UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
|
|
SECURITIES
EXCHANGE ACT OF 1934
|
|
For
the quarterly period ended
March
31, 2009
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
|
|
SECURITIES
EXCHANGE ACT OF 1934
|
|
For
the transition period from ______________________ to
_________________
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|
Commission
file number
0
00
-
00
565
|
Alexander & Baldwin, Inc.
|
(Exact
name of registrant as specified in its
charter)
|
Hawaii
|
99-0032630
|
(State
or other jurisdiction of
incorporation or
organization
)
|
(I.R.S.
Employer
Identification
No.)
|
|
|
P.
O. Box 3440, Honolulu, Hawaii
822
Bishop Street, Honolulu, Hawaii
(Address
of principal executive offices)
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9680l
96813
(Zip
Code)
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|
(Registrant’s
telephone number, including area
code)
|
|
(Former
name, former address, and former
|
|
fiscal
year, if changed since last report)
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes
x
No
o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every
Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such
files).
Yes
o
No
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer
x
|
Accelerated
filer
o
|
Non-accelerated
filer
o
(Do
not check if a smaller reporting company)
|
Smaller
reporting company
o
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
o
No
x
Number
of shares of common stock outstanding as of March 31,
2009: 41,021,303
PART
I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL
STATEMENTS
ALEXANDER
& BALDWIN, INC. AND SUBSIDIARIES
Condensed
Consolidated Statements of Income
(In
millions, except per-share amounts)(Unaudited)
|
Three
Months Ended
|
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March
31,
|
|
|
2009
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|
|
2008
|
|
Revenue:
|
|
|
|
|
|
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Operating
revenue
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$
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319.9
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$
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578.7
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|
|
|
|
|
|
|
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Costs
and Expenses:
|
|
|
|
|
|
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Costs
of goods sold, services and rentals
|
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272.0
|
|
|
|
482.9
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|
Selling,
general and administrative
|
|
46.2
|
|
|
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39.6
|
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Operating
costs and expenses
|
|
318.2
|
|
|
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522.5
|
|
|
|
|
|
|
|
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Operating
Income
|
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1.7
|
|
|
|
56.2
|
|
Other
Income and (Expense):
|
|
|
|
|
|
|
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Gain
on insurance settlement
|
|
--
|
|
|
|
7.7
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Equity
in income of real estate affiliates
|
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--
|
|
|
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8.2
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Interest
income
|
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0.1
|
|
|
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0.4
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|
Interest
expense
|
|
(5.6
|
)
|
|
|
(6.1
|
)
|
Income
(Loss) Before Taxes
|
|
(3.8
|
)
|
|
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66.4
|
|
Income
tax (benefit) expense
|
|
(1.8
|
)
|
|
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25.9
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|
Income
(Loss) From Continuing Operations
|
|
(2.0
|
)
|
|
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40.5
|
|
Income
From Discontinued Operations (net of income taxes)
|
|
5.0
|
|
|
|
1.6
|
|
|
|
|
|
|
|
|
|
Net
Income
|
$
|
3.0
|
|
|
$
|
42.1
|
|
|
|
|
|
|
|
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Basic
Earnings (Loss) Per Share:
|
|
|
|
|
|
|
|
Continuing
operations
|
$
|
(0.05
|
)
|
|
$
|
0.98
|
|
Discontinued
operations
|
|
0.12
|
|
|
|
0.04
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Net
income
|
$
|
0.07
|
|
|
$
|
1.02
|
|
|
|
|
|
|
|
|
|
Diluted
Earnings (Loss) Per Share:
|
|
|
|
|
|
|
|
Continuing
operations
|
$
|
(0.05
|
)
|
|
$
|
0.97
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|
Discontinued
operations
|
|
0.12
|
|
|
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0.04
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Net
income
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$
|
0.07
|
|
|
$
|
1.01
|
|
|
|
|
|
|
|
|
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Weighted
Average Number of Shares Outstanding:
|
|
|
|
|
|
|
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Basic
|
|
41.0
|
|
|
|
41.4
|
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Diluted
|
|
41.0
|
|
|
|
41.7
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|
See Notes
to Condensed Consolidated Financial Statements.
ALEXANDER
& BALDWIN, INC. AND SUBSIDIARIES
Condensed
Consolidated Balance Sheets
(In
millions) (Unaudited)
|
March
31,
|
|
|
December
31,
|
|
|
2009
|
|
|
2008
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|
ASSETS
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
$
|
10
|
|
|
$
|
19
|
|
Accounts
and notes receivable, net
|
|
160
|
|
|
|
163
|
|
Inventories
|
|
47
|
|
|
|
28
|
|
Real
estate held for sale
|
|
20
|
|
|
|
20
|
|
Section
1031 exchange proceeds
|
|
--
|
|
|
|
23
|
|
Prepaid
expenses and other assets
|
|
30
|
|
|
|
31
|
|
Total
current assets
|
|
267
|
|
|
|
284
|
|
Investments
in Affiliates
|
|
212
|
|
|
|
208
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|
Real
Estate Developments
|
|
79
|
|
|
|
78
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|
Property,
at cost
|
|
2,740
|
|
|
|
2,700
|
|
Less
accumulated depreciation and amortization
|
|
1,127
|
|
|
|
1,110
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Property
– net
|
|
1,613
|
|
|
|
1,590
|
|
Employee
Benefit Plan Assets
|
|
3
|
|
|
|
3
|
|
Other
Assets
|
|
153
|
|
|
|
187
|
|
Total
|
$
|
2,327
|
|
|
$
|
2,350
|
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
Notes
payable and current portion of long-term debt
|
$
|
33
|
|
|
$
|
52
|
|
Accounts
payable
|
|
103
|
|
|
|
105
|
|
Payroll
and vacation benefits
|
|
18
|
|
|
|
18
|
|
Uninsured
claims
|
|
10
|
|
|
|
10
|
|
Deferred
income taxes
|
|
1
|
|
|
|
1
|
|
Accrued
and other liabilities
|
|
44
|
|
|
|
52
|
|
Total
current liabilities
|
|
209
|
|
|
|
238
|
|
Long-term
Liabilities:
|
|
|
|
|
|
|
|
Long-term
debt
|
|
460
|
|
|
|
452
|
|
Deferred
income taxes
|
|
417
|
|
|
|
414
|
|
Employee
benefit plans
|
|
127
|
|
|
|
122
|
|
Uninsured
claims and other liabilities
|
|
52
|
|
|
|
52
|
|
Total
long-term liabilities
|
|
1,056
|
|
|
|
1,040
|
|
Commitments
and Contingencies (Note 3)
|
|
|
|
|
|
|
|
Shareholders’
Equity:
|
|
|
|
|
|
|
|
Capital
stock
|
|
33
|
|
|
|
33
|
|
Additional
capital
|
|
204
|
|
|
|
204
|
|
Accumulated
other comprehensive loss
|
|
(96
|
)
|
|
|
(96
|
)
|
Retained
earnings
|
|
932
|
|
|
|
942
|
|
Cost
of treasury stock
|
|
(11
|
)
|
|
|
(11
|
)
|
Total
shareholders’ equity
|
|
1,062
|
|
|
|
1,072
|
|
Total
|
$
|
2,327
|
|
|
$
|
2,350
|
|
See Notes
to Condensed Consolidated Financial Statements.
ALEXANDER
& BALDWIN, INC. AND SUBSIDIARIES
Condensed
Consolidated Statements of Cash Flows
(In
millions)(Unaudited)
|
Three
Months Ended
|
|
|
March
31,
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Operating Activities
|
$
|
8
|
|
|
$
|
160
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Investing Activities:
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
(16
|
)
|
|
|
(55
|
)
|
Proceeds
from disposal of property and other assets
|
|
29
|
|
|
|
1
|
|
Proceeds
from insurance settlement related to 2005 casualty loss
|
|
--
|
|
|
|
8
|
|
Deposits
into Capital Construction Fund
|
|
(2
|
)
|
|
|
(6
|
)
|
Withdrawals
from Capital Construction Fund
|
|
2
|
|
|
|
5
|
|
Increase
in investments
|
|
(6
|
)
|
|
|
(11
|
)
|
Reduction
in investments
|
|
1
|
|
|
|
4
|
|
Net
cash from (used in) investing activities
|
|
8
|
|
|
|
(54
|
)
|
|
|
|
|
|
|
|
|
Cash
Flows from Financing Activities:
|
|
|
|
|
|
|
|
Proceeds
from issuances of long-term debt
|
|
195
|
|
|
|
110
|
|
Payments
of long-term debt
|
|
(197
|
)
|
|
|
(62
|
)
|
Payments
of short-term debt
|
|
(9
|
)
|
|
|
(15
|
)
|
Proceeds
from issuances of capital stock, including
|
|
|
|
|
|
|
|
excess tax
benefit
|
|
(1
|
)
|
|
|
1
|
|
Repurchase
of capital stock
|
|
--
|
|
|
|
(50
|
)
|
Dividends
paid
|
|
(13
|
)
|
|
|
(12
|
)
|
Net
cash used in financing activities
|
|
(25
|
)
|
|
|
(28
|
)
|
|
|
|
|
|
|
|
|
Net
(Decrease) Increase in Cash and Cash Equivalents
|
$
|
(9
|
)
|
|
$
|
78
|
|
|
|
|
|
|
|
|
|
Other
Cash Flow Information:
|
|
|
|
|
|
|
|
Interest
paid
|
$
|
(6
|
)
|
|
$
|
(7
|
)
|
|
|
|
|
|
|
|
|
Other
Non-cash Information:
|
|
|
|
|
|
|
|
Depreciation
and amortization expense
|
$
|
26
|
|
|
$
|
25
|
|
Tax-deferred
property sales
|
$
|
19
|
|
|
$
|
1
|
|
Tax-deferred
property purchases
|
$
|
(50
|
)
|
|
$
|
(5
|
)
|
See Notes
to Condensed Consolidated Financial Statements.
