest and is accounted for under the equity
method.
The Company is part owner of an LLC with Stevedoring Services of America, named
SSA Terminals, LLC, which provides stevedoring and terminal services at six
terminals in three West Coast ports to the Company and other shipping lines.
In 1999, each company contributed the assets of California and Seattle,
Washington terminals to form the LLC. This investment represents a minority
interest and is accounted for under the equity method.
The carrying amounts of investments in unconsolidated affiliated companies
approximated their fair values at December 31, 2000 and 1999.
Limited Partnership Interests and Purchase-money Mortgages: The investments in
limited partnerships are recorded at the lower of cost or fair value and
purchase-money mortgages are recorded at cost. The purchase-money mortgages
are intended to be held to maturity. The values of the investments in limited
partnerships are assessed annually.
See Note 5 for a discussion of fair values of investments in the Capital
Construction Fund.
5. CAPITAL CONSTRUCTION FUND
A subsidiary is party to an agreement with the United States government which
established a Capital Construction Fund (CCF) under provisions of the Merchant
Marine Act, 1936, as amended. The agreement has program objectives for the
acquisition, construction or reconstruction of vessels and for repayment of
existing vessel indebtedness. Deposits to the CCF are limited by certain
applicable earnings. Such deposits are federal income tax deductions in the
year made; however, they are taxable, with interest payable from the year of
deposit, if withdrawn for general corporate purposes or other non-qualified
purposes, or upon termination of the agreement. Qualified withdrawals for
investment in vessels and certain related equipment do not give rise to a
current tax liability, but reduce the depreciable bases of the vessels or other
assets for income tax purposes.
Amounts deposited into the CCF are a preference item for calculating federal
alternative minimum taxable income. Deposits not committed for qualified
purposes within 25 years from the date of deposit, will be treated as non-
qualified withdrawals over the subsequent five years. As of December 31, 2000,
the oldest CCF deposits date from 1994. Management believes that all amounts
on deposit in the CCF at the end of 2000 will be used or committed for
qualified purposes prior to the expiration of the applicable 25-year periods.
Under the terms of the CCF agreement, the subsidiary may designate certain
qualified earnings as "accrued deposits" or may designate, as obligations of
the CCF, qualified withdrawals to reimburse qualified expenditures initially
made with operating funds. Such accrued deposits to and withdrawals from the
CCF are reflected on the Balance Sheets either as obligations of the Company's
current assets or as receivables from the CCF.
The Company has classified its investments in the CCF as "held-to-maturity"
and, accordingly, has not reflected temporary unrealized market gains and
losses on the Balance Sheets or Statements of Income. The long-term nature of
the CCF program supports the Company's intention to hold these investments to
maturity.
At December 31, 2000 and 1999, the balances on deposit in the CCF are
summarized as follows (in thousands):
- ---------------------------------------------------------------------------------------------------------
2000 1999
--------------------------------- ----------------------------------
Amortized Fair Unrealized Amortized Fair Unrealized
Cost Value Gain (Loss) Cost Value Loss
- ---------------------------------------------------------------------------------------------------------
Mortgage-backed securities $ 32,302 $ 32,281 $ (21) $ 37,086 $ 35,843 $ (1,243)
Cash and cash equivalents 113,583 113,871 288 105,153 104,958 (195)
Accrued deposits 4,520 4,520 -- 3,152 3,152
- ---------------------------------------------------------------------------------------------------------
Total $150,405 $150,672 $ 267 $145,391 $143,953 $ (1,438)
=========================================================================================================
Fair value of the mortgage-backed securities was determined by an outside
investment management company, based on experience trading identical or
substantially similar securities. No central exchange exists for these
securities; they are traded over-the-counter. The Company earned $2,654,000 in
2000, $3,152,000 in 1999, and $4,514,000 in 1998 on its investments in
mortgage-backed securities. The fair values of other CCF investments are based
on quoted market prices. These other investments mature no later than December
2, 2002. Three securities classified as "held-to-maturity" were sold during
2000 for a combined loss of $48,400. These securities no longer met authorized
credit requirements. No securities classified as "held-to-maturity" were sold
in 1999.
6. NOTES PAYABLE AND LONG-TERM DEBT
At December 31, 2000 and 1999, long-term debt consisted of the following (in
thousands):
- -------------------------------------------------------------------
2000 1999
- -------------------------------------------------------------------
Commercial paper, 2000 high 6.79%, low 5.66% $ 99,766 $ 99,570
Bank variable rate loans, due after 2000,
2000 high 7.53%, low 6.06% 136,500 78,000
Term loans:
7.29%, payable through 2007 52,500 60,000
7.42%, payable through 2009 20,000 --
7.43%, payable through 2007 15,000 15,000
7.57%, payable through 2009 15,000 15,000
7.55%, payable through 2009 15,000 15,000
7.65%, payable through 2001 7,500 10,000
8%, repaid in 2000 -- 7,500
- -------------------------------------------------------------------
Total 361,266 300,070
Less current portion 30,500 22,500
- -------------------------------------------------------------------
Long-term debt $330,766 $277,570
===================================================================
Commercial Paper: At December 31, 2000, $99,766,000 of commercial paper notes
was outstanding under a commercial paper program used by a subsidiary to
finance the construction of a vessel. Maturities ranged from two to 24 days.
The borrowings outstanding under this program are classified as long-term
because the subsidiary intends to continue the program and, eventually, to
repay the borrowings with qualified withdrawals from the Capital Construction
Fund.
