ALEXANDER & BALDWIN, INC.
FORM 10-K
ANNUAL REPORT FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1994
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
Alexander & Baldwin, Inc. ("A&B") is a diversified corporation with most of
its operations centered in Hawaii. It was founded in 1870 and incorporated in
1900. Ocean transportation operations and related shoreside operations of A&B
are conducted by a wholly-owned subsidiary, Matson Navigation Company, Inc.
("Matson"), and several Matson subsidiaries, all of which are headquartered in
San Francisco. Container leasing operations are conducted by a wholly-owned
subsidiary of Matson, Matson Leasing Company, Inc. ("Matson Leasing"), which is
headquartered in San Francisco. Real property and food products operations are
conducted by a wholly-owned subsidiary of A&B, A&B-Hawaii, Inc. ("ABHI"), and
several ABHI subsidiaries, including California and Hawaiian Sugar Company, Inc.
("C&H"), all of which are headquartered in Hawaii or California.
The industry segments of A&B are as follows:
A. Ocean Transportation - carrying freight primarily between various
United States Pacific Coast and Hawaii ports; providing terminal,
stevedoring, tugboat and container equipment maintenance services in
certain of those ports; and arranging United States Mainland
intermodal transportation.
B. Container Leasing - leasing marine cargo containers in standard 20-
foot and 40-foot lengths to transportation companies, primarily ocean
carriers in the liner trades.
C. Property Development and Management - developing real property in
Hawaii and on the U.S. Mainland; selling residential properties; and
managing, leasing, selling and purchasing commercial and industrial
properties.
D. Food Products - growing sugarcane and coffee in Hawaii; producing raw
sugar, molasses and green coffee; refining raw sugar, and marketing
and distributing refined sugar products in the western United States;
marketing and distributing roasted coffee and green coffee; providing
sugar and molasses hauling and storage, general freight and petroleum
hauling and self-storage services in Hawaii; and generating and
selling electricity.
For information about the revenue, operating profits and identifiable
assets of A&B's industry segments for the three years ended December 31, 1994,
see "Industry Segment Information" on page 28 of the Alexander & Baldwin, Inc.
1994 Annual Report ("1994 Annual Report"), which information is incorporated
herein by reference.
DESCRIPTION OF BUSINESS AND PROPERTIES
A. OCEAN TRANSPORTATION
(1) FREIGHT SERVICES
Matson offers containership freight services between ports at Los
Angeles, Oakland and Seattle and the major ports in Hawaii, which are located on
the islands of Hawaii, Kauai, Maui and Oahu. Roll-on/roll-off service is
provided between Los Angeles and Oakland and the major ports in Hawaii.
Portland container cargo is moved overland between Portland and Seattle at no
extra charge. Principal westbound cargoes carried by Matson to Hawaii include
dry containers of mixed commodities, refrigerated cargoes, packaged foods,
building materials and motor vehicles. Principal eastbound cargoes carried by
Matson from Hawaii include household goods, canned pineapple, refrigerated con
tainers of fresh pineapple, motor vehicles and molasses. The preponderance of
Matson's revenue is derived from westbound carriage of containers and motor
vehicles.
Matson is the principal carrier of ocean cargo between the United
States Pacific Coast and Hawaii. In 1994, Matson carried 240,612 twenty-four
foot equivalent units of container cargo and 116,762 motor vehicles between
these destinations. Matson also offers container and conventional freight
service between the United States Pacific Coast and the ports of Kwajalein,
Ebeye and Majuro in the Republic of the Marshall Islands and Johnston Island,
all via Honolulu.
In July 1994, Matson inaugurated its Pacific Coast Shuttle
Service, which provides containership freight service among ports at Los
Angeles, Oakland, Seattle, and Vancouver, British Columbia.
See "Rate Regulation" below with respect to Matson's freight
rates.
(2) VESSELS
Matson has been a leader in the containerization of freight in
the Pacific Basin since 1958. Matson's fleet consists of five containerships,
four combination container/trailerships, one roll-on/roll-off barge, two con
tainer barges equipped with cranes which serve the neighbor islands of Hawaii,
and one container barge equipped with cranes in the mid-Pacific service.
During 1994, Matson completed a life-extension and "open top"
conversion program for two containerships. Conversion of some holds to "open
top" design permits containers to be stacked higher without the need for lashing
or hatch covers. The life-extension program is expected to add 10 to 15 years
to the service life of each ship.
The thirteen vessels in Matson's fleet represent an investment of
approximately $648,000,000 during the past 25 years. With one exception, the
current fleet has been acquired through withdrawals from the Matson Capital
Construction Fund, established under Section 607 of the Merchant Marine Act,
1936, as amended. The exception is a combination container/trailership which
Matson continues to operate under a charter for a 25-year term ending in 1998,
with options to renew the charter for a total of up to five years and to
purchase the vessel at the end of the charter at fair market value.
Matson's fleet units are described in the list on the following
page.[Table inserted below in electronic Edgar filing.]
MATSON NAVIGATION COMPANY, INC.
-------------------------------
FLEET - 12/31/94
----------------
Usable Cargo Capacity
--------------------------------------------------------
Containers Vehicles Molasses
Year Maximum Maximum --------------------------- --------------- ---------
Vessel Official Year Recon- Speed Deadweight Reefer
Name Number Built structed Length (Knots) (Long Tons) 24' 40' Slots TEUs (1) Autos Trailers Short Tons
--------------------------------------------------------------------------------------------------------------------------------
R.J. PFEIFFER 979814 1992 713'6" 23.0 27,100 625 610 300 1,970 -- -- --
KAIMOKU 573223 1976 1990 790'9" 21.5 14,551 276 310 119 1,020 350 54 --
KAINALU 557149 1974 1990 790'9" 21.5 14,976 276 310 119 1,020 350 54 --
KAUAI 621042 1980 1994 720'5-1/2" 22.5 26,308 458 538 310 1,626 44 2,600
LURLINE 549900 1973 1982 826'6" 21.5 22,221 597 345 340 1,476 220 81 2,100
MANUKAI 524219 1970 720'5-1/2" 22.5 27,107 537 416 251 1,476 5,300
MANULANI 528400 1970 720'5-1/2" 22.5 27,165 537 416 251 1,476 5,300
MATSONIA 553090 1973 1987 760'0" 21.5 22,501 683 400 335 1,620 450 56 4,300
MAUI 591709 1978 1993 720'5-1/2" 22.5 26,623 458 538 310 1,626 2,600
HALEAKALA (2) 676972 1984 350'0" -- 4,658 144 72 84 316 2,100
ISLANDER (2) 933804 1988 372'0" -- 6,837 276 24 70 380 --
MAUNA LOA (2) 676973 1984 350'0" -- 4,658 144 72 84 316 2,100
WAIALEALE (3) 978516 1991 345'0" -- 5,621 35 230 45
JOE SEVIER (4) 500799 1965 80'0" 10.0 --
MAOI (4) 618705 1980 75'0" 10.0 --
____________________________________
(1) "Twenty-foot Equivalent Units" (includes trailers)
(2) Container Barge
(3) Roll-on/Roll-off Barge
(4) Tug
As a complement to its fleet, Matson owns or has under capital
leases approximately 17,900 containers, 6,800 container chassis, 500 auto-frames
and miscellaneous other equipment. In addition, 280 20-foot chassis, 600
40-foot chassis, 300 45-foot chassis, 500 40-foot dry containers, 100 45-foot
dry containers, and 480 40-foot refrigerated containers are being manufactured
and are scheduled for delivery during 1995. After disposing of older container
equipment, Matson expects to have 18,500 containers and 7,800 chassis on hand at
the end of 1995. Capital expenditures by Matson for vessels and equipment
totaled approximately $24,600,000 in 1994.
(3) TERMINALS
Matson Terminals, Inc. ("Matson Terminals"), a wholly-owned
subsidiary of Matson, provides container stevedoring, container equipment
maintenance, and other terminal services for Matson at the ports of Honolulu,
Los Angeles, Oakland and Seattle, as well as for other ocean carriers at its
Pacific Coast and Honolulu locations.
Matson Terminals is among the largest container stevedoring and
terminal operators on the United States Pacific Coast. An estimated total of
1,159 vessel calls were served at all Matson Terminals container facilities in
1994.
Matson Terminals owns or leases the shoreside cranes and
supporting container-handling equipment at its container facilities and owns all
of the maintenance equipment used in providing container equipment and terminal
maintenance services.
Matson Terminals has lease agreements with port authorities for
the use of publicly-owned container terminal properties at Honolulu, Los
Angeles, Oakland and Seattle. Matson Terminals does not anticipate any
difficulty in renewing its lease agreements as they expire or in finding
satisfactory alternative premises. Current terminal lease agreements expire as
follows:
Honolulu September 2016
Los Angeles January 1996
Oakland December 2008
Seattle December 1999, subject to an option to renew for
ten years
Capital expenditures for terminals and equipment totaled
approximately $5,100,000 in 1994.
(4) OTHER SERVICES
Matson Intermodal System, Inc. ("Matson Intermodal"), a
wholly-owned subsidiary of Matson, was formed in 1987 to serve as an intermodal
marketing company which arranges United States Mainland rail and truck
transportation for shippers and carriers, frequently in conjunction with prior
or subsequent ocean transportation.
Matson Services Company, Inc. ("Matson Services"), a wholly-owned
subsidiary of Matson, owns two tugboats which are employed in Hawaiian waters
under operating agreements to provide harbor assistance for vessels calling at
the islands of Hawaii and Maui.
Matson manages the Moku Pahu, an integrated tug/barge which
transports raw sugar from Hawaii to the Crockett, California sugar refinery
owned by C&H, a wholly-owned subsidiary of ABHI. The Moku Pahu is owned by the
Hawaiian Sugar & Transportation Cooperative, of which ABHI's two sugar
plantations are members.
(5) COMPETITION
Matson's freight service between the United States Pacific Coast
and Hawaii has one major containership competitor which serves Long Beach,
Oakland, Tacoma and Honolulu, employing vessels destined for Guam and the Far
East. Other competitors include two common carrier barge services, unregulated
proprietary and contract carriers of bulk cargoes and air cargo services.
Matson vessels are operated on schedules which make available to
shippers and consignees regular day-of-the-week sailings from the United States
Pacific Coast and day-of-the-week arrivals to Hawaii, a type of service that is
very attractive to customers because it decreases their warehousing costs. In
addition, Matson competes by offering more comprehensive service to customers,
supported by its scope of equipment and its efficiency and experience in the
handling of containerized cargoes, and by competitive pricing. Although air
freight competition is intense for time-sensitive or perishable cargoes,
historic and projected inroads of such competition in cargo volume are limited
by the amount of cargo space available in passenger aircraft and by generally
higher air freight rates.
The carriage of cargo between the United States Pacific Coast and
Hawaii on foreign-built and foreign-documented vessels is prohibited by
Section 27 of the Merchant Marine Act, 1920, frequently referred to as the Jones
Act. However, foreign-flag vessels bringing cargo to Hawaii from foreign
sources provide indirect competition for Matson's container freight service
between the United States Pacific Coast and Hawaii. Far East countries,
Australia and New Zealand have direct foreign-flag services to Hawaii.
