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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
Commission file number 0-565
ALEXANDER & BALDWIN, INC.
(Exact name of registrant as specified in its charter)
HAWAII 99-0032630
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
822 BISHOP STREET
POST OFFICE BOX 3440, HONOLULU, HAWAII 96801
(Address of principal executive offices and zip code)
808-525-6611
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, WITHOUT PAR VALUE
(Title of Class)
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AT FEBRUARY 12, 1999:
43,521,456
AGGREGATE MARKET VALUE OF COMMON STOCK HELD BY NON-AFFILIATES AT FEBRUARY 12,
1999:
$752,466,785
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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [x]
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF REGISTRANT'S PROXY STATEMENT DATED MARCH 8, 1999 (PART III OF FORM
10-K).
PORTIONS OF REGISTRANT'S ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR ENDED
DECEMBER 31, 1998 (PARTS I, II AND IV OF FORM 10-K).
TABLE OF CONTENTS
PART I
Page
Items 1. & 2. Business and Properties .............................. 1
A. Ocean Transportation ....................................... 2
(1) Freight Services ..................................... 2
(2) Vessels .............................................. 3
(3) Terminals ............................................ 5
(4) Other Services ....................................... 5
(5) Competition .......................................... 6
(6) Labor Relations ...................................... 7
(7) Rate Regulation ...................................... 8
B. Property Development and Management ........................ 8
(1) General .............................................. 8
(2) Planning and Zoning .................................. 9
(3) Residential Projects ................................. 10
(4) Commercial and Industrial Properties ................. 13
C. Food Products .............................................. 17
(1) Production ........................................... 17
(2) Sugar Refining; Marketing of Sugar
and Coffee ........................................... 18
(3) Competition and Sugar Legislation .................... 19
(4) Properties and Water ................................. 21
D. Employees and Labor Relations .............................. 23
E. Energy ..................................................... 25
Item 3. Legal Proceedings .......................................... 26
Item 4. Submission of Matters to a Vote of
Security Holders ........................................... 26
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters ................................ 27
Item 6. Selected Financial Data .................................... 27
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of
Operations ................................................. 27
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk .......................................... 28
Item 8. Financial Statements and Supplementary Data ................ 29
Item 9. Changes in and Disagreements With
Accountants on Accounting and Financial
Disclosure ................................................. 29
PART III
Item 10. Directors and Executive Officers of
the Registrant ............................................. 29
A. Directors .................................................. 29
B. Executive Officers of the Registrant ....................... 29
Item 11. Executive Compensation ..................................... 31
Item 12. Security Ownership of Certain Beneficial
Owners and Management ...................................... 31
Item 13. Certain Relationships and Related
Transactions ................................................31
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K .................................... 32
A. Financial Statements ....................................... 32
B. Financial Statement Schedules .............................. 32
C. Exhibits Required by Item 601 of
Regulation S-K ............................................. 32
D. Reports on Form 8-K ........................................ 40
Signatures .......................................................... 41
Independent Auditors' Report ........................................ 43
Schedule I .......................................................... 44
Independent Auditors' Consent ....................................... 48
ALEXANDER & BALDWIN, INC.
-------------------------
FORM 10-K
----------
ANNUAL REPORT FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1998
PART I
------
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
- ---------------------------------------
Alexander & Baldwin, Inc. ("A&B") is a diversified corporation with most
of its operations centered in Hawaii. It was founded in 1870 and incorporated
in 1900. Ocean transportation operations and related shoreside operations of
A&B are conducted by a wholly-owned subsidiary, Matson Navigation Company, Inc.
("Matson"), and several Matson subsidiaries, all of which are headquartered in
San Francisco. Real property and food products operations are conducted by a
wholly-owned subsidiary of A&B, A&B-Hawaii, Inc. ("ABHI"), and several ABHI
subsidiaries, all of which are headquartered in Hawaii or California.
The industry segments of A&B are as follows:
A. Ocean Transportation - carrying freight, primarily between various
--------------------
United States Pacific Coast ports, major Hawaii ports and Guam;
providing terminal, stevedoring, tugboat and container equipment
maintenance services in certain of those ports; chartering vessels to
third parties; arranging United States Mainland intermodal
transportation; and providing supply and distribution services.
B. Property Development and Management - developing real property in
-----------------------------------
Hawaii and on the U.S. Mainland; selling residential properties in
Hawaii and on the U.S. Mainland; and managing, leasing, selling and
purchasing commercial/industrial properties in Hawaii and on the U.S.
Mainland.
C. Food Products - growing sugar cane and coffee in Hawaii; producing
-------------
raw sugar, molasses and green coffee (and, until December 1998,
refining raw sugar and marketing and distributing refined sugar
products, primarily in the western United States); marketing and
distributing roasted coffee and green coffee; providing sugar and
molasses hauling and storage, general freight and petroleum hauling
in Hawaii; and generating and selling electricity.
For information about the revenue, operating profits and identifiable
assets of A&B's industry segments for the three years ended December 31, 1998,
see "Industry Segment Information" on page 19 of the Alexander & Baldwin, Inc.
1998 Annual Report to Shareholders ("1998 Annual Report"), which information is
incorporated herein by reference.
DESCRIPTION OF BUSINESS AND PROPERTIES
A. OCEAN TRANSPORTATION
--------------------
(1) FREIGHT SERVICES
----------------
Matson's Hawaii Service offers containership freight services
between the ports of Los Angeles, Oakland, Seattle, and the major ports in
Hawaii, which are located on the islands of Oahu, Kauai, Maui and Hawaii.
Roll-on/roll-off service is provided between Los Angeles and the major ports in
Hawaii. Container cargo also is received at and delivered to Portland, Oregon,
and moved overland between Portland and Seattle at no extra charge.
Matson is the principal carrier of ocean cargo between the
United States Pacific Coast and Hawaii. In 1998, Matson carried 143,431
containers (compared with 149,734 in 1997) and 73,717 motor vehicles (compared
with 78,641 in 1997) between those destinations. Principal westbound cargoes
carried by Matson to Hawaii include dry containers of mixed commodities,
refrigerated cargoes, packaged foods, building materials and motor vehicles.
Principal eastbound cargoes carried by Matson from Hawaii include household
goods, canned pineapple, refrigerated containers of fresh pineapple, motor
vehicles and molasses. The preponderance of Matson's Hawaii Service revenue
is derived from the westbound carriage of containerized freight and motor
vehicles.
Matson's Guam Service provides containership freight service
between the United States Pacific Coast and Guam and Micronesia. Matson's Guam
Service is a component of the Pacific Alliance Service, a strategic alliance
established in 1996 by Matson and American President Lines, Ltd. ("APL") to
provide freight service between the United States Pacific Coast and Hawaii,
Guam, and several Far East ports. In 1998, Matson carried 18,418 containers
(compared with 19,122 in 1997) and 3,132 automobiles (compared with 3,595 in
1997) in the Guam Service. Modifications to the strategic alliance were
implemented in January 1998 to provide better service and reduce operating
costs. The restructured alliance now utilizes six vessels (three Matson
vessels and three APL vessels) in a schedule which provides service from the
United States Pacific Coast to Guam and Micronesia, continuing through Far East
ports, and returning to California.
Matson's Pacific Coast Service provides containership freight
service between Los Angeles, Oakland, Seattle and Vancouver, Canada. In 1998,
Matson carried 34,669 containers (compared with 39,390 in 1997) in the Pacific
Coast Service. The Pacific Coast Service benefited in 1998 from a relationship
with Canadian National Railway, commenced in August 1997, which enables Matson
to provide the railway and its customers with reliable, fixed-day service that
reduces overall transit time between western Canada and southern California.
Matson's Mid-Pacific Service offers container and conven-
tional freight service between the United States Pacific Coast and the ports of
Kwajalein, Ebeye and Majuro in the Republic of the Marshall Islands and
Johnston Island, all via Honolulu.
See "Rate Regulation" below with respect to Matson's freight
rates.
(2) VESSELS
-------
Matson's cargo fleet consists of eleven containerships, four
combination container/trailerships, one roll-on/roll-off barge, two container
barges equipped with cranes which serve the neighbor islands of Hawaii and one
container barge equipped with cranes in the Mid-Pacific Service. These
nineteen vessels represent an investment of approximately $850,300,000 expended
over the past 29 years. The majority of vessels in the Matson cargo fleet have
been acquired with the assistance of withdrawals from a Capital Construction
Fund established under Section 607 of the Merchant Marine Act, 1936, as
amended.
In the second half of 1998, Matson agreed to bareboat charter
two container/trailerships in reserve status to Sea Star Line, LLC, a newly-
created entity which operates the vessels in the Florida-Puerto Rico trade.
The vessels were refitted to respond to the market requirements in that trade.
Matson's fleet units are described in the list on the
following page.
As a complement to its fleet, Matson owns approximately
16,500 containers, 9,000 container chassis, 590 auto-frames and miscellaneous
other equipment. Capital expenditures by Matson in 1998 for vessels, equipment
and systems totaled approximately $51,100,000.
MATSON NAVIGATION COMPANY, INC.
-------------------------------
FLEET - 3/1/99
--------------
Usable Cargo Capacity
-----------------------------------------------------------
Containers Vehicles Molasses
Year Maximum Maximum ------------------------------- -------------- --------
Official Year Recon- Speed Deadweight Reefer
Vessel Name Number Built structed Length (Knots) (Long Tons) 20' 24' 40' Slots TEUs (1) Autos Trailers Short Tons
- -----------------------------------------------------------------------------------------------------------------------------------
Diesel-Powered Ships
- --------------------
R.J. PFEIFFER 979814 1992 713'6" 23.0 27,100 48 171 988 300 2,229 -- -- --
MOKIHANA (2) 655397 1983 860'2" 23.0 30,167 182 0 1,340 408 2,824 -- -- --
MAHIMAHI (2) 653424 1982 860'2" 23.0 30,167 182 0 1,340 408 2,824 -- -- --
MANOA (2) 651627 1982 860'2" 23.0 30,187 182 0 1,340 408 2,824 -- -- --
Steam-Powered Ships
- -------------------
KAUAI 621042 1980 1994 720'5-1/2" 22.5 26,308 -- 458 538 300 1,626 44 -- 2,600
MAUI 591709 1978 1993 720'5-1/2" 22.5 26,623 -- 458 538 300 1,626 -- -- 2,600
EL YUNQUE (3) 573223 1976 1990 790'9" 21.5 14,551 48 -- 420 120 960 323 112 --
EL MORRO (3) 557149 1974 1990 790'9" 21.5 14,976 48 -- 420 120 960 323 110 --
MATSONIA 553090 1973 1987 760'0" 21.5 22,501 -- 683 400 329 1,620 450 56 4,300
LURLINE 549900 1973 1982 826'6" 21.5 22,213 6 162 713 292 1,379 220 81 2,100
EWA (4) 530140 1972 1978 787'8" 21.0 38,656 294 -- 861 180 2,015 -- -- --
CHIEF GADAO 530138 1971 1978 787'8" 21.0 37,346 230 464 597 274 1,981 -- -- --
LIHUE (4) 530137 1971 1978 787'8" 21.0 38,656 286 276 681 188 1,979 -- -- --
MANULANI 528400 1970 720'5-1/2" 22.5 27,165 -- 537 416 251 1,476 -- -- 5,300
MANUKAI (4) 524219 1970 720'5-1/2" 22.5 27,107 -- 537 416 251 1,476 -- -- 5,300
Tugs and Barges
- ---------------
WAIALEALE (5) 978516 1991 345'0" -- 5,621 -- -- -- 35 -- 230 45 --
ISLANDER (6) 933804 1988 372'0" -- 6,837 -- 276 24 70 380 -- -- --
MAUNA LOA (6) 676973 1984 350'0" -- 4,658 -- 144 72 84 316 -- -- 2,100
HALEAKALA (6) 676972 1984 350'0" -- 4,658 -- 144 72 84 316 -- -- 2,100
MAOI (7) 618705 1980 75'0" 10.0 --
JOE SEVIER (7) 500799 1965 80'0" 10.0 --
- ------------------------------------------------------
(1) "Twenty-foot Equivalent Units" (including trailers). TEU is a standard measure of cargo volume correlated to the volume of a
standard 20-foot dry cargo container.