Variable Rate Loans: The Company has a revolving credit and term loan agree-
ment with four commercial banks, whereby it may borrow up to $140,000,000 under
revolving loans to November 30, 2001, at varying rates of interest. Any
revolving loan outstanding on that date may be converted into a term loan,
which would be payable in 12 equal quarterly installments. The agreement
contains certain restrictive covenants, the most significant of which requires
the maintenance of an interest coverage ratio of 2:1. At December 31, 2000 and
1999, $113,500,000 and $60,000,000, respectively, were outstanding under this
agreement.
The Company has an uncommitted $70,000,000 short-term revolving credit
agreement with a commercial bank. This facility was increased from $45,000,000
during 2000. The agreement extends to November 30, 2001, but may be canceled
by the bank or the Company at any time. The amount which the Company may draw
under the facility is reduced by the amount drawn against the bank under the
previously referenced $140,000,000 multi-bank facility, in which it is a
participant, and by letters of credit issued under the $70,000,000 uncommitted
facility. At December 31, 2000 and 1999, $7,500,000 and $13,000,000,
respectively, were outstanding under this agreement. Under the borrowing
formula for this facility, the Company could have borrowed an additional
$22,700,000 at December 31, 2000.
The Company has a $50,000,000 one-year revolving credit agreement with a
commercial bank containing a two-year term option. At December 31, 2000 and
1999, $15,500,000 and $5,000,000, respectively, were outstanding under this
agreement.
The Company has a $25,000,000 one-year revolving credit agreement with a
commercial bank which serves as a commercial paper liquidity back-up line. At
December 31, 2000 and 1999, no amounts were outstanding under this agreement.
In 1999, the Company had an uncommitted $25,000,000 revolving credit agreement
with a commercial bank. That agreement expired December 31, 1999 and was
replaced in January 2000 with a comparable uncommitted $25,000,000 revolving
credit agreement with another commercial bank.
Other Debt Agreements: The Company has a private shelf agreement for a total
of $65,000,000. At December 31, 2000 this full amount had been drawn. At
December 31, 1999, $20,000,000 had not been drawn on the facility. The amounts
drawn on the agreement are included in term loans.
Long-term Debt Maturities: At December 31, 2000, maturities and planned
prepayments of all long-term debt during the next five years is $30,500,000 for
2001, $7,500,000 for 2002, $9,643,000 for 2003, $12,500,000 for 2004 and
$17,500,000 for 2005.
7. LEASES
The Company as Lessee: Principal operating leases include office and terminal
facilities, containers and equipment, leased for periods which expire between
2002 and 2052. Management expects that, in the normal course of business, most
operating leases will be renewed or replaced by other similar leases.
Rental expense under operating leases totaled $19,741,000, $28,343,000 and
$45,519,000 for the years ended December 31, 2000, 1999 and 1998, respectively.
Future minimum payments under operating leases as of December 31, 2000 were as
follows (in thousands):
---------------------------------------------------------------
Operating
Leases
---------------------------------------------------------------
2001 $ 11,701
2002 11,884
2003 11,882
2004 11,865
2005 8,759
Thereafter 99,567
---------------------------------------------------------------
Total minimum lease payments $155,658
===============================================================
The Company is obligated to pay terminal facility rent equal to the principal
and interest on Special Facility Revenue Bonds issued by the Department of
Transportation of the State of Hawaii. Interest on the bonds is payable semi-
annually and principal, in the amount of $16,500,000, is due in 2013. An
accrued liability of $9,887,000 and $9,344,000 at December 31, 2000 and 1999,
respectively, included in other long-term liabilities, provides for a pro-rata
portion of the principal due on these bonds.
The Company as Lessor: The Company leases land, buildings, land improvements,
and five vessels under operating leases. Two of the vessels are chartered-out
to an unconsolidated affiliate. The historical cost of and accumulated
depreciation on leased property at December 31, 2000 and 1999 were as follows
(in thousands):
---------------------------------------------------------------
2000 1999
---------------------------------------------------------------
Leased property $621,860 $571,640
Less accumulated amortization 154,467 129,465
---------------------------------------------------------------
Property under operating leases - net $467,393 $442,175
===============================================================
Total rental income under these operating leases for the three years ended
December 31, 2000 was as follows (in thousands):
- ---------------------------------------------------------------------------
2000 1999 1998
- ---------------------------------------------------------------------------
Minimum rentals $ 98,607 $ 93,275 $ 79,268
Contingent rentals (based on sales volume) 1,917 1,244 1,079
- ---------------------------------------------------------------------------
Total $100,524 $ 94,519 $ 80,347
===========================================================================
Future minimum rental income on non-cancelable leases at December 31, 2000 was
as follows (in thousands):
--------------------------------------------------------------
Operating
Leases
--------------------------------------------------------------
2001 $ 94,657
2002 90,913
2003 87,132
2004 81,211
2005 76,138
Thereafter 139,925
--------------------------------------------------------------
Total $569,976
==============================================================
8. EMPLOYEE BENEFIT PLANS
The Company has funded single-employer defined benefit pension plans which
cover substantially all non-bargaining unit employees.
In addition, the Company has plans that provide certain retiree health care and
life insurance benefits to substantially all salaried and to certain hourly
employees. Employees are generally eligible for such benefits upon retirement
and completion of a specified number of years of credited service. The Company
does not pre-fund these benefits and has the right to modify or terminate
certain of these plans in the future. Certain groups of retirees pay a portion
of the benefit costs.
The status of the funded defined benefit pension plans and the unfunded
accumulated post-retirement benefit plans, at December 31, 2000, 1999 and 1998,
is shown in Table 1 (page 47).
The net periodic benefit cost for the defined benefit pension plans and the
post-retirement health care and life insurance benefit plans during 2000, 1999
and 1998 is summarized in Table 2 (page 48).