Matson Terminals competes with numerous other companies which
perform the same or similar services. The container stevedoring and terminal
services business is extremely competitive. The primary considerations of ocean
carriers when selecting stevedore and terminal operators are rates, quality of
service, expertise and reputation. The industry is highly capital-intensive
because of the need for expensive container-handling equipment.
Matson Intermodal competes for freight with a number of large and
small companies engaged in intermodal transportation. Matson Services competes
with other large operators of tugboats in Hawaiian waters.
(6) LABOR RELATIONS
The absence of strikes and the availability of labor through
hiring halls are important to maintenance of profitable operations by Matson.
Matson's operations have been disrupted significantly by strikes in only two of
the last 39 years, most recently in 1972. See "Employees and Labor Relations"
below for a description of labor agreements and certain unfunded liabilities for
multi-employer pension plans to which Matson and Matson Terminals contribute.
(7) RATE REGULATION
Matson is regulated by the Federal Maritime Commission ("FMC")
with respect to rates, carrier agreements, shipping practices and other matters
relating to its carriage of cargo in the domestic and foreign commerce of the
United States. Matson Terminals is regulated by the FMC with respect to
terminal lease agreements and its practices in providing terminal services at
United States ports.
Matson is regulated by the Interstate Commerce Commission to the
extent of its joint rates with motor carriers for the carriage of commodities
subject to regulation under the Interstate Commerce Act. Matson's carriage of
exempt agricultural commodities under joint rates with motor carriers, and
carriage of containerized cargoes in trailer-on-flatcar/container-on-flatcar
service under joint tariff circulars with railroads, are unregulated. Mail is
carried under contracts with the U.S. Postal Service. Approximately 46% of
Matson's revenue is derived under arrangements not subject to regulation by the
FMC.
The FMC has promulgated guidelines under the Intercoastal
Shipping Act, 1933, for the determination of a just and reasonable rate of
return or profit for domestic offshore ocean common carriers. Under the
guidelines, as revised to date, and FMC decisions implementing and interpreting
them, rate of return on rate base is the criterion used in determining a just
and reasonable rate of return. Rate base includes net book value of vessels,
other property and equipment and assets of related companies, to the extent they
are devoted to the domestic common carrier service regulated by the FMC. Also
included in rate base are working capital and capitalized leases. The FMC
guidelines do not specify a just and reasonable rate of return on rate base, but
merely the procedure for determining it. The FMC applies a "comparable
earnings" test in determining a just and reasonable rate of return. The
"comparable earnings" test equates the rate of return of domestic common
carriers on rate base with the earnings of American industry generally on total
capital, with appropriate adjustments for current trends in interest rates and
the costs of capital. The FMC also considers the relative riskiness of
individual domestic common carriers in relation to the riskiness of American
industrial companies generally.
In April 1994, the FMC announced proposed revisions to its
guidelines for determining a just and reasonable rate of return. It is not
known whether, when, or to what extent the FMC will implement this proposal.
B. CONTAINER LEASING
Matson Leasing, which began operations in 1989, leases marine cargo
containers worldwide to the transportation industry, primarily to ocean carriers
in the liner trades.
Headquartered in San Francisco, Matson Leasing currently has offices
in New York, London, Paris, Bremen, Tokyo, Singapore, Hong Kong, Seoul, Sydney,
Rio de Janeiro and Bombay. It has 67 employees and utilizes 92 container depots
world-wide.
The Matson Leasing container fleet consists entirely of standard
20-foot and 40-foot steel dry freight containers, the principal types of
containers used in world trade. At the end of 1994, the fleet consisted of
112,000 containers, including 11,000 units delivered in 1994. Additional
containers are planned for delivery in 1995. In 1994, Matson Leasing's capital
expenditures for new containers totaled approximately $32,000,000. All
container leases are operating leases, with approximately 98% consisting of
long-term or master lease agreements.
With its fleet of approximately 160,000 TEUs (twenty-foot equivalent
units, a standard measure of container capacity), Matson Leasing competes on a
world-wide basis and ranks eighth in terms of fleet size among lessors of marine
containers. The ten largest lessors have fleets ranging from 45,000 to
1,300,000 TEUs. Lessors currently control approximately half of all marine
containers in service. Matson Leasing's average fleet utilization rate was 88%
in 1994, compared with 83% in 1993.
C. PROPERTY DEVELOPMENT AND MANAGEMENT
(1) GENERAL
The property development and management operations of A&B are
conducted by ABHI, a wholly-owned subsidiary headquartered in Honolulu. A&B and
its subsidiaries own approximately 92,854 acres of land, consisting of approxi
mately 90,786 acres in Hawaii and approximately 2,068 acres elsewhere, as
follows:
LOCATION NUMBER OF ACRES
Maui 68,852
Kauai 21,933
Oahu 1
California 2,000
Texas 42
Washington 23
Florida 3
The bulk of this acreage currently is used for agricultural and related acti
vities, and includes pasture land leased to ranchers, watersheds and con
servation reserves. The balance is used or planned for development or other
urban uses. An additional 17,900 acres on Maui and Kauai are leased from third
parties.
ABHI is actively involved in the entire spectrum of land
development, including planning, zoning, financing, constructing, purchasing,
managing and leasing, and selling and exchanging real property.
(2) PLANNING AND ZONING
The entitlement process for development of property in Hawaii is
both time-consuming and costly, involving numerous State and County regulatory
approvals. For example, conversion of an agriculturally-zoned parcel to
residential zoning usually requires the following approvals: amendment of the
County general plan to reflect the desired residential use; approval by the
State Land Use Commission to reclassify the parcel from the "agricultural"
district to the "urban" district; County approval to rezone the property to the
precise residential use desired; and, if the parcel is located in the Coastal
Zone Management area, the granting of a Special Management Area Permit by the
County Planning Commission. The entitlement process is complicated by the
conditions, restrictions and exactions that are placed on these approvals, such
as the construction of infrastructure improvements, payment of impact fees,
restrictions on the permitted uses of the land, provision of affordable housing,
and/or mandatory fee sale of portions of the project.
ABHI actively works with regulatory agencies, commissions and
legislative bodies at various levels of government to obtain zoning
reclassification of land to its highest and best use. ABHI designates a parcel
as "fully-zoned" when all necessary government approvals have been obtained.
Approximately 810 acres of property currently are designated fully-zoned.
As described in more detail below, work to obtain entitlements
for urban use in 1994 focused on (i) ABHI's Kukui'ula development on Kauai,
(ii) ABHI's proposed master-planned community at Pilot Hill Ranch in California,
and (iii) obtaining Community Plan designations for various ABHI lands on Maui.
With regard to item (iii) in the previous paragraph, ABHI
continues to participate actively in Maui County's decennial update of its
Community Plans, a process that began in 1992. The Community Plans serve to
guide planning development activity over the next decade. ABHI is seeking
various urban designations for its undeveloped lands within the following four
Community Plans, where most of its Maui lands are located: Paia-Haiku Community
Plan, Kihei-Makena Community Plan, Wailuku-Kahului Community Plan, and Makawao-
Pukalani-Kula ("Upcountry") Community Plan.
In 1994, the Maui County Planning Commission recommended urban
residential designations for approximately 110 acres, and industrial and light
industrial designations for approximately 230 acres, on ABHI-owned lands in
Central Maui covered by the Wailuku-Kahului Community Plan. Also, the Planning
Commission disagreed with the Upcountry Citizens' Advisory Committee's
recommendation of single-family residential designation for 165 acres of ABHI
land covered by the Upcountry Community Plan, conditioned on ABHI's contribution
of another 100 acres for the establishment of an institution of higher education
in the Upcountry region. The Planning Commission did not, however, make any
recommendations regarding single-family residential designations.
Adoption of the Community Plans by the Maui County Council is
expected in 1995 or 1996.
(3) RESIDENTIAL PROJECTS
ABHI is pursuing a number of residential projects in Hawaii and
on the U.S. Mainland, in particular:
(a) Kukui'ula. On Kauai, construction activity at the Kukui'ula
project has been suspended as a result of the effects of Hurricane Iniki, which
struck Kauai in September 1992. The 1,000-acre Kukui'ula project, envisioned to
be the first planned residential community on the island of Kauai, currently is
expected to include up to 3,000 dwelling units, as well as an 18-hole golf
course, a small boat marina, commercial areas, schools and parks. Construction
of the wastewater treatment plant, mass grading and drainage, and certain
roadway improvements were completed in 1993.
ABHI's current efforts with regard to the Kukui'ula project are
directed toward re-entitlement of the project to obtain State urban district
classification of an additional 822 acres. Urban district classification of an
initial 213 acres was obtained in 1985. This re-entitlement is associated with
ABHI's revisions to the project's master plan to address hurricane inundation
risks and market considerations. Implementation of this revised master plan
will require amendments to existing State of Hawaii and County of Kauai land use
classifications, and currently is expected to delay initial sales of dwelling
units until late 1997.
A petition to amend the State urban district, the first step in
the revision of Kukui'ula's master plan, was submitted to the State Land Use
Commission in October 1993. Public hearings on this petition commenced in
February 1994 and were completed in January 1995. The State Land Use Commission
is expected to take final action on the petition by April 1995. In addition, an
application to amend the County zoning, consistent with the revised master plan,
was submitted to the County Planning Commission in February 1995. Public
hearings before the County Planning Commission on this application are expected
to commence in the second quarter of 1995.
(b) Eleele Nani II. Also on Kauai, sales at ABHI's Eleele
Nani II development, consisting of 146 single-family lots on 27 acres, continued
during 1994. To date, sales have closed on all 58 "affordable" (as established
by State of Hawaii income and affordability guidelines) homes and all 58 of the
affordable lots, including 20 lots pursuant to the County of Kauai's self-help
housing program. Twenty-one of the market-priced lots have closed.
Nine market-priced lots remain available for sale.
(c) Makana Subdivision. On Maui's north shore, Makana
Subdivision, a joint venture with Gentry Homes, Ltd., will consist of
approximately 93 single-family homes on a 23-acre parcel. Subdivision
construction plans were submitted for County approval in July 1994. Assuming
County approval is obtained, construction is expected to commence in the second
quarter of 1995, with sales expected to commence by early 1996.
(d) Haiku Mauka. Also on Maui, sales of lots at Haiku Mauka, a
93-acre, 39-lot agricultural lot residential subdivision, commenced in September
1994. A total of 16 lots have been sold.
(e) Haiku Hill. At Haiku Hill, an 89-acre, 37-lot agricultural
lot residential subdivision on Maui's North Shore, the last five lots were sold
in early 1994.
(f) Kahului Ikena. Kahului Ikena, a 102-unit, market-priced
townhouse project in Kahului, is expected to be completed in mid-1995. The
project will be marketed either as rental units or as condominiums for sale.
(g) Pilot Hill Ranch. At Pilot Hill Ranch in El Dorado County,
near Sacramento, California, ABHI's efforts continue to focus on having the
project's development plan proposals designated in El Dorado County's General
Plan. Pilot Hill Ranch is intended to be developed as an 1,800-acre planned
residential community, consisting of approximately 980 single- and multi-family
homes, a golf course, parks and 20 acres of commercial development. A draft
environmental impact report was issued by the County in December 1994. Hearings
on the draft report are expected to be concluded by the middle of 1995. The
County is expected to take final action on its General Plan in 1995.