(2) Time-chartered to APL to February 2006.
(3) Formerly Kaimoku and Kainalu. Bareboat-chartered to Sea Star Line, LLC until 2005 and 2006, respectively. Cargo-carrying
reconfigurations begun in 1998 will include the installation in each ship of tanks having the capacity to carry 252,000
gallons of liquid cargo.
(4) Reserve Status
(5) Roll-on/Roll-off Barge
(6) Container Barge
(7) Tug
(3) TERMINALS
---------
Matson Terminals, Inc. ("Matson Terminals"), a wholly-owned
subsidiary of Matson, provides container stevedoring, container equipment
maintenance and other terminal services for Matson and other ocean carriers at
the ports of Honolulu, Los Angeles, Oakland and Seattle.
Matson Terminals is among the largest container stevedoring
and terminal operators on the United States Pacific Coast. A total of 852
vessel calls were served at all Matson Terminals container facilities in 1998.
The four terminals operated by Matson Terminals are as follows:
Terminal Expiration of 1998 Usable
Terminal Size Terminal Throughput Container Crane Ship
Location (acres) Lease (# containers) Cranes (#) Ownership Berths (#)
-------- -------- ------------- -------------- ---------- --------- ----------
Honolulu, HI 108 Sept 2016 351,119 7 Matson 3
Terminals
Los Angeles, CA 95 Jan 2002 205,844 4 Matson 3
Terminals
Oakland, CA 74 Dec 2008 109,727 3 Matson 3
Terminals
Seattle, WA 35 Dec 1999 90,835 3 Port of 2
Seattle
Matson Terminals has lease agreements with the port
authorities for the use of the publicly-owned container terminal properties at
these locations and does not anticipate any difficulty in renewing such
agreements as they expire or in finding satisfactory alternative premises.
Besides owning or leasing the shoreside cranes identified in the above table,
Matson Terminals owns or leases supporting container-handling equipment at its
container facilities and owns all of the maintenance equipment used in
providing container equipment and terminal maintenance services.
Capital expenditures for terminals and equipment totaled
approximately $8,300,000 in 1998.
(4) OTHER SERVICES
--------------
Matson Intermodal System, Inc. ("Matson Intermodal"), a
wholly-owned subsidiary of Matson, is an intermodal marketing company which
arranges North American rail and truck transportation for shippers and
carriers, frequently in conjunction with ocean transportation. Through volume
purchases of rail and motor carrier transportation services, augmented by such
services as shipment tracing and single-vendor invoicing, Matson Intermodal is
able to reduce transportation costs for customers. Matson Intermodal
currently has 11 offices and manages 30 equipment depots across the United
States Mainland.
Matson Services Company, Inc. ("Matson Services"), a
wholly-owned subsidiary of Matson, owns two tugboats, which are employed in
Hawaiian waters under operating agreements to provide harbor assistance to
vessels calling at the islands of Hawaii and Maui.
Matson Logistics Solutions, Inc. ("Matson Logistics"), a
wholly-owned subsidiary of Matson, was formed in 1998 to provide supply and
distribution services to Matson customers, including management of
transportation purchases, inventory and on-time deliveries.
(5) COMPETITION
-----------
Matson's Hawaii and Guam Services have one major container-
ship competitor which serves Long Beach, Oakland, Tacoma, Honolulu and Guam.
In an administrative proceeding in 1997, the purpose of which was to determine
the historic service levels to which that competitor would be limited as a
condition to its participation in the Maritime Security Program, the U.S.
Maritime Administration limited the annual capacity which the competitor may
offer in the Hawaii trade. The current limit on annual capacity is 162,378
TEUs (see footnote (1) on page 4 for an explanation of "TEU").
Other competitors in the Hawaii Service include two common
carrier barge services, unregulated proprietary and contract carriers of bulk
cargoes and air cargo services. Although air freight competition is intense
for time-sensitive or perishable cargoes, historic and projected inroads of
such competition in cargo volume are limited by the amount of cargo space
available in passenger aircraft and by generally higher air freight rates. In
the summer of 1998, a temporary barge service offered competing service for
the summer movement of military household goods to and from Hawaii.
Competitors in the Pacific Coast Service include truck, rail and ocean carrier
services.
Matson vessels are operated on schedules which make available
to shippers and consignees regular day-of-the-week sailings from the United
States Pacific Coast and day-of-the-week arrivals in Hawaii. This service is
attractive to customers because it decreases their overall distribution costs.
In order to match better the fleet capacity with existing cargo volume in the
Hawaii Service, without a reduction in service quality, in September 1998
Matson reduced the number of vessel arrivals in Honolulu from four per week to
three. This reduction still left Matson with 156 Hawaii round-trip voyages per
year, 50 percent more than its closest competitor. In addition, Matson
competes by offering more comprehensive service to customers, supported by its
scope of equipment and its efficiency and experience in the handling of
containerized cargoes, and by competitive pricing.
The carriage of cargo between the United States Pacific Coast
and Hawaii on foreign-built or foreign-documented vessels is prohibited by
Section 27 of the Merchant Marine Act, 1920, frequently referred to as the
Jones Act. However, foreign-flag vessels carrying cargo to Hawaii from foreign
sources provide indirect competition for Matson's container freight service
between the United States Pacific Coast and Hawaii. Far East countries,
Australia and New Zealand have direct foreign-flag services to Hawaii.
In response to coordinated efforts by various interests over
the past several years to convince Congress to repeal the Jones Act, in 1995
Matson joined other businesses and organizations to form the Maritime Cabotage
Task Force, which supports the retention of the Jones Act and other cabotage
laws. Repeal of the Jones Act would allow all foreign-flag vessel operators,
which do not have to abide by U.S. laws and regulations, to sail between
American ports in direct competition with Matson and other U.S. operators which
must comply with such laws and regulations. The Task Force seeks to inform
elected officials and the public about the economic, national security,
commercial, safety and environmental benefits of the Jones Act and similar
cabotage laws.
Matson Terminals competes with numerous other companies which
perform the same or similar services. The container stevedoring and terminal
services business is extremely competitive. The primary considerations of
ocean carriers, when selecting stevedore and terminal operators, are rates,
quality of service, expertise and reputation. The industry is highly capital-
intensive because of the need for expensive container-handling equipment.
Matson Intermodal competes for freight with a number of large
and small companies engaged in intermodal transportation. Matson Services
competes with several larger operators of tugboats in Hawaiian waters. Matson
Logistics competes with many larger providers of logistics services and with
transportation companies whose services include logistics.
(6) LABOR RELATIONS
---------------
The absence of strikes and the availability of labor through
hiring halls are important to the maintenance of profitable operations by
Matson. Matson's operations have not been disrupted significantly by strikes
in the past 27 years. However, in 1996 and 1997, labor disruptions at some
United States Pacific Coast ports by longshore bargaining units of the
International Longshore and Warehouse Union, attributed to dissatisfaction with
collective bargaining agreements negotiated in 1996, adversely affected ocean
carriers, including Matson, calling at those ports. See "Employees and Labor
Relations" below for a description of labor agreements and certain unfunded
liabilities for multi-employer pension plans to which Matson and Matson
Terminals contribute.
(7) RATE REGULATION
---------------
Matson is subject to the jurisdiction of the Surface
Transportation Board ("Board"), an agency within the U.S. Department of
Transportation, with respect to its domestic rates. The Interstate Commerce
Commission Termination Act of 1995 ("Act") establishes a "Zone of
Reasonableness," as defined in the Act, within which rate adjustments are
deemed reasonable. Rate adjustments outside of the Zone of Reasonableness are
subject to investigation and/or suspension by the Board. In December 1998,
Matson filed a 2.5 percent across-the-board increase in its Hawaii Service,
effective February 14, 1999.
B. PROPERTY DEVELOPMENT AND MANAGEMENT
(1) GENERAL
-------
The property development and management operations of A&B are
conducted by ABHI, a wholly-owned subsidiary headquartered in Honolulu. A&B
and its subsidiaries own approximately 93,000 acres of land, consisting of
approximately 91,000 acres in Hawaii and approximately 2,000 acres elsewhere,
as follows:
LOCATION NO. OF ACRES
-------- ------------
Oahu ................................... 40
Maui ................................... 69,040
Kauai .................................. 21,910
California ............................. 1,957
Texas .................................. 64
Washington ............................. 24
Arizona ................................ 11
Nevada ................................. 21
Colorado ............................... 10
Florida ................................ 3
------
TOTAL ................................ 93,080
======
As described more fully in the table below, the bulk of this acreage currently
is used for agricultural and related activities, and includes pasture land
leased to ranchers, watershed and conservation reserves. The balance is used
or planned for development or other urban uses. An additional 3,200 acres on
Maui and Kauai are leased from third parties.
CURRENT USE NO. OF ACRES
----------- ------------
HAWAII
Fully-entitled urban (defined below) ............... 1,190
Agricultural, pasture and
miscellaneous .................................... 60,800
Watershed land/conservation ........................ 29,000
U.S. MAINLAND
California ranch land............................... 1,900
Fully-entitled urban ............................... 190
------
TOTAL .......................................... 93,080
======
ABHI is actively involved in the entire spectrum of land
development, including planning, zoning, financing, constructing, purchasing,
managing and leasing, and selling and exchanging real property.
(2) PLANNING AND ZONING
-------------------
The entitlement process for development of property in Hawaii
is both time-consuming and costly, involving numerous State and County
regulatory approvals. For example, conversion of an agriculturally-zoned
parcel to residential zoning usually requires the following approvals:
- amendment of the County general plan to reflect the desired residential
use;
- approval by the State Land Use Commission to reclassify the parcel from
the "Agricultural" district to the "Urban" district;
- County approval to rezone the property to the precise residential use
desired; and,
- if the parcel is located in the Special Management Area, the granting of
a Special Management Area permit by the County.
The entitlement process is complicated by the conditions, restrictions and
exactions that are placed on these approvals, such as the construction of
infrastructure improvements, payment of impact fees, restrictions on the
permitted uses of the land, provision of affordable housing, and/or mandatory
fee sale of portions of the project.
ABHI actively works with regulatory agencies, commissions and
legislative bodies at various levels of government to obtain zoning
reclassification of land to its highest and best use. ABHI designates a parcel
as "fully-entitled" or "fully-zoned" when all necessary government land use
approvals have been obtained.
As described in more detail below, in 1998 work to obtain
entitlements for urban use focused on (i) the Kukui'Ula residential development
on Kauai, (ii) the proposed master-planned community at Pilot Hill Ranch in
California, (iii) obtaining Community Plan designations for various ABHI lands
on Maui, and (iv) obtaining State "Urban" designation for two proposed single-
family subdivisions on Maui.
With regard to item (iii) in the preceding paragraph, ABHI
continues to participate actively in Maui County's decennial update of its
Community Plans, a process that began in 1992. The Community Plans serve to
guide planning and development activity over the next decade. ABHI has
obtained and continues to seek various urban designations for its undeveloped
lands within the following four Community Plans, where most of its Maui lands
are located: Pa'ia-Haiku Community Plan, Kihei-Makena Community Plan, Wailuku-
Kahului Community Plan, and Makawao-Pukalani-Kula ("Upcountry") Community Plan.
In March 1998, the Maui County Council adopted the Kihei-Makena Community Plan.
The Plan reflected the approval of "Project District" designation for 650 acres
in Maalaea as a master-planned residential community, consisting of up to 1,800
homes, a golf course and commercial uses. The County Council previously had
adopted the Pa'ia-Haiku and Upcountry Community Plans in 1995 and 1996,
respectively. Adoption of the Wailuku-Kahului Community Plan by the County
Council is expected in 1999.
(3) RESIDENTIAL PROJECTS
--------------------
ABHI is pursuing a number of residential projects in Hawaii
and on the U.S. Mainland, in particular:
(a) KUKUI'ULA. The 1,045-acre Kukui'Ula project was
---------
originally conceived to be a planned residential community on the island of
Kauai, comprising up to 3,000 dwelling units, an 18-hole golf course, hotels,
commercial areas, schools and parks. Construction of the wastewater treatment
plant, mass grading and drainage and certain roadway improvements were
completed in 1993. Since 1993, construction of major infrastructure to serve
the Kukui'Ula project has been suspended because of weak economic conditions on
Kauai.