Alexander
& Baldwin, Inc.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Description of
Business:
Founded in 1870, Alexander & Baldwin, Inc. (“A&B” or
the “Company”) is incorporated under the laws of the State of Hawaii. A&B
operates in five segments in three industries: Transportation, Real
Estate and Agribusiness. These industries are described below:
Transportation:
The Transportation Industry consists of Ocean Transportation and Logistics
Services segments. The Ocean Transportation segment, which is conducted through
Matson Navigation Company, Inc. (“Matson”), a wholly-owned subsidiary of
A&B, is an asset-based business that derives its revenue primarily through
the carriage of containerized freight between various U.S. Pacific Coast,
Hawaii, Guam, China and other Pacific island ports. Additionally, the Ocean
Transportation segment has a 35 percent interest in an entity (SSA Terminals,
LLC or “SSAT”) that provides terminal and stevedoring services at U.S. Pacific
Coast facilities. The Logistics Services segment is a non-asset based business
that is a provider of domestic and international rail intermodal service
(“Intermodal”), long-haul and regional highway brokerage, specialized hauling,
flat-bed and project work, less-than-truckload, expedited/air freight services,
and warehousing and distribution services (collectively “Highway”).
Real
Estate:
The Real Estate Industry consists of two segments, both of which
have operations in Hawaii and on the U.S. mainland. The Real Estate Sales
segment generates its revenues through the development and sale of land,
commercial and residential properties. The Real Estate Leasing segment owns,
operates, and manages retail, office, and industrial properties.
Agribusiness:
Agribusiness, which contains one segment, produces bulk raw sugar, specialty
food-grade sugars, and molasses; produces, markets, and distributes roasted
coffee and green coffee; provides general trucking services, mobile equipment
maintenance and repair services, and self-service storage in Hawaii; and
generates and sells, to the extent not used in the Company’s operations,
electricity.
(1)
|
The
Condensed Consolidated Financial Statements are unaudited. Because of the
nature of the Company’s operations, the results for interim periods are
not necessarily indicative of results to be expected for the year. While
these condensed consolidated financial statements reflect all normal
recurring adjustments that are, in the opinion of management, necessary
for fair presentation of the results of the interim period, they do not
include all of the information and footnotes required by U.S. generally
accepted accounting principles for complete financial statements.
Therefore, the interim Condensed Consolidated Financial Statements should
be read in conjunction with the Consolidated Financial Statements and
Notes thereto included in the Company’s Annual Report filed on Form 10-K
for the year ended December 31,
2008.
|
(2)
|
In
June 2008, the Financial Accounting Standards Board (“FASB”) issued FASB
Staff Position EITF No. 03-6-1,
Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities
(“FSP EITF No. 03-6-1”). FSP EITF No. 03-6-1 addresses
whether instruments granted in share-based payment transactions are
participating securities prior to vesting, and therefore, need to be
included in the earnings allocation in calculating earnings per share
under the two-class method described in Statement of Financial Accounting
Standards (“SFAS”) No. 128,
Earnings per Share
. FSP
EITF No. 03-6-1 requires companies to treat unvested share-based payment
awards that have non-forfeitable rights to dividends or dividend
equivalents as a separate class of securities in calculating earnings per
share. The Company adopted FSP EITF No. 03-6-1 effective January 1, 2009.
The adoption of FSP EITF No. 03-6-1 did not have a material effect on the
Company’s earnings per share of common
stock.
|
(3)
|
Commitments,
Guarantees and Contingencies: Commitments and financial
arrangements (excluding lease commitments disclosed in Note 8 of the
Company’s Annual Report filed on Form 10-K for the year ended December 31,
2008) at March 31, 2009, included the following (in
millions):
|
|
Standby
letters of credit
|
(a)
|
$10
|
|
Performance
and customs bonds
|
(b)
|
$29
|
|
Benefit
plan withdrawal obligations
|
(c)
|
$60
|
|
These
amounts are not recorded on the Company’s condensed consolidated balance
sheet and it is not expected that the Company or its subsidiaries will be
called upon to advance funds under these
commitments.
|
|
(a)
|
Represents
letters of credit, of which approximately $8 million enable the Company to
qualify as a self-insurer for state and federal workers’ compensation
liabilities. Additionally, the balance also includes a $2 million of
letter of credit related to insurance-related matters for one of the
Company’s real estate projects.
|
|
(b)
|
Consists
of approximately $16 million in U.S. customs bonds, approximately $11
million in bonds related to real estate construction projects in Hawaii,
and approximately $2 million related to transportation and other
matters.
|
|
(c)
|
Represents
the withdrawal liabilities for multiemployer pension plans, in which
Matson is a participant. The aggregate withdrawal liability is
approximately $60 million as of the most recent valuation dates.
Management has no present intention of withdrawing from, and does not
anticipate the termination of, any of the aforementioned
plans.
|
Indemnity Agreements:
For
certain real estate joint ventures, the Company may be obligated under bond
indemnities in order to complete construction of the real estate development if
the joint venture does not perform. These indemnities are designed to protect
the surety. To date, no such indemnities have been called upon. Under the
provisions of FASB Interpretation No. 45,
Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others—an interpretation of FASB Statements No. 5, 57, and 107
and rescission of FASB Interpretation No. 34
(“FIN 45”), the Company
recorded liabilities for three indemnities it provided in connection with surety
bonds issued to cover construction activities, such as project amenities, roads,
utilities, and other infrastructure, at three of its joint ventures. The fair
values of the liabilities recorded were not material at March 31, 2009. Under
the indemnities, the Company and its joint venture partners agreed to indemnify
the surety bond issuer from all loss and expense arising from the failure of the
joint venture to complete the specified bonded construction. The maximum
potential amount of aggregate future payments is a function of the amount
covered by outstanding bonds at the time of default by the joint venture,
reduced by the amount of work completed to date.
Completion Guarantees
: For
certain real estate joint ventures, the Company may be required to perform work
to complete construction if the joint venture fails to complete construction.
These guarantees are intended to assure the joint venture’s lender that the
project will be completed as represented to the lender. To date, no such
guarantees have been called upon. Under the provisions of FIN 45, the Company
recorded liabilities for two completion guarantees it provided in connection
with joint venture development projects. The fair values of these liabilities
were not material at March 31, 2009. Under the completion guarantees, the
Company and its joint venture partners agree to complete development of
specified development work if the joint venture fails to complete development.
The maximum potential amount of aggregate future payments related to the
Company’s completion guarantees is a function of the work agreed to be
completed, reduced by the amount of work completed to date at the time of
default by the joint venture.
Certain of the businesses in which
the Company holds a non-controlling interest have long-term debt obligations.
Other than obligations described above, those investee obligations do not have
recourse to the Company and the Company’s “at-risk” amounts are limited to its
investment.
Legal Proceedings:
On
December 24, 2008, the Coast Guard Marine Safety Center informed Matson that the
Shipbuilders Council of America, Inc. and Pasha Hawaii Transport Lines LLC had
requested reconsideration of the Coast Guard's July 2005 and June 2006 major
conversion determinations. The Coast Guard had earlier ruled that the
work performed on Mokihana in foreign and U.S. shipyards was minor and,
therefore, would not necessitate certain safety and maintenance
upgrades. On April 16, 2009, the Coast Guard denied the request for
reconsideration on the grounds that the Shipbuilders Council and Pasha were not
persons directly affected by the decisions, and reaffirmed the determinations
that the modifications made to Mokihana do not constitute a major
conversion.
The
Company and Matson have been named as defendants in civil lawsuits purporting to
be class actions alleging violations of the antitrust laws and seeking
treble damages and injunctive relief. The Company is aware of 26 such lawsuits
that have been filed. All of the lawsuits have been transferred and
consolidated into a consolidated civil lawsuit in the U.S. District Court for
the Western District of Washington in Seattle purporting to be a class
action. Another domestic shipping carrier operating in the Hawaii and
Guam trades, Horizon Lines, Inc., also has been named as a defendant in the
consolidated civil lawsuit. The plaintiffs filed a consolidated class
action complaint on February 2, 2009. The Company and Matson filed
their motion to dismiss the complaint on March 20, 2009. The Company and Matson
will vigorously defend themselves in this lawsuit. The Company, at this time, is
unable to predict the outcome of the lawsuit or the financial impact, if any, of
this lawsuit.
There
have been no material developments in the previously reported investigation by
the Department of Justice into the competitive practices of carriers operating
in the domestic trades. Matson has fully cooperated, and will
continue to fully cooperate, with the Department of Justice.
(4)
|
Earnings
Per Share (“EPS”): The number of shares used to compute basic and diluted
earnings per share is as follows (in
millions):
|
|
|
Quarter
Ended
|
|
|
|
March
31,
|
|
|
|
2009
|
|
2008
|
|
Denominator
for basic EPS - weighted average shares
|
41.0
|
|
41.4
|
|
Effect
of dilutive securities:
|
|
|
|
|
Employee/director
stock options, non-vested common stock,
and
restricted stock units
|
--
|
|
0.3
|
|
Denominator
for diluted EPS - weighted average shares
|
41.0
|
|
41.7
|
Basic
earnings per share is computed based on the weighted-average number of common
shares outstanding during the period. Diluted earnings per share is computed
based on the weighted-average number of common shares outstanding adjusted by
the number of additional shares that would have been outstanding had the
potentially dilutive common shares been issued. Potentially dilutive shares of
common stock include non-qualified stock options, non-vested common stock, and
restricted stock units.
