PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
See the condensed statements of income, balance sheets, statements of cash
flows and financial notes included in the Alexander & Baldwin, Inc. (A&B) 1995
second quarter interim report. This report is included as Exhibit 20 and is
incorporated herein by reference.
The financial information referred to in the preceding paragraph is to be
read in conjunction with the following additional financial notes:
(g) The condensed balance sheet as of June 30, 1995 and the condensed
statements of income and the condensed statements of cash flows for the
three and six months ended June 30, 1995 and 1994 are unaudited.
However, in the opinion of management, all material adjustments
necessary for the fair presentation of interim period results have been
included.
(h) On June 30, 1995, XTRA Corporation acquired all of the containers and
certain other assets and assumed certain liabilities of Matson Leasing
Company, Inc.(MLC) for $357,471,000, subject to completion of an
independent audit. Accordingly, the container leasing segment is
reported as a discontinued operation at June 30, 1995, and the
consolidated financial statements report separately the net assets,
operating results and cash flows of that business. The amounts presented
for prior periods have been restated for comparability.
The condensed statements of income relating to the discontinued container
leasing segment are presented below (in thousands):
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
------- ------- ------- -------
Revenue $18,094 $15,534 $35,344 $30,215
Costs and
expenses (13,714) (11,240) (26,780) (22,808)
------- ------- ------- -------
Income before
income taxes 4,380 4,294 8,564 7,407
Income tax
expense (1,650) (1,626) (3,228) (2,789)
------- ------- ------- -------
Net income $ 2,730 $ 2,668 $ 5,336 $ 4,618
======= ======= ======= =======
Net assets of the discontinued container leasing segment at December 31,
1994 were as follows (in thousands):
Accounts receivable $ 13,802
Property, net 305,874
Other assets 1,027
Liabilities (7,013)
--------
Net assets $313,690
========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY:
A&B's principal liquid resources, comprising cash and cash equivalents, trade
receivables, sugar inventories and unused lines of credit, less accrued deposits
to the Capital Construction Fund (CCF), increased by $186,834,000 from December
31, 1994 to June 30, 1995. This resulted primarily from the receipt of proceeds
from the sale of MLC, partially offset by higher accrued deposits to the CCF and
increased borrowings from revolving credit facilities.
Working capital totaled $133,976,000 at June 30, 1995, an increase of
$75,930,000 from that at 1994 year-end. The increase was primarily due to
a higher cash and cash equivalents balance as a result of the sale of MLC,
partially offset by increased accrued deposits to the CCF and the reclassifica-
tion of certain long-term liabilities to current. A portion of the proceeds
from the sale of MLC will be used to repay long-term debt.
RESULTS OF SEGMENT OPERATIONS - SECOND QUARTER 1995 COMPARED WITH THE SECOND
QUARTER 1994:
The following analysis is based on a comparison of second quarter 1995
results with those for second quarter 1994, which have been restated to reflect
the sale of MLC as of June 30, 1995.
Ocean Transportation
For the second quarter of 1995, ocean transportation revenue decreased six
percent compared with the second quarter of 1994. Operating profit was 30
percent lower than in the second quarter of 1994. The decline was primarily
attributable to lower container cargo volume in the Hawaii service and higher
fuel prices. In the second quarter of 1994, a competitor's operations were
disrupted by a strike, which boosted Matson's carriage during that quarter.
Partly because of that additional volume in the prior year, comparison of
Matson's total second-quarter 1995 Hawaii container volume with that of the 1994
second quarter reflects a decline of 10 percent. Matson's total Hawaii
automobile volume declined five percent.
Property Development and Management - Leasing
For the second quarter of 1995, property leasing revenue and operating profit
remained relatively stable, compared with 1994 second quarter levels.
Two shopping centers, one near Reno, Nevada and the other in Greely,
Colorado, were acquired late in the second quarter using tax-deferred proceeds
from the 1994 sale of a Denver shopping center. The combined annual contribu-
tion to operating profit of these two acquired properties is expected to exceed
that of the Denver property.
Also, late in the second quarter, earnings commenced from a ground lease for
a newly-opened Price-Costco Wholesale Warehouse facility located in Kahului,
Maui.
Property Development and Management - Sales
For the second quarter of 1995, property sales revenue totaled $2,874,000,
compared with $4,082,000 for the second quarter of 1994. Operating profit for
the second quarter of 1995 of $1,524,000 was about half of the comparable 1994
amount. Sales in the second quarter of 1995 included several small, developed
business lots, an unimproved parcel and four residential lots. Sales in the
second quarter of 1994 included a two-acre parcel near the harbor at Kahului,
Maui, one developed business lot and two small, undeveloped parcels.
During the second quarter, construction began on the first phase of the 76-
acre Maui Business Park (a project formerly called Kahului Industrial Park).
Sitework construction also began for the 92-lot, 21-acre Makana subdivision
on the North Shore of Maui. Originally, a joint venture was formed with Gentry
Pacific, Ltd. (Gentry) to develop this residential subdivision. During the
second quarter of 1995, however, the parties agreed to terminate the joint
venture. The Company will be developing the project without Gentry's on-
going participation. Sales activities were initiated in the second quarter
at the 102-unit Kahului Ikena residential condominium project.