As described in Note 4, the Company sold a majority of its interest in C&H
during 1998. The impact of this transaction on the benefit obligation and the
plan assets is noted in Table 1. At the time of the transaction, C&H had
recorded in its financial statements net obligations of $12,300,000 and
$46,500,000 for its pension and post-retirement benefit plans, respectively.
The assumptions used to determine the benefit information were as follows:
------------------------------------------------------------------------------------------------
Pension Benefits Other Post-retirement Benefits
------------------------ ------------------------------
2000 1999 1998 2000 1999 1998
------------------------------------------------------------------------------------------------
Discounted rate 7.75% 7.75% 6.75% 7.75% 7.75% 6.75%
Expected return on plan assets 9.00% 9.00% 9.00% -- -- --
Rate of compensation increase 4.25% 4.25% 4.25% 4.25% 4.25% 4.25%
For post-retirement benefit measurement purposes, a ten percent annual rate of
increase in the per capita cost of covered health care benefits was assumed
through 2001. The rate was assumed to decrease to five percent for 2002 and
remain at that level thereafter. Unrecognized gains and losses of the post-
retirement benefit plans are amortized over five years.
If the assumed health care cost trend rate were increased or decreased by one
percentage point, the accumulated post-retirement benefit obligation, as of
December 31, 2000, 1999 and 1998, and the net periodic post-retirement benefit
cost for 2000, 1999 and 1998, would have increased or decreased as follows (in
thousands):
- -------------------------------------------------------------------------------------------------------
Other Post-retirement Benefits
One Percentage Point
-------------------------------------------------------------------
Increase Decrease
----------------------------- -------------------------------
2000 1999 1998 2000 1999 1998
- -------------------------------------------------------------------------------------------------------
Effect on total of service and
interest cost components $ 196 $ 416 $ 689 $ (226) $ (347) $ (583)
Effect on post-retirement
benefit obligation $ 1,664 $ 4,062 $ 5,157 $(2,278) $(3,388) $(4,387)
The assets of the defined benefit pension plans consist principally of listed
stocks and bonds. Contributions are determined annually for each plan by the
Company's pension administrative committee, based upon the actuarially
determined minimum required contribution under the Employee Retirement Income
Security Act of 1974 (ERISA), as amended, and the maximum deductible
contribution allowed for tax purposes. For the plans covering employees who
are members of collective bargaining units, the benefit formulas are determined
according to the collective bargaining agreements, either using career average
pay as the base or a flat dollar amount per year of service. The benefit
formulas for the remaining defined benefit plans are based on final average
pay.
The Company has non-qualified supplemental pension plans covering certain
employees and retirees, which provide for incremental pension payments from the
Company's general funds, so that total pension benefits would be substantially
equal to amounts that would have been payable from the Company's qualified
pension plans if it were not for limitations imposed by income tax regulations.
The obligation, included with other non-current liabilities, relating to these
unfunded plans, totaled $12,597,000 and $10,801,000 at December 31, 2000 and
1999, respectively. The annual expense associated with the non-qualified plans
was not significant.
Total contributions to the multi-employer pension plans covering personnel in
shoreside and seagoing bargaining units were $3,027,000 in 2000, $4,367,000 in
1999 and $5,633,000 in 1998. Union collective bargaining agreements provide
that total employer contributions during the terms of the agreements must be
sufficient to meet the normal costs and amortization payments required to be
funded during those periods. Contributions are generally based on union labor
paid or cargo volume. A portion of such contributions is for unfunded accrued
actuarial liabilities of the plans being funded over periods of 25 to 40 years,
which began between 1967 and 1976.
The multi-employer plans are subject to the plan termination insurance
provisions of ERISA and are paying premiums to the Pension Benefit Guarantee
Corporation (PBGC). The statutes provide that an employer who withdraws from,
or significantly reduces its contribution obligation to, a multi-employer plan
generally will be required to continue funding its proportional share of the
plan's unfunded vested benefits.
Under special rules approved by the PBGC and adopted by the Pacific Coast
longshore plan in 1984, the Company could cease Pacific Coast cargo-handling
operations permanently and stop contributing to the plan without any withdrawal
liability, provided that the plan meets certain funding obligations as defined
in the plan. The estimated withdrawal liabilities under the Hawaii longshore
plan and the seagoing plans aggregated approximately $971,000 as of December
31, 2000, based on estimates by plan actuaries. Management has no present
intention of withdrawing from and does not anticipate termination of any of the
aforementioned plans.