The
computation of weighted average dilutive shares outstanding excluded
non-qualified stock options to purchase 2.3 million and 0.8 million shares of
common stock during the quarters ended March 31, 2009 and 2008, respectively.
These options were excluded because the options’ exercise prices were greater
than the average market price of the Company’s common stock for the periods
presented and, therefore, the effect would be anti-dilutive.
(5)
|
Share-Based
Compensation: On January 28, 2009, the Company granted
non-qualified stock options to purchase 478,589 shares of the Company’s
common stock. The grant-date fair value of each stock option granted using
the Black-Scholes-Merton option pricing model, was $2.79 using the
following weighted average assumptions: volatility of 24.8%, risk-free
interest rate of 1.9%, dividend yield of 5.4%, and expected term of 5.8
years.
|
|
Activity
in the Company’s stock option plans for the first quarter of 2009 was as
follows (in thousands, except weighted average exercise price and weighted
average contractual life):
|
|
|
|
|
|
Predecessor
Plans
|
|
|
|
Weighted
|
|
Weighted
|
|
|
|
|
|
|
|
|
1998
|
|
1998
|
|
|
|
Average
|
|
Average
|
|
Aggregate
|
|
|
|
|
2007
|
|
Employee
|
|
Directors’
|
|
Total
|
|
Exercise
|
|
Contractual
|
|
Intrinsic
|
|
|
|
|
Plan
|
|
Plan
|
|
Plan
|
|
Shares
|
|
Price
|
|
Life
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
January 1, 2009
|
|
480
|
|
1,316
|
|
239
|
|
2,035
|
|
$39.71
|
|
|
|
|
|
|
Granted
|
|
478
|
|
--
|
|
--
|
|
478
|
|
$23.33
|
|
|
|
|
|
|
Forfeited
and expired
|
|
--
|
|
(14
|
)
|
--
|
|
(14
|
)
|
$20.88
|
|
|
|
|
|
|
Outstanding,
March 31, 2009
|
|
958
|
|
1,302
|
|
239
|
|
2,499
|
|
$36.68
|
|
6.7
|
|
$--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
March 31, 2009
|
|
159
|
|
1,209
|
|
220
|
|
1,588
|
|
$38.12
|
|
5.2
|
|
$--
|
|
The
following table summarizes non-vested common stock and restricted stock unit
activity through March 31, 2009 (in thousands, except weighted-average
grant-date fair value amounts):
|
|
|
|
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
Plans
|
|
|
|
|
|
|
|
Plan
|
|
|
Weighted
|
|
Non-Vested
|
|
|
Weighted
|
|
|
|
|
Restricted
|
|
|
Average
|
|
Common
|
|
|
Average
|
|
|
|
|
Stock
|
|
|
Grant-Date
|
|
Stock
|
|
|
Grant-Date
|
|
|
|
|
Units
|
|
|
Fair
Value
|
|
Shares
|
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
January 1, 2009
|
|
160
|
|
|
$46.68
|
|
94
|
|
|
$47.48
|
|
|
Granted
|
|
359
|
|
|
$23.33
|
|
--
|
|
|
$ --
|
|
|
Vested
|
|
(79
|
)
|
|
$45.38
|
|
(66
|
)
|
|
$47.23
|
|
|
Canceled
|
|
(1
|
)
|
|
$28.63
|
|
--
|
|
|
$ --
|
|
|
Outstanding
March 31, 2009
|
|
439
|
|
|
$27.85
|
|
28
|
|
|
$48.07
|
|
A portion
of the above awards are time-based awards that vest ratably over three years.
The remaining portion of the awards represents performance-based awards that
vest after three years, provided certain performance targets, related to the
first year of the performance period, are achieved.
A summary
of compensation cost related to share-based payments is as follows (in
millions):
|
|
|
Quarter
Ended
|
|
|
|
|
March
31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Share-based
expense (net of estimated forfeitures):
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
$
|
0.9
|
|
|
$
|
0.8
|
|
|
Non-vested
stock/Restricted stock units
|
|
|
1.7
|
|
|
|
2.4
|
|
|
Total
share-based expense
|
|
|
2.6
|
|
|
|
3.2
|
|
|
Total
recognized tax benefit
|
|
|
(0.7
|
)
|
|
|
(0.8
|
)
|
|
Share-based
expense (net of tax)
|
|
$
|
1.9
|
|
|
$
|
2.4
|
|
(6)
|
Accounting
for and Classification of Discontinued Operations: As required by
Statement of Financial Accounting Standards No. 144,
Accounting for the Impairment
or Disposal of Long-Lived Assets
(“SFAS No. 144”), the sales of
certain income-producing assets are classified as discontinued operations
if (i) the operations and cash flows of the assets can be clearly
distinguished from the remaining assets of the Company, (ii) the cash
flows that are specific to the assets sold have been, or will be,
eliminated from the ongoing operations of the Company, (iii) the Company
will not have a significant continuing involvement in the operations of
the assets sold, and (iv) the amount is considered material. Certain
income-producing properties that are “held for sale,” based on the
likelihood and intention of selling the property within 12 months, are
also treated as discontinued operations. Depreciation on these assets
ceases upon classification as discontinued operations. Sales of land,
residential houses, and office condominium units are generally considered
inventory and are not included in discontinued
operations.
|
Discontinued
operations consisted of (in millions):
|
|
|
Quarter
Ended
|
|
|
|
|
March
31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Discontinued
Operations (net of tax)
|
|
|
|
|
|
|
|
|
|
Sales
of Assets
|
|
$
|
4.7
|
|
|
$
|
0.4
|
|
|
Leasing
Operations
|
|
|
0.3
|
|
|
|
1.2
|
|
|
Total
|
|
$
|
5.0
|
|
|
$
|
1.6
|
|
Discontinued
operations includes the results for properties that were sold through March 31,
2009 and, if applicable, the operating results of properties still owned, but
meet the definition of “discontinued operations” under SFAS No. 144. Operating
results included in the Condensed Consolidated Statements of Operations and the
segment results (Note 9) for the first quarter of 2008 have been restated to
reflect property that was classified as discontinued operations subsequent to
March 31, 2008.
(7)
|
Comprehensive
Income for the three months ended March 31, 2009 and 2008 consisted
of (in millions):
|
|
|
|
Quarter
Ended
|
|
|
|
|
March
31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Net
Income
|
|
$
|
3.0
|
|
|
$
|
42.1
|
|
|
Amortization
of unrealized pension asset gain/loss
|
|
|
0.3
|
|
|
|
--
|
|
|
Comprehensive
Income
|
|
$
|
3.3
|
|
|
$
|
42.1
|
|
(8)
|
Pension
and Post-retirement Plans: The Company has defined benefit
pension plans that cover substantially all non-bargaining unit and certain
bargaining unit employees. The Company also has unfunded non-qualified
plans that provide benefits in excess of the amounts permitted to be paid
under the provisions of the tax law to participants in qualified plans.
The assumptions related to discount rates, expected long-term rates of
return on invested plan assets, salary increases, age, mortality and
health care cost trend rates, along with other factors, are used in
determining the assets, liabilities and expenses associated with pension
benefits. Management reviews the assumptions annually with its independent
actuaries, taking into consideration existing and future economic
conditions and the Company’s intentions with respect to these plans.
Management believes that its assumptions and estimates for 2009 are
reasonable. Different assumptions, however, could result in material
changes to the assets, obligations and costs associated with benefit
plans.
|
|
The
components of net periodic benefit cost for the first quarters of 2009 and
2008 were as follows (in millions):
|
|
|
|
Pension Benefits
|
|
|
Post-retirement Benefits
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
Cost
|
|
$
|
2.0
|
|
|
$
|
2.0
|
|
|
$
|
0.2
|
|
|
$
|
0.2
|
|
|
Interest
Cost
|
|
|
4.8
|
|
|
|
4.6
|
|
|
|
0.8
|
|
|
|
0.7
|
|
|
Expected
Return on Plan Assets
|
|
|
(5.0
|
)
|
|
|
(7.9
|
)
|
|
|
--
|
|
|
|
--
|
|
|
Amortization
of Prior Service Cost
|
|
|
0.2
|
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
--
|
|
|
Amortization
of Net (Gain) Loss
|
|
|
2.9
|
|
|
|
--
|
|
|
|
(0.1
|
)
|
|
|
(0.3
|
)
|
|
Net
Periodic Benefit Cost (Income)
|
|
$
|
4.9
|
|
|
$
|
(1.2
|
)
|
|
$
|
1.0
|
|
|
$
|
0.6
|
|
|
Based
on the actuarial report as of January 1, 2009, the 2009 return on plan
assets is not expected to exceed the sum of the service cost, interest
cost and amortization components, resulting in an expected net periodic
pension expense of $4.9 million for the first quarter of 2009 and
approximately $19.5 million for the full year. The increase in net
periodic pension expense in 2009 relative to 2008 is principally due to a
decline in pension assets, from $379 million at the end of 2007 to $244
million at the end of 2008. In 2009, the Company does not expect that it
will be required to make contributions to its pension
plans.
