Alexander & Baldwin, Inc. (NYSE:AXB) today reported that net
income for the third quarter of 2008 was $36.8 million, or $0.89
per fully diluted share. Net income in the third quarter of 2007
was $49.1 million, or $1.14 per fully diluted share. Revenue in the
third quarter of 2008 was $458.6 million, compared with revenue of
$432.9 million in the third quarter of 2007. Net income for the
first three quarters of 2008 was $108.5 million, or $2.61 per fully
diluted share. Net income in the first three quarters of 2007 was
$105.8 million, or $2.46 per fully diluted share. Revenue for the
first three quarters of 2008 was $1,501.2 million, compared to
revenue of $1,239.6 million in the same period of 2007. COMMENTS ON
QUARTER �We did relatively well in the third quarter given the
deteriorating conditions in the markets we serve,� said Allen
Doane, chairman and chief executive officer of A&B. �Continuing
cost containment and revenue optimization efforts have offset to
some degree the impact of much weaker economic conditions. We are
pleased at this stage of the year to be slightly above 2007 in
earnings but we realize the challenges of the current economic
turmoil make it difficult to maintain this performance.� �Ocean
Transportation produced a good quarter, with earnings of over $31
million. Total container volume decreased 5 percent versus the
prior year. The drop in container volume was attributable mostly to
slowing market conditions in Hawaii. Guam and China volumes
remained essentially flat. In all of our trade lanes, improvements
in yield management and ongoing cost containment initiatives,
including fleet rationalization, partially offset the impact of
reduced volume and higher vessel expenses. Late quarter declines
from the historic high price of bunker fuel positively impacted our
fuel recovery in China, where surcharge mechanisms are a mix of
floating and fixed per-container fees.� �The logistics segment
posted operating profit of $5.1 million. Year over year volume
declines of 8 and 11 percent in the highway and rail segments,
respectively, negatively impacted earnings. Non-recurring
reductions in accruals and lower provision for bad debts that
occurred in the third quarter of 2007 also contributed to a
negative year over year comparison. Volume decreases stemmed from
the softening in domestic logistics markets, in line with
slackening consumer demand. Strategic growth initiatives
accelerated during the quarter with the commencement of warehousing
operations in Savannah through MIL�s Matson Global subsidiary, and
the acquisition of a San Francisco Bay Area warehousing and
distribution company.� �Agribusiness segment results were severely
impacted by significant erosion in raw sugar production caused
primarily by severe drought conditions on Maui. We have, therefore,
lowered our annual production forecast, which resulted in a higher
cost per ton for our sugar. The segment posted a $6.7 million loss
for the quarter. Higher power sales partially offset the impact of
the sugar production decline.� �Our real estate leasing segment
posted operating profit of $11.1 million. Modest occupancy losses
in a few retail and office properties, directly related to
softening economic market conditions, unfavorably impacted results
in the quarter. Despite recent market trends, occupancy levels for
the quarter remained high at 98 and 95 percent, respectively, in
the Hawaii and mainland portfolios for the quarter.� �Real estate
sales operating profit was $25.8 million. This favorable result was
driven largely by the sale of two retail properties and a vacant
Maui commercial parcel in the quarter. The retail sales, at
favorable cap rates, capture the embedded value of the enhancements
we achieved through our asset management efforts during our
ownership and reflect the underlying appreciation of real estate
values in the markets in which we invested. Residential sales were
nominal and will continue to be negatively impacted by
substantially softened buyer demand.� TRANSPORTATION � OCEAN
TRANSPORTATION � � � � � Quarter Ended September 30, (dollars in
millions) � 2008 � � 2007 � � Change Revenue � $ 272.8 � $ 259.9 �
5 % Operating profit $ 31.4 $ 38.6 -19 % Operating profit margin �
� 11.5 % � � 14.9 % � � � Volume (Units) Hawaii containers 1 39,900
42,900 -7 % Hawaii automobiles 21,800 30,800 -29 % China containers
12,300 12,500 -2 % Guam containers � � 3,600 � � � 3,600 � � -- � �
1 Includes approximately 900 containers moved under contract in
2008 that will not recur. The quarter-over-quarter change in Hawaii
container volumes excluding the non-recurring volumes related to
the contract of carriage is a decrease of 9 percent. For the third
quarter of 2008, higher revenue from fuel surcharges, favorable
yields, and improved cargo mix were offset by reduced container
volume in the Hawaii and China trade lanes, which were down 7 and 2
percent, respectively, resulting in $7 million lower operating
profit. In all of our trade lanes, ongoing cost containment
initiatives, including fleet rationalization, partially offset the
impact of reduced volume and higher maintenance and repair
expenses. Lower Hawaii container and automobile volume reflect a
broad-based decline caused by overall weakness in Hawaii�s economy.