(4) COMMERCIAL AND INDUSTRIAL PROPERTIES
An important source of property revenue is the lease rental
income A&B and its subsidiaries receive from various ground leases on
11,000 acres of land (including agricultural and pasture lands) and leases of
2,550,000 square feet of industrial and commercial building space.
In Hawaii, most of the income-producing commercial and industrial
properties owned by A&B and its subsidiaries are located in the central Kahului
area of Maui. These properties consist primarily of two shopping centers and
two office buildings, as well as several separate commercial and industrial
properties, as follows:
PROPERTY LOCATION TYPE LEASED AREA
Maui Mall Kahului, Maui Retail shopping center 192,000 sq. ft.
Kahului Shopping Kahului, Maui Retail shopping center 112,000 sq. ft.
Center
Kahului Office Kahului, Maui Office 30,000 sq. ft.
Center
Wakea Business Kahului, Maui Warehouse/retail 61,500 sq. ft.
Center
Kmart Kahului, Maui Ground lease 7.41 acres
Kahului Office Kahului, Maui Office 52,000 sq. ft.
Building
In addition to the above-described properties, a number of other
commercial and industrial projects are being developed on Maui and Kauai,
including:
(a) Triangle Square. Development continues at Triangle Square,
an 11-acre retail/commercial complex and factory outlet center in Kahului, Maui.
Three lots have been leased and the balance of the project is being developed in
two phases as a 108,000-square-foot factory outlet center. Construction of
Phase I of the factory outlet center, consisting of the 28,000-square-foot Apex
building, was completed in January 1995. It currently is being tenanted and
scheduled for opening in 1995. Construction of Phase II, consisting of five
buildings with a total of 80,000 square feet, is expected to commence in 1995.
(b) Costco. On a nearby 13-acre parcel owned by A&B, Price
Costco, Inc. has commenced construction of a 134,000-square-foot retail
facility, scheduled for completion in 1995.
(c) Kamehameha Parkway. Also located in Kahului is ABHI's
Kamehameha Parkway, a 22-acre, light industrial park subdivision. Of the
Parkway's 35 lots, 32 have been sold in fee and two have been leased. Sale of
the remaining lot is expected to be completed in 1995.
(d) Kahului Industrial Park. Site work construction at the 76-
acre first phase of the Kahului Industrial Park, a light industrial subdivision
located near Maui's primary airport and harbor, is projected to commence in the
second quarter of 1995. Sales and leasing may begin late in the year.
(e) Port Allen Industrial Subdivision. On Kauai, work on five
additional industrial lots and a multi-tenant warehouse complex on six acres at
the Port Allen Industrial Subdivision was completed in 1994. The 13,800-square-
foot warehouse is approximately 65% occupied and four of the five lots are under
contract of sale.
In November 1994, a subsidiary of ABHI sold a 19.4-acre
industrial parcel in Aiea, Hawaii for $17.8 million. This parcel originally was
acquired from C&H in 1993.
On the U.S. Mainland, A&B and its subsidiaries own a portfolio of
commercial and industrial properties comprising a total of 1.9 million square
feet of leasable area, as follows:
LEASED AREA
PROPERTY LOCATION TYPE (SQUARE FT.)
--------------- ------------- ------------ -----------
DEC Building Cupertino, CA Research and 246,742
development
LinPac Building City of Manufacturing 126,048
Industry, CA
Moulton Plaza Laguna Hills, Retail 134,000
CA
Spinnaker II Fremont, CA Research and 98,500
development
Great Southwest Grand Warehouse/ 901,000
Industrial Prairie,TX Industrial
4225 Roosevelt Seattle, WA Office/Medical 106,000
Valley Freeway Kent, WA Warehouse/ 229,245
Corporate Park Industrial
Winslow Village Bainbridge Retail 97,908
Shopping Center Island, WA
The Great Southwest Industrial property in Texas has maintained
an above-market average occupancy of 97%. In 1995, relatively few leases will
expire.
A&B's three Washington State properties continue to benefit from
the economic stability in the Pacific Northwest. The 4225 Roosevelt office
building and Winslow Village Shopping Center remain 100% leased, while strong
leasing activity in 1994 has increased occupancy at the Valley Freeway Corporate
Park warehouse complex to 95%.
Digital Equipment Corporation ("DEC"), the sole tenant of the DEC
Building in Cupertino, California, has continued its efforts to sublease
available space in the facility. DEC ceased manufacturing operations at the
facility in 1992, but continues to meet the obligations under its lease with
A&B, which expires in 1997. Rental activity in both Cupertino and nearby
Fremont, California, the location of Spinnaker II, increased in the latter half
of 1994, with continued improvement expected in 1995. At the Moulton Plaza
shopping center in Laguna Hills, California, the conversion of a 11,500-square-
foot former Lincoln Savings branch to retail space was completed in 1994, with
60% of the space leased prior to completion. This shopping center is expected
to benefit from an improving California economy.
In December 1994, the Arapahoe Marketplace Shopping Center,
located in Denver, Colorado, was sold by A&B. The $21 million proceeds of this
sale are planned to be reinvested in other income-producing property on the U.S.
Mainland pursuant to the tax-deferred exchange provisions of Section 1031 of the
Internal Revenue Code.
Overall occupancy rates for the U.S. Mainland leased property
portfolio averaged 97% in 1994, compared with 93% in 1993. Overall occupancy
rates for the Hawaii leased property portfolio averaged 92% in 1994, compared
with 94% in 1993.
D. FOOD PRODUCTS
(1) PRODUCTION
A&B has been engaged in activities relating to the production of
cane sugar and molasses in Hawaii since 1870. A&B's present food products
operations are conducted by ABHI. ABHI operates two sugar plantations, Hawaiian
Commercial & Sugar Company ("HC&S") on the island of Maui and McBryde Sugar
Company, Limited ("McBryde") on the island of Kauai.
ABHI is Hawaii's largest producer of raw sugar. In 1994, ABHI
produced 34% of the 658,539 tons of raw sugar produced in Hawaii. The Hawaii
sugar production, in turn, amounted to approximately 9% of total United States
sugar production, and accounted for about 8% of the sugar consumed in the United
States. ABHI's raw sugar production tonnage for the years 1990 through 1994 is
summarized in the following table:
1994 1993 1992 1991 1990
HC&S 206,217 224,677 193,485 214,122 225,555
McBryde 17,273 14,493 22,941 38,455 46,851
Total 223,490 239,170 216,426 252,577 272,406
HC&S harvested 16,457 acres of sugarcane in 1994, compared with
16,726 acres in 1993 and 15,715 acres in 1992. Yields averaged 12.4 tons of
sugar per acre in 1994, compared with 13.4 in 1993 and 12.3 in 1992. As a
by-product of sugar production, HC&S also produced 58,997 tons of molasses in
1994, compared with 61,954 tons in 1993, and 49,189 tons in 1992.
An advanced ultrafiltration plant constructed by HC&S in 1994
should, when fully operational, increase sugar recovery at HC&S' Puunene mill
(the larger and more modern of HC&S' two mills) by 1.5%, thereby increasing
sugar production by more than 3,000 tons. HC&S currently is evaluating a second
phase of the project, which could result in an additional 4.5% increase in sugar
recovery.
McBryde harvested 3,340 acres of sugarcane in 1994, compared with
2,893 acres in 1993 and 3,365 acres in 1992. In addition, 7,774 tons of
molasses were produced in 1994, compared with 5,861 tons in 1993 and 8,233 tons
in 1992. The average yield in 1994 was 5.2 tons of sugar per acre, up from 5.0
in 1993, but down from 6.8 in 1992. The reduction, from 1992 to 1993 and 1994,
in raw sugar production, molasses production and sugar yields is due to damage
to the sugar crop by Hurricane Iniki in September 1992.
The average cost per ton of sugar produced at the two plan
tations, including the cost of power production, was $428.56 in 1994, compared
with $390.37 in 1993 and $425.55 in 1992. The increase in cost per ton from
1993 to 1994 is primarily the result of lower production at HC&S (more than
offsetting higher production at McBryde) and modest increases in costs at both
plantations. Continuing cost reduction programs at both plantations have been
successful in minimizing cost increases.
Both HC&S and McBryde produce electricity for their own use and
for sale to electric utility companies by burning bagasse (sugarcane fiber), by
hydroelectric power generation and, when necessary, by burning fossil fuels.
The price for power sold is equal to the utility companies' "avoided cost" of
not producing the electricity supplied by the plantations. In 1994, HC&S sold
101,994 megawatt hours ("MWH") of electric power, and McBryde sold 20,381 MWH.
Revenue from the sale of electricity depends on the amount of power produced and
sold as well as the average price of fuel. See "Energy" below.
During 1994, McBryde cultivated 7,117 acres in sugar and about
4,000 acres in coffee. The harvest of the 1994 coffee crop is expected to yield
1,365,000 pounds of green coffee, compared with 550,000 pounds in 1993.
Although the long-term effects of the 1992 Hurricane Iniki on the coffee crop
are still uncertain, the young coffee trees are recovering from the storm
effects. Coffee production is expected to continue to increase during the next
few years.
Kahului Trucking & Storage, Inc. and Kauai Commercial Company,
Incorporated, both of which are subsidiaries of ABHI, provide sugar and molasses
hauling and storage, petroleum hauling, and mobile equipment maintenance and
repair services on Maui and Kauai, self-service storage facilities on Maui and
Kauai and general trucking services on Kauai.
(2) SUGAR REFINING; MARKETING OF SUGAR AND COFFEE
Virtually all of the raw sugar produced in Hawaii is purchased
and refined by, and marketed through, C&H. C&H processes the raw cane sugar
into a full line of refined sugar products for the grocery market, and a full
range of industrial refined sugar products for industrial bakers, confectioners
and food processors. C&H is the leading sugar brand in the western United
States. Marketing of C&H's refined products is conducted by C&H's sales staff
and a network of brokers under exclusive representation agreements. The refined
products are marketed primarily in the western and central United States.
C&H's profit margins in 1994 were hurt by a combination of
relatively high raw cane sugar prices and depressed prices for refined sugar
products. Contributing to this situation was ineffective governmental
administration of the domestic sugar support program and an excess supply of
beet sugar. The current domestic sugar support program will be reviewed for
renewal later in 1995 in conjunction with Congress' five-year review of U.S.
farm programs. Long-term prospects for the business are expected to be more
favorable. Consumer sugar sales are seasonal in nature and, as a result, C&H's
financial results are expected to be better in the third and fourth quarters of
each fiscal year, compared with the first two quarters.
C&H has a ten-year supply contract, ending in 2003, with Hawaiian
Sugar & Transportation Cooperative ("HSTC"), a cooperative consisting of the
major sugarcane growers in Hawaii (including HC&S and McBryde), for C&H to
acquire substantially all raw sugar produced in Hawaii at a discount to the New
York Contract #14 price for domestic raw sugar. There are no minimum supply
guarantees on the part of HSTC. During 1994, the supply contract with HSTC
provided all the raw sugar used by C&H. In recent years, a number of Hawaii
sugarcane growers have exited the business or have announced they will be
exiting the business or are considering such action. There is no certainty that
the companies now producing sugarcane in Hawaii will be doing so in the future.