In early May 1995, the State Land Use Commission approved a petition to grant
State urban district classification on an incremental basis for the balance of
the 1,045-acre Kukui'ula planned residential community on Kauai. A&B is now
pursuing the next entitlement step of County zoning. Construction on the
project remains suspended pending better economic conditions.
Food Products
For the second quarter of 1995, food products revenue increased five percent
compared with 1994 second quarter levels. The second quarter operating loss was
$11.4 million, which included an $8.1 million pre-tax charge for phasing out
sugar operations at the McBryde Sugar Company, Ltd. (McBryde) plantation on
Kauai. The segment broke even in the second quarter of 1994. Also, sugar
refining and sugar growing margins at California and Hawaiian Sugar Company,
Inc. (C&H) and the plantations, respectively, remained under pressure.
At McBryde, the phase-out of sugar operations which was announced on June 22
began with the immediate cessation of cane planting. Harvesting and processing
of sugar cane, however, will continue until September 1996. To date, nine
employees have taken early retirement and 36 employees have been laid off.
Another 158 employees are expected to be laid off by September 1996. The
Company's primary agricultural focus on Kauai now will be on the coffee-growing
activities at its Island Coffee Company, Inc. subsidiary.
OTHER ANALYSIS:
Interest Expense
For the second quarter of 1995, interest expense of $7,711,000 was nine
percent higher than for the second quarter of 1994. This increase was primarily
due to a higher weighted average cost of debt.
Income Tax Expense
For the second quarter of 1995, income tax expense of $1.9 million was $7.9
million less than for the second quarter of 1994, primarily due to lower pre-tax
income.
Repurchase of Stock
There were no repurchases of common stock during the second quarter of 1995.
To date, the Company has repurchased a total of 972,500 shares for $23.1 million
since the repurchase program was authorized by the Board of Directors in
December 1993.
RESULTS OF SEGMENT OPERATIONS - FIRST SIX MONTHS OF 1995 COMPARED WITH THE FIRST
SIX MONTHS OF 1994:
The following analysis is based on a comparison of first six months of
1995 results with those for first six months of 1994, which have been restated
to reflect the sale of MLC as of June 30, 1995.
Ocean Transportation
For the first half of 1995, ocean transportation revenue remained virtually
unchanged from the comparable 1994 period. For the first six months of 1995,
operating profit declined by 27 percent, primarily due to lower cargo and
higher fuel costs. During this period, Hawaii container and total automobile
volumes were down eight and two percent, respectively, compared with volumes
for the first half of 1994.
The process of due diligence continues on the proposed strategic operating
alliance with American President Lines, Ltd. which was announced previously.
If final approvals are received, the agreement would close in the fourth
quarter and the new service would begin at the start of 1996.
Property Development and Management - Leasing
Property leasing revenue for the first six months of 1995 approximated
revenue for the comparable 1994 period. Property leasing operating profit for
the first six months of 1995 was seven percent lower than in the first half of
1994. A smaller portfolio of leasable property, due to the sale last year of
a shopping center in Denver, Colorado, contributed to the decrease in operating
profit in the first half of 1995.
The portfolio benefited from continuing high occupancy levels for Mainland
properties, where year-to-date occupancy rates averaged 97 percent, versus 96
percent last year. Occupancy levels for Hawaii properties, however, averaged
89 percent, versus 94 percent last year, primarily due to the relocation of
tenants from an older shopping center on Maui that is set to be renovated.
Property Development and Management - Sales
For the first six months of 1995, property sales revenue totaled $6,995,000,
compared with $12,691,000 for the first six months of 1994. Operating profit of
$3,220,000 for the first half of 1995 was about one-third of that in the first
six months of 1994.
Food Products
For the first six months of 1995, food products revenue increased 4 percent
compared with the first six months of 1994. The operating loss for the first
half of 1995 was $15,230,000,a substantial decline from the break-even
results experienced for the comparable 1994 period. The operating loss was
attributable to the $8.1 million pre-tax charge for phasing out sugar
operations on Kauai, as well as continued deterioration of sugar refining
margins. C&H's sugar refining operations were hurt by unusually high raw
cane sugar prices and relatively low refined product prices. As of June 30,
1995, refinery operations at C&H were continuing without contracts, as the
contracts with two labor units expired on May 31, 1995. On July 29, 1995,
the members of the smaller of the two unions ratified a three-year contract.
Negotiations with the larger union are continuing.