China container volume decreased 2 percent compared with the third
quarter of 2007, due to lower Asian import demand, partially offset
by aggressive yield management strategies. This lower import demand
also negatively impacted earnings from Matson�s SSAT West Coast
stevedoring joint venture. Average bunker fuel costs in the quarter
increased by over 78 percent from the prior year, from $60.19 to
$107.17 per barrel, which impacted profitability in the China trade
lane, where fuel recovery mechanisms do not capture the entirety of
bunker fuel cost increases. � � � � � Nine Months Ended September
30, (dollars in millions) � 2008 � � 2007 � � Change Revenue � $
784.2 � $ 744.6 � 5 % Operating profit $ 84.7 $ 96.5 -12 %
Operating profit margin � � 10.8 % � � 13.0 % � � � Volume (Units)
Hawaii containers 1 116,800 126,000 -7 % Hawaii automobiles 71,000
76,900 -8 % China containers 36,700 38,000 -3 % Guam containers � �
10,600 � � � 10,700 � � -1 % 1 Includes approximately 900
containers moved under contract in 2008 that will not recur. The
year-over-year change in Hawaii container volumes excluding the
non-recurring volumes related to the contract of carriage is a
decrease of 8 percent. For the first nine months of 2008, Ocean
Transportation revenue increased by 5 percent due to principally
the same factors cited for the quarter. Container and auto volume
changes also were due to the same factors cited for the quarter.
Operating profit for the first nine months of 2008 decreased by 12
percent, primarily from the net volume changes, increases in vessel
and terminal handling costs due to higher stevedoring rates and
lower earnings from Matson�s SSAT joint venture, partially offset
by lower transportation and operations overhead expenses.
TRANSPORTATION � LOGISTICS SERVICES � � � � � Quarter Ended
September 30, (dollars in millions) � 2008 � � 2007 � � Change
Intermodal revenue � $ 73.9 � $ 71.7 � 3 % Highway revenue � 44.2 �
� 38.7 � 14 % Total Revenue � $ 118.1 � � $ 110.4 � � 7 % Operating
profit $ 5.1 $ 6.0 -15 % Operating profit margin � � 4.3 % � � 5.4
% � � � Logistics Services operating profit fell by $0.9 million
compared to the third quarter of 2007 as 11 and 8 percent decreases
in volume in the intermodal (rail) and highway (truck) services,
respectively, impacted earnings. The difference in the year over
year comparison is due to the non-recurring items that positively
impacted income in the third quarter of 2007. The commencement of
Matson Global�s warehousing operations positively impacted revenues
and earnings, as did the mid-quarter acquisition of a regional
warehousing and distribution company. Gross margins for intermodal
service lines improved significantly, while gross margins for
highway service lines generally were flat. Reductions in volume
reflect worsened economic conditions and some loss of highway agent
activity. Despite the volume reduction, the revenue base increased
modestly for the quarter as a result of higher fuel surcharges. � �
� � � Nine Months Ended September 30, (dollars in millions) � 2008
� � 2007 � � Change Intermodal revenue � $ 212.2 � $ 209.8 � 1 %
Highway revenue � 124.0 � � 115.9 � 7 % Total Revenue � $ 336.2 � �
$ 325.7 � � 3 % Operating profit $ 14.4 $ 17.2 -16 % Operating
profit margin � � 4.3 % � � 5.3 % � � � For the first nine months
of 2008, logistics revenue and gross margins increased or stayed
the same for principally the same factors cited for the quarter.