In 1995, C&H will purchase raw sugar from other than Hawaiian sources to
supplement its purchases under the supply contract with HSTC.
At McBryde, coffee marketing efforts currently are being directed
toward developing a market for premium-priced, Kauai-grown green coffee. Most
of the 1994 coffee crop is being marketed primarily on the U.S. Mainland in
whole-bean form. McBryde has a supply agreement with Nestle Beverage Company,
ending in 1998, pursuant to which Nestle Beverage Company will purchase up to
25 percent of McBryde's mid-grade coffee beans over the next five years. In
addition to the sale of green coffee, in 1994 McBryde launched a roasted,
packaged coffee product in Hawaii under the "Kauai Coffee" name.
(3) COMPETITION AND SUGAR LEGISLATION
Hawaiian sugar growers produce more sugar per acre than other
major producing areas of the world, but that advantage is partially offset by
Hawaii's high labor costs and the distance to the U.S. Mainland market.
Hawaiian refined sugar is marketed primarily west of Chicago. This is also the
largest beet sugar growing and refining area and, as a result, the only market
area in the United States which produces more sugar than it consumes. Sugar
from sugar beets is the greatest source of competition for the Hawaiian cane
sugar industry. In addition, competition from high fructose corn syrup ("HFCS")
has increased substantially since 1974, but now has stabilized, as sweetener
markets in which the use of HFCS is economical have become saturated. The use
of non-caloric (artificial) sweeteners accounts for a small percentage of the
domestic sweetener market. Although the use of artificial sweeteners is ex
pected to grow, such increased use is not expected to affect sugar markets
significantly in the near future.
Worldwide, most sugar is consumed in the country of origin. Only
about a quarter of world sugar is involved in international trade. A much
smaller amount is traded at the world sugar market price (the other sugar
involved in international trade is traded at negotiated prices under bilateral
trade agreements). Due to protective legislation, raw cane sugar prices in the
U.S. generally are higher than the world price, and only limited amounts of
foreign sugar are allowed into the U.S. under import quotas. Such foreign sugar
sells at U.S. domestic prices. As a result, the world sugar price does not have
material relevance to U.S. sugar producers and refiners.
The United States government price supports are important to the
economic viability of the domestic sugar growing industry, and the U.S. Congress
long has sought, through legislation, to assure a reliable domestic supply of
sugar at stable and reasonable prices. Congress' most recent renewal of pro
tective legislation for domestic sugar is provided by the Food, Agriculture,
Conservation and Trade Act of 1990, known as the 1990 Farm Bill. The 1990 Farm
Bill provides a sugar loan program for the 1991 through 1995 crops, with a loan
rate (support price) of 18 cents per pound for raw sugar, the same as that
provided by the 1985 Farm Act. The 1990 Farm Bill also provides minimum import
quotas and a means of limiting domestic production.
The loan rate represents the value of sugar given as collateral
for government price-support loans. The government is required to administer
the sugar program at no net cost, and this is accomplished by adjusting fees and
quotas for imported sugar to maintain the domestic price at a level that
prevents producers from defaulting on loans. The target price established by
the government is known as the market stabilization price and is based on the
loan rate plus transportation costs, interest, and an incentive factor. The
market stabilization price was 21.8 cents per pound in 1988-89 and 21.9 cents
per pound in 1990-91. No market stabilization price has been announced since
1990-91. The actual U.S. domestic sugar price averaged 21.31 cents per pound in
1992, 21.62 cents per pound in 1993, and 22.03 cents per pound in 1994. This
average is based on the average daily New York Contract #14 price for raw sugar.
A chronological chart of these prices is shown on the next page.
The long-term raw sugar supply agreement between C&H and HSTC
provides that the participating growers will sell all their raw sugar to C&H at
a price equal to the No. 14 Contract settlement price, less a discount and less
costs of sugar vessel discharge and stevedoring. This price becomes a cost to
C&H and, after deducting marketing, operating, distribution, transportation and
interest costs of HSTC, reflects the gross revenue to the Hawaii sugar growers,
including HC&S and McBryde. The No. 14 price is established by, among other
things, the supply of and demand for all forms of domestically-produced
sweeteners, government policies regarding the U.S. sugar import quota and, on
occasion, domestic market allocations, as well as by potential changes to inter
national trade matters which might affect the U.S. sugar program.
Liberalized international trade agreements, such as the General
Agreement on Tariff and Trade ("GATT"), include provisions relating to
agriculture, but these agreements will not affect the U.S. sugar or sweetener
industries materially. The "side" agreements that modified the North American
Free Trade Agreement ("NAFTA") alleviated sugar producers' concerns over NAFTA
provisions which could have allowed Mexico to export large quantities of sugar
to the U.S. starting in seven years.
(4) PROPERTIES AND WATER
C&H's main refining operations are located at Crockett,
California. The Crockett refinery is among the largest in the world, and is the
only cane sugar refinery on the United States West Coast. It is ideally located
next to a deep-water port, a major rail line and an interstate highway. The
refinery and administrative offices occupy a complex of buildings that contains
approximately 1,310,000 square feet and is located on approximately 55 acres.
C&H leases approximately 42 acres from the California State Lands Commission
under long-term ground leases, and owns the remaining area. The Lease Agreement
with the State of California covering the main refinery and wharf facilities
expires in 2022, and the Lease Agreement covering the area where the secondary
water treatment facility is located expires in 2024.
Construction by a third party began in early 1994 on a 240 MW
cogeneration plant adjacent to the C&H refinery at Crockett, California.
Pursuant to an agreement between C&H and the third party that expires in 2026,
the steam produced by the cogeneration plant will be used to power the C&H
refinery, thereby reducing C&H's energy costs. The cogeneration plant also will
allow C&H to shut down its own, less-efficient steam generating plant, and
thereby avoid required capital improvements to the existing plant. The
cogeneration plant is expected to be operational in 1996.
C&H also operates a smaller sugar refining and distribution
facility in Aiea, Hawaii that primarily produces liquid sweeteners for the local
beverage industry. This facility was completed in 1994 and replaced an older
refinery. C&H leases the refining equipment pursuant to a lease that expires in
December 1996, with options to renew for up to an additional six years, and
leases the facilities and the site pursuant to a lease that expires in 2004. In
the City of Commerce, California, C&H owns and operates a bulk sugar receiving
and distribution facility. The facility is located on a four-acre parcel owned
by C&H.
The HC&S sugar plantation, the largest in Hawaii, consists of
approximately 36,000 acres of land, including 2,000 acres leased from the State
of Hawaii. Approximately 35,900 acres are under cultivation and completely
irrigated, and the balance either is used for contributory purposes, such as
roads and plant sites, or is not suitable for cultivation. In December 1994,
HC&S reached an agreement to lease an additional 1,300 acres of sugar land.
This is expected eventually to add more than 7,000 tons to HC&S' annual
production and to reduce the average cost per ton of sugar produced.
The McBryde plantation consists of approximately 15,000 acres of
land, of which about 11,100 are under cultivation. About 7,000 acres under
cultivation are held under long-term leases. Two-thirds of McBryde's fields are
irrigated, and the remainder depends upon rainfall.
Large quantities of water are necessary to grow sugarcane.
Because of the importance of water, both access to water and efficient
irrigation systems are crucial for the successful growing of sugarcane. A&B's
plantations use a "drip" irrigation system that distributes water to the cane
roots through small holes in plastic tubes. In 1983, McBryde completed its con
version of 6,715 acres to drip irrigation. HC&S completed its conversion
program in January 1987, and 34,326 acres, 96% of its cane lands, now are drip
irrigated. Conversion to the drip method has improved yields in the converted
fields, has allowed increased mechanization of field operations, has resulted in
added acres under cultivation and helps mitigate the effects of drought.
ABHI also owns 19,000 acres of watershed lands on Maui which
supply part of the irrigation water used by HC&S. ABHI also has held water
licenses to 38,000 acres owned by the State of Hawaii, which over the years have
supplied approximately one-third of the irrigation water used by HC&S. The last
of these four water license agreements expired in 1986, and all four agreements
have been extended as revocable permits. The State Board of Land and Natural
Resources has indicated its intention to replace these four permits with
long-term licenses. The issuance of such licenses currently is pending a
hearing before the State Board of Land and Natural Resources.
E. EMPLOYEES AND LABOR RELATIONS
As of December 31, 1994, A&B and its subsidiaries had approximately
3,581 regular full-time employees. About 1,383 were engaged in the growing of
sugarcane and manufacturing of raw sugar, 812 were engaged in the refining and
marketing of sugar, 1,068 were engaged in ocean transportation, 67 were engaged
in container leasing, 54 were engaged in property development and management,
and the balance was in administration and miscellaneous operations. Approxi
mately 58% were covered by collective bargaining agreements with unions.
As of December 31, 1994, Matson and its subsidiaries had approximately
1,135 regular full-time employees and 594 casual employees. Approximately 36%
of the regular full-time employees, and all of the casual employees, were
covered by collective bargaining agreements. The casual employees consist of
seagoing employees and United States Pacific Coast longshoremen who are employed
through hiring halls and are not full-time employees of Matson or Matson
Terminals.
Employees of Matson and Matson Terminals are represented by 10
different unions, and Matson and Matson Terminals are parties to 92 separate
collective bargaining agreements. Matson's seagoing employees are represented
by six unions. Matson and Matson Terminals are members of the Pacific Maritime
Association ("PMA"), and Matson Terminals is a member of the Hawaii Stevedoring
Industry Committee and the Hawaii Employers Council, through which various
collective bargaining agreements are negotiated. Matson is a member of the
Maritime Service Committee ("MSC") for collective bargaining with three unions
representing licensed deck, engineer and radio officers for Matson vessels.
Historically, collective bargaining with the longshore and seagoing
unions has been complex and difficult. However, Matson and Matson Terminals
consider their respective relations with the International Longshoremen's and
Warehousemen's Union ("ILWU"), other unions and their non-union employees to be
satisfactory. During 1994, collective bargaining agreements with the three
unions representing Matson's licensed officers were renewed for terms ranging
from four to six and a half years. Agreements with three ILWU units in Hawaii
also were renewed in 1994, for three-year terms effective mid-1993. Expiring
agreements with the International Association of Machinists in Oakland and Los
Angeles and with the United Brotherhood of Carpenters and Joiners of America in
Oakland are expected to be renewed in 1995 without service interruption.
Matson contributed during 1994 to multi-employer pension plans for
vessel crews. If Matson were to withdraw from or significantly reduce its
obligation to contribute to one of the plans, Matson would review and evaluate
data, actuarial assumptions, calculations and other factors used in determining
its withdrawal liability, if any, and, in the event of material disagreement
with such determination, would pursue the various means available to it under
federal law for the adjustment or removal of its withdrawal liability. In 1994,
Matson Terminals began participating in a multi-employer pension plan for its
Hawaii longshore employees. For a discussion of withdrawal liabilities under
the Hawaii longshore and seagoing plans, see Note 3 to A&B's financial
statements on pages 38 and 39 of the 1994 Annual Report, which is incorporated
herein by reference.
Matson pays through Matson Terminals on the basis of cargo tons
carried, and Matson Terminals contributes as a direct employer, to a
multi-employer pension plan for Pacific Coast longshoremen. Under special
withdrawal liability rules in the plan, Matson Terminals could cease United
States Pacific Coast cargo handling operations permanently and stop making
contributions to the plan without any withdrawal liability.