Beginning in late 1997, and continuing throughout 1998, a
complete reevaluation of the Kukui'Ula project was undertaken. That work has
led to a revised strategy for the project and to subsequent write-downs of
costs previously incurred. The revised strategy recognizes that, as a result
of Hurricane Iniki and generally weak economic conditions on Kauai, the resi-
dential housing market will not provide the level of sales absorption needed
to support the planned residential community concept.
The revised strategy is to proceed with the development of
the residential component of the project on a reduced scale, through a series
of individual residential subdivisions designed in accordance with a master
development plan. This approach will allow infrastructure requirements to be
built on an incremental basis, rather than as a single large project, which
would be the case with a planned residential community.
The initial increment of this program, a 32-lot residential
subdivision known as "Koloa Estates," received tentative subdivision approval
from the County of Kauai in December 1997. Construction plans were prepared
and approved, and construction began in August 1998. Construction is
anticipated to be complete in mid-1999. A public offering statement has been
submitted to the State, and is expected to be approved in March 1999.
Marketing of the lots will commence upon approval of the public offering
statement.
The second aspect of the revised strategy is to expedite the
resort component of the project. A concept plan for the resort area at
Kukui'Ula was completed in early 1998. Based on that plan, a petition was
filed with the State Land Use Commission to add 77 acres of land, comprising
most of the planned resort, to the State "Urban" district. That petition was
approved in June 1998. As a result of that action, 837 acres at Kukui'Ula are
classified "Urban" and are available for development, while 208 acres are
conditionally designated "Urban," subject to a showing that substantial
progress has been made on providing infrastructure to the initial increment.
In October 1998, three petitions were submitted to the Kauai
County Planning Department to (i) amend the County General Plan, (ii) amend the
County Zoning Ordinance, and (iii) amend the County Visitor Destination Area
Ordinance to complete the basic entitlements needed to proceed with the resort
component of the project. Hearings on these petitions began in early 1999 and
final action is anticipated in mid-1999.
In 1998, in recognition of the reduced market support for the
project, previously-incurred and capitalized development costs of $20,216,000
were written off. These costs were primarily related to the wastewater
treatment plant, and recognized that the costs of that plant would not be
recoverable through the future cash flows of the plant. For additional
information, see Note 4 to A&B's financial statements on page 33 of the 1998
Annual Report, which Note is incorporated herein by reference.
(b) KU'AU BAYVIEW AT PA'IA. Since the completion and
----------------------
opening of the model homes in April 1996, 87 homes in this 92-lot single-family
subdivision on Maui (92% of the total) have been sold (19 homes in 1998). As
of March 15, 1999, three contracts were in escrow. The remaining two homes are
being marketed actively through brokers. It is anticipated that the project
will be sold out by the end of the second quarter of 1999.
(c) KAHULUI IKENA. Since the completion of the 102-unit
-------------
Maui condominium project in June 1995, a total of 82 units have been sold to
date (13 units in 1998). As of March 15, 1999, an additional 8 units were in
escrow. The remaining 12 units are being marketed through various brokers.
(d) OTHER MAUI SUBDIVISIONS. Four agricultural
-----------------------
subdivisions, which consist of a minimum lot size of two acres per lot, were in
various stages of design, development and sale in 1998. At the nine-lot
Kauhikoa Hill Ranch subdivision (located in Haiku), six lots were sold in 1998,
leaving two lots available for purchase. Site work construction for the 28-lot
Haiku Makai subdivision (also located in Haiku) was substantially completed in
April 1998. By year-end, 25 lots had been sold at an average sales price of
approximately $200,000 per lot, and sales contracts for the remaining three
lots were in escrow. The construction plans for the 37-lot Maunaolu sub-
division (located in Haliimaile) continue to be processed by the County.
Approval of the plans has been delayed due to inadequate availability of
water, and final approval will require a potable water source to be secured
for the project. The last of the four lots in the 10-acre Ku'au Beach Estates
subdivision (located in Pa'ia) was sold last year.
In addition, ABHI is seeking entitlements
for two single-family subdivisions on Maui: (i) an approximately 200-unit
subdivision on 45 acres in Haliimaile, and (ii) an approximately 400-unit
subdivision on 110 acres in Spreckelsville, which includes the possible
development of nine holes of golf in order to expand the nearby nine-hole Maui
Country Club golf course into an 18-hole course. In October 1998, State
"Urban" designation was obtained for the Haliimaile project. In December 1998,
an application was filed with the County for the re-zoning of the property, the
final entitlement required for the project's development. A Petition also was
filed in 1998 seeking State "Urban" designation for the Spreckelsville project.
The hearing on the Petition was substantially completed in October 1998, and
final action is expected in 1999.
(e) PILOT HILL RANCH. Pilot Hill Ranch, located in El
----------------
Dorado County, near Sacramento, California, is an 1,800-acre parcel designated
in the 1996 El Dorado County General Plan as a planned residential community.
In 1997 and 1998, completion of the entitlement process for the property was
pursued through the submission to the County of a Specific Plan and an
Environmental Impact Report. In December 1998, the County Board of Supervisors
considered the Specific Plan application, but was not able to reach a decision.
Action on the application was continued to sometime in 1999. In light of this,
several alternatives are being considered, including the sale of the project.
(4) COMMERCIAL AND INDUSTRIAL PROPERTIES
------------------------------------
An important source of property revenue is the lease rental
income A&B and its subsidiaries receive from nearly 3.6 million leasable square
feet of industrial and commercial building space, ground leases on 286 acres
for commercial/industrial use, and leases on 11,600 acres for agricultural/
pasture use.
(a) HAWAII COMMERCIAL/INDUSTRIAL PROPERTIES
---------------------------------------
In Hawaii, most of the nearly 839,000 square feet of income-
producing commercial and industrial properties owned by A&B and its subsi-
diaries are located in the central Kahului/Wailuku area of Maui. They consist
primarily of two shopping centers and four office buildings, as well as several
improved commercial and industrial properties.
The primary Hawaii commercial/industrial properties are as
follows:
LEASABLE AREA
PROPERTY LOCATION TYPE (SQUARE FT.)
-------- -------- ---- -------------
Maui Mall Kahului, Maui Retail 180,600
Kahului Shopping Kahului, Maui Retail 108,500
Center
One Main Plaza Wailuku, Maui Office 85,300
Wakea Business Kahului, Maui Warehouse/Retail 61,500
Center
Kahului Office Kahului, Maui Office 51,700
Building
Kahului Office Kahului, Maui Office 29,800
Center
Apex Building Kahului, Maui Retail 28,000
Stangenwald Building Honolulu, Oahu Office 28,200
In addition to the above-described properties, a number of
other commercial and industrial projects are being developed on Maui, Oahu and
Kauai, including:
(i) TRIANGLE SQUARE. Development and marketing
---------------
efforts are continuing for this 10.6-acre, light industrial zoned, commercial
subdivision in Kahului, Maui. Three lots have been leased, and the 28,000-
square-foot Apex Building is 95% occupied by retail users. A County Special
Management Area permit was secured in late 1998 to build Tri-Square One
Building, a proposed 15,000-square-foot, multi-tenant retail center on two of
the six remaining lots available for ground leases and retail development.
(ii) MAUI BUSINESS PARK. In 1998, the sale of the
------------------
final fee interest in the Maui Marketplace site was completed. Located in the
42-acre initial phase (Phase IA) of the Maui Business Park, Maui Marketplace is
a 300,000-square-foot retail center, owned by a third party, which occupies
20.3 acres of Phase IA's 37.4 salable acres. Maui Marketplace includes such
anchor tenants as Eagle Hardware and Garden, Office Max, Sports Authority and
Border's Books and Music. In addition, 13 Maui Business Park lots have been
sold to various commercial and retail businesses. There are 19 lots remaining
for sale or lease in Phase IA.
Steps taken by the State of Hawaii to extend the runway
at the nearby Kahului Airport have generated increased interest in the next
phase of Maui Business Park, Phase IB. As a result, the planning and design of
the onsite improvements for the 34-acre site have been accelerated to meet the
anticipated market demand.
The entire Maui Business Park development consists of a
planned total of 239 acres, and is planned to be developed in four phases. The
overall absorption of the property is expected to take 20 years.
(iii) MILL TOWN. Located in Waipahu, Oahu, near
---------
Honolulu, this 40-acre parcel of light industrial zoned land was acquired in
November 1998 for $8 million. All major entitlements had been secured for
development of the property, and 80% of the improvements had been completed for
the development of the first 17 acres. This two-phase project consists of 23
subdivided lots ready for sale in the first phase, a three-acre park expansion
area, and an additional 20 acres remaining for future subdivision in the second
phase. Construction commenced in November to complete the roadway improvements
for the sale of the lots within the first phase. Sales activities commenced in
December 1998.
Overall occupancy for the Hawaii improved commercial and
industrial properties owned by A&B and its subsidiaries averaged 68% in 1998,
compared with 78% in 1997. The lower occupancy level reflects the addition of
new properties having large amounts of untenanted space, the retenanting of a
major retail unit, and the continuing weak Hawaii economy. In particular, on
Maui, the addition of the large amounts of new retail space which slowed
absorption and depressed average rents in 1998 is expected to continue to
challenge this market in 1999. A&B is continuing its program to upgrade its
Hawaii properties, as demonstrated by the completion in 1998 of major reno-
vation to the interior of the Kahului Office Building and the planned
repositioning of the Maui Mall in order to complement the addition of a twelve-
screen movie theater to the property.
(b) U.S. MAINLAND COMMERCIAL/INDUSTRIAL PROPERTIES
----------------------------------------------
On the U.S. Mainland, A&B and its subsidiaries own a port-
folio of commercial and industrial properties, acquired primarily by way of
tax-deferred exchanges under Section 1031 of the Internal Revenue Code, as
amended ("IRC"), comprising a total of approximately 2.72 million square feet
of leasable area, as follows:
LEASABLE AREA
PROPERTY LOCATION TYPE (SQUARE FT.)
-------- -------- ---- -------------
Great Southwest Dallas, TX Industrial 842,900
Industrial
Valley Freeway Kent, WA Industrial 229,100
Corporate Park
Airport Square Reno, NV Retail 170,800
San Pedro Plaza San Antonio, TX Office 167,500
2868 Prospect Park Sacramento, CA Office 162,400
Arbor Park San Antonio, TX Retail 140,000
Moulton Plaza Laguna Hills, CA Retail 134,000
San Jose Avenue City of Industrial 126,000
Warehouse Industry, CA
Southbank II Phoenix, AZ Office 120,800
Bainbridge Bainbridge Retail 114,600
Properties Island, WA
4225 Roosevelt Seattle, WA Office 108,300
Building
Village at Indian Indian Wells, CA Retail 104,600
Wells
2450 Venture Oaks Sacramento, CA Office 98,800
Northwest Business San Antonio, TX Service Center/ 87,000
Center Warehouse
Wilshire Center Greeley, CO Retail 46,700
Market Square Greeley, CO Retail 43,300
Professional Gainesville, FL Office 24,200
Center
Office Plaza
TOTAL: 2,721,000
A&B took advantage of the strong real estate market in
California's Silicon Valley area by selling Ridgeview Court, a 246,000-square-
foot office/research facility located in Cupertino, CA, in June 1998 for
$51.5 million. Proceeds from this sale, together with proceeds from the sale
of other Mainland and Hawaii land parcels, were invested in six Mainland
properties by way of IRC 1031 and 1033 exchanges. Three of these properties
were acquired in San Antonio, TX: San Pedro Plaza, Northwest Business Center,
and Arbor Park. The other three acquisitions consisted of two office buildings
in Sacramento, CA (2868 Prospect Park and 2450 Venture Oaks), and an office
building in Phoenix, AZ (Southbank II), marking A&B's entry into these markets.
These office buildings are well positioned to realize the benefits of the
above-average population and business growth that is expected to occur in these
metropolitan areas over the next several years.
A&B's Seattle area properties continued to benefit from the
strength of the Pacific Northwest's economy. The 4225 Roosevelt Building and
the Valley Freeway Corporate Park warehouse complex maintained 100% occupancy,
while demand for retail space on Bainbridge Island, a suburb of Seattle,
enabled A&B to construct an 8,400-square-foot retail building next to its
existing Island Village shopping center. A&B has listed the 4225 Roosevelt
Building for sale, after securing a five-year lease extension for a major
tenant occupying 20% of the property.