|
(9)
|
Segment
results for the three months ended March 31, 2009 and 2008 were as follows
(In millions) (Unaudited):
|
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
Transportation:
|
|
|
|
|
|
|
|
|
Ocean
transportation
|
$
|
201.1
|
|
|
$
|
243.0
|
|
|
Logistics
services
|
|
76.2
|
|
|
|
102.6
|
|
|
Real
Estate:
|
|
|
|
|
|
|
|
|
Leasing
|
|
27.2
|
|
|
|
28.8
|
|
|
Sales
|
|
25.2
|
|
|
|
187.4
|
|
|
Less
amounts reported in discontinued operations
|
|
(25.2
|
)
|
|
|
(4.1
|
)
|
|
Agribusiness
|
|
17.7
|
|
|
|
22.5
|
|
|
Reconciling
Items
|
|
(2.3
|
)
|
|
|
(1.5
|
)
|
|
Total
revenue
|
$
|
319.9
|
|
|
$
|
578.7
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Profit, Net Income (Loss):
|
|
|
|
|
|
|
|
|
Transportation:
|
|
|
|
|
|
|
|
|
Ocean
transportation
|
$
|
(0.5
|
)
|
|
$
|
15.9
|
|
|
Logistics
services
|
|
1.5
|
|
|
|
4.7
|
|
|
Real
Estate:
|
|
|
|
|
|
|
|
|
Leasing
|
|
12.0
|
|
|
|
13.9
|
|
|
Sales
|
|
5.6
|
|
|
|
41.4
|
|
|
Less
amounts reported in discontinued operations
|
|
(8.8
|
)
|
|
|
(2.5
|
)
|
|
Agribusiness
|
|
(1.9
|
)
|
|
|
4.8
|
|
|
Total
operating profit
|
|
7.9
|
|
|
|
78.2
|
|
|
Interest
Expense
|
|
(5.6
|
)
|
|
|
(6.1
|
)
|
|
General
Corporate Expenses
|
|
(6.1
|
)
|
|
|
(5.7
|
)
|
|
Income
(Loss) From Continuing Operations Before Income Taxes
|
|
(3.8
|
)
|
|
|
66.4
|
|
|
Income
Tax (Benefit) Expense
|
|
(1.8
|
)
|
|
|
25.9
|
|
|
Income
(Loss) From Continuing Operations
|
|
(2.0
|
)
|
|
|
40.5
|
|
|
Income
From Discontinued Operations (net of income taxes)
|
|
5.0
|
|
|
|
1.6
|
|
|
Net
Income
|
$
|
3.0
|
|
|
$
|
42.1
|
|
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The
following analysis of the consolidated financial condition and results of
operations of Alexander & Baldwin, Inc. and its subsidiaries (collectively,
the “Company”) should be read in conjunction with the condensed consolidated
financial statements and related notes thereto included in Item 1 of this Form
10-Q.
FORWARD-LOOKING
STATEMENTS
The Company, from time to time, may
make or may have made certain forward-looking statements, whether orally or in
writing, such as forecasts and projections of the Company’s future performance
or statements of management’s plans and objectives. These statements are
“forward-looking” statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements may be contained
in, among other things, Securities and Exchange Commission (“SEC”) filings, such
as the Forms 10-K, 10-Q and 8-K, the Annual Report to Shareholders, press
releases made by the Company, the Company’s Internet Web sites (including Web
sites of its subsidiaries), and oral statements made by the officers of the
Company. Except for historical information contained in these written or oral
communications, such communications contain forward-looking statements. New risk
factors emerge from time to time and it is not possible for the Company to
predict all such risk factors, nor can it assess the impact of all such risk
factors on the Company’s business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements. Accordingly, forward-looking
statements cannot be relied upon as a guarantee of future results and involve a
number of risks and uncertainties that could cause actual results to differ
materially from those projected in the statements, including, but not limited to
the factors that are described in Part I, Item 1A under the caption of “Risk
Factors” of the Company’s 2008 Annual Report on Form 10-K and in Part II, Item
1A under the caption of “Risk Factors” in this Form 10-Q. The Company is not
required, and undertakes no obligation, to revise or update forward-looking
statements or any factors that may affect actual results, whether as a result of
new information, future events, or circumstances occurring after the date of
this report.
OVERVIEW
Management’s Discussion and Analysis of
Financial Condition and Results of Operations (“MD&A”) is designed to
provide a discussion of the Company’s financial condition, results of
operations, liquidity and certain other factors that may affect its future
results from the perspective of management. The discussion that follows is
intended to provide information that will assist in understanding the changes in
the Company’s financial statements from period to period, the primary factors
that accounted for those changes, and how certain accounting principles,
policies and estimates affect the Company’s financial statements. MD&A is
provided as a supplement to the condensed consolidated financial statements and
notes herein, and should be read in conjunction with the Company’s 2008 Annual
Report on Form 10-K as well as the Company’s reports on Forms 10-Q and 8-K and
other publicly available information.
MD&A is presented in the following
sections:
• Business
Overview
• Consolidated
Results of Operations
• Analysis
of Operating Revenue and Profit by Segment
• Liquidity
and Capital Resources
• Business
Outlook
• Other
Matters
BUSINESS
OVERVIEW
Alexander & Baldwin, Inc.
(“A&B”), founded in 1870, is a multi-industry corporation headquartered in
Honolulu that operates in five segments in three industries—Transportation, Real
Estate, and Agribusiness.
Transportation:
The Transportation Industry consists of Ocean Transportation and Logistics
Services segments. The Ocean Transportation segment, which is conducted through
Matson Navigation Company, Inc. (“Matson”), a wholly-owned subsidiary of
A&B, is an asset-based business that derives its revenue primarily through
the carriage of containerized freight between various U.S. Pacific Coast,
Hawaii, Guam, China and other Pacific island ports. Additionally, the Ocean
Transportation segment has a 35 percent interest in an entity that provides
terminal and stevedoring services at U.S. Pacific Coast facilities.
The Logistics Services segment, which
is conducted through Matson Integrated Logistics, Inc. (“MIL”), a wholly-owned
subsidiary of Matson, is a non-asset based business that is a provider of
domestic and international rail intermodal service (“Intermodal”), long-haul and
regional highway brokerage, specialized hauling, flat-bed and project work,
less-than-truckload, expedited/air freight services, and warehousing and
distribution services (collectively “Highway”). Warehousing and distribution
services are provided by Matson Global Distribution Services, Inc. (“MGDS”), a
subsidiary of MIL.
Real
Estate:
The
Real Estate Industry consists of two segments, both of which have operations in
Hawaii and on the U.S. mainland. The Real Estate Sales segment generates its
revenues through the development and sale of land, commercial and residential
properties. The Real Estate Leasing segment owns, operates, and manages retail,
office, and industrial properties. Real estate activities are conducted through
A&B Properties, Inc. and various other wholly-owned subsidiaries of
A&B.
Agribusiness:
Agribusiness, a division of A&B, contains one segment and produces bulk raw
sugar, specialty food-grade sugars, and molasses; produces, markets, and
distributes roasted coffee and green coffee; provides general trucking services,
mobile equipment maintenance, and repair services; and generates and sells, to
the extent not used in the Company’s operations, electricity.
CONSOLIDATED
RESULTS OF OPERATIONS
Consolidated
– First quarter of 2009 compared with 2008
|
|
Quarter
Ended March 31,
|
(dollars
in millions)
|
|
2009
|
|
|
2008
|
|
Change
|
Operating
Revenue
|
|
$
|
319.9
|
|
|
$
|
578.7
|
|
-45
|
%
|
Operating
Costs and Expenses
|
|
|
318.2
|
|
|
|
522.5
|
|
-39
|
%
|
Operating
Income
|
|
|
1.7
|
|
|
|
56.2
|
|
-97
|
%
|
Other
Income and (Expense)
|
|
|
(5.5
|
)
|
|
|
10.2
|
|
NM
|
|
Income
(Loss) Before Taxes
|
|
|
(3.8
|
)
|
|
|
66.4
|
|
NM
|
|
Income
Tax (Benefit) Expense
|
|
|
(1.8
|
)
|
|
|
25.9
|
|
NM
|
|
Discontinued
Operations (net of income taxes)
|
|
|
5.0
|
|
|
|
1.6
|
|
3
|
X
|
Net
Income
|
|
$
|
3.0
|
|
|
$
|
42.1
|
|
-93
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Basic
Earnings per Share
|
|
$
|
0.07
|
|
|
$
|
1.02
|
|
-93
|
%
|
Diluted
Earnings per Share
|
|
$
|
0.07
|
|
|
$
|
1.01
|
|
-93
|
%
|
Consolidated
operating revenue for the first quarter of 2009 decreased $258.8 million, or 45
percent, compared to the first quarter of 2008. This decrease was principally
due to $186.1 million in lower revenue from Real Estate Sales (excluding revenue
from property sales classified as discontinued operations) primarily associated
with the sales of 300 units at the Company’s Keola La’i condominium project in
2008, $41.9 million in lower revenue for Ocean Transportation, $26.4 million in
lower revenue for Logistics Services, $4.8 million in lower revenue for
Agribusiness, partially offset by $1.2 million in higher revenue from
Real Estate Leasing (excluding leasing revenue from assets classified as
discontinued operations). The reasons for the revenue decline are described
below, by business segment, in the Analysis of Operating Revenue and Profit by
Segment.
Operating
costs and expenses for the first quarter of 2009 decreased $204.3 million,
or 39 percent, compared to the first quarter of 2008. This decrease was
principally due to $141.8 million of lower costs for the real estate segments,
primarily reflecting the cost of sales of units at the Company’s Keola La’i
condominium project recognized in 2008, $56.2 million decrease in cost for the
transportation segments due principally to lower volumes, lower fuel costs, and
cost containment initiatives. Embedded within each segments’ cost decrease is an
offsetting cost increase in pension expenses that aggregated approximately $6
million quarter-over-quarter. The reasons for the operating cost and expense
changes are described below, by business segment, in the Analysis of Operating
Revenue and Profit by Segment.
Other
income and (expense) decreased $15.7 million, primarily due to $8.2 million
of lower joint venture earnings in the first quarter of
2009, principally as a result of sales at the Company’s Kai Malu and Centre
Pointe joint ventures recorded in the first quarter of 2008, and a final
insurance payout of $7.7 million received in 2008 related to a 2005 fire at
Kahului Shopping Center, partially offset by $0.5 million in lower interest
expense resulting from lower average debt balances and lower rates on variable
rate debt.