HC&S and McBryde have approximately 923 employees and 232 employees,
respectively, covered by collective bargaining agreements with the ILWU.
Production units of HC&S and McBryde, as well as an HC&S clerks and technical
employees unit, are represented by Local 142 of the ILWU. Agreements with the
ILWU for the HC&S and McBryde production units and for the HC&S clerks and
technical employees unit expired on January 31, 1995. The agreement with the
HC&S production unit has been renegotiated for a one-year period expiring on
January 31, 1996. The other agreements are in the process of being
renegotiated.
Kahului Trucking & Storage, Inc. has three Local 142 bargaining units
covering 40 employees. Six employees are covered by the Bulk Sugar Agreement,
and two are covered by the Tugboat Agreement. These agreements were renewed for
three-year periods expiring June 30, 1996. The other 32 employees are in the
production unit, and are covered by an agreement that will expire on March 31,
1995. This agreement is in the process of being renegotiated.
Kauai Commercial Company, Incorporated has 53 employees represented by
Local 142. Of these, 46 employees are in the production unit, and seven are in
the clerical unit. Both contracts were extended to April 30, 1995 and are in
the process of being renegotiated.
Of the 615 bargaining unit employees of C&H at Crockett, California,
506 are members of Sugar Workers Union No. 1, AFL-CIO Seafarers International
Union of North America and 101 employees are members of ILWU Local 6. Eight
employees of C&H at the Aiea, Hawaii refinery are members of ILWU Local 142.
Contracts covering these employees extend through May 31, 1995 and are in the
process of being renegotiated.
F. ENERGY
Matson and Matson Terminals purchase bunker fuel oil, lubricants,
gasoline and diesel fuel for their operations. Bunker fuel oil and diesel fuel
are the largest items of energy-related expense.
Bunker fuel prices started 1994 at $59 per metric ton and ended the
year at $87 per metric ton. A low of $55 per metric ton occurred in January,
and a high of $119 per metric ton occurred in August. Sufficient fuel for
Matson's requirements is expected to be available in 1995.
As is the practice throughout Hawaii, ABHI's sugar plantations use
bagasse, the residual fiber of the sugarcane plant, as a fuel to generate steam
for the production of most of the electrical power for sugar mill and irrigation
pumping operations. However, supplemental fuel is required to produce power,
principally for pumping irrigation water during the factory shutdown period when
bagasse is not being produced. No. 6 (heavy) oil and coal have been the
supplemental fuels most commonly used by the sugar factories. However, in 1992,
the suppliers of oil to the ABHI sugar plantations announced they would
discontinue regular heavy oil shipments as a result of unlimited liability
concerns arising from federal and state environmental laws. Currently, heavy
oil is being transported to HC&S on a space-available basis. As a result of the
oil-availability problem, HC&S reduced its 1992 power production, began
converting its factories to use diesel fuel, and increased its use of coal. In
1994, HC&S produced 224,883 MWH of electric power and sold 101,994 MWH, compared
with 1993's power production of 226,924 MWH and sales of 101,346 MWH. HC&S' oil
use decreased to 126,568 barrels in 1994 from the 216,158 barrels used in 1993.
In November 1993, HC&S obtained a state permit that more than doubled its
capability for burning coal. Coal use for power generation increased
substantially, from 25,786 short tons in 1993 to 34,490 short tons in 1994.
McBryde uses very little oil and no coal because it normally produces
a large amount of hydroelectric power from two plants that supplement power
produced from bagasse. Both of these plants were out of service in the first
half of 1993 during repairs of hurricane damage. To deal with the discon
tinuance of heavy oil shipments to Kauai, McBryde converted its factories to use
diesel fuel. In 1994, power production was 43,494 MWH, up substantially from
20,772 MWH in 1993. Power sales in 1994 of 20,381 MWH were up from 16,520 MWH
in 1993. The lower power production in 1993 was due primarily to the 1992
hurricane-related damage to the two hydroelectric plants and the lower sugar
harvest in 1993. The two hydroelectric plants were put back in service in June
and in July 1993, respectively.
ITEM 3. LEGAL PROCEEDINGS
See "Business and Properties - Ocean Transportation - Rate Regulation"
above for a discussion of rate and other regulatory matters in which Matson is
routinely involved.
In June 1990, Matson Terminals filed a complaint in the Superior Court of
California against Home Insurance Company, Hobbs Group, Inc. and Arkwright-
Boston Insurance Company for breach of contract and negligence. The complaint
sought recovery of damages sustained at Matson Terminals' Oakland terminal as a
result of the October 1989 Loma Prieta earthquake. The court awarded Matson
Terminals $23,516,000, which included $11,250,000 in punitive damages.
Defendant Home Insurance Company has filed an appeal of the court's award.
On February 11, 1992, Pan Ocean Shipping Co., Ltd. ("Pan Ocean") served an
amended complaint on Matson, alleging that a Matson vessel negligently
discharged contaminated ballast water into Los Angeles harbor on January 9,
1991. Pan Ocean admits that a vessel owned and operated by Pan Ocean discharged
fuel oil into Los Angeles harbor on January 8, 1991. Pan Ocean is seeking
contribution and indemnification for the in-harbor clean-up charges which it
alleged to be between $16,000,000 and $19,000,000. On April 12, 1993, Pan Ocean
amended its complaint to allege fraud and seek unspecified punitive damages.
On September 13, 1993, the parties stipulated to binding arbitration before
a Special Master appointed by the United States District Court for the Central
District of California. The Special Master's findings will be incorporated into
a judgment by the United States District Court, which judgment may be appealed
to the Ninth Circuit Court of Appeals only on the issues of punitive damages and
misconduct of the Special Master. The arbitration hearing commenced on
January 13, 1994. Management believes, after consultation with legal counsel and
given the Protection and Indemnity coverage under Matson's insurance policy in
effect at the time of the alleged conduct, that any ultimate liability in
connection with this action will not have a material adverse effect on Matson's
financial condition.
On November 1, 1994, the Division of Water Quality, Department of
Wastewater Management, City and County of Honolulu ("City and County") issued a
Cease and Desist Order to C&H, alleging violations of a City and County
ordinance arising out of C&H's discharge of industrial wastewater from C&H's
liquid sugar refinery into the City and County's sewer system. Among other
things, the Cease and Desist Order ordered C&H to stop discharging wastewater
into the sewer system, ordered C&H to provide a corrective action plan and
warned that the violations might carry civil and/or criminal penalties. Sub
sequently, the City and County issued Amended Order No. 1, on November 9, 1994,
and Amended Order No. 2, on December 2, 1994, which, among other things,
permitted C&H to discharge wastewater into the sewer system, provided C&H did
not violate its permit, and imposed a fine on C&H in the amount of $1,650,000,
which fine was suspended provided C&H comply with the Amended Orders. A hearing
on Amended Order No. 2 was held on January 9, 1995. No decision has been issued
yet.
Modifications have been completed to the refinery that C&H believes will
allow the refinery to operate without violating the original Cease and Desist
Order or the Amended Orders. C&H has appealed all Orders and will be responding
to the charges brought by the City and County.
A&B and its subsidiaries are parties to, or may be contingently liable in
connection with, other legal actions arising in the normal conduct of their
businesses, the outcomes of which, in the opinion of management after consulta
tion with counsel, would not have a material adverse effect on A&B's financial
position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
For the information about executive officers of A&B required to be included
in this Part I, see paragraph B of "Directors and Executive Officers of the
Registrant" in Part III below, which is incorporated into Part I by reference.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
This information is contained in the sections captioned "Common Stock" and
"Dividends" on pages 23 and 24 of the 1994 Annual Report, which sections are
incorporated herein by reference.
At February 17, 1995, there were 6,729 record holders of A&B common stock.
ITEM 6. SELECTED FINANCIAL DATA
Information for the years 1990 through 1994 is contained in the comparative
table captioned "Eleven-Year Summary of Selected Financial Data" on pages 26 and
27 of the 1994 Annual Report, which information is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
A&B's financial statements, including the results of operations discussed
herein, are based on the historical-cost method of accounting, in accordance
with generally accepted accounting principles. If estimated current costs of
property and inventory were applied to reflect the effects of inflation on A&B's
businesses, total assets would be higher and net income lower than shown by the
historical-cost financial statements. However, the carrying values of current
assets (other than inventories, real estate held for sale, deferred income taxes
and prepaid and other assets) and of debt instruments are reasonable estimates
of their fair values. Investments in marketable securities are stated in the
financial statements at market values in accordance with Statement of Financial
Accounting Standards No. 115. Certain investments held in the Capital
Construction Fund at amortized cost exceeded their fair values at December 31,
1994. This matter is described more fully in Note 9 on pages 42 and 43 of the
1994 Annual Report, which Note is incorporated herein by reference.
Additional information applicable to this Item 7 is contained in the
section captioned "Management's Discussion and Analysis" on pages 29 through 31
of the 1994 Annual Report, which section is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This information is contained in the financial statements and accompanying
notes on pages 32 through 43 of the 1994 Annual Report, the Independent
Auditors' Report on page 25 of the 1994 Annual Report, and the Industry Segment
Information for the years ended December 31, 1994, 1993 and 1992 appearing on
page 28 of the 1994 Annual Report and incorporated into the financial statements
by Note 11 thereto, all of which are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
A. DIRECTORS
For information about the directors of A&B, see the section captioned
"Election of Directors" on pages 2 and 3 of A&B's proxy statement dated March 6,
1995 ("A&B's 1995 Proxy Statement"), which section is incorporated herein by
reference.
B. EXECUTIVE OFFICERS OF THE REGISTRANT
The name of each executive officer of A&B (in alphabetical order), age
(in parentheses) as of March 31, 1995, present and prior positions with A&B and
year appointed as such, and business experience for the past five years are
given below.
Generally, the term of office of executive officers is at the pleasure
of the Board of Directors. With regard to compliance with Section 16(a) of the
Securities Exchange Act of 1934, A&B believes that during fiscal 1994 its
directors and executive officers filed on a timely basis all reports required to
be filed under Section 16(a). For a discussion of severance agreements between
A&B and certain of A&B's executive officers, see the subsection captioned
"Severance Agreements" on page 13 of A&B's 1995 Proxy Statement, which subsec
tion is incorporated herein by reference.
Meredith J. Ching (38)
Vice President (Government & Community Relations) of A&B, 10/92-present;
Vice President of ABHI (Government & Community Relations), 10/92-present; Vice
President of ABHI (Natural Resources Development & Government Affairs), 4/89-
9/92; Vice President of ABHI (Natural Resources Development), 4/88-3/89.
John C. Couch (55)
Chairman of the Board of A&B, effective 4/95; President of A&B, 10/85-4/89,
4/91-present; Chief Executive Officer of A&B, 4/92-present; Chief Operating
Officer of A&B, 10/85-4/89, 4/91-4/92; Executive Vice President of A&B, 1/85-
10/85; Chairman of the Board of ABHI, effective 4/95; President and Chief
Executive Officer of ABHI, 4/89-present; Chairman of the Board of Matson,
effective 4/95; Vice Chairman of the Board of Matson, 4/92-3/95; President and
Chief Operating Officer of Matson, 1/85-10/85; Executive Vice President and
Chief Operating Officer of Matson, 1984; Chairman of the Board of C&H, 7/90-
present; Director of A&B, 10/85-present; Director of Matson, 10/85-4/89, 4/91-
present; Director of ABHI, 4/89-present.