Table 1 (in thousands)
Pension Benefits Other Post-retirement Benefits
----------------------------------- -----------------------------------
2000 1999 1998 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at
beginning of year $ 218,189 $ 229,573 $ 354,883 $ 47,836 $ 55,298 $ 91,112
Service cost 4,877 5,705 7,182 504 892 1,154
Interest cost 16,882 15,013 25,024 2,939 3,460 5,474
Plan participants' contributions -- -- -- 1,165 1,423 1,615
Actuarial (gain) loss (2,016) (25,177) 20,682 (2,652) (8,198) (8,482)
Sale of subsidiary -- -- (158,758) -- -- (29,615)
Benefits paid (13,146) (12,109) (22,631) (3,635) (4,320) (6,326)
Amendments 1,137 10,129 3,191 -- -- 366
Settlements 8,602 (1,304) -- (8,247) -- --
Curtailments -- (3,823) -- -- (719) --
Special or contractual
termination benefits 475 182 -- -- -- --
- -------------------------------------------------------------------------------------------------------------
Benefit obligation at
end of year 235,000 218,189 229,573 37,910 47,836 55,298
- -------------------------------------------------------------------------------------------------------------
CHANGE IN PLAN ASSETS
Fair value of plan assets at
beginning of year 381,090 338,267 443,249 -- -- --
Actual return on plan assets (3,645) 56,236 72,646 -- -- --
Settlements -- (1,304) -- -- -- --
Sale of subsidiary -- -- (154,997) -- -- --
Benefits paid (13,146) (12,109) (22,631) -- -- --
- -------------------------------------------------------------------------------------------------------------
Fair value of plan assets
at end of year 364,299 381,090 338,267 -- -- --
- -------------------------------------------------------------------------------------------------------------
ACCRUED ASSET OBLIGATION
Plan assets less benefit
obligation 129,299 162,901 108,694 (37,910) (47,836) (55,298)
Unrecognized net actuarial gain (91,307) (135,670) (88,373) (9,134) (15,841) (10,104)
Unrecognized transition asset (63) (183) (876) -- -- --
Unrecognized prior
service cost 12,547 13,939 4,767 79 32 358
- -------------------------------------------------------------------------------------------------------------
Accrued asset (obligation) $ 50,476 $ 40,987 $ 24,212 $ (46,965) $ (63,645) $(65,044)
=============================================================================================================
_____________________________________________________________________________________________________________
Table 2 (in thousands)
- -------------------------------------------------------------------------------------------------------------
Pension Benefits Other Post-retirement Benefits
----------------------------------- -----------------------------------
2000 1999 1998 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------
COMPONENTS OF NET PERIODIC
BENEFIT COST/(INCOME)
Service cost $ 4,877 $ 5,705 $ 7,182 $ 504 $ 892 $ 1,154
Interest cost 16,882 15,013 25,024 2,939 3,460 5,474
Expected return on plan
assets (33,651) (29,922) (38,862) -- -- --
Recognition of net gain (9,083) (4,251) (4,128) (2,872) (2,644) (7,221)
Amortization of prior
service cost 2,528 905 1,105 7 8 (359)
Amortization of unrecognized
transition asset (119) (713) (992) -- -- --
Recognition of settlement
(gain)/loss 8,602 53 -- (14,800) -- --
Recognition of curtailment gain -- (3,641) -- -- (292) --
- --------------------------------------------------------------------------------------------------------------
Net periodic benefit
cost/(income) $ (9,964) $ (16,957) $ (10,671) $ (14,222) $ 1,424 $ (952)
==============================================================================================================
Cost of termination benefits
recognized $ 475 $ 182 $ -- $ -- $ -- $ --
=============================================================================================================
9. INCOME TAXES
The income tax expense for the three years ended December 31, 2000 consisted of
the following (in thousands):
- ----------------------------------------------------------------------------
2000 1999 1998
- ----------------------------------------------------------------------------
Current:
Federal $ 26,186 $ 21,035 $ 28,877
State 847 3,461 3,723
- ----------------------------------------------------------------------------
Current 27,033 24,496 32,600
Deferred 17,358 8,465 (8,248)
- ----------------------------------------------------------------------------
Income tax expense $ 44,391 $ 32,961 $ 24,352
============================================================================
Income tax expense for the three years ended December 31, 2000 differs from
amounts computed by applying the statutory federal rate to pre-tax income, for
the following reasons (in thousands):
- ----------------------------------------------------------------------------
2000 1999 1998
- ----------------------------------------------------------------------------
Computed income tax expense $ 42,950 $ 33,439 $ 19,353
State tax on income, less applicable
federal tax 2,968 3,790 1,824
Low-income housing credits (1,124) (1,161) (1,204)
Dividend exclusion (954) (860) (931)
Prior years' tax settlement -- (2,815) --
Bases differences in net assets acquired -- -- 3,114
Other - net 551 568 2,196
- ----------------------------------------------------------------------------
Income tax expense $ 44,391 $ 32,961 $ 24,352
============================================================================
The tax effects of temporary differences that give rise to significant portions
of the net deferred tax liability at December 31, 2000 and 1999 were as follows
(in thousands):
- ----------------------------------------------------------------------------
2000 1999
- ----------------------------------------------------------------------------
Property basis and depreciation $ 179,510 $ 187,301
Tax-deferred gains on real estate transactions 104,033 93,966
Capital Construction Fund 58,704 52,374
Unrealized holding gains on securities 36,371 28,851
Pensions 19,447 15,913
Post-retirement benefits (17,900) (24,662)
Insurance reserves (10,740) (10,996)
Other - net 4,528 (653)
- ----------------------------------------------------------------------------
Total $ 373,953 $ 342,094
============================================================================
The Internal Revenue Service (IRS) completed its examination of the Company's
tax returns through 1997. In 1999, the Company reached an agreement with the
IRS settling certain valuation issues relating to the Company's tax returns
for 1992 through 1995. This agreement resulted in a one-time reduction of
income tax expense of $2,815,000, due to the reversal of previously accrued
income tax liabilities. The IRS is currently auditing the Company's tax
returns for 1998 and 1999. Management believes that the outcome of the current
audit will not have a material effect on the Company's financial position or
results of operations.
10. STOCK OPTIONS AND CAPITAL STOCK
Employee Stock Option Plans: The Company has two stock option plans under
which key employees are granted options to purchase shares of the Company's
common stock. There are no longer any outstanding options under a third plan,
which terminated in 1993.
Adopted in 1998, the Company's 1998 Plan provides for the issuance of non-
qualified stock options to employees of the Company. Under the 1998 Plan,
option prices may not be less than the fair market value of the Company's
common stock on the dates of grant, and the options become exercisable over
periods determined, at the dates of grant, by the committee that administers
the plan (generally ratably over three years), and generally expire ten years
from the date of grant. Payments for options exercised may be made in cash or
in shares of the Company's stock. If an option to purchase shares is exercised
within five years of the date of grant and if payment is made in shares of the
Company's stock, the option holder may receive, under a reload feature, a new
stock option grant for such number of shares as is equal to the number
surrendered, with an option price not less than the greater of the fair market
value of the Company's stock on the date of exercise or one and one-half times
the original option price.