Operating profit and volume decreases also were due to the same
factors cited for the quarter. REAL ESTATE � INDUSTRY Real estate
leasing and sales revenue and operating profit are analyzed before
discontinued operations are removed. This is consistent with how
the Company evaluates and makes decisions regarding capital
allocation. REAL ESTATE � LEASING � � � � � Quarter Ended September
30, (dollars in millions) � 2008 � � 2007 � � Change Revenue � $
26.2 � $ 26.3 � -- � Operating profit $ 11.1 $ 12.2 -9 % Operating
profit margin � � 42.4 % � � 46.4 % � � � Occupancy Rates: Mainland
95 % 97 % -2 % Hawaii � � 98 % � � 98 % � -- � Leasable Space
(million sq. ft.): Mainland 5.9 3.9 51 % Hawaii � � 1.3 � � � 1.4 �
� -7 % In the third quarter of 2008, Real Estate Leasing revenue
was flat and operating profit was lower by 9 percent primarily due
to lower occupancy in certain mainland properties (mostly higher
margin office properties), partially offset by the net improvement
in margin resulting from acquisition and disposition activity, as
well as lower general and administrative costs. Lower mainland U.S.
occupancy is attributable to general slowing in economic activity
and, to a lesser degree, the loss of two regional mortgage tenants.
During the quarter, the company sold its Boardwalk Shopping Center
(Texas) and Marina Shores Shopping Center (California) and acquired
the Republic Distribution Center (Texas). As a result of these and
prior year acquisitions, gross Mainland U.S. leasable square feet
increased 51 percent, or 2.0 million square feet, from the year
earlier period. Hawaii gross leasable square feet decreased as a
result of the prior sale of two Maui retail centers. � � � � � Nine
Months Ended September 30, (dollars in millions) � 2008 � � 2007 �
� Change Revenue � $ 82.3 � $ 81.5 � 1 % Operating profit $ 37.6 $
39.5 -5 % Operating profit margin � � 45.7 % � � 48.5 % � � �
Occupancy Rates: Mainland 96 % 97 % -1 % Hawaii � � 98 % � � 98 % �
-- � For the first nine months of 2008, real estate leasing revenue
increased by 1 percent from the year earlier period. Operating
profit decreased modestly for the first nine months of 2008,
resulting from higher depreciation expenses and lower mainland
occupancy. Depreciation expenses increased primarily due to the
2007 sale of land that was ground leased to a retail tenant, and
the subsequent tax-deferred reinvestment of sale proceeds in
depreciable commercial property. REAL ESTATE � SALES � � � � �
Quarter Ended September 30, (dollars in millions) � 2008 � � 2007 �
� Change Improved property sales � $ 61.2 � � $ 73.6 � � -17 %
Development sales 7.1 4.2 69 % Unimproved/other property sales �
8.9 � � 0.7 � 13 X Total revenue � $ 77.2 � � $ 78.5 � � -2 %
Operating profit before joint ventures $ 25.5 $ 33.9 -25 % Earnings
from joint ventures � 0.3 � � 4.0 � -93 % Total operating profit �
$ 25.8 � � $ 37.9 � � -32 % Third quarter 2008 Real Estate Sales
revenue and operating profit were principally the result of the
sales of the Boardwalk Shopping Center (Texas) and Marina Shores
Shopping Center (California) described above, and the sale of a
3.9-acre vacant commercial parcel in Kahului, Maui in September.
Additionally, a number of development and joint venture residential
sales contributed to earnings for the quarter. Revenue and
operating profit for the third quarter of 2008 were lower than 2007
due to the higher revenue and operating profit associated with the
2007 sales of a four-acre land parcel ground leased to a retail
tenant in Honolulu and two retail centers on Maui. � � � � � Nine
Months Ended September 30, (dollars in millions) � 2008 � � 2007 �
� Change Improved property sales � $ 73.3 � � $ 73.6 � � -- �
Development sales 211.8 4.2 50 X Unimproved/other property sales �
10.7 � � 7.6 � 41 % Total revenue � $ 295.8 � � $ 85.4 � � 3 X
Operating profit before joint ventures $ 66.0 $ 35.7 85 % Earnings
from joint ventures � 10.3 � � 15.6 � -34 % Total operating profit
� $ 76.3 � � $ 51.3 � � 49 % For the first nine months of 2008,
revenues and operating profit were substantially higher than from
the same period in 2007, due to ongoing development residential
unit sales at the Company�s Keola La�i and Keala�ula projects and
to the commercial property dispositions described above. In
addition to the sales cited above, the Company sold several
buildings at a joint venture in Valencia, California and received a
final insurance payment of nearly $8 million from the 2005 fire at
Kahului Shopping Center in the first quarter of 2008, which
contributed to the favorable year over year results. These
increases were partially offset by the 2007 sales as cited above.