In Texas, A&B sold Woodlands IV and V in October 1998, two
service center/warehouse properties that were part of its Great Southwest
Industrial portfolio. Proceeds from this sale were reinvested in accordance
with IRC Section 1031. The remaining properties in the Great Southwest
Industrial portfolio continued to perform well, despite increased competition
from new construction. As described above, A&B entered the San Antonio, TX
market in 1998 with the purchase of three properties. These properties all
maintained occupancy in excess of 90%, reflecting this market's strong demand.
In Reno, NV, A&B entered into an agreement with Costco
Wholesale Corporation, an anchor store at Airport Square, which enabled Costco
Wholesale Corporation to expand its store and thereby enhance this retail
shopping center's presence in the Reno market. Despite a large increase in
retail space in Reno, Airport Square's excellent location and strong anchor
stores enabled achievement of a 99% occupancy rate.
The U.S. Mainland leased property portfolio had an average
overall occupancy rate of 91%, as compared with 98% for the prior year, due to
the vacancy of two large warehouse spaces in City of Industry, CA and Dallas,
TX. The City of Industry property is now fully leased.
C. FOOD PRODUCTS
-------------
(1) PRODUCTION
----------
A&B has been engaged in activities relating to the production
of cane sugar and molasses in Hawaii since 1870. A&B's food products opera-
tions are conducted by ABHI. ABHI operates a sugar plantation on the island of
Maui, through its Hawaiian Commercial & Sugar Company ("HC&S") division, and a
coffee farm on the island of Kauai, through its Kauai Coffee Company, Inc.
("Kauai Coffee") subsidiary.
HC&S is Hawaii's largest producer of raw sugar, producing
216,188 tons of raw sugar in 1998, or 61% of the raw sugar produced in Hawaii,
compared with 198,037 tons of raw sugar in 1997. Total Hawaii sugar pro-
duction, in turn, amounted to approximately five percent of total United States
sugar production. HC&S harvested 17,210 acres of sugar cane in 1998, compared
with 17,005 acres in 1997. Yields averaged 12.7 tons of sugar per acre in
1998, compared with 11.6 tons per acre in 1997, due to changes in farming and
factory practices. The average cost per ton of sugar produced at HC&S,
including the cost of power production, was $373.89 in 1998, compared with
$446.92 in 1997. The decrease in cost per ton is attributable to the nine
percent increase in sugar production and to aggressive cost reduction efforts,
including personnel reductions, that had been initiated in January 1998. As a
by-product of sugar production, HC&S also produced 80,915 tons of molasses in
1998, compared with 77,960 tons in 1997.
During 1998, Kauai Coffee had approximately 3,800 acres of
coffee trees under cultivation. The harvest of the 1998 coffee crop is
expected to yield approximately 4.0 million pounds of green coffee, compared
with 4.7 million pounds in 1997. The reduction is attributable to fewer acres
harvested, due to pruning and to the natural cyclicality of coffee yields.
HC&S and McBryde Sugar Company, Limited ("McBryde"), the
parent company of Kauai Coffee, produce electricity for internal use and for
sale to the local electric utility companies. HC&S's power is produced by
burning bagasse (sugarcane fiber), by hydroelectric power generation and, when
necessary, by burning fossil fuels, whereas McBryde produces power solely by
hydroelectric generation. The price for the power sold by HC&S and McBryde is
equal to the utility companies' "avoided cost" of not producing such power
themselves. In addition, HC&S receives a capacity payment to provide a
guaranteed power generation capacity to the local utility. In 1998, HC&S sold
72,589 megawatt hours ("MWH") of electric power, and McBryde sold 21,975 MWH.
Revenue from the sale of electricity depends on the amount of power produced
and sold, as well as the average price of fuel. (See "Energy" below.)
Kahului Trucking & Storage, Inc., a subsidiary of ABHI,
provides sugar and molasses hauling and storage, petroleum hauling, mobile
equipment maintenance and repair services, and self-service storage facilities
on Maui. Kauai Commercial Company, Incorporated, another subsidiary of ABHI,
provides similar services on Kauai, as well as general trucking services.
(2) SUGAR REFINING; MARKETING OF SUGAR AND COFFEE
---------------------------------------------
Virtually all of the raw sugar produced in Hawaii is pur-
chased, refined and marketed by California and Hawaiian Sugar Company, Inc.
("C&H"). C&H processes the raw cane sugar into a full line of refined sugar
products for the grocery market, and a full range of industrial refined sugar
products for industrial bakers, confectioners and food processors. C&H is the
leading sugar brand in the western United States. Marketing of C&H's refined
products is conducted by C&H's sales staff and a network of brokers under
exclusive representation agreements. The refined products are marketed
primarily in the western and central United States.
C&H's profit margins declined in 1998 as a result of lower
selling prices driven by the large 1997/1998 beet sugar crop. The larger crop
created an intense period of price competition among beet processors in late
1997, which affected the performance of C&H in 1998. Consumer sugar sales are
seasonal in nature and, as a result, C&H's financial results are expected to be
better in the third and fourth quarters of each fiscal year, compared with the
first two quarters.
C&H has a ten-year supply contract, ending in 2003, with
Hawaiian Sugar & Transportation Cooperative ("HS&TC"), a cooperative consisting
of the three major sugarcane growers in Hawaii (including HC&S), pursuant to
which the growers sell their raw sugar to C&H at a price equal to the No. 14
Contract settlement price, less a discount and less costs of sugar vessel
discharge and stevedoring. This price becomes a cost to C&H and, after
deducting the marketing, operating, distribution, transportation and interest
costs of HS&TC, reflects the gross revenue to the Hawaii sugar growers,
including HC&S. The No. 14 price is established by, among other things, the
supply of and demand for all forms of domestically-produced sweeteners,
government policies regarding the U.S. sugar import quota, and potential
changes in international trade programs which might affect the U.S. sugar
program. There are no minimum supply guarantees on the part of HS&TC.
During 1998, the supply contract with HS&TC provided approximately 50% of the
raw sugar used by C&H.
On December 24, 1998, A&B completed the recapitalization and
partial sale of approximately 60 percent of the equity interest in C&H to an
investor group that included Citicorp Venture Capital, Ltd. The transaction
will permit A&B to focus better on its core businesses. Beginning in 1999, the
results of A&B's remaining equity investment in C&H will be reported in A&B's
financial statements as an investment in an affiliate.
At Kauai Coffee, coffee marketing efforts currently are being
directed toward developing a market for premium-priced, estate-grown Kauai
green coffee. Most of the 1998 coffee crop is being marketed on the U.S.
Mainland and in Asia as green (unroasted) coffee. In addition to the sale of
green coffee, Kauai Coffee produces and sells a roasted, packaged coffee
product in Hawaii under the "Kauai Coffee" trademark.
(3) COMPETITION AND SUGAR LEGISLATION
---------------------------------
Hawaii sugar growers produce more sugar per acre than other
major producing areas of the world, but that advantage is partially offset by
Hawaii's high labor costs and the distance to the U.S. Mainland market. C&H's
refined sugar is marketed primarily west of Chicago. This is also the largest
beet sugar growing and processing area and, as a result, the only market area
in the United States which produces more sugar than it consumes. Sugar from
sugar beets is the greatest source of competition for C&H.
The overall U.S. sweetener market continues to grow. In
1998, domestic consumption of caloric sweeteners comprised the following:
Refined sugar . . . . . . . 43%
High fructose corn syrup. . 40%
Other corn sweeteners . . . 16%
Other . . . . . . . . . . . 1%
----
TOTAL 100%
====
The use of non-caloric (artificial) sweeteners accounts for a relatively small
percentage of the domestic sweetener market. Although the use of high fructose
corn syrup and artificial sweeteners is expected to continue to grow, such in-
creased use is not expected to affect sugar markets significantly in the near
future.
Worldwide, most sugar is consumed in the country of origin.
Only about a quarter of world sugar is involved in international trade. A much
smaller amount is traded at the world sugar market price (the other sugar
involved in international trade is traded at negotiated prices under bilateral
trade agreements). Due to protective legislation, raw cane sugar prices in the
U.S. generally are substantially higher than the world price, and the amount of
foreign sugar allowed into the U.S. under import quotas is regulated by the
U.S. government. Such foreign sugar sells at U.S. domestic prices. As a
result, the world sugar price does not have material relevance to U.S. sugar
producers and refiners.
The U.S. Congress historically has sought, through legisla-
tion, to assure a reliable domestic supply of sugar at stable and reasonable
prices. Congress's most recent renewal of protective legislation for domestic
sugar, the Federal Agriculture Improvement and Reform Act (the "1996 Act"),
provides a sugar loan program for the 1996 through 2002 crops, with a loan rate
(support price) of 18 cents per pound for raw sugar. When the import quota is
1.5 million tons or less, the loans are recourse, meaning the producer is
liable for any losses the government incurs in remarketing any sugar forfeited
by the producer. When the import quota is greater than 1.5 million tons, the
loans are non-recourse, but in the event of forfeiture the producer must pay a
one-cent-per-pound penalty for the sugar forfeited to the government. The 1996
Act also eliminated marketing allotments, thereby removing the means of
limiting domestic production. The 1.25-million-ton minimum import quota set
under the General Agreement on Tariff and Trade ("GATT") is retained in the
1996 Act.
The loan rate represents the value of sugar given as
collateral for government price-support loans. The government is required to
administer the sugar program at no net cost, and this is accomplished by
adjusting fees and quotas for imported sugar to maintain the domestic price
at a level that discourages producers from defaulting on loans. The target
price established by the government is known as the market stabilization price
and is based on the loan rate plus transportation costs, interest and an
incentive factor. The market stabilization price was 21.8 cents per pound in
1988-89 and 21.9 cents per pound in 1990-91. No market stabilization price
has been announced since 1990-91. The actual U.S. domestic raw sugar price
(measured by the closing price of the quoted spot contract) averaged 22.07
cents per pound in 1998, compared with 21.94 cents per pound in 1997. A
chronological chart of the average U.S. domestic raw sugar prices, based on
the average daily New York Contract #14 price for domestic raw sugar, is shown
below:
[The printed document includes a graph of the prices; the data points for this
graph are shown below.]
U.S. Raw Sugar Prices
(New York Contract #14)
(Average cents per pound)
1996 1997 1998
---- ---- ----
January 22.39 21.88 22.11
February 22.58 21.87 21.79
March 22.57 21.81 21.74
April 22.59 21.73 22.20
May 22.59 21.70 22.28
June 22.49 21.63 22.30
July 21.80 22.04 22.32
August 22.35 22.26 22.30
September 22.38 22.30 22.25
October 22.36 22.25 22.15
November 22.12 21.90 22.03
December 22.10 21.89 21.97
Liberalized international trade agreements, such as the GATT,
include provisions relating to agriculture, but these agreements will not
affect the U.S. sugar or sweetener industries materially. A "side" agreement
that modified the North American Free Trade Agreement ("NAFTA") alleviated some
of the cane refiners' and sugar producers' concerns over NAFTA provisions which
could have allowed Mexico to export large quantities of sugar to the U.S.
starting in three years. Under the side agreement, if Mexico is projected to
be a net surplus producer of sugar, i.e., its production of sugar is expected
to exceed its consumption of both sugar and high fructose corn syrup, then it
is limited to 25,000 tons of sugar exports, in any form, to the U.S. This
export ceiling increases to 250,000 tons of sugar in the year 2000, and is
eliminated in the year 2007.
(4) PROPERTIES AND WATER
--------------------
C&H's refining operations are located at Crockett,
California. The Crockett refinery is one of the largest in the world, and is
the only cane sugar refinery on the U.S. West Coast. It is ideally located
next to a deep-water port, a major rail line and an interstate highway. The
refinery and administrative offices occupy a complex of buildings that contains
approximately 1,310,000 square feet and is located on approximately 55 acres.
C&H leases approximately 42 acres from the California State Lands Commission
under long-term ground leases, and owns the remaining area. The Lease
Agreement with the State of California covering the main refinery and wharf
facilities expires in 2022, and the Lease Agreement covering the area where the
secondary wastewater treatment facility is located expires in 2024.