Adopted in 1989, the 1989 Plan is substantially the same as the 1998 Plan,
except that each option is generally exercisable in-full one year after the
date granted. The 1989 Plan terminated in January 1999, but options granted
through 1997 remain exercisable.
The 1998 and 1989 Plans also permit the issuance of shares of the Company's
common stock as a reward for past service rendered to the Company or one of its
subsidiaries or as an incentive for future service with such entities. The
recipients' interest in such shares may be vested fully upon issuance or may
vest in one or more installments, upon such terms and conditions as are
determined by the committee which administers the plans. The number of
incentive shares issued during 2000 or outstanding at the end of the year was
not material.
Director Stock Option Plans: The Company has two Directors' stock option
plans. Under the 1998 Directors' Plan, each non-employee Director of the
Company, elected at an Annual Meeting of Shareholders, is automatically
granted, on the date of each such Annual Meeting, an option to purchase 3,000
shares of the Company's common stock at the fair market value of the shares on
the date of grant. Each option to purchase shares becomes exercisable in three
successive annual installments of 1,000 shares beginning one year after the
date granted.
The 1989 Directors' Plan is substantially the same as the 1998 Directors' Plan,
except that each option generally becomes exercisable in-full one year after
the date granted. This plan terminated in January 1999, but options granted
through termination remain exercisable.
Changes in shares and the weighted average exercise prices for the three years
ended December 31, 2000, were as follows (shares in thousands):
- -----------------------------------------------------------------------------------------------------------
Employee Plans Directors' Plans
------------------------ --------------------------
Weighted
1998 1989 Average
1998 1989 1983 Directors' Directors' Total Exercise
Plan Plan Plan Plan Plan Shares Price
- -----------------------------------------------------------------------------------------------------------
December 31,1997 -- 2,862 161 -- 183 3,206 $26.54
Granted 100 485 -- -- 21 606 27.10
Exercised -- (66) -- -- -- (66) 23.91
Canceled -- (18) -- -- -- (18) 28.66
- -----------------------------------------------------------------------------------------------------------
December 31, 1998 100 3,263 161 -- 204 3,728 26.69
Granted 515 -- -- 24 -- 539 20.65
Exercised -- (4) -- -- -- (4) 22.02
Canceled (2) (373) (161) -- (15) (551) 29.16
- ----------------------------------------------------------------------------------------------------------
December 31, 1999 613 2,886 -- 24 189 3,712 25.43
Granted 511 -- -- 24 -- 535 21.70
Exercised (7) (139) -- -- -- (146) 23.79
Canceled (31) (340) -- -- (21) (392) 29.49
- -----------------------------------------------------------------------------------------------------------
December 31, 2000 1,086 2,407 -- 48 168 3,709 $24.52
===========================================================================================================
Exercisable 256 2,406 -- 8 168 2,838 $25.52
===========================================================================================================
As of December 31, 2000, the Company had reserved 1,089,000 shares of its
common stock for the exercise of options. Additional information about
stock options outstanding as of 2000 year-end is summarized below
(shares in thousands):
- ----------------------------------------------------------------------------------------------
Weighted Weighted
Shares Average Weighted Shares Average
Range of Outstanding Remaining Average Exercisable Price of
Exercise as of Contractual Exercise as of Exercisable
Price 12/31/2000 Years Price 12/31/2000 Options
- ----------------------------------------------------------------------------------------------
$ 0.00 5 4.00 $ 0.00 -- $ 0.00
$20.01 - 22.00 1,254 7.30 $21.32 428 $21.41
$22.01 - 24.00 397 6.00 $23.10 357 $23.04
$24.01 - 26.00 572 1.70 $24.39 572 $24.39
$26.01 - 28.00 1,058 4.70 $27.03 1,058 $27.03
$28.01 - 30.00 325 1.50 $28.35 325 $28.35
$30.01 - 34.88 98 4.50 $33.51 98 $33.51
- ----------------------------------------------------------------------------------------------
$ 0.00 - 34.88 3,709 5.00 $24.52 2,838 $25.52
==============================================================================================
ACCOUNTING METHOD FOR STOCK-BASED COMPENSATION: The Company applies Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees,"
and related Interpretations, to account for its stock-based compensation plans.
Accordingly, no compensation cost is recognized in the Company's income
statement for stock option plans at the time grants are awarded. Pro forma
information regarding net income and earnings per share is required, using the
fair value method, by SFAS No. 123, "Accounting for Stock-based Compensation."
The fair value of options granted for the three years ended December 31, 2000
reported below have been estimated using a Black-Scholes option pricing model.
This model was developed for use in estimating the fair value of traded options
which do not have vesting requirements and which are fully transferable. The
Company's options have characteristics significantly different from those of
traded options. The following assumptions were used in determining the pro-
forma amounts:
-------------------------------------------------------------------
2000 1999 1998
-------------------------------------------------------------------
Stock volatility 25.0% 24.8% 25.1%
Expected term from grant date (in years) 6.7 6.5 5.8
Risk-free interest rate 6.0% 5.0% 5.0%
Forfeiture discount 0.3% 0.2% 0.3%
Dividend yield 3.4% 4.0% 4.0%
-------------------------------------------------------------------
Based upon the above assumptions, the computed annual weighted average fair
value of employee stock options granted during 2000, 1999 and 1998 was $5.54,
$4.63 and $5.84, respectively, per option.