AGRIBUSINESS The operating results of the Agribusiness segment are
highly dependent on a number of factors, including sugar and power
volumes and pricing, and the costs of inputs such as labor, fuel
and fertilizers. Weather conditions represent one of the most
important factors affecting operating results because they affect
yields, volume of electricity generation and sales, plantings,
harvesting, and factory operations. Consequently, operating results
from the Agribusiness segment will vary from period to period. � �
� � � Quarter Ended September 30, (dollars in millions) � 2008 � �
2007 � � Change Revenue � $ 37.5 � $ 37.3 � 1 % Operating loss � $
(6.7 ) � $ (3.2 ) � -109 % Tons sugar produced � � 50,500 � � �
58,300 � � -13 % Third quarter 2008 Agribusiness revenue increased
moderately and operating profit decreased significantly,
principally the result of lower sugar production and higher
operating costs. Sugar production was 13 percent lower in the third
quarter of 2008 than in the same period of 2007 due to lower
average yields per acre that are mainly attributable to
insufficient water availability. Partially offsetting the lower
sugar volume were improved power sales resulting from higher power
prices and volume. � � � � � Nine Months Ended September 30,
(dollars in millions) � 2008 � � 2007 � Change Revenue � $ 96.2 � $
93.0 � 3 % Operating profit (loss) � $ (6.8 ) � $ 0.9 � NM � Tons
sugar produced � � 114,800 � � � 130,500 � -12 % In the first nine
months of 2008, Agribusiness revenues increased 3 percent, compared
to the same period of 2007, due primarily to higher power revenue
and higher specialty sugar sales. Operating profit decreased
significantly due to lower sugar production and higher operating
costs, offset only partially by higher power prices and volume.
CORPORATE EXPENSE Third quarter 2008 corporate expenses of $5.3
million were $0.7 million lower than the third quarter of 2007. The
decrease is due principally to lower accruals related to
performance-based incentive programs, and to other cost containment
initiatives related to corporate overhead. CONDENSED CASH FLOW
TABLE � � � � � Year-to-Date September 30, (dollars in millions,
unaudited) � 2008 � � 2007 � � Change Cash Flow from Operating
Activities � $ 202 � � $ 78 � � 3 X � Capital Expenditures (1)
Transportation (29 ) (51 ) -43 % Real Estate (51 ) (8 ) 6 X
Agribusiness and other � (11 ) � (13 ) -15 % Total Capital
Expenditures (91 ) (72 ) 26 % � Other Investing Activities, Net �
(49 ) � (15 ) 3 X Cash Used in Investing Activities $ (140 ) $ (87
) 61 % � Net Debt Proceeds 17 33 -48 % Repurchase of Capital Stock
(50 ) (12 ) 4 X Dividends Paid (38 ) (36 ) 6 % Other Financing
Activities, Net � 2 � � 8 � -75 % Cash Used in Financing Activities
$ (69 ) $ (7 ) 10 X � Net Decrease in Cash � $ (7 ) � $ (16 ) � -56
% � (1) Excludes non-cash 1031 transactions and real estate
development activity. Alexander & Baldwin, Inc., headquartered
in Honolulu, is engaged in ocean transportation and logistics
services, through its subsidiaries, Matson Navigation Company, Inc.
and Matson Integrated Logistics, Inc.; in real estate, through
A&B Properties, Inc.; and in agribusiness, through Hawaiian
Commercial & Sugar Company and Kauai Coffee Company, Inc.