W. Allen Doane (47)
Executive Vice President and Chief Operating Officer of ABHI, 4/91-present;
Managing Partner and Chief Operating Officer of The Shidler Group, 1988-1990.
Raymond J. Donohue (58)
Senior Vice President and Chief Financial Officer of Matson, 1/87-present;
Vice President (Finance) of Matson, 10/80-12/86.
Frederick M. Gutterson (52)
Senior Vice President of Matson, 4/94-present; Vice President of Matson,
4/89-4/94; President and Chief Executive Officer of Matson Leasing Company,
Inc., 4/89-present.
G. Stephen Holaday (50)
Vice President and Controller of A&B, 4/93-present; Vice President, Chief
Financial Officer and Treasurer of A&B, 4/89-4/93; Senior Vice President, Chief
Financial Officer and Treasurer of ABHI, 4/89-present; Senior Vice President and
Chief Financial Officer of A&B, 10/87-3/89; Vice President and Chief Financial
Officer of A&B, 2/87-9/87; Vice President, Treasurer and Controller of A&B,
1984-1987.
John B. Kelley (49)
Vice President (Investor Relations) of A&B, 1/95-present; Vice President
(Corporate Planning & Development, Investor Relations) of A&B, 10/92-12/94; Vice
President (Community & Investor Relations) of A&B, 2/91-10/92; Vice President
(Corporate & Investor Relations) of A&B, 8/88-1/91; Vice President (Project De
velopment) of ABHI, 8/89-1/91; Vice President of Matson, 7/87-7/88; Vice
President (Public Relations) of A&B, 8/85-7/87.
Miles B. King (47)
Vice President and Chief Administrative Officer of A&B, 4/93-present;
Senior Vice President (Industrial Relations) of ABHI, 4/93-present; Senior Vice
President (Human Resources) of Matson, 10/92-present; Executive Vice President
of The Hay Group, 1988-1992.
David G. Koncelik (53)
Senior Vice President of ABHI, 1/94-present; President and Chief Executive
Officer of C&H, 1/94-present; Executive Vice President and Chief Operating
Officer of C&H, 1/91-12/93; Chief Financial Officer of C&H, 12/88-12/93; Senior
Vice President of C&H, 12/88-12/90.
Michael J. Marks (56)
Vice President, General Counsel and Secretary of A&B, 4/89-present; Senior
Vice President and General Counsel of ABHI, 4/89-present; Senior Vice President,
General Counsel and Secretary of A&B, 1985-3/89; Vice President and General
Counsel of A&B, 1980-1985.
C. Bradley Mulholland (53)
President of Matson, 5/90-present; Chief Executive Officer of Matson, 4/92-
present; Chief Operating Officer of Matson, 7/89-4/92; Executive Vice President
of Matson, 9/87-5/90; Director of A&B, 4/91-present; Director of Matson,
7/89-present; Director of ABHI, 4/91-present.
Glenn R. Rogers (51)
Vice President, Chief Financial Officer and Treasurer of A&B, 4/93-present;
Senior Vice President, Marketing of Matson, 1/89-4/93; Vice President, Freight
Division, of Matson, 9/87-1/89; Vice President, Area Manager, Hawaii, of Matson,
4/86-9/87.
Robert K. Sasaki (54)
Vice President of A&B, 7/90-present; Senior Vice President (Properties) of
ABHI, 4/89-present; Senior Vice President (Properties) of A&B, 1986-3/89; Vice
President (Properties) of A&B, 1974-1986.
Thomas A. Wellman (36)
Assistant Controller of A&B, 4/93-present; Controller of A&B, 11/91-4/93;
Controller of ABHI, 11/91-present; Area Controller (Hawaii), Matson, 9/90-10/91,
Internal Auditor, A&B, 7/89-8/90.
ITEM 11. EXECUTIVE COMPENSATION
See the section captioned "Executive Compensation" on pages 8 through 13 of
A&B's 1995 Proxy Statement, which section is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
See the section titled "Security Ownership of Certain Shareholders" and the
subsection titled "Security Ownership of Directors and Executive Officers" on
page 5 and on pages 6 and 7, respectively, of A&B's 1995 Proxy Statement, which
section and subsection are incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See the subsection titled "Certain Relationships and Transactions" on
page 7 of A&B's 1995 Proxy Statement, and the last two paragraphs of the
subsection titled "Compensation of Directors" on pages 4 and 5 of A&B's 1995
Proxy Statement, which are incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
A. FINANCIAL STATEMENTS
Financial Statements of Alexander & Baldwin, Inc. and Subsidiaries and
Independent Auditors' Report (incorporated by reference to the pages of the 1994
Annual Report shown in parentheses below):
Balance Sheets, December 31, 1994 and 1993
(pages 34 and 35).
Statements of Income for the years ended
December 31, 1994, 1993 and 1992 (page 32).
Statements of Shareholders' Equity for the
years ended December 31, 1994, 1993 and
1992 (page 36).
Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992 (page 33).
Notes to Financial Statements (pages 37 through
43 and page 28 to the extent incorporated by
Note 11)
Independent Auditors' Report (page 25).
B. FINANCIAL STATEMENT SCHEDULES
Financial Schedules of Alexander & Baldwin, Inc. and Subsidiaries as
required by Rule 5-04 of Regulation S-X (filed herewith):
III - Condensed Financial Information of
Registrant - Balance Sheets, December 31,
1994 and 1993; Statements of Income and
Cash Flows for the years ended December 31,
1994, 1993 and 1992; Notes to Condensed
Financial Statements.
NOTE: All other schedules are omitted because of the absence of the conditions
under which they are required or because the information called for is included
in the financial statements or notes thereto.
C. EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K
Exhibits not filed herewith are incorporated by reference to the
exhibit number and previous filing shown in parentheses. All previous exhibits
were filed with the Securities and Exchange Commission in Washington, D.C.
Exhibits filed pursuant to the Securities Exchange Act of 1934 were filed under
file number 0-565. Shareholders may obtain copies of exhibits for a copying and
handling charge of $0.15 a page by writing to Michael J. Marks, Vice President,
General Counsel and Secretary, Alexander & Baldwin, Inc., P. O. Box 3440,
Honolulu, Hawaii 96801.
3. Articles of incorporation and bylaws.
3.a. Restated Articles of Association of A&B, as restated effective May
5, 1986, together with Amendments dated April 28, 1988 and April 26, 1990
(Exhibits 3.a.(iii) and (iv) to A&B's Form 10-Q for the quarter ended
March 31, 1990).
3.b. Bylaws of A&B as amended effective October 24, 1991 (Exhibit 3.b.(i)
to A&B's Form 10-Q for the quarter ended September 30, 1991).
4. Instruments defining rights of security holders, including indentures.
4.a. Equity.
4.a. Rights Agreement, dated as of December 8, 1988 between Alexander &
Baldwin, Inc. and Manufacturers Hanover Trust Company, Press Release of
Alexander & Baldwin, Inc. and Form of Letter to Shareholders of Alexander &
Baldwin, Inc. (Exhibits 4, 28(a) and 28(b) to A&B's Form 8-K dated
December 13, 1988).
4.b. Debt.
4.b. (i) Amended and Restated Revolving Credit and Term Loan Agreement
effective as of April 1, 1989 among Alexander & Baldwin, Inc. and
A&B-Hawaii, Inc. and Wells Fargo Bank, N.A., First Hawaiian Bank, Chemical
Bank, Bank of Hawaii, Chase Manhattan Bank, and The Bank of California,
N.A. (Exhibit 4.b.(xi) to A&B's Form 10-Q for the quarter ended
September 30, 1989).
(ii) First Amendment to Amended and Restated Revolving Credit and
Term Loan Agreement, dated as of December 21, 1989, among Alexander &
Baldwin, Inc. and A&B-Hawaii, Inc. and Wells Fargo Bank, N.A., First
Hawaiian Bank, Chemical Bank, Bank of Hawaii, Chase Manhattan Bank and The
Bank of California, N.A. (Exhibit 4.b.(ii) to A&B's Form 10-K for the year
ended December 31, 1989).
(iii) Second Amendment to Amended and Restated Revolving Credit and
Term Loan Agreement, dated as of May 4, 1990, among Alexander & Baldwin,
Inc. and A&B-Hawaii, Inc. and Wells Fargo Bank, N.A., First Hawaiian Bank,
Chemical Bank, Bank of Hawaii, Chase Manhattan Bank and The Bank of
California, N.A. (Exhibit 4.b.(iii) to A&B's Form 10-Q for the quarter
ended June 30, 1990).
(iv) Third Amendment to Amended and Restated Revolving Credit and
Term Loan Agreement, dated as of February 8, 1991, among Alexander &
Baldwin, Inc. and A&B-Hawaii, Inc. and Wells Fargo Bank, N.A., First
Hawaiian Bank, Bank of Hawaii, Bank of America National Trust & Savings
Association and The Bank of California, N.A. (Exhibit 4.b.(iv) to A&B's
Form 10-K for the year ended December 31, 1990).
(v) Fourth Amendment to Amended and Restated Revolving Credit and
Term Loan Agreement, dated as of November 26, 1991, among Alexander &
Baldwin, Inc. and A&B-Hawaii, Inc. and Wells Fargo Bank, N.A., First
Hawaiian Bank, Bank of America National Trust & Savings Association, Bank
of Hawaii, The Bank of California, N.A., and Credit Lyonnais San Francisco
Branch and Credit Lyonnais Cayman Island Branch (Exhibit 4.b.(vi) to A&B's
Form 10-K for the year ended December 31, 1991).
(vi) Fifth Amendment to Amended and Restated Revolving Credit and
Term Loan Agreement, dated as of December 29, 1992, among Alexander &
Baldwin, Inc. and A&B-Hawaii, Inc. and First Hawaiian Bank, Bank of America
National Trust & Savings Association, Bank of Hawaii, The Bank of
California, N.A., Credit Lyonnais San Francisco Branch and Credit Lyonnais
Cayman Island Branch (Exhibit 4.b.(vii) to A&B's Form 10-K for the year
ended December 31, 1992).
(vii) Sixth Amendment to Amended and Restated Revolving Credit and
Term Loan Agreement, dated as of December 30, 1993, among Alexander &
Baldwin, Inc. and A&B-Hawaii, Inc. and First Hawaiian Bank, Bank of America
National Trust & Savings Association, Bank of Hawaii, The Bank of
California, N.A., Credit Lyonnais Los Angeles Branch and Credit Lyonnais
Cayman Island Branch (Exhibit 4.b.(vii) to A&B's Form 10-K for the year
ended December 31, 1993).
(viii) Seventh Amendment to Amended and Restated Revolving Credit and
Term Loan Agreement, dated as of November 30, 1994, among Alexander &
Baldwin, Inc. and A&B-Hawaii, Inc. and First Hawaiian Bank, Bank of America
National Trust & Savings Association, Bank of Hawaii, The Bank of
California, N.A., Credit Lyonnais Los Angeles Branch and Credit Lyonnais
Cayman Island Branch.