The HC&S sugar plantation, the largest in Hawaii, consists of
approximately 43,300 acres of land, including 2,000 acres leased from the State
of Hawaii and 1,300 acres under lease from private parties. Approximately
36,900 acres are under cultivation, and the balance either is used for
contributory purposes, such as roads and plant sites, or is not suitable for
cultivation.
McBryde owns approximately 9,500 acres of land on Kauai, of
which approximately 2,400 acres are used for watershed and other conservation
uses, approximately 3,900 acres are used by Kauai Coffee, and the remaining
acreage is leased to various agriculture enterprises for cultivation of a
variety of crops and for pasturage.
Large quantities of water are necessary to grow sugar cane
and coffee. Because of the importance of water, access to water, reliable
sources of supply and efficient irrigation systems are crucial for the
successful growing of sugar cane and coffee. A&B's plantations use a "drip"
irrigation system that distributes water to the roots through small holes in
plastic tubes. Except for 55 acres expected to be converted to drip irriga-
tion by June 1999, all of the cultivated cane land owned by HC&S, a total of
34,378 acres, currently is drip irrigated. All of Kauai Coffee's fields are
drip irrigated.
ABHI owns 16,000 acres of watershed lands on Maui which
supply a portion of the irrigation water used by HC&S. ABHI also held four
water licenses to 38,000 acres owned by the State of Hawaii, which over the
years supplied approximately one-third of the irrigation water used by HC&S.
The last of these water license agreements expired in 1986, and all four
agreements have been extended as revocable permits that are renewable
annually. The State Board of Land and Natural Resources has indicated its
intention to replace these four permits with long-term licenses. The issuance
of such licenses currently is pending a hearing before the Board.
D. EMPLOYEES AND LABOR RELATIONS
-----------------------------
As of December 31, 1998, A&B and its subsidiaries had approximately
2,331 regular full-time employees (this figure does not include C&H's regular
full-time employees, who numbered 547 as of December 24, 1998, when a majority
of the equity interest in C&H was sold). About 1,009 regular full-time
employees were engaged in the growing of sugar cane and coffee and the
production of raw sugar and green coffee, 1,096 were engaged in ocean trans-
portation, 37 were engaged in property development and management, and the
balance was in administration and miscellaneous operations. Approximately 55%
were covered by collective bargaining agreements with unions.
As of December 31, 1998, Matson and its subsidiaries had approxi-
mately 1,096 regular full-time employees, 289 seagoing employees and 339 casual
employees. Approximately 37% of the regular full-time employees, all of the
seagoing employees and all of the casual employees were covered by collective
bargaining agreements. The casual employees are U.S. Pacific Coast longshore
workers who are employed through hiring halls and are not full-time employees
of either Matson or Matson Terminals.
Bargaining unit employees of Matson and Matson Terminals, other
than seagoing employees, are represented by 10 different unions, and Matson and
Matson Terminals are parties to 95 separate collective bargaining agreements.
Matson's seagoing employees are represented by six unions. Matson and Matson
Terminals are members of the Pacific Maritime Association ("PMA"), and Matson
Terminals also is a member of the Hawaii Stevedoring Industry Committee and the
Hawaii Employers Council, through which organizations various collective
bargaining agreements are negotiated. Matson also is a member of the Maritime
Service Committee ("MSC"), which engages in collective bargaining with three
unions representing licensed deck, engineer, and radio officers for Matson
vessels.
Historically, collective bargaining with the longshore and seagoing
unions has been complex and difficult. However, Matson and Matson Terminals
consider their respective relations with the International Longshore and
Warehouse Union ("ILWU"), other unions, and their non-union employees generally
to be satisfactory.
During 1998, collective bargaining agreements with the American
Radio Association, the United Brotherhood of Carpenters and Joiners of America
in Oakland, and the ILWU Office Clerical union in Los Angeles were renewed for
2-year, 3-year, and 3-year terms, respectively. Collective bargaining
agreements with the ILWU on the U.S. Pacific Coast, ILWU longshore workers in
Hawaii, ILWU clerical bargaining units in Honolulu and Oakland, and the three
unions representing unlicensed crew members are expected to be renewed in 1999
without service interruption.
In January 1997, the Acting Regional Director of the National Labor
Relations Board ("NLRB"), in response to the ILWU's petition requesting that it
be certified as the bargaining agent for employees who plan and supervise the
loading of ships at Seattle, ruled that these Seattle employees are supervisors
who are not subject to the National Labor Relations Act. The union's appeal of
that ruling to the NLRB in Washington, D.C. is pending.
Matson contributed during 1998 to multi-employer pension plans for
vessel crews. If Matson were to withdraw from or significantly reduce its
obligation to contribute to one of the plans, Matson would review and evaluate
data, actuarial assumptions, calculations and other factors used in determining
its withdrawal liability, if any, and, in the event of material disagreement
with such determination, would pursue the various means available to it under
federal law for the adjustment or removal of its withdrawal liability. Matson
Terminals participates in a multi-employer pension plan for its Hawaii long-
shore employees. For a discussion of withdrawal liabilities under the Hawaii
longshore and seagoing plans, see Note 6 to A&B's financial statements on
pages 34 and 35 of the 1998 Annual Report, which Note is incorporated herein by
reference.
Matson pays, through Matson Terminals on the basis of cargo tons
carried, and Matson Terminals contributes as a direct employer, to a
multi-employer pension plan for Pacific Coast longshore workers. Under special
withdrawal liability rules in the plan, Matson Terminals could cease United
States Pacific Coast cargo handling operations permanently and stop making
contributions to the plan, without any withdrawal liability.
Bargaining unit employees of HC&S are covered by two collective
bargaining agreements with the ILWU. These agreements have been renegotiated
and expire January 31, 2000. The collective bargaining agreements covering the
three ILWU bargaining units at Kahului Trucking & Storage, Inc. have been
renegotiated, with two expiring June 30, 1999 and the third expiring March 31,
2000. The two collective bargaining agreements with Kauai Commercial Company,
Incorporated employees represented by the ILWU were renegotiated in 1998 and
will expire April 30, 2001. The collective bargaining agreement with the ILWU
for the production unit employees of Kauai Coffee has been renegotiated and
will expire on December 31, 1999.
The bargaining unit employees of C&H at Crockett, California are
represented by the Sugar Workers Union and the ILWU. Contracts covering these
employees have been renegotiated and expire May 31, 2003.
E. ENERGY
------
Matson and Matson Terminals purchase residual fuel oil, lubricants,
gasoline and diesel fuel for their operations. Residual fuel oil is by far
Matson's largest energy-related expense. In 1998, Matson vessels consumed
approximately 2.0 million barrels of residual fuel oil, compared with
2.8 million barrels in 1997.
Residual fuel oil prices paid by Matson started 1998 at $101.50 per
metric ton and ended the year at $68.88 per metric ton. A high of $101.50 per
metric ton occurred in January, and a low of $55.00 per metric ton occurred in
March. Sufficient fuel for Matson's requirements is expected to be available
in 1999.
As has been the practice with sugar plantations throughout Hawaii,
HC&S uses bagasse, the residual fiber of the sugarcane plant, as a fuel to
generate steam for the production of most of the electrical power for sugar
milling and irrigation pumping operations. In addition to bagasse, supple-
mental fuel is required to produce power, principally for pumping irrigation
water during the factory shutdown period when bagasse is not being produced.
No. 6 (heavy) oil and coal are the primary supplemental fuels used by HC&S.
Since 1992, when suppliers of oil to HC&S discontinued regular heavy oil
shipments as a result of unlimited liability concerns arising from federal and
state environmental laws, heavy oil has been provided to HC&S on a space-
available basis. In 1998, HC&S produced 203,755 MWH of electric power and sold
72,589 MWH, compared with 228,279 MWH produced and 85,680 MWH sold in 1997.
The reduction in power production was due to the failure of a turbogenerator in
1998. HC&S's oil use decreased to 155,966 barrels in 1998 from the 215,389
barrels used in 1997. Coal use for power generation also decreased, from
50,946 short tons in 1997 to 43,614 short tons in 1998. The decreased use of
oil and coal was due primarily to an improvement in the quality (in terms of
fuel value) of the bagasse and a decrease in the steam energy requirements for
raw sugar production.
In 1998, McBryde produced 34,400 MWH of hydroelectric power,
compared with 34,676 MWH of hydroelectric power produced in 1997. Power sales
in 1998 amounted to 21,975 MWH, compared with 23,712 MWH sold in 1997.
C&H relies primarily on steam to power its Crockett refinery.
Natural gas and electricity also are used, to a lesser extent, for refinery
operations. C&H obtains its steam from a 240 MW cogeneration plant, located
adjacent to its refinery, that was placed into operation by a third party in
May 1996. Pursuant to an agreement between C&H and the third party that
expires in 2026, C&H purchases the steam at prices that reflect a discount to
the prevailing market price for natural gas, thereby reducing C&H's total
energy costs. In 1998, C&H purchased 24,833,949 therms of steam from the
cogeneration plant, compared with 23,654,519 therms of steam in 1997.
ITEM 3. LEGAL PROCEEDINGS
- --------------------------
See "Business and Properties - Ocean Transportation - Rate Regulation"
above for a discussion of rate and other regulatory matters in which Matson is
routinely involved.
In February 1992, Pan Ocean Shipping Co., Ltd. ("Pan Ocean") served on
Matson an amended complaint alleging that a Matson vessel negligently dis-
charged contaminated ballast water into Los Angeles harbor on January 9, 1991.
In that amended complaint, Pan Ocean sought contribution and indemnification
for the in-harbor clean-up charges it had incurred as the result of a fuel oil
discharge into Los Angeles harbor on January 8, 1991 from a vessel which it
owned and operated. In January 1999, the parties settled the matter for an
amount covered by insurance.
On September 14, 1998, Matson was served with a complaint filed with the
Surface Transportation Board, alleging that Sea-Land Services, Inc., American
President Lines, Ltd. and Matson charged unreasonable rates in the Guam trade
from January 1991 to the present. Matson did not enter the trade until
February of 1996. Matson has filed an answer to the complaint denying that its
rates have been unreasonable, and it intends to defend vigorously against the
charges in the complaint.
A&B and its subsidiaries are parties to, or may be contingently liable in
connection with, other legal actions arising in the normal conduct of their
businesses, the outcomes of which, in the opinion of management after consulta-
tion with counsel, would not have a material adverse effect on A&B's financial
position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
For the information about executive officers of A&B required to be
included in this Part I, see paragraph B of "Directors and Executive Officers
of the Registrant" in Part III below, which is incorporated into Part I by
reference.
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- ------------------------------------------------------------------------------
This information is contained in the sections captioned "Common Stock"
and "Dividends" on the inside back cover of the 1998 Annual Report, which
sections are incorporated herein by reference.
At February 12, 1999, there were 5,088 record holders of A&B common
stock. In addition, Cede & Co., which appears as a single record holder,
represents the holdings of thousands of beneficial owners of A&B common stock.
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
Information for the years 1988 through 1998 is contained in the
comparative table captioned "Eleven-Year Summary of Selected Financial Data" on
pages 20 and 21 of the 1998 Annual Report, which information is incorporated
herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
A&B's financial statements, including the results of operations discussed
herein, are based on the historical-cost method of accounting, in accordance
with generally accepted accounting principles. If estimated current costs of
property and inventory were applied to reflect the effects of inflation on
A&B's businesses, total assets would be higher and net income lower than shown
by the historical-cost financial statements. Additional information regarding
the fair values of A&B's assets and liabilities is included in Notes 1, 2, and
5 on pages 31 through 34 of the 1998 Annual Report, which Notes are incorpora-
ted herein by reference.
Additional information applicable to this Item 7 is contained in the
section captioned "Management's Discussion and Analysis" on pages 22 through 25
of the 1998 Annual Report, which section is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- --------------------------------------------------------------------
A&B, in the normal course of doing business, is exposed to the risks
associated with fluctuations in the market value of certain financial
instruments. A&B maintains a portfolio of marketable equity securities
available for sale, a preferred stock investment in an affiliated company, and
an investment in mortgage-backed securities. Details regarding these financial
instruments are described in Notes 2 and 5 on pages 32 through 34 of the 1998
Annual Report, which Notes are incorporated herein by reference. A&B believes
that, as of December 31, 1998, its exposure to market risk fluctuations for
these financial instruments is not material.