Income
taxes decreased by $27.7 million, principally due to a loss from continuing
operations. The effective tax rate for the first quarter of 2009 was 39.5%,
compared with 39.0% for the first quarter of 2008. The higher effective tax rate
for the quarter was principally due to non-deductible expenses that had a
greater impact on the effective tax rate due to lower income relative to the
prior quarter.
ANALYSIS
OF OPERATING REVENUE AND PROFIT BY SEGMENT
TRANSPORTATION
INDUSTRY
Ocean
Transportation – First quarter of 2009 compared with 2008
|
|
Quarter
Ended March 31,
|
(dollars
in millions)
|
|
2009
|
|
|
2008
|
|
Change
|
Revenue
|
|
$
|
201.1
|
|
|
$
|
243.0
|
|
-17
|
%
|
Operating
profit (loss)
|
|
$
|
(0.5
|
)
|
|
$
|
15.9
|
|
NM
|
|
Operating
profit margin
|
|
|
-0.2
|
%
|
|
|
6.5
|
%
|
|
|
Volume
(Units)*
|
|
|
|
|
|
|
|
|
|
|
Hawaii
containers
|
|
|
32,500
|
|
|
|
37,900
|
|
-14
|
%
|
Hawaii
automobiles
|
|
|
14,400
|
|
|
|
25,600
|
|
-44
|
%
|
China
containers
|
|
|
9,600
|
|
|
|
11,700
|
|
-18
|
%
|
Guam
containers
|
|
|
3,400
|
|
|
|
3,400
|
|
--
|
%
|
*Container
volumes included for the period are based on the voyage departure date, but
revenue and operating profit are adjusted to reflect the percentage of revenue
and operating profit earned during the reporting period for voyages that
straddle the beginning and/or end of each reporting period.
Ocean Transportation revenue
decreased 17
percent
, or $
41.9
million, to $
201.1
million in the first quarter of
200
9
compared with the first quarter of
200
8
. The
revenue
de
crease was due to
reduced volumes in all markets of
$34.8 million,
principally
the
Hawaii
market, and $21.1 million
in
lower
fuel surcharge
s due to lower fuel prices as compared
to 2008. These reductions were partially offset by
favorable yields
of $14.9 million, primarily in the
Hawaii
market, resulting from rate increases.
Total
Hawaii
container volume was down
14 percent
in the first quarter of
2009,
relative to
the first quarter of 200
8
, reflecting a broad-based decline in
demand caused by the continuing softness in
Hawaii
’s economy.
Similarly,
Matson’s
Hawaii
automobile volume for the
quarter
was
44
percent lower than 200
8
, reflecting
lower
new car shipments from manufacturers to
Hawaii
auto dealers and rental car companies.
Additionally, weak demand
for container imports on the
U.S.
mainland led to an 18 percent decrease
in
China
container volume in
the first quarter of 2009
, compared with
the first quarter of
200
8
.
Ocean Transportation’s operating profit
decreased $16.4 million to a loss of $0.5 million in the first quarter of 2009
compared with the first quarter of 2008. Approximately $8.1 million of the
decrease was due to the net effect of lower volumes described above, partially
offset by favorable yields and lower net direct and indirect fuel costs.
Additionally, operating profit was negatively impacted by a charge to general
and administrative expense of $6.0 million related to Matson’s headcount
reduction program that was completed during the first quarter of 2009, as well
as $2.2 million in higher pension expenses. Matson’s share of SSAT joint venture
earnings also decreased by $1.4 million, principally due to lower terminal
volumes.
Logistics
Services – First quarter of 2009 compared with 2008
|
|
Quarter
Ended March 31,
|
(dollars
in millions)
|
|
2009
|
|
|
2008
|
|
Change
|
Intermodal
revenue
|
|
$
|
44.5
|
|
|
$
|
65.0
|
|
-32
|
%
|
Highway
revenue
|
|
|
31.7
|
|
|
|
37.6
|
|
-16
|
%
|
Total
Revenue
|
|
$
|
76.2
|
|
|
$
|
102.6
|
|
-26
|
%
|
Operating
profit
|
|
$
|
1.5
|
|
|
$
|
4.7
|
|
-68
|
%
|
Operating
profit margin
|
|
|
2.0
|
%
|
|
|
4.6
|
%
|
|
|
Logistics Services revenue decreased 26
percent, or $26.4 million, to $76.2 million in the first quarter of 2009
compared with the first quarter of 2008. This decrease was principally the
result of a 24 percent decrease in intermodal volume and a 20 percent decrease
in highway volume, reflecting the weakness in the U.S. economy, but was also
partially due to lower fuel surcharges, and to a lesser extent, rates. These
decreases were partially offset by increased revenue of $6.4 million from MGDS’s
warehousing operations, which includes the operations of Pacific American
Services, LLC (“PACAM”) that was acquired in the third quarter of
2008.
Logistics Services operating profit
decreased 68 percent, or $3.2 million, to $1.5 million in the first quarter of
2009 compared with the first quarter of 2008. The operating profit margin
decrease was due principally to lower volumes and yields.
REAL
ESTATE INDUSTRY
Real
Estate Leasing and Real Estate Sales revenue and operating profit are analyzed
before subtracting amounts related to discontinued operations. This
is consistent with how the Company evaluates and makes decisions regarding
capital allocation, acquisitions, and dispositions for the Company’s real estate
businesses. A discussion of discontinued operations for the real estate business
is included separately.
Effect of Property Sales Mix on
Operating Results: Direct year-over-year comparison of the real
estate sales results may not provide a consistent, measurable barometer of
future performance because results from period to period are significantly
affected by joint venture income and the mix of property sales. Operating
results, by virtue of each project’s asset class, geography, and timing, are
inherently episodic. Earnings from joint venture investments are not included in
segment revenue, but are included in operating profit. The mix of real estate
sales in any year or quarter can be diverse and can include developed
residential real estate, commercial properties, developable subdivision lots,
undeveloped land, and property sold under threat of condemnation. The sale of
undeveloped land and vacant parcels in Hawaii generally provides higher margins
than does the sale of developed and commercial property, due to the low
historical-cost basis of the Company’s Hawaii land. Consequently, real estate
sales revenue trends, cash flows from the sales of real estate, and the amount
of real estate held for sale on the balance sheets do not necessarily indicate
future profitability trends for this segment. Additionally, the operating profit
reported in each quarter does not necessarily follow a percentage of sales trend
because the cost basis of property sold can differ significantly between
transactions. The reporting of real estate sales is also affected by the
classification of certain real estate sales as discontinued
operations.
Real
Estate Leasing – First quarter of 2009 compared with 2008
|
|
Quarter
Ended March 31,
|
(dollars
in millions)
|
|
2009
|
|
|
2008
|
|
Change
|
Revenue
|
|
$
|
27.2
|
|
|
$
|
28.8
|
|
-6
|
%
|
Operating
profit
|
|
$
|
12.0
|
|
|
$
|
13.9
|
|
-14
|
%
|
Operating
profit margin
|
|
|
44.1
|
%
|
|
|
48.3
|
%
|
|
|
Occupancy
Rates:
|
|
|
|
|
|
|
|
|
|
|
Mainland
|
|
|
90
|
%
|
|
|
96
|
%
|
-6
|
%
|
Hawaii
|
|
|
95
|
%
|
|
|
98
|
%
|
-3
|
%
|
Leasable
Space (million sq. ft.):
|
|
|
|
|
|
|
|
|
|
|
Mainland
|
|
|
7.1
|
|
|
|
5.2
|
|
37
|
%
|
Hawaii
|
|
|
1.4
|
|
|
|
1.4
|
|
--
|
%
|
Real
Estate Leasing revenue for the first quarter of 2009, before subtracting amounts
presented as discontinued operations, was 6 percent lower than 2008,
primarily due to a 2008 final $1.4 million business interruption insurance
payment for a 2005 fire at Kahului Shopping Center. Excluding this one-time
payment, leasing revenue approximated the results in 2008. Revenues
in 2009 benefited from the timing of property sales and acquisitions, but were
offset by lower occupancies in the mainland and Hawaii portfolios.
Operating
profit for the first quarter of 2009, before subtracting amounts presented as
discontinued operations, was 14 percent lower than 2008, primarily due to the
2008 insurance payment mentioned above and lower occupancies in the mainland and
Hawaii portfolios, but was partially offset by higher margins due to the timing
of property sales and acquisitions.
Leasable space increased by a net 1.9
million square feet in the first quarter of 2009 compared with the first quarter
of 2008, due principally to the following acquisitions: Activity Distribution
Center in California in February 2009; Waipio Industrial Center in Honolulu in
March 2009; Republic Distribution Center in Texas in September 2008; and
Midstate 99 Distribution Center in California in November 2008. Additionally,
Savannah Logistics Park Building B was placed in service in March
2009. Dispositions that partially offset these additions include:
Boardwalk Shopping Center in Texas in August 2008; Marina Shores Shopping Center
in California in September 2008; Venture Oaks office building in November 2008;
Southbank II in March 2009; Kahului Town Terrace apartments in May 2008; and
several Triangle Square retail properties on Maui in December 2008.