10. Material contracts.
10.a. (i) Agreement, by and between Alexander & Baldwin, Inc. and The
Harry and Jeanette Weinberg Foundation, dated January 26, 1989; Agreement,
by and among Alexander & Baldwin, Inc., Mr. Harry Weinberg, 3900 Corp., 300
Corporation and HRT, Ltd., dated January 26, 1989; and Press Release of
Alexander & Baldwin, Inc., dated January 27, 1989 (Exhibits 28.1, 28.2 and
28.3 to A&B's Form 8-K dated January 31, 1989).
(ii) Purchase and Exchange Agreement, by and between Wailea
Development Company, Inc. and Wailea Resort Company, Ltd., dated as of
January 15, 1989; Letters of Guaranty of Alexander & Baldwin, Inc. and
Shinwa Golf Kabushiki Kaisha, respectively, dated as of January 15, 1989;
Press Release of Alexander & Baldwin, Inc., dated February 10, 1989; and
Pro Forma Financial Information relative to the transaction (Ex-
hibits 10.b.(vii)(a) through 10.b.(vii)(e) to A&B's Form 8-K dated
February 10, 1989).
(iii) Contract for the Construction of One Containership by and
between Matson Navigation Company, Inc. and National Steel and Shipbuilding
Company, dated January 31, 1990 (Exhibit 10.b.(vii) to A&B's Form 10-K for
the year ended December 31, 1989).
(iv) Note Agreement between Matson Leasing Company, Inc. and The
Prudential Insurance Company of America, dated as of June 28, 1991
(Exhibit 10.b.(x) to A&B's Form 10-Q for the quarter ended June 30, 1991).
(v) Amendment dated March 11, 1992 to the Note Agreement between
Matson Leasing Company, Inc. and The Prudential Insurance Company of
America, dated as of June 28, 1991 (Exhibit 10.a.(vii) to A&B's Form 10-K
for the year ended December 31, 1992).
(vi) Second Amendment dated as of August 31, 1993 to the Note
Agreement between Matson Leasing Company, Inc. and The Prudential Insurance
Company of America, dated as of June 28, 1991 (Exhibit 10.a.(viii) to A&B's
Form 10-K for the year ended December 31, 1993).
(vii) Note Agreement between Matson Leasing Company, Inc. and The
Prudential Insurance Company of America, dated as of March 11, 1992
(Exhibit 10.a.(x) to A&B's Form 10-Q for the quarter ended March 31, 1992).
(viii) First Amendment dated as of August 1, 1993 to the Note Agreement
between Matson Leasing Company, Inc. and The Prudential Insurance Company
of America, dated as of March 11, 1992 (Exhibit 10.a.(xi) to A&B's
Form 10-K for the year ended December 31, 1993).
(ix) Issuing and Paying Agent Agreement between Matson Navigation
Company, Inc. and Security Pacific National Trust (New York), with respect
to Matson Navigation Company, Inc.'s $150 million commercial paper program
dated September 18, 1992 (Exhibit 10.b.1.(xxviii) to A&B's Form 10-Q for
the quarter ended September 30, 1992).
(x) Issuing and Paying Agent Agreement among Matson Leasing Company,
Inc., Matson Navigation Company, Inc. and Security Pacific National Trust
(New York), with respect to Matson Leasing Company, Inc.'s $115 million
commercial paper program dated September 18, 1992 (Exhibit 10.b.1.(xxix) to
A&B's Form 10-Q for the quarter ended September 30, 1992).
(xi)(a) Purchase Agreement, by and between A&B-Hawaii, Inc., California
and Hawaiian Sugar Company, Kekaha Sugar Company, Limited, The Lihue
Plantation Company, Limited, Oahu Sugar Company, Limited, Pioneer Mill
Company, Limited, Amfac/JMB Hawaii, Inc., Ka'u Agribusiness Co., Inc.,
Mauna Kea Agribusiness Co., Inc., Olokele Sugar Company, Ltd., C. Brewer
and Company, Limited, Waialua Sugar Company, Inc., Dole Food Company, Inc.
and Gay & Robinson, Inc., dated as of May 30, 1993 (Exhibit 10.a.(xii)(a)
to A&B's Form 8-K dated June 4, 1993).
(xi)(b) Purchase Agreement, by and between A&B-Hawaii, Inc., California
and Hawaiian Sugar Company, and John Goss, as Trustee in Bankruptcy for
Hamakua Sugar Company, Inc., dated as of June 1, 1993
(Exhibit 10.a.(xii)(b) to A&B's Form 8-K dated June 4, 1993).
(xii) Revolving Credit Agreement between Alexander & Baldwin, Inc.,
A&B-Hawaii, Inc. and First Hawaiian Bank, dated July 9, 1991
(Exhibit 10.b.(xi) to A&B's Form 10-Q for the quarter ended September 30,
1991).
(xiii) Note Agreement among Alexander & Baldwin, Inc. and A&B-Hawaii,
Inc. and The Prudential Insurance Company of America, effective as of
December 20, 1990 (Exhibit 10.b.(ix) to A&B's Form 10-K for the year ended
December 31, 1990).
(xiv) Note Agreement among Alexander & Baldwin, Inc. and A&B-Hawaii,
Inc. and The Prudential Insurance Company of America, dated as of June 4,
1993 (Exhibit 10.a.(xiii) to A&B's Form 8-K dated June 4, 1993).
(xv) Amendment dated as of May 20, 1994 to the Note Agreements among
Alexander & Baldwin, Inc., A&B-Hawaii, Inc. and The Prudential Insurance
Company of America, dated as of December 20, 1990 and June 4, 1993
(Exhibit 10.a.(xviv) to A&B's Form 10-Q for the quarter ended June 30,
1994).
(xvi) Amendment dated January 23, 1995 to the Note Agreement among
Alexander & Baldwin, Inc. and A&B-Hawaii, Inc. and The Prudential Insurance
Company of America, effective as of December 20, 1990.
(xvii) General Lease between the State of California and California and
Hawaiian Sugar Company, dated September 24, 1992 (Exhibit 10.a.(xiv) to
A&B's Form 10-Q for the quarter ended June 30, 1993).
(xviii) Amendment to Lease and Reservation of Easements, between the
State of California and California and Hawaiian Sugar Company, dated as of
July 29, 1993 (Exhibit 10.a.(xv) to A&B's Form 10-Q for the quarter ended
September 30, 1993).
(xix)(a) Commercial Paper Dealer Agreement between California and
Hawaiian Sugar Company and First Chicago Capital Markets, Inc., dated April
22, 1991, with respect to California and Hawaiian Sugar Company's
$100 million revolving credit facility (Ex-hibit 10.a.(xviii) to A&B's
Form 10-K for the year ended December 31, 1993).
(xix)(b) Depositary Agreement between California and Hawaiian Sugar
Company and the First National Bank of Chicago, dated as of April 6, 1989.
(xx) Amendment dated as of February 10, 1995, to Depositary Agreement
between California and Hawaiian Sugar Company and The First National Bank
of Chicago, dated as of April 6, 1989.
(xxi) Revolving Credit Agreement between Alexander & Baldwin, Inc.,
A&B-Hawaii, Inc., and First Hawaiian Bank, dated December 30, 1993 (Ex-
hibit 10.a.(xx) to A&B's Form 10-Q for the quarter ended September 30,
1994).
(xxii) Amendment dated August 31, 1994 to the Revolving Credit
Agreement between Alexander & Baldwin, Inc., A&B-Hawaii, Inc., and First
Hawaiian Bank dated December 30, 1993 (Exhibit 10.a.(xxi) to A&B's
Form 10-Q for the quarter ended September 30, 1994).
*10.b.1.(i) Alexander & Baldwin, Inc. Restricted Stock Bonus Plan, as
restated effective April 28, 1988 (Exhibit 10.c.1.(xi) to A&B's Form 10-Q
for the quarter ended June 30, 1988).
_______________
* All exhibits listed under 10.b.1. are management contracts or compensatory
plans or arrangements.
________________
(ii) Alexander & Baldwin, Inc. 1983 Stock Option Plan
(Exhibit 10.c.1.(vii) to A&B's Form 10-K for the year ended December 31,
1982).
(iii) Amendment No. 1 to Alexander & Baldwin, Inc. 1983 Stock Option
Plan, effective December 14, 1983 (Exhibit 10.c.1.(viii) to A&B's Form 10-K
for the year ended December 31, 1983).
(iv) Amendment No. 2 to Alexander & Baldwin, Inc. 1983 Stock Option
Plan, effective January 1, 1987 (Exhibit 10.c.1.(xii) to A&B's Form 10-K
for the year ended December 31, 1986).
(v) Amendment No. 3 to the Alexander & Baldwin, Inc. 1983 Stock
Option Plan (Exhibit 10.b.1.(xxv) to A&B's Form 10-Q for the quarter ended
June 30, 1992).
(vi) Alexander & Baldwin, Inc. 1989 Stock Option/ Stock Incentive
Plan (Exhibit 10.c.1.(ix) to A&B's Form 10-K for the year ended
December 31, 1988).
(vii) Amendment No. 1 to the Alexander & Baldwin, Inc. 1989 Stock
Option/Stock Incentive Plan (Exhibit 10.b.1.(xxvi) to A&B's Form 10-Q for
the quarter ended June 30, 1992).
(viii) Amendment No. 2 to the Alexander & Baldwin, Inc. 1989 Stock
Option/Stock Incentive Plan, effective as of January 27, 1994
(Exhibit 10.b.1.(iv) to A&B's Form 10-Q for the quarter ended March 31,
1994).
(ix) Amendment No. 3 to the Alexander & Baldwin, Inc. 1989 Stock
Option/Stock Incentive Plan, effective as of October 27, 1994.
(x) Alexander & Baldwin, Inc. 1989 Non-Employee Director Stock
Option Plan (Exhibit 10.c.1.(x) to A&B's Form 10-K for the year ended
December 31, 1988).
(xi) Amendment No. 1 to the Alexander & Baldwin, Inc. 1989
Non-Employee Director Stock Option Plan (Exhibit 10.b.1.(xxiv) to A&B's
Form 10-K for the year ended December 31, 1991).
(xii) Amendment No. 2 to the Alexander & Baldwin, Inc. 1989 Non-
Employee Director Stock Option Plan (Exhibit 10.b.1.(xxvii) to A&B's
Form 10-Q for the quarter ended June 30, 1992).
(xiii) Second Amended and Restated Employment Agreement between
Alexander & Baldwin, Inc. and R. J. Pfeiffer, effective as of October 25,
1990 (Ex-hibit 10.c.1.(xiii) to A&B's Form 10-K for the year ended
December 31, 1990).
(xiv) A&B Deferred Compensation Plan for Outside Directors
(Exhibit 10.c.1.(xviii) to A&B's Form 10-K for the year ended December 31,
1985).
(xv) Amendment No. 1 to A&B Deferred Compensation Plan for Outside
Directors, effective October 27, 1988 (Exhibit 10.c.1.(xxix) to A&B's
Form 10-Q for the quarter ended September 30, 1988).
(xvi) A&B Life Insurance Plan for Outside Directors
(Exhibit 10.c.1.(xix) to A&B's Form 10-K for the year ended December 31,
1985).