A&B also is exposed to changes in U.S. interest rates, primarily as a
result of its borrowing and investing activities used to maintain liquidity and
to fund business operations. In order to manage its exposure to changes in
interest rates, A&B utilizes a balanced mix of debt maturities, along with both
fixed-rate and variable-rate debt. A&B does not hedge its interest rate
exposure. The nature and amount of A&B's long-term and short-term debt can be
expected to fluctuate as a result of future business requirements, market
conditions and other factors. The following table summarizes A&B's debt
obligations at December 31, 1998, presenting principal cash flows and related
interest rates by expected fiscal year of maturity. Variable interest rates
represent the weighted-average rates of the portfolio at December 31, 1998.
A&B estimates that the carrying value of its debt is not materially different
from its fair value. The information presented below should be read in
conjunction with Note 7 on page 37 of the 1998 Annual Report, which Note is
incorporated herein by reference.
Expected Fiscal Year of Maturity
--------------------------------
1999 2000 2001 2002 2003 Thereafter Total
---- ---- ---- ---- ---- ---------- -----
(dollars in thousands)
--------------------
Fixed rate $30,533 $17,500 $15,000 $7,500 $7,500 $45,000 $123,033
Average interest 7.55% 7.32% 7.26% 7.23% 7.24% 7.27%
rate
Variable rate $57,000 -- -- -- -- $163,266 $220,266
Average interest 5.5% -- -- -- -- 5.5%
rate
A&B's sugar plantation, HC&S, has a contract to sell its raw sugar
production to HS&TC until 2003. Under that contract, the price paid will
fluctuate with the #14 Contract settlement price for domestic raw sugar, less a
fixed discount rate. A&B is not exposed to foreign currency exchange rate
risk.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
This information is contained in the financial statements and
accompanying notes on pages 26 through 41 of the 1998 Annual Report, the
Independent Auditors' Report on page 18 of the 1998 Annual Report, the Industry
Segment Information for the years ended December 31, 1998, 1997 and 1996
appearing on page 19 of the 1998 Annual Report and incorporated into the
financial statements by Note 12 thereto, and the section captioned "Quarterly
Results (Unaudited)" on page 42 of the 1998 Annual Report, all of which are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
Not applicable.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
A. DIRECTORS
---------
For information about the directors of A&B, see the section
captioned "Election of Directors" on pages 2 through 4 of A&B's proxy
statement dated March 8, 1999 ("A&B's 1999 Proxy Statement"), which section is
incorporated herein by reference.
B. EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------
The name of each executive officer of A&B (in alphabetical order),
age (in parentheses) as of March 31, 1999, and present and prior positions with
A&B and business experience for the past five years are given below.
Generally, the term of office of executive officers is at the
pleasure of the Board of Directors. For a discussion of compliance with
Section 16(a) of the Securities Exchange Act of 1934 by A&B's directors and
executive officers, see the subsection captioned "Section 16(a) Beneficial
Ownership Reporting Compliance" on page 8 of A&B's 1999 Proxy Statement, which
subsection is incorporated herein by reference. For a discussion of severance
agreements between A&B and certain of A&B's executive officers, see the
subsection captioned "Severance Agreements" on pages 14 and 15 of A&B's 1999
Proxy Statement, which subsection is incorporated herein by reference.
Meredith J. Ching (42)
- ----------------------
Vice President (Government & Community Relations) of A&B, 10/92-present;
Vice President of ABHI (Government & Community Relations), 10/92-present; first
joined A&B or a subsidiary in 1982.
W. Allen Doane (51)
- -------------------
President and Chief Executive Officer of A&B, and Director of A&B and
Matson, 10/98-present; Vice Chairman of Matson, 12/98-present; Director of
ABHI, 4/97-present; Chief Executive Officer of ABHI, 1/97-present; President of
ABHI, 4/95-present; Chief Operating Officer of ABHI, 4/91-12/96; Executive Vice
President of ABHI, 4/91-4/95; first joined A&B or a subsidiary in 1991.
Raymond J. Donohue (62)
- -----------------------
Senior Vice President of Matson, 4/86-present; Chief Financial Officer of
Matson, 2/81-present; first joined Matson in 1980.
John B. Kelley (53)
- -------------------
Vice President (Investor Relations) of A&B, 1/95-present; Vice President
(Corporate Planning & Development, Investor Relations) of A&B, 10/92-12/94;
Vice President (Community & Investor Relations) of A&B, 2/91-10/92; Vice
President of ABHI, 9/89-present; first joined A&B or a subsidiary in 1979.
Miles B. King (51)
- ------------------
Vice President and Chief Administrative Officer of A&B, 4/93-present;
Senior Vice President (Industrial Relations) of ABHI, 4/93-1/99; Senior Vice
President (Human Resources) of Matson, 10/92-1/99; first joined A&B or a
subsidiary in 1992.
Stanley M. Kuriyama (45)
- ------------------------
Vice President of A&B, 2/99-present; Executive Vice President of ABHI,
2/99-present; Vice President of ABHI, 1/92-1/99; first joined A&B or a
subsidiary in 1992.
Michael J. Marks (60)
- ---------------------
Vice President and General Counsel of A&B, 9/80-present; Secretary of
A&B, 8/84-1/99; Senior Vice President and General Counsel of ABHI, 4/89-
present; first joined A&B or a subsidiary in 1975.
C. Bradley Mulholland (57)
- --------------------------
Executive Vice President of A&B, 8/98-present; President of Matson,
5/90-present; Chief Executive Officer of Matson, 4/92-present; Chief Operating
Officer of Matson, 7/89-4/92; Director of A&B, 4/91-present; Director of
Matson, 7/89-present; Director of ABHI, 4/91-present; first joined Matson in
1965.
Alyson J. Nakamura (33)
- -----------------------
Secretary of A&B, 2/99-present; Assistant Secretary of A&B, 6/94-1/98;
Secretary of ABHI, 6/94-present; Attorney, Cades Schutte Fleming & Wright,
10/91-5/94.
Robert J. Pfeiffer (79)
- -----------------------
Chairman of the Boards of A&B, ABHI and Matson, 7/98-present; President
and Chief Executive Officer of A&B, 7/98-10/98; Chairman Emeritus of the Boards
of A&B, ABHI, and Matson, 4/95-7/98; Chairman of the Boards of A&B (from 1980
until 1995), ABHI (from 1989 until 1995), and Matson (from 1979 until 1995);
previously held other executive positions with A&B and Matson; first joined A&B
or a subsidiary in 1956.
Glenn R. Rogers (55)
- --------------------
Executive Vice President of A&B, 7/97-present; Vice President of A&B,
4/93-7/97; Chief Financial Officer and Treasurer of A&B, 4/93-present; Senior
Vice President, Chief Financial Officer and Treasurer of ABHI, 1/96-present;
first joined A&B or a subsidiary in 1975.
Thomas A. Wellman (40)
- ----------------------
Controller of A&B, 1/96-present; Assistant Controller of A&B, 4/93-1/96;
Vice President of ABHI, 1/96-present; Controller of ABHI, 11/91-present; first
joined A&B or a subsidiary in 1989.
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
See the section captioned "Executive Compensation" on pages 8 through 15
of A&B's 1999 Proxy Statement, which section is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
See the section titled "Security Ownership of Certain Shareholders" and
the subsection titled "Security Ownership of Directors and Executive Officers"
on pages 6 through 8 of A&B's 1999 Proxy Statement, which section and sub-
section are incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
See the section titled "Compensation Committee Interlocks and Insider
Participation" on pages 17 and 18 of A&B's 1999 Proxy Statement, which section
is incorporated herein by reference.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------
A. FINANCIAL STATEMENTS
--------------------
Financial Statements of Alexander & Baldwin, Inc. and Subsidiaries
and Independent Auditors' Report (incorporated by reference to the pages of the
1998 Annual Report shown in parentheses below):
Balance Sheets, December 31, 1998 and 1997
(pages 28 and 29).
Statements of Income for the years ended
December 31, 1998, 1997 and 1996 (page 26).
Statements of Shareholders' Equity for the
years ended December 31, 1998, 1997 and
1996 (page 30).
Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 (page 27).
Notes to Financial Statements (pages 31 through
41 and page 19 to the extent incorporated by
Note 12).
Independent Auditors' Report (page 18).
B. FINANCIAL STATEMENT SCHEDULES
-----------------------------
Financial Schedules of Alexander & Baldwin, Inc. and Subsidiaries
as required by Rule 5-04 of Regulation S-X (filed herewith):
I - Condensed Financial Information of
Registrant - Balance Sheets, December 31,
1998 and 1997; Statements of Income and
Cash Flows for the years ended December 31,
1998, 1997 and 1996; Notes to Condensed
Financial Statements.
NOTE: All other schedules are omitted because of the absence of the conditions
under which they are required or because the information called for is included
in the financial statements or notes thereto.
C. EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K
-----------------------------------------------
Exhibits not filed herewith are incorporated by reference to the
exhibit number and previous filing shown in parentheses. All previous exhibits
were filed with the Securities and Exchange Commission in Washington, D.C.
Exhibits filed pursuant to the Securities Exchange Act of 1934 were filed under
file number 0-565. Shareholders may obtain copies of exhibits for a copying
and handling charge of $0.15 a page by writing to Alyson J. Nakamura,
Secretary, Alexander & Baldwin, Inc., P. O. Box 3440, Honolulu, Hawaii 96801.
3. Articles of incorporation and bylaws.
3.a. Restated Articles of Association of Alexander & Baldwin, Inc.,
as restated effective May 5, 1986, together with Amendments dated April
28, 1988 and April 26, 1990 (Exhibits 3.a.(iii) and (iv) to A&B's Form
10-Q for the quarter ended March 31, 1990).
3.b. Revised Bylaws of Alexander & Baldwin, Inc. (as Amended Effec-
tive June 25, 1998) (Exhibit 3.c.(i) to A&B's Form 10-Q for the quarter
ended June 30, 1998).
4. Instruments defining rights of security holders, including indentures.
4.a. Equity.
4.a. Rights Agreement, dated as of June 25, 1998 between Alexander &
Baldwin, Inc. and ChaseMellon Shareholder Services, L.L.C. and Press
Release of Alexander & Baldwin, Inc. (Exhibits 4 and 99 to A&B's Form 8-K
dated June 25, 1998).
4.b. Debt.
4.b. (i) Second Amended and Restated Revolving Credit and Term Loan
Agreement, effective as of December 31, 1996, among Alexander & Baldwin,
Inc. and A&B-Hawaii, Inc. and First Hawaiian Bank, Bank of America
National Trust & Savings Association, Credit Lyonnais Los Angeles Branch,
Bank of Hawaii and The Union Bank of California, N.A. (Exhibit 4.b to
A&B's Form 10-K for the year ended December 31, 1996).
(ii) First Amendment to Second Amended and Restated Revolving
Credit and Term Loan Agreement, effective as of December 10, 1997, among
Alexander & Baldwin, Inc. and A&B-Hawaii, Inc. and First Hawaiian Bank,
Bank of America National Trust & Savings Association, Credit Lyonnais Los
Angeles Branch, Bank of Hawaii, The Union Bank of California, N.A. and
The Bank of New York (Exhibit 4.b(ii) to A&B's Form 10-K for the year
ended December 31, 1997).
(iii) Second Amendment to Second Amended and Restated Revolving
Credit and Term Loan Agreement, effective as of November 30, 1998, among
Alexander & Baldwin, Inc. and A&B-Hawaii, Inc. and First Hawaiian Bank,
Bank of America National Trust & Savings Association, Credit Lyonnais Los
Angeles Branch, Bank of Hawaii, The Union Bank of California, N.A. and The
Bank of New York.
10. Material contracts.
10.a. (i) Issuing and Paying Agent Agreement between Matson Naviga-
tion Company, Inc. and Security Pacific National Trust (New York), with
respect to Matson Navigation Company, Inc.'s $150 million commercial
paper program dated September 18, 1992 (Exhibit 10.b.1.(xxviii) to A&B's
Form 10-Q for the quarter ended September 30, 1992).