Had compensation cost for the stock options granted during the past three years
been based on the estimated fair value at grant dates, as prescribed by SFAS
No. 123, the Company's pro forma net income and net income per share would have
been as follows (in thousands, except per share amounts):
--------------------------------------------------------------
2000 1999 1998
--------------------------------------------------------------
Net Income:
As reported $ 90,574 $ 62,579 $ 25,142
Pro forma $ 89,060 $ 61,108 $ 23,127
Net Income Per Share:
Basic, as reported $ 2.21 $ 1.45 $ 0.56
Basic, pro forma $ 2.18 $ 1.42 $ 0.51
Diluted, as reported $ 2.21 $ 1.45 $ 0.56
Diluted, pro forma $ 2.17 $ 1.42 $ 0.51
--------------------------------------------------------------
The pro forma disclosures of net income and earnings per share are not likely
to be representative of the pro forma effects on future net income or earnings
per share, because the number of future shares which may be issued is not
known, shares vest over several years, and assumptions used to determine the
fair value can vary significantly.
SHAREHOLDER RIGHTS PLAN: The Company has a Shareholder Rights Plan, designed
to protect the interests of shareholders in the event an attempt is made to
acquire the Company. The rights initially will trade with the Company's out-
standing common stock and will not be exercisable absent certain acquisitions
or attempted acquisitions of specified percentages of such stock. If
exercisable, the rights generally entitle shareholders to purchase additional
shares of the Company's stock or shares of an acquiring company's stock at
prices below market value.
SHARE REPURCHASES: During 2000, the Company purchased and retired 2,378,195
shares of its stock, at an average per-share price of $20.29. During 1999, the
Company purchased and retired 1,564,500 shares, at an average per-share price
of $22.26.
11. RELATED PARTY TRANSACTIONS, COMMITMENTS AND CONTINGENCIES
At December 31, 2000, the Company and its subsidiaries had an unspent balance
of total appropriations for capital expenditures of approximately $92,679,000.
However, there are no contractual obligations to spend this entire amount.
The Company has arranged for standby letters of credit totaling $25,237,000.
This includes letters of credit, totaling approximately $14,000,000, which
enable the Company to qualify as a self-insurer for state and federal workers'
compensation liabilities. The amount also includes a letter of credit of
$7,596,000 for workers' compensation claims incurred by C&H employees, under a
now-closed self-insurance plan, prior to December 24, 1998 (see Note 4). The
Company only would be called upon to honor this letter of credit in the event
of C&H's insolvency. The remaining letters of credit are for insurance-related
matters, construction performance guarantees and other routine operating
matters.
C&H, in which A&B has a 36-percent common stock interest, is a party to a long-
term sugar supply contract with Hawaiian Sugar & Transportation Cooperative
(HSTC), a raw sugar marketing and transportation cooperative that is partially
owned by the Company. Under the terms of this contract, C&H is obligated to
purchase, and HSTC is obligated to sell, all of the raw sugar delivered to HSTC
by the Hawaii sugar growers, at prices determined by the quoted domestic sugar
market. The Company delivered to HSTC raw sugar totaling $64,455,000,
$83,412,000 and $79,422,000, during 2000, 1999 and 1998, respectively. The
Company has guaranteed up to $15,000,000 of HS&TC's $35,000,000 working capital
line.
The Company's operating expenses in 2000 and 1999 include approximately
$99,151,000 and $46,856,000, respectively, paid to an unconsolidated affiliate.
A subsidiary has guaranteed obligations of $22,500,000 of an unconsolidated
affiliate in which it has a minority interest.
In 1999, a subsidiary transferred assets with a value of $16,438,000 to an
unconsolidated joint venture.
The Company and certain subsidiaries are parties to various legal actions and
are contingently liable in connection with claims and contracts arising in the
normal course of business, the outcome of which, in the opinion of management
after consultation with legal counsel, will not have a material adverse effect
on the Company's financial position or results of operations.
12. INDUSTRY SEGMENTS
Industry segment information on page 26, is incorporated herein by reference.
Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker, or decision-making group, in deciding how to
allocate resources and in assessing performance. The Company's chief operating
decision-making group is made up of the president and lead executives of the
Company and each of the Company's segments. The lead executive for each
operating segment manages the profitability, cash flows and assets of his or
her respective segment's various product or service lines and businesses. The
operating segments are managed separately, because each operating segment
represents a strategic business unit that offers different products or services
and serves different markets.
The Company's reportable operating segments include Ocean Transportation,
Property Development and Management and Food Products. The Ocean
Transportation segment carries freight between various United States and
Canadian West Coast, Hawaii and other Pacific ports; holds investments in ocean
transportation and terminal service businesses (see Note 4); and provides
terminal and cargo logistics services. The Property Development and Management
segment develops, manages and sells residential, commercial and industrial
properties. The Food Products segment grows and processes raw sugar and
molasses; invests in a sugar refining and marketing business (see Note 4);
grows, mills and markets coffee; and generates and sells electricity.
The accounting policies of the operating segments are the same as those
described in the summary of significant policies. Reportable segments are
measured based on operating profit, exclusive of non-operating or unusual
transactions, interest expense, general corporate expenses and income taxes.
