ALEXANDER & BALDWIN, INC.
INTRODUCTION TO THE UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma condensed financial statements include the
accounts of Alexander & Baldwin, Inc. ("the Company"). The Company's unaudited
pro forma condensed financial statements give effect to the recapitalization
and partial sale of a subsidiary, as set forth in note (A) to these financial
statements, as if such transactions had occurred, for balance sheet purposes,
on September 30, 1998 and, for statement of operations purposes, on January 1,
1997. The unaudited pro forma condensed financial information has been
prepared utilizing the historical financial statements for the year ended
December 31, 1997 and the nine months ended September 30, 1998. These
unaudited pro forma condensed financial statements should be read in
conjunction with the accompanying notes and the historical financial
statements. The pro forma information is not necessarily indicative of the
results that would have been reported had such events actually occurred on
the dates specified, nor is it indicative of the Company's future results.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED DECEMBER 31, 1997
(In thousands, except per share amounts)
Historical Basis Pro forma Adjustments Pro forma Basis
---------------------------- ------------------------- -----------------
A&B C&H Amount Reference
(i) (ii) (iii) (i) - (ii) + (iii)
---------- -------- ------- --------- ------------------
Revenue:
Net sales, revenue from services and rentals $1,233,344 $450,307 $71,111 (1) $ 854,148
Equity in earnings of affiliated company - - 4,610 (3) 4,610
Interest, dividends and other 42,101 1,729 1,171 (2) 41,543
---------- -------- ------- -----------
Total revenue 1,275,445 452,036 76,892 900,301
---------- -------- ------- -----------
Costs and Expenses:
Costs of goods sold, services and rentals 1,011,718 400,904 71,111 (1) 681,925
Selling, general and administrative 107,579 22,160 85,419
Interest 28,936 6,757 1,171 (2)
(2,409) (4) 20,941
Income taxes 45,825 9,409 2,702 (5) 39,118
---------- -------- ------- -----------
Total costs and expenses 1,194,058 439,230 72,575 827,403
---------- -------- ------- -----------
Net Income $ 81,387 $ 12,806 $ 4,317 $ 72,898
========== ======== ======= ===========
Basic and Diluted Earnings Per Share $ 1.80 $ 1.61
Dividends Per Share $ 0.880 $ 0.880
Average Number of Shares Outstanding 45,182 45,182
PRO FORMA CONDENSED STATEMENT OF OPERATIONS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1998
(In thousands, except per share amounts)
Historical Basis Pro forma Adjustments Pro forma Basis
---------------------------- ------------------------- ----------------
A&B C&H Amount Reference
(i) (ii) (iii) (i) - (ii) + (iii)
---------- -------- ------- --------- ------------------
Revenue:
Net sales, revenue from services and rentals $ 967,973 $316,413 $59,004 (1) $ 710,564
Equity in earnings of affiliated company - - 574 (3) 574
Interest, dividends and other 15,621 520 836 (2) 15,937
---------- -------- ------- -----------
Total revenue 983,594 316,933 60,414 727,075
---------- -------- ------- -----------
Costs and Expenses:
Costs of goods sold, services and rentals 810,724 297,876 59,004 (1) 571,852
Selling, general and administrative 79,830 12,094 67,736
Interest 18,602 4,262 836 (2)
(1,816) (4) 13,360
Income taxes 27,914 1,107 920 (5) 27,727
---------- -------- ------- -----------
Total costs and expenses 937,070 315,339 58,944 680,675
---------- -------- ------- -----------
Net Income $ 46,524 $ 1,594 $ 1,470 $ 46,400
========== ======== ======= ===========
Basic Earnings Per Share $ 1.04 $ 1.03
Diluted Earnings Per Share $ 1.03 $ 1.02
Dividends Per Share $ 0.675 $ 0.675
Average Number of Shares Outstanding 44,851 44,851
PRO FORMA CONDENSED BALANCE SHEET (UNAUDITED)
SEPTEMBER 30, 1998
(In thousands)
Historical Basis Pro forma Adjustments Pro forma Basis
--------------------------- --------------------- ------------------
Disposition
A&B of C&H Amount Reference
(i) (ii) (iii) (i) - (ii) + (iii)
---------- ------------ -------- --------- ------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 7,966 $ 40,263 (6)
(40,263) (4) $ 7,966
---------
Accounts and notes receivable, net 176,526 $ 39,838 136,688
Inventories 95,897 78,487 17,410
Real estate held for sale 10,485 10,485
Deferred income taxes 11,638 (5,547) (6) 6,091
Prepaid expenses and other 12,918 3,738 9,180
---------- ---------- --------- -----------
Total current assets 315,430 122,063 (5,547) 187,820
---------- ---------- --------- -----------
Investments 83,894 35,000 (6) 118,894
---------- ---------- --------- -----------
Real Estate Development 68,532 68,532
---------- ---------- --------- -----------
Property, at cost 1,929,087 164,460 1,764,627
Less accumulated depreciation and amortization 876,810 44,526 832,284
---------- ---------- --------- -----------
Property - net 1,052,277 119,934 932,343
---------- ---------- --------- -----------
Capital Construction Fund 141,410 141,410
---------- ---------- --------- -----------
Other Assets 76,426 35,677 12,354 (7) 53,103
---------- ---------- --------- -----------
Total $1,737,969 $ 277,674 $ 41,807 $ 1,502,102