(ii) Note Agreement among Alexander & Baldwin, Inc., A&B-Hawaii,
Inc. and The Prudential Insurance Company of America, effective as of
December 20, 1990 (Exhibit 10.b.(ix) to A&B's Form 10-K for the year ended
December 31, 1990).
(iii) Note Agreement among Alexander & Baldwin, Inc., A&B-Hawaii,
Inc. and The Prudential Insurance Company of America, dated as of June 4,
1993 (Exhibit 10.a.(xiii) to A&B's Form 8-K dated June 4, 1993).
(iv) Amendment dated as of May 20, 1994 to the Note Agreements
among Alexander & Baldwin, Inc., A&B-Hawaii, Inc. and The Prudential
Insurance Company of America, dated as of December 20, 1990 and June 4,
1993 (Exhibit 10.a.(xviv) to A&B's Form 10-Q for the quarter ended
June 30, 1994).
(v) Amendment dated January 23, 1995 to the Note Agreement
among Alexander & Baldwin, Inc., A&B-Hawaii, Inc. and The Prudential
Insurance Company of America, dated as of December 20, 1990 (Exhibit
10.a.(xvi) to A&B's Form 10-K for the year ended December 31, 1994).
(vi) Amendment dated as of June 30, 1995 to the Note Agreements,
among Alexander & Baldwin, Inc., A&B-Hawaii, Inc. and The Prudential
Insurance Company of America, dated as of December 20, 1990 and June 4,
1993 (Exhibit 10.a.(xxvii) to A&B's Form 10-Q for the quarter ended
June 30, 1995).
(vii) Amendment dated as of November 29, 1995 to the Note
Agreements among Alexander & Baldwin, Inc., A&B-Hawaii, Inc. and The
Prudential Insurance Company of America, dated as of December 20, 1990 and
June 4, 1993 (Exhibit 10.a.(xvii) to A&B's Form 10-K for the year ended
December 31, 1995).
(viii) Revolving Credit Agreement between Alexander & Baldwin,
Inc., A&B-Hawaii, Inc., and First Hawaiian Bank, dated December 30, 1993
(Exhibit 10.a.(xx) to A&B's Form 10-Q for the quarter ended September 30,
1994).
(ix) Amendment dated August 31, 1994 to the Revolving Credit
Agreement between Alexander & Baldwin, Inc., A&B-Hawaii, Inc., and First
Hawaiian Bank dated December 30, 1993 (Exhibit 10.a.(xxi) to A&B's
Form 10-Q for the quarter ended September 30, 1994).
(x) Second Amendment dated March 29, 1995 to the Revolving
Credit Agreement between Alexander & Baldwin, Inc., A&B-Hawaii, Inc., and
First Hawaiian Bank, dated December 30, 1993 (Exhibit 10.a.(xxiii) to
A&B's Form 10-Q for the quarter ended March 31, 1995).
(xi) Third Amendment dated November 30, 1995 to the Revolving
Credit Agreement between Alexander & Baldwin, Inc., A&B-Hawaii, Inc., and
First Hawaiian Bank, dated December 30, 1993 (Exhibit 10.a.(xvii) to A&B's
Form 10-K for the year ended December 31, 1996).
(xii) Fourth Amendment dated November 25, 1996 to the Revolving
Credit Agreement between Alexander & Baldwin, Inc., A&B-Hawaii, Inc., and
First Hawaiian Bank, dated December 30, 1993 (Exhibit 10.a.(xviii) to
A&B's Form 10-K for the year ended December 31, 1996).
(xiii) Fifth Amendment dated November 28, 1997 to the Revolving
Credit Agreement between Alexander & Baldwin, Inc., A&B-Hawaii, Inc., and
First Hawaiian Bank, dated December 30, 1993 (Exhibit 10.a.(xix) to A&B's
Form 10-K for the year ended December 31, 1997).
(xiv) Sixth Amendment dated November 30, 1998 to the Revolving
Credit Agreement between Alexander & Baldwin, Inc., A&B-Hawaii, Inc., and
First Hawaiian Bank, dated December 10, 1993.
(xv) Note Agreement between Matson Leasing Company, Inc. and The
Prudential Insurance Company of America, dated as of June 28, 1991
(Exhibit 10.b.(x) to A&B's Form 10-Q for the quarter ended June 30, 1991).
(xvi) Amendment dated March 11, 1992 to the Note Agreement
between Matson Leasing Company, Inc. and The Prudential Insurance Company
of America, dated as of June 28, 1991 (Exhibit 10.a.(vii) to A&B's Form
10-K for the year ended December 31, 1992).
(xvii) Second Amendment dated as of August 31, 1993 to the Note
Agreement between Matson Leasing Company, Inc. and The Prudential
Insurance Company of America, dated as of June 28, 1991 (Exhibit
10.a.(viii) to A&B's Form 10-K for the year ended December 31, 1993).
(xviii) Note Agreement between Matson Leasing Company, Inc. and The
Prudential Insurance Company of America, dated as of March 11, 1992
(Exhibit 10.a.(x) to A&B's Form 10-Q for the quarter ended March 31,
1992).
(xix) First Amendment dated as of August 1, 1993 to the Note
Agreement between Matson Leasing Company, Inc. and The Prudential
Insurance Company of America, dated as of March 11, 1992 (Exhibit
10.a.(xi) to A&B's Form 10-K for the year ended December 31, 1993).
(xx)(a) Assignment and Assumption Agreement dated as of June 30,
1995, among Matson Leasing Company, Inc., Matson Navigation Company, Inc.
and The Prudential Insurance Company of America, with respect to the Note
Agreements between Matson Leasing Company, Inc. and The Prudential
Insurance Company of America dated as of June 28, 1991 and March 11, 1992
(Exhibit 10.a.(xxviii)(a) to A&B's Form 10-Q for the quarter ended June
30, 1995).
(xx)(b) Consent and Amendment Agreement dated as of June 30, 1995,
among Matson Leasing Company, Inc., Matson Navigation Company, Inc. and
The Prudential Insurance Company of America, with respect to the Note
Agreements between Matson Leasing Company, Inc. and The Prudential
Insurance Company of America dated as of June 28, 1991 and March 11, 1992
(Exhibit 10.a.(xxviii)(b) to A&B's Form 10-Q for the quarter ended June
30, 1995).
(xxi) Private Shelf Agreement between Alexander & Baldwin, Inc.,
A&B-Hawaii, Inc., and Prudential Insurance Company of America, dated as of
August 2, 1996 (Exhibit 10.a.(xxxiii) to A&B's Form 10-Q for the quarter
ended September 30, 1996).
(xxii) First Amendment, dated as of February 5, 1999, to the
Private Shelf Agreement between Alexander & Baldwin, Inc., A&B-Hawaii,
Inc., and Prudential Insurance Company of America, dated as of August 2,
1996.
(xxiii) Amended and Restated Asset Purchase Agreement, dated as of
December 24, 1998, by and among California and Hawaiian Sugar Company,
Inc., A&B-Hawaii, Inc., McBryde Sugar Company, Limited and Sugar
Acquisition Corporation (without exhibits or schedules) (Exhibit
10.a.1.(xxxvi) to A&B's Form 8-K dated December 24, 1998).
(xxiv) Amended and Restated Stock Sale Agree-
ment, dated as of December 24, 1998, by and between California and
Hawaiian Sugar Company, Inc. and Citicorp Venture Capital, Ltd. (without
exhibits) (Exhibit 10.a.1.(xxxvii) to A&B's Form 8-K dated December 24,
1998).
(xxv) Pro forma financial information relative to the trans-
actions (Exhibit 10.a.1.(xxxviii) to A&B's Form 8-K dated December 24,
1998).
*10.b.1. (i) Alexander & Baldwin, Inc. 1989 Stock Option/ Stock
Incentive Plan (Exhibit 10.c.1.(ix) to A&B's Form 10-K for the year ended
December 31, 1988).
(ii) Amendment No. 1 to the Alexander & Baldwin, Inc. 1989 Stock
Option/Stock Incentive Plan (Exhibit 10.b.1.(xxvi) to A&B's Form 10-Q for
the quarter ended June 30, 1992).
(iii) Amendment No. 2 to the Alexander & Baldwin, Inc. 1989 Stock
Option/Stock Incentive Plan, effective as of January 27, 1994
(Exhibit 10.b.1.(iv) to A&B's Form 10-Q for the quarter ended March 31,
1994).
(iv) Amendment No. 3 to the Alexander & Baldwin, Inc. 1989 Stock
Option/Stock Incentive Plan, effective as of October 27, 1994
(Exhibit 10.b.1.(ix) to A&B's Form 10-K for the year ended December 31,
1994).
(v) Alexander & Baldwin, Inc. 1989 Non-Employee Director Stock
Option Plan (Exhibit 10.c.1.(x) to A&B's Form 10-K for the year ended
December 31, 1988).
(vi) Amendment No. 1 to the Alexander & Baldwin, Inc. 1989
Non-Employee Director Stock Option Plan (Exhibit 10.b.1.(xxiv) to A&B's
Form 10-K for the year ended December 31, 1991).
(vii) Amendment No. 2 to the Alexander & Baldwin, Inc. 1989
Non-Employee Director Stock Option Plan (Exhibit 10.b.1.(xxvii) to A&B's
Form 10-Q for the quarter ended June 30, 1992).
(viii) Alexander & Baldwin, Inc. 1998 Stock Option/
Stock Incentive Plan (Exhibit 10.b.1.(xxxii) to A&B's Form 10-Q for the
quarter ended March 31, 1998).
(ix) Alexander & Baldwin, Inc. 1998 Non-Employee Director Stock
Option Plan (Exhibit 10.b.1.(xxxiii) to A&B's Form 10-Q for the quarter
ended March 31, 1998).
_______________
* All exhibits listed under 10.b.1. are management contracts or compensatory
plans or arrangements.
(x) Alexander & Baldwin, Inc. Non-Employee Director Stock
Retainer Plan, dated June 25, 1998 (Exhibit 10.b.1.(xxxiv) to A&B's Form
10-Q for the quarter ended June 30, 1998).
(xi) Second Amended and Restated Employment Agreement between
Alexander & Baldwin, Inc. and R. J. Pfeiffer, effective as of October 25,
1990 (Ex-hibit 10.c.1.(xiii) to A&B's Form 10-K for the year ended
December 31, 1990).
(xii) Employment Agreement between Alexander & Baldwin, Inc. and
Robert J. Pfeiffer, dated as of July 27, 1998 (Exhibit 10.b.1.(xli) to
A&B's Form 10-Q for the quarter ended September 30, 1998).
(xiii) Amendment, dated as of October 22, 1998, to Employment
Agreement between Alexander & Baldwin, Inc. and Robert J. Pfeiffer, dated
as of July 27, 1998.
(xiv) A&B Deferred Compensation Plan for Outside Directors
(Exhibit 10.c.1.(xviii) to A&B's Form 10-K for the year ended December 31,
1985).
(xv) Amendment No. 1 to A&B Deferred Compensation Plan for
Outside Directors, effective October 27, 1988 (Exhibit 10.c.1.(xxix) to
A&B's Form 10-Q for the quarter ended September 30, 1988).
(xvi) A&B Life Insurance Plan for Outside Directors
(Exhibit 10.c.1.(xix) to A&B's Form 10-K for the year ended December 31,
1985).
(xvii) A&B Excess Benefits Plan, Amended and Restated effective
February 1, 1995 (Exhibit 10.b.1.(xx) to A&B's Form 10-K for the year
ended December 31, 1994).
(xviii) Amendment No. 1 to the A&B Excess Benefits Plan, dated
June 26, 1997 (Exhibit 10.b.1.(xxxi) to A&B's Form 10-Q for the quarter
ended June 30, 1997).
(xix) Amendment No. 2 to the A&B Excess Benefits Plan, dated
December 10, 1997 (Exhibit 10.b.1.(xx) to A&B's Form 10-K for the year
ended December 31, 1997).
(xx) Amendment No. 3 to the A&B Excess Benefits Plan, dated
April 23, 1998 (Exhibit 10.b.1.(xxxv) to A&B's Form 10-Q for the quarter
ended June 30, 1998).
(xxi) Amendment No. 4 to the A&B Excess Benefits plan, dated
June 25, 1998 (Exhibit 10.b.1.(xxxvi) to A&B's Form 10-Q for the quarter
ended June 30, 1998).