Real
Estate Sales –First quarter of 2009 compared with 2008
|
|
Quarter
Ended March 31,
|
(dollars
in millions)
|
|
2009
|
|
|
2008
|
|
Change
|
Improved
property sales
|
|
$
|
20.1
|
|
|
$
|
--
|
|
NM
|
|
Development
sales
|
|
|
0.4
|
|
|
|
186.5
|
|
-100
|
%
|
Unimproved/other
property sales
|
|
|
4.7
|
|
|
|
0.9
|
|
5
|
X
|
Total
revenue
|
|
$
|
25.2
|
|
|
$
|
187.4
|
|
-87
|
%
|
Operating
profit before joint ventures
|
|
$
|
5.6
|
|
|
$
|
25.5
|
|
-78
|
%
|
Gain
on insurance settlement
|
|
|
--
|
|
|
|
7.7
|
|
NM
|
|
Earnings
from joint ventures
|
|
|
--
|
|
|
|
8.2
|
|
NM
|
|
Total
operating profit
|
|
$
|
5.6
|
|
|
$
|
41.4
|
|
-86
|
%
|
200
9
First
Quarter:
Revenue from Real Estate Sales was $25.2 million.
Real Estate Sales revenue included the sale of the Southbank II office building
in Arizona, two leased fee parcels in Kahului on Maui, and one Keala’ula
single-family home on Kauai. In addition to the sales described above, Real
Estate Sales operating profit for the first quarter of 2009 included one unit
sold at the Company’s Kai Malu residential joint venture development on Maui and
rental revenue from the Bridgeport Marketplace retail center development in
California, offset by holding costs for other joint venture
developments.
2008 First
Quarter:
Revenue from Real Estate Sales was $187.4 million.
Real Estate Sales revenue included $186.5 million from the closing of 300 Keola
La’i condominium residential units on Oahu and 19 Keala’ula single-family homes
on Kauai. Real Estate Sales revenue also included the sale of a Maui commercial
leased fee property. In addition to the sales described above, Real Estate Sales
operating profit for the first quarter of 2008 included joint venture income of
$8.2 million, principally related to sales at the Company’s Kai Malu residential
joint venture development on Maui and the partial sale of several buildings at
the Company’s Centre Pointe retail/office joint venture development in Valencia,
California. Real Estate Sales operating profit also included a final $7.7
million insurance payment for the 2005 fire at Kahului Shopping
Center.
Real
Estate Discontinued Operations – First quarter of 2009 compared with
2008
Revenue and operating profit related
to discontinued operations for the first quarter of 2009 were as
follows:
|
Quarter
Ended March 31,
|
(dollars
in millions, before tax)
|
2009
|
|
|
2008
|
|
Sales
revenue
|
$
|
24.6
|
|
|
$
|
0.7
|
|
Leasing
revenue
|
$
|
0.6
|
|
|
$
|
3.4
|
|
Sales
operating profit
|
$
|
8.4
|
|
|
$
|
0.6
|
|
Leasing
operating profit
|
$
|
0.4
|
|
|
$
|
1.9
|
|
The
leasing revenue and operating profit noted above includes the results for
properties that were sold through March 31, 2009 and, if applicable, the
operating results of properties still owned, but meet the definition of
“discontinued operations” under SFAS No. 144,
Accounting for the Impairment or
Disposal of Long-Lived Assets
. The leasing revenue and operating
profit for the first quarter of 2009 and 2008 have been restated to reflect
property that was classified as discontinued operations subsequent to March 31,
2008.
AGRIBUSINESS
Agribusiness
– First quarter of 2009 compared with 2008
|
|
Quarter
Ended March 31,
|
(dollars
in millions)
|
|
2009
|
|
|
2008
|
|
Change
|
Revenue
|
|
$
|
17.7
|
|
|
$
|
22.5
|
|
-21
|
%
|
Operating
profit (loss)
|
|
$
|
(1.9
|
)
|
|
$
|
4.8
|
|
NM
|
|
Operating
profit (loss) margin
|
|
|
-10.7
|
%
|
|
|
21.3
|
%
|
|
|
Tons
sugar produced
|
|
|
12,200
|
|
|
|
14,200
|
|
-14
|
%
|
Agribusiness
revenue decreased 21 percent, or $4.8 million, to $17.7 million in the first
quarter of 2009 compared with the first quarter of 2008, due principally to $4.3
million lower power revenue resulting from lower prices and volumes, as well as
$0.5 million lower revenue from trucking and coffee operations. Power prices,
which decreased by more than 50 percent in the quarter compared to the prior
year quarter, are determined by an avoided cost calculation for the public
utilities in Hawaii, and have been negatively impacted by both a reduction in
fossil fuel costs and an unfavorable modification to the government mandated
formula.
Operating
profit decreased $6.7 million, compared with the first quarter of 2008, due
principally to $4.7 million in lower power sales prices and volumes, as well as
$1.5 million in lower sugar margins from a higher estimated standard production
cost per ton used in the first quarter of 2009 compared with the estimate used
in the first quarter of 2008. The higher estimated standard production cost per
ton used in the first quarter of 2009 is due principally to lower expected full
year production volume for 2009 relative to the estimate of full year production
volume used in the first quarter of 2008.
The operating results of the
Agribusiness segment are highly dependent on a number of factors, including
seasonality and weather conditions. Weather conditions represent one of the most
important factors affecting operating results because weather affects yields,
volume of electricity generation, plantings, harvesting, and factory operations.
Consequently, operating results from the Agribusiness segment will vary from
period to period.
LIQUIDITY
AND CAPITAL RESOURCES
Overview:
Cash
flows provided by operating activities are generally the Company’s primary
source of liquidity. Additional sources of liquidity were provided by available
cash and cash equivalent balances as well as borrowings on available credit
facilities.
Cash Flows:
Cash
Flows from Operating Activities totaled $8 million for the first quarter of
2009, compared with $160 million for the first quarter of 2008. This decrease
was due principally to proceeds received in 2008 from the sales of condominium
units at the Company’s Keola La’i development project, as well as lower income
from the transportation segments.
Cash Flows from Investing Activities
totaled $8 million for the first quarter of 2009, compared with cash used in
investing activities of $54 million for the first quarter of 2008. The increase
in net cash from investing activities was due principally to lower capital
expenditures in the first quarter of 2009, relative to the first quarter of 2008
that included the acquisition of Savannah Logistics Center for approximately $48
million (with approximately $5 million funded with tax-deferred proceeds).
Additionally, the first quarter of 2009 included the receipt of $23 million in
expired 1031 funds that were not reinvested within the required
period.
Capital expenditures for the first
quarter of 2009 totaled $16 million compared with $55 million for the first
quarter of 2008. The 2009 expenditures included $8 million related to real
estate related acquisitions, development and property improvements, $6 million
for the purchase of transportation-related assets, and $2 million related to
Agribusiness operations. The 2008 expenditures include $46 million related to
real estate related acquisitions, development and property improvements, $4
million for the purchase of transportation-related assets, and $5 million
related to Agribusiness. The 2009 amounts reported in Capital
Expenditures on the Condensed Consolidated Statement of Cash Flows excluded $50
million of tax-deferred purchases since the Company did not actually take
control of the cash during the exchange period. The $55 million reported in
Capital Expenditures on the Condensed Consolidated Statement of Cash Flows for
2008 excluded $5 million of tax-deferred purchases.
Cash Flows used in Financing Activities
totaled $25 million for the first quarter 2009 compared with $28 million in the
first quarter of 2008. The Company reduced debt by a net $11 million in the
first quarter of 2009, as compared to a net increase in debt of $33 million in
the first quarter of 2008. Additionally, the first quarter of 2008 included
share repurchases totaling approximately $50 million.
The Company believes that funds
generated from results of operations, available cash and cash equivalents, and
available borrowings under credit facilities will be sufficient to finance the
Company’s business requirements for the next fiscal year, including working
capital, capital expenditures, dividends, and potential acquisitions and stock
repurchases. There can be no assurance, however, that the Company will continue
to generate cash flows at or above current levels or that it will be able to
maintain its ability to borrow under its available credit
facilities.
Sources of
Liquidity:
Additional sources of liquidity for the Company,
consisting of cash and cash equivalents, receivables, and sugar and coffee
inventories, totaled $200 million at March 31, 2009, an increase of $5 million
from December 31, 2008. The increase was due primarily to $16 million in higher
sugar and coffee inventories, partially offset by a $9 million decrease in cash
and cash equivalents and a $3 million decrease in receivable
balances.
The Company also has various revolving
credit and term facilities that provide additional sources of liquidity for
working capital requirements or investment opportunities on a short-term as well
as longer-term basis. Total debt was $493 million as of March 31, 2009 compared
with $504 million at the end of 2008. The decrease in debt was primarily due to
repayments on revolving credit facilities. As of March 31, 2009, available
capacity under these facilities totaled $416 million.
On January 29, 2009, the Company
committed to a fourth series of senior promissory notes, Series D notes,
totaling $100 million under its $400 million Prudential facility. On March 9,
2009, the Company drew $100 million of Series D notes at an annual fixed-rate of
6.9 percent with a final maturity on March 9, 2020. Interest will be paid
semi-annually, commencing in September 2009, and the principal under the note
will be repaid in annual installments commencing in March 2012. The proceeds of
the notes were primarily used to retire short-term revolver borrowings. On
February 20, 2009, the Company amended its $400 million Prudential facility to
extend the maturity date of the facility from April 19, 2009 to April 19,
2012.
Balance
Sheet:
Working capital was $58 million at March 31, 2009, an
increase of $12 million from the consolidated balance at the end of 2008. The
increase in working capital was due primarily to a $19 million increase in
inventories, a $19 million net reduction in current debt balances and an $8
million reduction in accrued and other liabilities, partially offset by a $23
million reduction in Section 1031 exchange proceeds resulting from
expiration.