========== ========== ========= ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 52,944 $ 500 $ (2,083) (6) $ 50,361
Short-term commercial paper borrowings 60,000 (60,000) (6) -
Accounts payable 49,348 16,106 (75) (6) 33,167
Other 85,327 17,137 68,190
---------- ---------- --------- -----------
Total current liabilities 247,619 33,743 (62,158) 151,718
---------- ---------- --------- -----------
Long-term Liabilities:
Long-term debt 264,028 (40,263) (4)
(26,500) (6) 197,265
---------
Capital lease obligations 1,500 1,500 -
Post-retirement benefit obligations 109,163 45,487 63,676
Pension obligation - 12,354 12,354 (7) -
Other 44,707 2,170 42,537
---------- ---------- --------- -----------
Total long-term liabilities 419,398 61,511 (54,409) 303,478
---------- ---------- --------- -----------
Deferred Income Taxes 351,485 (8,146) (6) 343,339
---------- ---------- --------- -----------
Shareholders' Equity:
Capital stock 36,611 36,611
Additional capital 51,898 51,898
Unrealized holding gains on securities 42,612 42,612
Retained earnings 600,897 (15,900) (6) 584,997
Cost of treasury stock (12,551) (12,551)
---------- ---------- --------- -----------
Total shareholders' equity 719,467 (15,900) 703,567
---------- ---------- --------- -----------
Total $1,737,969 $ 95,254 $(140,613) $ 1,502,102
========== ========== ========= ===========
Notes to Pro Forma Condensed Financial Statements
(Unaudited)
A. Basis of Presentation
The accompanying pro forma condensed financial statements present the
financial position of Alexander & Baldwin, Inc. ("the Company") following
the recapitalization and partial sale of California and Hawaiian Sugar
Company, Inc. (C&H), a wholly-owned indirect subsidiary of the Company, as
of September 30, 1998, for the year ended December 31, 1997 and for the nine
months ended September 30, 1998. A description of the transactions is
included in Item 2 of this Form 8-K.
In connection with these transactions, on December 24, 1998, the Company
received cash proceeds of approximately $101 million and gross proceeds of
approximately $136 million as summarized below (in thousands):
Cash $ 86,036
Proceeds from sale of junior preferred stock 14,400
Proceeds from sale of common stock 540
----------
Total Cash Proceeds 100,976
Investment in senior preferred stock 25,000
Investment in junior preferred stock 9,600
Investment in common stock 360
----------
Total Gross Proceeds $ 135,936
==========
The cash proceeds of approximately $101 million were or are expected to be
used initially as follows (in thousands):
Repayment of C&H commercial paper notes $ 56,000
Repayment of the Company's indebtedness 41,576
Taxes and other charges associated with the sale 3,400
----------
Total Use of Cash $ 100,976
==========
The amounts shown above differ from the amounts included in the pro forma
financial statements because the net assets at the pro forma dates were not
the same as the net assets at December 24, 1998. In addition, the above
amounts are subject to audit and possible adjustments as described in the
other exhibits to this Form 8-K.
The pro forma condensed statements of operations do not include the loss
from the recapitalization and partial sale of C&H. This loss (subject to
audit) was approximately $15.9 million, after a tax benefit of approximately
$3.6 million. The pro forma condensed balance sheet, consistent with the
actual transactions, assumes that C&H's debt was repaid and that excess cash
from the recapitalization and partial sale was used to retire other debt of
the Company. These debt repayments will actually be accomplished within one
month of the December 24, 1998 closing, based upon the maturities of the C&H
commercial paper notes.
B. Pro Forma Adjustments
The following explains the pro forma condensed statements of operations and
balance sheet adjustments, referenced 1-7, which are necessary to reflect
the transactions described above on a pro forma basis.
1. Intercompany sales and purchases that were eliminated in consolidation
were restored in the pro forma adjustments column. These are
principally the sales of raw sugar from the Company's sugar plantation
to C&H.
2. Intercompany interest income and expense that was eliminated in
consolidation was restored in the pro forma adjustments column.
3. Since the Company retained an interest of approximately 40% in C&H, it
will account for this investment on the equity method. This adjustment
reflects the Company's interest in the earnings of C&H.
4. This adjustment reflects the reduction in long-term debt, cash and
interest expense resulting from the repayment of approximately $42
million in long-term debt from a portion of the proceeds received from
the sale of C&H.
5. This adjustment reflects the tax effect of the pro forma adjustments,
calculated at a 38.5 percent statutory income tax rate, which was in
effect during the periods presented.
6. This adjustment reflects the recapitalization and partial sale of C&H
as described in Note A and Item 2, taking into consideration balance
sheet amounts at the dates assumed for purposes of the pro forma
financial statements.
7. This adjustment represents a balance sheet reclassification of
pension obligations to properly reflect a net consolidated pension asset
after the removal of the C&H pension liability.