Quarterly Results (Unaudited)
Segment results by quarter for 2000 and 1999 are listed below (in thousands, except per-share amounts):
2000 1999
----------------------------------------- -----------------------------------------
4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
- ------------------------------------------------------------------------------------------------------------------------
Revenue:
Ocean transportation 1 $216,124 $220,759 $213,584 $200,225 $211,766 $193,798 $196,508 $176,463
Property development
and management:
Leasing 1 16,778 15,522 15,287 14,518 14,622 12,893 12,884 13,511
Sales 3,848 14,435 24,987 3,052 4,940 7,985 27,179 7,932
Food products 23,877 34,294 34,504 13,666 31,279 39,812 37,269 8,002
Other 848 776 798 764 977 726 726 726
- ------------------------------------------------------------------------------------------------------------------------
Total revenue $261,475 $285,786 $289,160 $232,225 $263,584 $255,214 $274,566 $206,634
========================================================================================================================
Operating Profit (Loss):
Ocean transportation $ 19,819 $ 26,106 $ 27,914 $ 19,893 $ 18,299 $ 21,896 $ 25,318 $ 18,265
Property development
and management:
Leasing 7,863 7,467 7,606 7,184 6,919 6,562 6,394 7,622
Sales (862) 5,472 18,917 701 323 1,590 9,949 5,540
Food products 4,613 2,901 (2,060) 2,068 2,992 4,828 2,019 1,471
Other 756 745 764 709 911 693 690 650
- ------------------------------------------------------------------------------------------------------------------------
Total operating profit 32,189 42,691 53,141 30,555 29,444 35,569 44,370 33,548
Write-down of Assets 2 -- -- -- -- (15,410) -- -- --
Interest Expense (6,285) (6,661) (5,959) (5,347) (4,669) (4,209) (4,369) (4,527)
General Corporate Expenses (3,009) (2,392) (2,706) (3,502) (3,286) (3,941) (3,100) (3,880)
- -------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes
and Accounting Change 22,895 33,638 44,476 21,706 6,079 27,419 36,901 25,141
Income taxes (8,349) (12,284) (16,233) (7,525) (1,063) (8,943) (13,652) (9,303)
Change in accounting method (net
of income taxes of $7,668) 1 -- -- -- 12,250 -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Net Income $ 14,546 $ 21,354 $ 28,243 $ 26,431 $ 5,016 $ 18,476 $ 23,249 $ 15,838
========================================================================================================================
Earnings Per Share:
Basic $ 0.36 $ 0.53 $ 0.69 $ 0.63 $ 0.12 $ 0.43 $ 0.54 $ 0.36
========================================================================================================================
Diluted $ 0.36 $ 0.52 $ 0.69 $ 0.63 $ 0.12 $ 0.43 $ 0.54 $ 0.36
========================================================================================================================
1 See Note 2 for discussion of changes in presentation and accounting method.
2 See Note 3 for discussion of the write-down of Kauai Coffee assets in 1999.
ALEXANDER & BALDWIN, INC.
OFFICERS
All positions as of December 31, 2000
All ages as of March 31, 2001
Charles M. Stockholm (68)
Chairman of the Board
W. Allen Doane (53)
President and
Chief Executive Officer
C. Bradley Mulholland (59)
Executive Vice President
James S. Andrasick (57)
Senior Vice President, Chief Financial Officer and Treasurer
Meredith J. Ching (44)
Vice President (Government & Community Relations)
John F. Gasher (67)
Vice President
(Human Resources)
G. Stephen Holaday (56)
Vice President (Plantation General Manager, HC&S)
John B. Kelley (55)
Vice President (Corporate Planning & Investor Relations)
Stanley M. Kuriyama (47)
Vice President (Properties Group)
(Chief Executive Officer and
Vice Chairman of the Board,
A&B Properties, Inc.)
Michael J. Marks (62)
Vice President, General Counsel
and Assistant Secretary
Thomas A. Wellman (42)
Controller and
Assistant Treasurer
Alyson J. Nakamura (35)
Secretary
MATSON NAVIGATION COMPANY, INC.
OFFICERS
Charles M. Stockholm (68)
Chairman of the Board
W. Allen Doane (53)
Vice Chairman of the Board
C . Bradley Mulholland (59)
President and
Chief Executive Officer
Raymond J. Donohue (64)
Senior Vice President and
Chief Financial Officer
Gary J. North (56)
Senior Vice President (Operations)
(President and Chief Operating Officer, Matson Terminals, Inc.)
Kevin C. O'Rourke (54)
Senior Vice President and General Counsel
Paul E. Stevens (48)
Senior Vice President (Marketing)
Richard S. Bliss (62)
Vice President (Area Manager, Pacific Northwest)
Robert L. Dawdy (56)
Vice President
(West Coast Operations)
Branton B. Dreyfus (47)
Vice President
(Area Manager, Hawaii)
Ronald J. Forest (45)
Vice President
(President &
Chief Executive Officer,
Matson Intermodal System, Inc.)
Philip M. Grill (53)
Vice President
(Government Relations)
Dale B. Hendler (47)
Vice President
(E-Commerce and Technology)
Merle A. K. Kelai (69)
Vice President
(Community Relations and Government Affairs)
Judith A. Williams (57)
Vice President (Corporate Planning & Development)
Michael J. Marks (62)
Secretary
Timothy H. Reid (54)
Treasurer
Joseph A. Palazzolo (52)
Controller
ALEXANDER & BALDWIN, INC.
HONOLULU, HAWAII
PRINCIPAL SUBSIDIARIES AND AFFILIATES1
Division:
Hawaiian Commercial & Sugar Company
Puunene, Maui
Subsidiaries:
A&B Development
Company (California)
San Francisco
A&B Properties, Inc.
Honolulu
East Maui Irrigation Company, Limited
Puunene, Maui
Hawaiian Duragreen, Inc.
Puunene, Maui
Kukui'Ula Development Company, Inc.
Poipu, Kauai
Matson Navigation Company, Inc.
San Francisco
Subsidiaries:
Matson Intermodal System, Inc.