Tax-Deferred Real Estate
Exchanges:
Sales
– During the first
quarter of 2009, $19 million of proceeds from the sales of Southbank II office
building in Arizona, two leased fee parcels in Kahului, Maui, and one remnant
parcel in Haiku on Maui qualified for potential tax-deferral treatment under the
Internal Revenue Code Section 1031. An additional $5 million of proceeds were
applied to a previous purchase under a reverse 1031 purchase transaction. During
the first quarter of 2008, $0.7 million of proceeds from one leased to fee sale
qualified for potential tax-deferral treatment under the Internal Revenue Code
Section 1031.
Purchases
– During the first
quarter of 2009, the Company utilized $54.5 million in proceeds from
tax-deferred sales to purchase the Activity Distribution Center in California
and the Waipio Industrial Center in Honolulu. During the first quarter of 2008,
the Company utilized $5.2 million in proceeds from tax-deferred sales to
purchase a 1.04 million square-foot, two-building industrial facility in
Savannah, Georgia for a purchase price of $48 million.
The proceeds from 1031 tax-deferred
sales are held in escrow pending future use to purchase new real estate assets.
The proceeds from 1033 condemnations are held by the Company until the funds are
redeployed. As of March 31, 2009, there was $17.2 million of proceeds from
tax-deferred sales that had not been reinvested. Additionally, in the first
quarter of 2009, approximately $23 million of tax deferred proceeds expired and
were not reinvested.
The funds related to 1031 transactions
are not included in cash flows from investing activities in the Condensed
Consolidated Statement of Cash Flows but are disclosed as non-cash activities.
For “reverse 1031” transactions, the Company purchases a property in
anticipation of receiving funds from a future property sale. Funds used for
reverse 1031 purchases are included as capital expenditures on the Condensed
Consolidated Statement of Cash Flows and the related sales of property, for
which the proceeds are linked, are included as property sales in the
Statement.
Commitments, Contingencies and
Off-balance Sheet Arrangements:
A description of other commitments,
contingencies, and off-balance sheet arrangements at March 31, 2009, and herein
incorporated by reference, is included in Note 3 to the condensed consolidated
financial statements of Item 1 in this Form 10-Q.
BUSINESS
OUTLOOK
The
Company operates in multiple industries in domestic and international markets,
and its operations are impacted by regional, national and international economic
and market trends. Still, a majority of the Company’s operations are centered in
Hawaii and a corresponding measure of the Company’s performance is directly
influenced by the fundamentals of the Hawaii economy.
Throughout
2008 and continuing into 2009, the underpinnings of the Hawaii economy were
weakened considerably, following a significant contraction in the U.S. Mainland
economy. The erosion in the Hawaii economy was driven by and reflected in
significantly lower occupancy levels at hotels; reduced air travel to and from
the state; reduced consumer demand for automobiles, home furnishings, and other
“big-ticket” discretionary items; and reduction in real estate sales activity.
The above factors have had, and are expected to continue to have, an adverse
impact on the Company’s operations for the balance of 2009, most notably in
reduced shipping volume levels and in residential real estate
sales.
Similarly,
increased earnings challenges are expected in other core markets in which the
Company operates, including: the U.S. West where the Company has commercial
property and limited development interests; Asia-U.S. West Coast trade lanes,
upon which the Company’s international shipping and stevedoring volumes are
dependent; and throughout U.S. Mainland urban centers, which are important cargo
nodes and whose economic vitality drives logistics volume.
In the
first quarter of 2009, as a result of significant erosion in assets in the
Company’s various defined benefit pension plans in 2008, the Company recognized
almost $5 million in pension expense, compared to net periodic pension income of
approximately $1.0 million in the first quarter of 2008. For the full year,
therefore, the Company expects to incur approximately $20 million in pension
expense, compared to net periodic pension income of approximately $4 million in
2008. The change will significantly impact earnings in 2009, as compared to
2008.
The
Company continues to implement cost containment and revenue optimization
initiatives designed to better position its businesses for lower levels of
economic activity, preserve operating margins and cash flow, and sustain
earnings momentum. These efforts include: workforce reductions and headcount
freezes, fleet cost-reduction initiatives; deferral or elimination of
non-essential capital expenditures; management and non-union salary freezes and
other reductions in management compensation levels.
In the
first quarter of 2009 Matson Navigation put into effect a workforce
restructuring plan that resulted in a nearly 15 percent reduction of its
non-union workforce. Headcount reductions at A&B Properties and the A&B
Corporate Office were also effected in the quarter. Headcount reductions are
underway at MIL. Agribusiness augmented prior headcount reductions through
additional cost cutting measures related to personnel, which will include
furloughs and mandatory vacations throughout the year.
The
Company’s short-term and long-term strategic intent remains
to grow its asset base, earnings streams and cash flow generation
prospects by leveraging its core competencies and financial strength.
The Company continues to seek higher-return investments in real estate leasing
assets and development projects, and expansion of its transportation services,
both shipping and logistics. The Company is additionally exploring renewable
energy alternatives at its sugar operations.
Transportation
: The ocean
shipping and stevedoring businesses are high fixed-cost operations where volume
contraction can impact earnings disproportionately. Matson’s 2009 first quarter
operating performance reflected, to a certain degree, the disproportionate
nature of the volume impact on cost and operating profit. To the extent to which
volume demand continues to decline, or remain at depressed levels, Matson
earnings will be adversely impacted. It is therefore a critical area of focus
for the Company to continue to contain or reduce expenses and operating costs,
and generate new sources of revenue to offset volume declines. In the first
quarter of 2009, Matson was able to offset a portion of the volume-related
earnings impact in all its trade lanes through improved yields and better cargo
mix, and by capturing efficiencies in its fleet and shore-side asset deployment.
In late March 2009, for example, Matson transitioned to a nine-ship fleet
deployment, and in late May, Matson will expand its China service with the
addition of a call on the port of Xiamen. Further reductions in fleet capacity
or port of call expansion are not expected in 2009. The SSAT joint venture
expects to realize the benefit of adding a large customer in the summer of 2009
which may effectively offset the first half year volume loss.
Looking
out, the Company expects that its container volume in Hawaii will continue to be
affected by the contraction in the Hawaii economy, and therefore, volumes are
expected be lower than 2008 levels. In Guam, the Company expects volume to be
relatively flat with potential modest gains in late 2009. In China, demand
reductions and excess capacity are expected to significantly increase pressure
on rates. Annual contracts in this trade lane are typically consummated in the
second quarter of each year. Similarly, SSAT, which operates terminals on
the U.S. West Coast, has been, and will continue to be, negatively impacted by a
reduction in import volumes from Asia.
In the
first quarter of 2009, overarching economic deterioration resulted in
significant volume declines at MIL. While MIL expects volume and rate challenges
to continue for the balance of the year, it is aggressively pursuing new
business opportunities that have arisen from recent disruptions in supply chain
management. In 2008, MIL commenced operations at a warehouse facility in
Savannah, Georgia and additionally acquired a regional warehousing and
distribution company. These initiatives provide platforms for future growth,
although it is noted that the ability to scale operationally in the current
economic climate is constrained.
Real Estate
: The significant
decline in first quarter 2009 operating profit, as compared to the prior year,
is principally attributable to the 2008 success at the Company’s Keola La’i
residential development. However, markedly different sales prospects are
expected in 2009 due to the economic factors cited above, as primary and resort
residential sales dramatically declined in the latter half of 2008.
The
Company, therefore, has very modest expectations of residential unit sales for
the coming year, and several actions have been taken in response to current and
expected market conditions, such as: modifying the timing and scope of projects,
deferring or eliminating capital spending, deferring project infrastructure and
amenities to better match slower sales velocity, and reducing overhead and
marketing expenses.
The
Company and DMB Associates, Inc., the Company’s Kukui’ula joint venture partner,
are in advanced discussions to renegotiate the terms of the Kukui’ula joint
venture operating agreement, under which A&B may accept a larger capital
role in exchange for more favorable terms. No definitive agreements have
yet been reached by the parties.
A key
earnings component of the Real Estate Sales segment is the disposition of
improved properties and land sales. Improved property sales allow the Company to
capture embedded value created by its property and asset management efforts. In
the first quarter of 2009, the Company sold an office building in Phoenix,
Arizona and two ground lease parcels on Maui. Sales of similar assets are
expected to continue in 2009, but the number of dispositions and the prices at
which these dispositions materialize are likely to be impacted by a smaller
universe of qualified buyers, reduced capital availability and recessionary
impacts on operations. However, these same factors should generate improved
acquisition opportunities for the Company as well. Typically, sales proceeds
from dispositions provide investment capital for redeployment in assets offering
higher appreciation potential through efficient, tax-deferred 1031
exchanges. To the extent the Company is not able to reinvest sales proceeds
in new properties, leasing income may decline.
In
addition to the sale of improved properties, the Company periodically sells land
parcels. In the first quarter of 2009, a small parcel was sold from the
Company’s landholdings. The Company expects that similar sales will continue
throughout 2009. As with income property dispositions, proceeds from these sales
will likely be reinvested through the acquisition of improved properties
offering higher appreciation and income potential.
The
Company’s commercial property portfolio occupancy has high average occupancy
levels (95 and 90 percent in Hawaii and at its U.S. Mainland holdings,
respectively) due to its strong asset, tenant and geographic diversification.
However, in the first quarter, occupancy levels decreased by 3 and 6 percent,
respectively, in the Company’s Hawaii and U.S. Mainland holdings as the domestic
economy continued to contract. In addition, in March 2009, the Company placed a
second building at its Savannah locale into service, which effectively decreased
U.S. Mainland occupancy by 2 percent. Lower occupancy and rents from slowed
demand, and potential tenant bankruptcies stemming from recent economic
contraction, are expected to continue to impact the Company’s commercial real
estate portfolio. In addition, while variable common area operating costs such
as energy consumption do decrease with lower occupancy levels, other cash and
non-cash fixed costs such as property taxes and depreciation have a
disproportionate negative impact to earnings as occupancy levels
decrease.