(xvii) A&B Excess Benefits Plan, Amended and Restated Effective July 1,
1991 (Exhibit 10.b.1.(xvi) to A&B's Form 10-K for the year ended
December 31, 1992).
(xviii) Amendment No. 1 to the A&B Excess Benefits Plan, effective
January 1, 1994 (Exhibit 10.b.1.(xvii) to A&B's Form 10-K for the year
ended December 31, 1993).
(xix) Amendment No. 2 to the A&B Excess Benefits Plan, effective
August 24, 1994.
(xx) Amendment No. 3 to and Restatement of the A&B Excess Benefits
Plan, effective February 1, 1995.
(xxi) A&B Executive Survivor/Retirement Benefit Plan, Amended and
Restated Effective July 1, 1991 (Exhibit 10.b.1.(xvii) to A&B's Form 10-K
for the year ended December 31, 1992).
(xxii) Amendment No. 1 to and Restatement of the A&B Executive
Survivor/Retirement Benefit Plan, effective February 1, 1995.
(xxiii) A&B 1985 Supplemental Executive Retirement Plan, Amended and
Restated Effective July 1, 1991 (Exhibit 10.b.1.(xviii) to A&B's Form 10-K
for the year ended December 31, 1992).
(xxiv) Amendment No. 1 to and Restatement of the A&B 1985 Supplemental
Executive Retirement Plan, effective February 1, 1995.
(xxv) A&B Retirement Plan for Outside Directors, Amended and Restated
Effective October 24, 1991 (Exhibit 10.b.1.(xix) to A&B's Form 10-K for the
year ended December 31, 1992).
(xxvi) Amendment No. 1 to and Restatement of the A&B Retirement Plan
for Outside Directors, effective February 1, 1995.
(xxvii) Form of Severance Agreement entered into with certain executive
officers, as amended and restated effective August 22, 1991
(Exhibit 10.c.1.(xxiv) to A&B's Form 10-Q for the quarter ended
September 30, 1991).
(xxviii) Alexander & Baldwin, Inc. One-Year Performance Improvement
Incentive Plan, as restated effective October 22, 1992
(Exhibit 10.b.1.(xxi) to A&B's Form 10-K for the year ended December 31,
1992).
(xxix) Alexander & Baldwin, Inc. Three-Year Performance Improvement
Incentive Plan, as restated effective October 22, 1992
(Exhibit 10.b.1.(xxii) to A&B's Form 10-K for the year ended December 31,
1992).
(xxx) Alexander & Baldwin, Inc. Deferred Compensation Plan effective
August 25, 1994 (Exhi-bit 10.b.1.(xxv) to A&B's Form 10-Q for the quarter
ended September 30, 1994).
11. Statement re computation of per share earnings.
13. Annual report to security holders.
13. Alexander & Baldwin, Inc. 1994 Annual Report.
22. Subsidiaries.
22. Alexander & Baldwin, Inc. Subsidiaries as of February 28, 1995
24. Consent of Deloitte & Touche LLP dated March 27, 1995 (included as last
page of A&B's Form 10-K for the year ended December 31, 1994).
D. REPORTS ON FORM 8-K
No Reports on Form 8-K were filed during the quarter ended
December 31, 1994.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ALEXANDER & BALDWIN, INC.
(Registrant)
Date: March 27, 1995 By /s/ John C. Couch
John C. Couch
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ John C. Couch President and March 27, 1995
John C. Couch Chief Executive
Officer and
Director
/s/ Glenn R. Rogers Vice President, March 27, 1995
Glenn R. Rogers Chief Financial
Officer and
Treasurer
/s/ G. Stephen Holaday Vice President March 27, 1995
G. Stephen Holaday and Controller
/s/ R. J. Pfeiffer Chairman of March 27, 1995
R. J. Pfeiffer the Board and
Director
/s/ Michael J. Chun Director March 27, 1995
Michael J. Chun
Leo E. Denlea, Jr.* Director March 27, 1995
Leo E. Denlea, Jr.
/s/ Walter A. Dods, Jr. Director March 27, 1995
Walter A. Dods, Jr.
/s/ Charles G. King Director March 27, 1995
Charles G. King
/s/ Carson R. McKissick Director March 27, 1995
Carson R. McKissick
/s/ C. Bradley Mulholland Director March 27, 1995
C. Bradley Mulholland
/s/ Robert G. Reed III Director March 27, 1995
Robert G. Reed III
/s/ Maryanna G. Shaw Director March 27, 1995
Maryanna G. Shaw
/s/ Charles M. Stockholm Director March 27, 1995
Charles M. Stockholm
*By /s/ John C. Couch
John C. Couch
Attorney-in-Fact
INDEPENDENT AUDITORS' REPORT
Alexander & Baldwin, Inc.:
We have audited the financial statements of Alexander & Baldwin, Inc. and its
subsidiaries as of December 31, 1994 and 1993, and for each of the three years
in the period ended December 31, 1994, and have issued our report thereon dated
January 27, 1995; such financial statements and report are included in your 1994
Annual Report to Shareholders and are incorporated herein by reference. Our
audits also included the financial statement schedules of Alexander & Baldwin,
Inc. and its subsidiaries, listed in Item 14.B. These financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information shown therein.
/s/ Deloitte & Touche LLP
January 27, 1995
SCHEDULE I
Page 1 of 4
ALEXANDER & BALDWIN, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ALEXANDER & BALDWIN, INC. (Parent Company)
CONDENSED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
(In thousands)
__________________________________________________________________________
1994 1993
-------- --------
ASSETS
Current Assets:
Cash and cash equivalents $37 $140
Accounts and notes receivable, net 1 62
Prepaid expenses and other 5,913 6,193
-------- --------
Total current assets 5,951 6,395
-------- --------
Investments:
Subsidiaries consolidated, at equity 596,070 582,067
Other 61,031 15,204
-------- --------
Total investments 657,101 597,271
-------- --------
Real Estate Developments 8,196 -
-------- --------
Property, at cost 80,814 81,019
Less accumulated depreciation and
amortization 7,595 5,999
-------- --------
Property -- net 73,219 75,020
-------- --------
Other Assets 1,232 676
-------- --------
Total $745,699 $679,362
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $1,640 $1,647
Due to subsidiaries 54,162 49,096
Other 9,188 4,126
-------- --------
Total current liabilities 64,990 54,869
-------- --------
Long-Term Liabilities 7,485 13,223
-------- --------
Deferred Income Taxes 40,610 24,264
-------- --------
Commitments and Contingencies
Shareholders' Equity:
Capital stock 37,493 38,028
Additional capital 38,862 38,510
Unrealized holding gains on securities 29,073 -
Retained earnings 541,910 525,192
Cost of treasury stock (14,724) (14,724)
-------- --------
Total shareholders' equity 632,614 587,006
-------- --------
Total $745,699 $679,362
See accompanying notes. ======== ========
SCHEDULE III
Page 2 of 4
ALEXANDER & BALDWIN, INC. (Parent Company)
CONDENSED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(In thousands)
1994 1993 1992
---------- ---------- ---------
Revenue:
Net sales, revenue from services and rentals $9,753 $12,362 $11,584
Interest, dividends and other 3,753 2,683 4,588
Total revenue 13,506 15,045 16,172
---------- ---------- ---------
Costs and Expenses:
Cost of goods sold, services and rentals 4,972 3,289 2,092
Selling, general and administrative 11,119 10,904 10,583
Interest and other 1,148 2,449 1,774
Total costs and expenses 12,900 15,249 12,895
---------- ---------- ---------
Income (Loss) Before Cumulative Effect of Change in
Accounting for Post-retirement Benefits and
Equity in Net Income of Subsidiaries Consolidated 606 (204) 3,277
Cumulative Effect of Change in Accounting for
Post-retirement Benefits - - (2,230)
Income (Loss) Before Equity in Net Income
of Subsidiaries Consolidated 606 (204) 1,047
Equity in Net Income of Subsidiaries Consolidated* 74,002 67,193 17,907
Net Income $74,608 $66,989 $18,954
See accompanying notes.
* Equity in Net Income of Subsidiaries Consolidated for 1992 is net of the cumulative
effect of the change in accounting for post-retirement benefits of $39,321,000.
SCHEDULE III
Page 3 of 4
ALEXANDER & BALDWIN, INC. (Parent Company)
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994,1993 AND 1992
(In thousands)
1994 1993 1992
---------- ---------- ----------
Cash Flows from Operations ($6,341) $11,696 ($7,030)
---------- ---------- ----------
Cash Flows from Investing Activities:
Capital expenditures (935) (800) (3,484)
Proceeds from sale of property and investments 1,200 - -
---------- ---------- ----------
Net cash provided by (used in) investing activities 265 (800) (3,484)
---------- ---------- ----------
Cash Flows from Financing Activities:
Increase (decrease) in intercompany payable 5,066 (8,118) 21,980
Dividends received from subsidiaries 60,000 39,000 29,000
Payments of long-term debt (935) (936) (917)
Proceeds from issuances of capital stock 122 288 924
Repurchase of capital stock (17,717) - -
Dividends paid (40,563) (40,777) (40,744)
---------- ---------- ----------
Net cash provided by (used in) financing activities 5,973 (10,543) 10,243
---------- ---------- ----------
Cash and Cash Equivalents:
Net increase (decrease) for the year (103) 353 (271)
Balance, beginning of year 140 (213) 58
---------- ---------- ----------
Balance, end of year $37 $140 ($213)
========== =========== ==========
Other Cash Flow Information:
Interest paid, net of amounts capitalized $889 $690 $699
Income taxes paid 18,391 15,123 21,295
See accompanying notes.
ALEXANDER & BALDWIN, INC. (Parent Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(a) ORGANIZATION AND OPERATIONS
OAlexander & Baldwin, Inc. is the parent company of A&B-Hawaii, Inc. (ABHI) and
Matson Navigation Company, Inc. (Matson). ABHI has principal business oper-
ations of Food Products and Property Development and Management. Matson has
principal business operations of Ocean Transportation and Marine Container
Leasing.
(b) LONG-TERM LIABILITIES
At December 31, 1994 and 1993, long-term liabilities consisted of the following:
1994 1993
------- -------
(In thousands)
Long-term debt:
Limited partnership subscription notes,
no interest, payable through 1996 $1,700 $2,550
Mortgage loans, collateralized by land and
buildings, 9% to 12.5%, payable through 2000 6,041 5,856
------ -------
Total 7,741 8,406
Less current portion 6,657 936
------ -------
Long-term debt 1,084 7,470
Other--principally deferred compensation and
executive survivors 6,401 5,753
------ -------
Total $7,485 $13,223
====== =======
At December 31, 1994, maturities of long-term debt during the next two years
(1995 and 1996) totalled $6,657,000 and $892,000, respectively.
(c) COMMITMENTS AND CONTINGENCIES
The Company and certain subsidiaries are parties to various legal actions and
are contingently liable in connection with claims and contracts arising in the
normal course of business, the outcome of which, in the opinion of management
after consultation with legal counsel, will not have a material adverse effect
on the Company's financial position.
At December 31, 1994, the Company did not have any significant firm commitments.
(d) CASH DIVIDENDS FROM AFFILIATES
Cash dividends from a consolidated subsidiary were $60,000,000 in 1994, $39,000,
1993 and $29,000,000 in 1992.