Legislation that will affect many agricultural commodities, including
sugar, presently is being considered by Congress. The Company continues to
work with the sweetener industry and congressional representatives in an effort
to include an effective and fair domestic sugar program in this legislation.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
At the Annual Meeting of Shareholders of the Company held on April 27, 1995, the
Company's shareholders voted in favor of: (i) the election of ten directors to
the Company's Board of Directors, and (ii) the election of Deloitte & Touche LLP
as the Company's independent auditors. The number of votes for, against or
withheld, as well as the number of abstentions and broker non-votes, as to each
matter voted upon at the annual Meeting of Shareholders, were as follows:
(i) Election of Directors For Withheld
Michael J. Chun 41,631,579 288,460
John C. Couch 41,617,980 302,059
Leo E. Denlea, Jr. 41,628,591 291,448
Walter A. Dods, Jr. 41,635,124 284,915
Charles G. King 41,635,909 284,130
Carson R. McKissick 41,638,675 281,364
C. Bradley Mulholland 41,626,606 293,433
Robert G. Reed III 41,561,544 358,495
Maryanna G. Shaw 41,628,384 291,655
Charles M. Stockholm 41,629,891 290,148
(ii) Election of For Against Abstain
Auditors
41,600,541 77,961 241,537
There were no broker non-votes at the Annual Meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10. Material contracts.
10.a.(xxvi) Commercial Paper Dealer Agreement among California
and Hawaiian Sugar Company, Inc., Alexander & Baldwin, Inc.,
A&B-Hawaii, Inc. and Goldman Sachs Money Markets, L.P. dated
June 20, 1995, with respect to California and Hawaiian Sugar
Company, Inc.'s $100 million revolving credit facility.
10.a.(xxvii) Amendment dated as of June 30, 1995 to the Note
Agreements, among Alexander & Baldwin, Inc., A&B-Hawaii, Inc. and
The Prudential Insurance Company of America, dated as of
December 20, 1990 and June 4, 1993.
10.a.(xxviii)(a) Assignment and Assumption Agreement dated as of
June 30, 1995, among Matson Leasing Company, Inc., Matson
Navigation Company, Inc. and The Prudential Insurance Company of
America, with respect to the Note Agreements between Matson
Leasing Company, Inc. and The Prudential Insurance Company of
America, dated as of June 28, 1991 and March 11, 1992.
10.a.(xxviii)(b) Consent and Amendment Agreement dated as of
June 30, 1995, among Matson Leasing Company, Inc., Matson
Navigation Company, Inc. and The Prudential Insurance Company of
America, with respect to the Note Agreements between Matson
Leasing Company, Inc. and The Prudential Insurance Company of
America, dated as of June 28, 1991 and March 11, 1992.
11. Statement re computation of per share earnings.
20. Report furnished to security holders.
(i) Condensed Balance Sheets, Condensed Statements of Income,
Condensed Statements of Cash Flows and Financial Notes as
appearing in the Alexander & Baldwin, Inc. Interim
Report/Second Quarter 1995.
27. Financial Data Schedule.
(b) Reports on Form 8-K
A report on Form 8-K dated June 30, 1995 was filed on July 13,
1995 to report, under Item 2 thereof, the sale by Matson Leasing
Company, Inc. ("Matson Leasing"), an indirect wholly-owned subsidiary
of Alexander & Baldwin, Inc. ("A&B"), and Matson Navigation Company,
Inc., a wholly-owned subsidiary of A&B and the parent corporation of
Matson Leasing (collectively, the "Sellers"), of Matson Leasing's
container leasing business, through the sale of certain assets and
liabilities of the Sellers (primarily of Matson Leasing).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of l934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALEXANDER & BALDWIN, INC.
(Registrant)
Date: August 10, 1995 /s/ Glenn R. Rogers
Glenn R. Rogers
Vice President and Chief
Financial Officer
Date: August 10, 1995 /s/ G. Stephen Holaday
G. Stephen Holaday
Vice President and Controller
EXHIBIT INDEX
10. Material contracts.
10.a.(xxvi) Commercial Paper Dealer Agreement among California and
Hawaiian Sugar Company, Inc., Alexander & Baldwin, Inc., A&B-Hawaii, Inc.
and Goldman Sachs Money Markets, L.P. dated June 20, 1995, with respect to
California and Hawaiian Sugar Company, Inc.'s $100 million revolving credit
facility.
10.a.(xxvii) Amendment dated as of June 30, 1995 to the Note Agreements,
among Alexander & Baldwin, Inc., A&B-Hawaii, Inc. and The Prudential
Insurance Company of America, dated as of December 20, 1990 and June 4,
1993.
10.a.(xxviii)(a) Assignment and Assumption Agreement dated as of June 30,
1995, among Matson Leasing Company, Inc., Matson Navigation Company, Inc.
and The Prudential Insurance Company of America, with respect to the Note
Agreements between Matson Leasing Company, Inc. and The Prudential
Insurance Company of America, dated as of June 28, 1991 and March 11, 1992.
10.a.(xxviii)(b) Consent and Amendment Agreement dated as of June 30,
1995, among Matson Leasing Company, Inc., Matson Navigation Company, Inc.
and The Prudential Insurance Company of America, with respect to the Note
Agreements between Matson Leasing Company, Inc. and The Prudential
Insurance Company of America, dated as of June 28, 1991 and March 11, 1992.
11. Statement re computation of per share earnings.
20. Report furnished to security holders.
(i) Condensed Balance Sheets, Condensed Statements of Income, Condensed
Statements of Cash Flows and Financial Notes as appearing in the
Alexander & Baldwin, Inc. Interim Report/Second Quarter 1995.
27. Financial Data Schedule.