Agribusiness
: The Company’s
Agribusiness operations consist of sugar and coffee operations, both of which
have power generation capability, trucking service companies and related
business service companies. In the first quarter of 2009, as a result of the
dramatic decrease in the price of energy and an unfavorable PUC ruling in 2008,
power revenue and operating profit decreased significantly. The Company is
making continued, broad-based cost reductions to offset losses stemming from
these reductions in power sales and from lower sugar production levels. Further,
the Company is actively negotiating the terms of its power delivery contracts to
provide more favorable pricing in the future.
Sugar
production levels continue to be severely impacted by the effects of an historic
two-year drought. As a result, HC&S expects to post significant operating
losses in 2009, particularly in the second and third quarters of 2009. These
operating losses, in total, will likely exceed 2008 losses appreciably. The
Company recognizes that continuing large losses at its sugar operations are
unacceptable and has implemented, and will continue to, actions to mitigate the
losses, as well as to determine the on-going viability of its sugar business and
of alternative business models. Management changes made in the first quarter
sharpen the company's focus on the plantation's financial performance and
facilitate the review of strategic alternatives for the business, including the
possibility of transitioning to a more energy-centric model. Other operational
improvements and strategic alternatives also are under evaluation.
The
Company utilizes two primary sources of periodic economic forecasts for the
state of Hawaii; the University of Hawaii Economic Research Organization and the
State’s Department of Business, Economic Development &
Tourism.
OTHER
MATTERS
Share Repurchases:
There were
no open market share repurchases in the first quarter of 2009. As of March 31,
2009, 1,851,823 shares remained available for repurchase subject to an
authorization that expires December 31, 2009.
Dividends:
The Company’s
first quarter dividend of $0.315 per share to shareholders was paid on March 5,
2009 to shareholders of record on February 13, 2009. The second quarter dividend
is payable on June 4, 2009 to shareholders of record as of the close of business
on May 14, 2009.
Significant Accounting
Policies:
The Company’s significant accounting policies are
described in Note 1 to the consolidated financial statements included in Item 8
of the Company’s 2008 Form 10-K.
Critical Accounting
Estimates:
The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America, upon which the Management’s Discussion and Analysis is based, requires
that management exercise judgment when making estimates and assumptions about
future events that may affect the amounts reported in the financial statements
and accompanying notes. Future events and their effects cannot be determined
with absolute certainty and actual results will, inevitably, differ from those
critical accounting estimates. These differences could be material. The most
significant accounting estimates inherent in the preparation of A&B’s
financial statements were described in Item 7 of the Company’s 2008 Form
10-K.
Officer and Management
Changes:
The following management changes were effective
between January 1, 2009 and April 30, 2009.
Effective
as of March 9, 2009, Christopher J. Benjamin will serve as general manager,
Hawaiian Commercial & Sugar Company. Mr. Benjamin continues to serve as
senior vice president, chief financial officer and treasurer of Alexander &
Baldwin, Inc.
G.
Stephen Holaday retired from his position as president, Agribusiness, where he
held oversight responsibility for A&B’s Kauai Coffee Company, Inc., Kahului
Trucking & Storage, Inc., and Kauai Commercial Company, Incorporated. His
retirement was effective as of April 15, 2009.
ITEM 3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information
concerning market risk is incorporated herein by reference to Item 7A of the
Company’s Form 10-K for the fiscal year ended December 31, 2008. There has been
no material change in the quantitative and qualitative disclosures about market
risk since December 31, 2008.
ITEM 4. CONTROLS AND
PROCEDURES
|
(a)
|
Disclosure
Controls and Procedures. The Company’s management, with the participation
of the Company’s Chief Executive Officer and Chief Financial Officer, has
evaluated the effectiveness of the Company’s disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as
of the end of the period covered by this report. Based on such evaluation,
the Company’s Chief Executive Officer and Chief Financial Officer have
concluded that, as of the end of such period, the Company’s disclosure
controls and procedures are
effective.
|
|
(b)
|
Internal
Control Over Financial Reporting. There have not been any changes in the
Company’s internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during
the fiscal quarter to which this report relates that have materially
affected, or are reasonably likely to materially affect, the Company’s
internal control over financial
reporting.
|
PART
II. OTHER INFORMATION
ITEM 1. LEGAL
PROCEEDINGS
On
December 24, 2008, the Coast Guard Marine Safety Center informed Matson that the
Shipbuilders Council of America, Inc. and Pasha Hawaii Transport Lines LLC had
requested reconsideration of the Coast Guard's July 2005 and June 2006 major
conversion determinations. The Coast Guard had earlier ruled that the
work performed on Mokihana in foreign and U.S. shipyards was minor and,
therefore, would not necessitate certain safety and maintenance
upgrades. On April 16, 2009, the Coast Guard denied the request for
reconsideration on the grounds that the Shipbuilders Council and Pasha were not
persons directly affected by the decisions, and reaffirmed the determinations
that the modifications made to Mokihana do not constitute a major
conversion.
The
Company and Matson have been named as defendants in civil lawsuits purporting to
be class actions alleging violations of the antitrust laws and seeking
treble damages and injunctive relief. The Company is aware of 26 such lawsuits
that have been filed. All of the lawsuits have been transferred and
consolidated into a consolidated civil lawsuit in the U.S. District Court for
the Western District of Washington in Seattle purporting to be a class
action. Another domestic shipping carrier operating in the Hawaii and
Guam trades, Horizon Lines, Inc., also has been named as a defendant in the
consolidated civil lawsuit. The plaintiffs filed a consolidated class
action complaint on February 2, 2009. The Company and Matson filed
their motion to dismiss the complaint on March 20, 2009. The Company and Matson
will vigorously defend themselves in this lawsuit. The Company, at this time, is
unable to predict the outcome of the lawsuit or the financial impact, if any, of
this lawsuit.
There
have been no material developments in the previously reported investigation by
the Department of Justice into the competitive practices of carriers operating
in the domestic trades. Matson has fully cooperated, and will
continue to fully cooperate, with the Department of Justice.
ITEM 2. UNREGISTERED SALES
OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer
Purchases of Equity Securities
Period
|
Total
Number of
Shares
Purchased
|
Average
Price
Paid
per Share
|
Total
Number of
Shares
Purchased as
Part
of Publicly
Announced
Plans
or
Programs
|
Maximum
Number
of
Shares that
May
Yet Be Purchased
Under
the Plans
or
Programs
|
Jan
1 - 31, 2009
|
54,621
(1)
|
$21.87
|
--
|
--
|
Feb
1 - 28, 2009
|
4,632
(1)
|
$19.33
|
--
|
--
|
Mar
1 - 31, 2009
|
--
|
--
|
--
|
--
|
(1)
|
Represents
shares accepted in satisfaction of tax withholding obligations upon
vesting of non-vested common stock and restricted stock
units.
|
ITEM 4
. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
At the
Annual Meeting of Shareholders of the Company held on April 30, 2009, the
Company’s shareholders voted in favor of: (i) the election of nine directors to
the Company’s Board of Directors and (ii) the ratification of the appointment of
Deloitte & Touche LLP as the Company’s Independent Registered Public
Accounting Firm. 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
|
Broker
Non-Votes
|
W.
Blake Baird
|
33,726,744
|
1,201,818
|
--
|
Michael
J. Chun
|
31,512,460
|
3,416,102
|
--
|
W.
Allen Doane
|
33,280,081
|
1,648,481
|
--
|
Walter
A. Dods, Jr.
|
29,257,393
|
5,671,169
|
--
|
Charles
G. King
|
32,015,053
|
2,913,509
|
--
|
Constance
H. Lau
|
30,648,892
|
4,279,670
|
--
|
Douglas
M. Pasquale
|
33,707,926
|
1,220,636
|
--
|
Maryanna
G. Shaw
|
32,021,696
|
2,906,866
|
--
|
Jeffrey
N. Watanabe
|
31,745,645
|
3,182,917
|
--
|
(ii)
Ratification of Appointment of Independent Registered Public Accounting
Firm
|
For
|
Against
|
Abstain
|
Broker
Non-Votes
|
|
34,742,419
|
171,398
|
14,734
|
--
|
ITEM 5
. OTHER
INFORMATION
On
May 1, 2009, to allow The Dun & Bradstreet Corporation (“D&B”) to
properly provide a credit rating for Matson’s subsidiaries, Matson released
certain summarized financial information relating to the periods ended December
26, 2008, December 28, 2007, and December 29, 2006, respectively. The
information provided to D&B is made available to its subscribers. This
information is furnished herewith as Exhibit 99.1.
ITEM
6. EXHIBITS
31.1 Certification
of Chief Executive Officer, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification
of Chief Financial Officer, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32 Certification
of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
99.1 Summarized
financial information for Matson Navigation Company, Inc., as of December 26,
2008, December 28, 2007, and December 29, 2006.
Pursuant
to the requirements 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:
May 1, 2009
|
|
/s/
Christopher J. Benjamin
|
|
|
Christopher
J. Benjamin
|
|
|
Senior
Vice President,
|
|
|
Chief
Financial Officer and Treasurer
|
|
|
|
|
|
|
|
|
|
Date:
May 1, 2009
|
|
/s/
Paul K. Ito
|
|
|
Paul
K. Ito
|
|
|
Vice
President, Controller and
|
|
|
Assistant
Treasurer
|
EXHIBIT
INDEX
31.1 Certification
of Chief Executive Officer, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification
of Chief Financial Officer, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32 Certification
of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
99.1 Summarized
financial information for Matson Navigation Company, Inc., as of December 26,
2008, December 28, 2007, and December 29, 2006.