San Francisco
Matson Logistics Solutions, Inc.
San Francisco
Matson Services
Company, Inc.
San Francisco
Matson Terminals, Inc.
San Francisco
McBryde Sugar Company, Limited
Eleele, Kauai
Subsidiary:
Kauai Coffee
Company, Inc.
Eleele, Kauai
Kahului Trucking & Storage, Inc.
Kahului, Maui
Kauai Commercial Company, Incorporated
Puhi, Kauai
Hawaiian Sugar & Transportation Cooperative2
Puunene, Maui
C&H Sugar Company, Inc.3
Crockett, California
1 Wholly owned, unless otherwise indicated
2 A cooperative, owned with other Hawaii sugar companies
3 An affiliated company, approximately 40 percent owned by A&B
INVESTOR INFORMATION
ANNUAL MEETING
The Annual Meeting of Shareholders will be held in the Plaza Meeting Room on
the ground floor of Amfac Center, 745 Fort Street, Honolulu, Hawaii, at
10 a.m. on Thursday, April 26, 2001.
INVESTOR INFORMATION
Corporate news releases, the annual report and other information about the
Company are available at A&B's Web site on the Internet:
www.alexanderbaldwin.com.
Shareholders having questions about A&B are encouraged to write to Allen Doane,
President and Chief Executive Officer; or Alyson J. Nakamura, Corporate
Secretary.
Inquiries from professional investors may be directed to
John B. Kelley, Vice President, Investor Relations,
phone (808) 525-8422, e-mail: invrel@abinc.com.
FORM 10-K
Shareholders may obtain a copy of the Company's Annual Report on Form 10-K, as
filed with the Securities and Exchange Commission, without charge, by writing
to Alyson J. Nakamura, Corporate Secretary, Alexander & Baldwin, Inc., P.O. Box
3440, Honolulu, HI 96801-3440.
TRANSFER AGENT & REGISTRAR
Mellon Investor Services, San Francisco, California, and Ridgefield Park, New
Jersey.
For questions regarding stock certificates, dividends, or other transfer-
related matters, representatives of the Transfer Agent may be reached at
1-800-356-2017 between 8 a.m. and 8 p.m., Eastern Time, or via its Web site,
www.mellon-investor.com. Correspondence may be sent to: P.O. Box 3315, So.
Hackensack, NJ 07606.
AUDITORS
Deloitte & Touche LLP, Honolulu, Hawaii.
COMMON STOCK
A&B common shares trade under the symbol ALEX on The Nasdaq Stock MarketSM. A
summary of daily stock transactions is listed in the Nasdaq National Market
Issues section of major newspapers. Trading volume averaged 98,900 shares a day
in 2000, compared with 105,800 in 1999 and 109,400 in 1998. Currently,
16 firms make a market in ALEX.
High and low sales prices per share, by quarter, for 2000 and 1999 were:
- ---------------------------------------------------------
Quarter 2000 1999
- ---------------------------------------------------------
First $22-25/32 - 17-15/16 $23-1/8 - 18-5/8
Second 24-5/8 - 19-1/4 24 - 19
Third 27-1/2 - 21-7/8 27-1/8 - 21-3/4
Fourth 28-1/4 - 21-5/8 25-3/8 - 21-3/8
DIVIDENDS
A&B strives to pay the highest possible dividends commensurate with operating
and capital needs. The Company has paid cash dividends in every quarter since
1903. The most recent increase in the quarterly dividend rate was effective in
the first quarter of 1998, from 22 cents a share to 22.5 cents. In 2000, total
dividend payments to shareholders were $36.8 million, 41 percent of reported
net income for the year. The following dividend schedule for 2001 has been
set, subject to final approval by the A&B Board of Directors:
- ----------------------------------------------
Quarterly Declaration Record Payment
Dividend Date Date Date
- ----------------------------------------------
First Jan. 25 Feb. 15 March 1
Second April 26 May 7 June 7
Third June 28 Aug. 2 Sept. 6
Fourth Oct. 25 Nov. 8 Dec. 6
GENERAL INFORMATION
BOARD OF DIRECTORS
Members of the Board of Directors beneficially own approximately two percent of
A&B shares.
The Annual Meeting of Shareholders on April 27, 2000, was the 100th regular
Annual Meeting of A&B's shareholders. At that meeting, the shareholders
reelected a total of 10 directors, all of whom were nominated by the Board.
Reelected were Michael J. Chun, Leo E. Denlea, Jr., W. Allen Doane, Walter A.
Dods, Jr., Charles G. King, Carson R. McKissick, C. Bradley Mulholland, Lynn M.
Sedway, Maryanna G. Shaw and Charles M. Stockholm. R. J. Pfeiffer, previously
Chairman of the Board and a director, continues to hold the honorary position
of Chairman Emeritus.
MANAGEMENT, ORGANIZATION
On June 1, 2000, James S. Andrasick joined A&B as senior vice president, chief
financial officer and treasurer.
At year-end 2000, A&B had 2,029 employees, versus 2,050 at year-end 1999.
CREDIT RATINGS
As discussed in Note 6 to the financial statements, Matson had outstanding
commercial paper notes totaling $99.8 million at December 31, 2000. The Matson
notes are rated A-1, P-1 and D-1 by Standard & Poor's, Moody's Investor Service
and Fitch IBCA, Duff & Phelps, respectively. Standard & Poor's rates Matson's
senior debt as A-.
STOCK INDEXES
The stock of A&B is included in the Dow Jones Transportation Index, the Dow
Jones Composite Index, the Dow Jones Marine Transportation Index, the Dow Jones
Sustainability Group Index and the S&P MidCap 400 Index.