(xxii) Amendment No. 5 to the A&B Excess Benefits Plan, dated
December 9, 1998.
(xxiii) Restatement of the A&B Executive Survivor/Retirement
Benefit Plan, effective February 1, 1995 (Exhibit 10.b.1.(xxii) to A&B's
Form 10-K for the year ended December 31, 1994).
(xxiv) Restatement of the A&B 1985 Supplemental Executive
Retirement Plan, effective February 1, 1995 (Exhibit 10.b.1.(xxiv) to
A&B's Form 10-K for the year ended December 31, 1994).
(xxv) Amendment No. 1 to the A&B 1985 Supplemental Executive
Retirement Plan, dated August 27, 1998 (Exhibit 10.b.1.(xliii) to A&B's
Form 10-Q for the quarter ended September 30, 1998).
(xxvi) Restatement of the A&B Retirement Plan for Outside
Directors, effective February 1, 1995 (Exhibit 10.b.1.(xxvi) to A&B's
Form 10-K for the year ended December 31, 1994).
(xxvii) Amendment No. 1 to the A&B Retirement Plan for Outside
Directors, dated August 27, 1998 (Exhibit 10.b.1.(xlii) to A&B's Form
10-Q for the quarter ended September 30, 1998).
(xxviii) Form of Severance Agreement entered into with certain
executive officers, as amended and restated effective August 22, 1991
(Exhibit 10.c.1.(xxiv) to A&B's Form 10-Q for the quarter ended
September 30, 1991).
(xxix) Alexander & Baldwin, Inc. One-Year Performance Improvement
Incentive Plan, as restated effective October 22, 1992
(Exhibit 10.b.1.(xxi) to A&B's Form 10-K for the year ended December 31,
1992).
(xxx) Alexander & Baldwin, Inc. Three-Year Performance Improve-
ment Incentive Plan, as restated effective October 22, 1992
(Exhibit 10.b.1.(xxii) to A&B's Form 10-K for the year ended December 31,
1992).
(xxxi) Alexander & Baldwin, Inc. Deferred Compensation Plan
effective August 25, 1994 (Exhibit 10.b.1.(xxv) to A&B's Form 10-Q for the
quarter ended September 30, 1994).
(xxxii) Amendment No. 1 to the Alexander & Baldwin, Inc. Deferred
Compensation Plan, effective July 1, 1997 (Exhibit 10.b.1.(xxxii) to A&B's
Form 10-Q for the quarter ended June 30, 1997).
(xxxiii) Amendment No. 2 to the Alexander & Baldwin, Inc. Deferred
Compensation Plan, dated June 25, 1998 (Exhibit 10.b.1.(xxxvii) to A&B's
Form 10-Q for the quarter ended June 30, 1998).
(xxxiv) Alexander & Baldwin, Inc. Restricted Stock Bonus Plan, as
restated effective April 28, 1988 (Exhibit 10.c.1.(xi) to A&B's Form 10-Q
for the quarter ended June 30, 1988).
(xxxv) Amendment No. 1 to the Alexander & Baldwin, Inc. Restricted
Stock Bonus Plan, effective December 11, 1997 (Exhibit 10.b.1.(ii) to
A&B's Form 10-K for the year ended December 31, 1997).
(xxxvi) Amendment No. 2 to the Alexander & Baldwin, Inc. Restricted
Stock Bonus Plan, dated June 25, 1998 (Exhibit 10.b.1.(xxxviii) to A&B's
Form 10-Q for the quarter ended June 30, 1998).
11. Statement re computation of per share earnings.
13. Annual report to security holders.
13. Alexander & Baldwin, Inc. 1998 Annual Report.
21. Subsidiaries.
21. Alexander & Baldwin, Inc. Subsidiaries as of February 28, 1999.
23. Consent of Deloitte & Touche LLP dated March 26, 1999 (included as last
page of A&B's Form 10-K for the year ended December 31, 1998).
27. Financial data schedule.
D. REPORTS ON FORM 8-K
-------------------
A report on Form 8-K, dated December 24, 1998, was filed on
January 8, 1999 to report, under Item 2 thereof, the consummation of a
recapitalization of California and Hawaiian Sugar Company, Inc. a wholly-owned
indirect subsidiary of A&B, in a transaction involving the participation of an
investor group that included Citicorp Venture Capital, Ltd.
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ALEXANDER & BALDWIN, INC.
(Registrant)
Date: March 26, 1999 By /s/ W. Allen Doane
---------------------------
W. Allen Doane, President
and Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ W. Allen Doane President and March 26, 1999
W. Allen Doane Chief Executive
Officer and
Director
/s/ Glenn R. Rogers Executive March 26, 1999
Glenn R. Rogers Vice President,
Chief Financial
Officer and
Treasurer
/s/ Thomas A. Wellman Controller March 26, 1999
Thomas A. Wellman
/s/ R. J. Pfeiffer Chairman of March 26, 1999
R. J. Pfeiffer the Board and
Director
/s/ Michael J. Chun Director March 26, 1999
Michael J. Chun
/s/ John C. Couch Director March 26, 1999
John C. Couch
/s/ Leo E. Denlea, Jr. Director March 26, 1999
Leo E. Denlea, Jr.
/s/ Walter A. Dods, Jr. Director March 26, 1999
Walter A. Dods, Jr.
/s/ Charles G. King Director March 26, 1999
Charles G. King
/s/ Carson R. McKissick Director March 26, 1999
Carson R. McKissick
/s/ C. Bradley Mulholland Director March 26, 1999
C. Bradley Mulholland
/s/ Lynn M. Sedway Director March 26, 1999
Lynn M. Sedway
/s/ Maryanna G. Shaw Director March 26, 1999
Maryanna G. Shaw
/s/ Charles M. Stockholm Director March 26, 1999
Charles M. Stockholm
INDEPENDENT AUDITORS' REPORT
Alexander & Baldwin, Inc.:
We have audited the financial statements of Alexander & Baldwin, Inc. and its
subsidiaries as of December 31, 1998 and 1997, and for each of the three years
in the period ended December 31, 1998, and have issued our report thereon dated
January 28, 1999; such financial statements and report are included in your
1998 Annual Report to Shareholders and are incorporated herein by reference.
Our audits also included the financial statement schedules of Alexander &
Baldwin, Inc. and its subsidiaries, listed in Item 14.B. These financial
statement schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits. In our
opinion, such financial statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
/s/ Deloitte & Touche LLP
January 28, 1999
ALEXANDER & BALDWIN, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ALEXANDER & BALDWIN, INC. (Parent Company)
CONDENSED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(In thousands)
1998 1997
---- ----
ASSETS
Current Assets:
Cash and cash equivalents $ 885 $ -
Income tax receivable - 2,480
Accounts and notes receivable, net 220 760
Prepaid expenses and other 1,262 1,090
--------- ---------
Total current assets 2,367 4,330
--------- ---------
Investments:
Subsidiaries consolidated, at equity 602,368 619,963
Other 115,144 101,624
--------- ---------
Total investments 717,512 721,587
--------- ---------
Property, at Cost 94,052 91,873
Less accumulated depreciation and amortization 11,536 10,629
--------- ---------
Property -- net 82,516 81,244
--------- ---------
Other Assets 549 701
-------- --------
Total $ 802,944 $ 807,862
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Bank overdraft $ - $ 936
Accounts payable 493 359
Other 4,730 4,123
--------- ---------
Total current liabilities 5,223 5,418
--------- ---------
Long-term Liabilities 7,649 6,355
--------- ---------
Due to Subsidiaries 35,486 22,306
--------- ---------
Deferred Income Taxes 59,944 54,195
--------- ---------
Commitments and Contingencies
Shareholders' Equity:
Capital stock 36,098 36,769
Additional capital 51,946 49,437
Unrealized holding gains on securities 63,329 55,144
Retained earnings 555,820 591,135
Cost of treasury stock (12,551) (12,897)
--------- ---------
Total shareholders' equity 694,642 719,588
--------- ---------
Total $ 802,944 $ 807,862
========= =========
See accompanying notes.
ALEXANDER & BALDWIN, INC. (Parent Company)
CONDENSED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(In thousands)
1998 1997 1996
---- ---- ----
Revenue:
Net revenue from goods and services $ 20,708 $ 17,784 $ 18,449
Interest, dividends and other 3,958 4,510 3,961
--------- --------- ---------
Total revenue 24,666 22,294 22,410
--------- --------- ---------
Costs and Expenses:
Cost of goods and services 11,390 10,013 4,331
Selling, general and administrative 9,303 7,055 7,331
Interest and other 774 872 1,019
Income taxes 462 239 3,008
--------- --------- ---------
Total costs and expenses 21,929 18,179 15,689
--------- --------- ---------
Income Before Equity in Net Income
of Subsidiaries Consolidated 2,737 4,115 6,721
Equity in Net Income of Subsidiaries
Consolidated 22,405 77,272 58,564
--------- --------- ---------
Net Income 25,142 81,387 65,285
Unrealized holding gains on securities
(Net of income taxes of $5,337 in
1998, $3,977 in 1997 and $3,961 in
1996) 8,185 6,939 8,375
--------- --------- ---------
Comprehensive Income $ 33,327 $ 88,326 $ 73,660
========= ========= =========
See accompanying notes.
ALEXANDER & BALDWIN, INC. (Parent Company)
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(In thousands)
1998 1997 1996
---- ---- ----
Cash Flows from Operations $ 9,664 $ 25,495 $ (5,892)
-------- -------- --------
Cash Flows from Investing Activities:
Capital expenditures (1,437) (4,002) (353)
Proceeds from sale of investments - - 10,182
Dividends received from subsidiaries 40,000 50,000 50,000
-------- -------- --------
Net cash provided by investing activities 38,563 45,998 59,829
-------- -------- --------
Cash Flows from Financing Activities:
Increase (decrease) in due to subsidiaries 13,180 (18,171) (13,328)
Payments of long-term debt - - (850)
Proceeds from issuances of capital stock 1,575 2,132 1,291
Repurchases of capital stock (20,838) (16,585) (1,250)
Dividends paid (40,323) (39,789) (39,860)
-------- -------- --------
Net cash used in financing activities (46,406) (72,413) (53,997)
-------- -------- --------
Cash and Cash Equivalents:
Net increase (decrease) for the year 1,821 (920) (60)
Balance, beginning of year (936) (16) 44
-------- -------- --------
Balance, end of year $ 885 $ (936) $ (16)
======== ======== ========
Other Cash Flow Information:
Interest paid, net of amounts capitalized $ 263 $ 197 $ 152
Income taxes paid, net of refunds 34,672 29,775 26,360
Other Non-cash Information:
Depreciation 2,396 1,019 2,604
See accompanying notes.
ALEXANDER & BALDWIN, INC. (Parent Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
- ---------------------------------------
(a) ORGANIZATION AND OPERATIONS
Alexander & Baldwin, Inc. is the parent company of A&B-Hawaii, Inc. (ABHI) and
Matson Navigation Company, Inc. (Matson). ABHI has principal business
operations of Food Products and Property Development and Management. Matson's
principal business operation is Ocean Transportation.
On December 24, 1998, ABHI sold a majority of its equity in a subsidiary
(California and Hawaiian Sugar Company, Inc. "C&H") to an investor group. ABHI
received approximately $45,000,000 in cash, after the repayment of certain C&H
indebtedness, $25,000,000 in senior preferred stock, $9,600,000 in junior
preferred stock, and retained an approximately 36 percent common stock interest
in the recapitalized C&H.
(b) INVESTMENTS
Subsidiaries consolidated, at equity consisted of ABHI and Matson at December
31, 1998 and 1997.
Investments - other consisted principally of marketable equity securities at
December 31, 1998 and 1997.
(c) LONG-TERM LIABILITIES
At December 31, 1998 and 1997, long-term liabilities of $7,649,000 and
$6,355,000, respectively, consisted principally of deferred compensation and
executive benefit plans.
(d) COMMITMENTS AND CONTINGENCIES
The Company and certain subsidiaries are parties to various legal actions and
are contingently liable in connection with claims and contracts arising in the
normal course of business, the outcome of which, in the opinion of management
after consultation with legal counsel, will not have a material adverse effect
on the Company's financial position or results of operations.
At December 31, 1998, the Company did not have any significant firm
commitments.