Additional information about A&B may be found at its web site:
www.alexanderbaldwin.com. Statements in this press release that are
not historical facts are �forward-looking statements,� within the
meaning of the Private Securities Litigation Reform Act of 1995,
that involve a number of risks and uncertainties that could cause
actual results to differ materially from those contemplated by the
relevant forward-looking statement. These forward-looking
statements are not guarantees of future performance. This release
should be read in conjunction with our Annual Report on Form 10-K
and our other filings with the SEC through the date of this
release, which identify important factors that could affect the
forward-looking statements in this release. � ALEXANDER &
BALDWIN, INC. 2008 and 2007 Third-Quarter and Nine Month Results
(Condensed) (In Millions, Except Per Share Amounts, Unaudited) � �
� 2008 2007 Three Months Ended September 30: Revenue $ 458.6 $
432.9 Income From Continuing Operations $ 19.8 $ 26.0 Discontinued
Operations 1 $ 17.0 $ 23.1 Net Income $ 36.8 $ 49.1 Basic Share
Earnings Continuing Operations $ 0.48 $ 0.61 Net Income $ 0.89 $
1.15 Diluted Share Earnings Continuing Operations $ 0.48 $ 0.61 Net
Income $ 0.89 $ 1.14 Weighted Average Number of Basic Shares
Outstanding 41.3 42.6 Weighted Average Number of Diluted Shares
Outstanding 41.5 43.0 � 2008 2007 Nine Months Ended September 30:
Revenue $ 1,501.2 $ 1,239.6 Income From Continuing Operations $
85.8 $ 80.0 Discontinued Operations 1 $ 22.7 $ 25.8 Net Income $
108.5 $ 105.8 Basic Share Earnings Continuing Operations $ 2.08 $
1.88 Net Income $ 2.63 $ 2.48 Diluted Share Earnings Continuing
Operations $ 2.06 $ 1.86 Net Income $ 2.61 $ 2.46 Weighted Average
Number of Basic Shares Outstanding 41.3 42.6 Weighted Average
Number of Diluted Shares Outstanding 41.6 43.0 � 1 �Discontinued
Operations� consists of property sales, or intended sales, of
certain lands and buildings that are material and have separately
identifiable earnings and cash flows. � Industry Segment Data, Net
Income (Condensed) (In Millions, Except Per Share Amounts,
Unaudited) � � � � Three Months Ended Nine Months Ended September
30, September 30, 2008 2007 2008 2007 Revenue: Transportation Ocean
Transportation $ 272.8 $ 259.9 $ 784.2 $ 744.6 Logistics Services
118.1 110.4 336.2 325.7 Real Estate Leasing 26.2 26.3 82.3 81.5
Sales 77.2 78.5 295.8 85.4 Less Amounts Reported In Discontinued
Operations (70.2 ) (77.1 ) (86.4 ) (84.4 ) Agribusiness 37.5 37.3
96.2 93.0 Reconciling Items � (3.0 ) � (2.4 ) � (7.1 ) � (6.2 )
Total Revenue $ 458.6 � $ 432.9 � $ 1,501.2 � $ 1,239.6 � �
Operating Profit, Net Income: Transportation Ocean Transportation $
31.4 $ 38.6 $ 84.7 $ 96.5 Logistics Services 5.1 6.0 14.4 17.2 Real
Estate Leasing 11.1 12.2 37.6 39.5 Sales 25.8 37.9 76.3 51.3 Less
Amounts Reported In Discontinued Operations (27.3 ) (37.1 ) (36.4 )
(41.7 ) Agribusiness � (6.7 ) � (3.2 ) � (6.8 ) � 0.9 � Total
Operating Profit 39.4 54.4 169.8 163.7 Interest Expense (5.8 ) (4.8
) (17.5 ) (13.2 ) Corporate Expenses � (5.3 ) � (6.0 ) � (16.4 ) �
(19.5 ) Income From Continuing Operations Before Income Taxes 28.3
43.6 135.9 131.0 Income Taxes � 8.5 � � 17.6 � � 50.1 � � 51.0 �
Income From Continuing Operations 19.8 26.0 85.8 80.0 Discontinued
Operations (net of income taxes) � 17.0 � � 23.1 � � 22.7 � � 25.8
� Net Income $ 36.8 � $ 49.1 � $ 108.5 � $ 105.8 � � Basic Earnings
Per Share, Continuing Operations $ 0.48 $ 0.61 $ 2.08 $ 1.88 Basic
Earnings Per Share, Net Income $ 0.89 $ 1.15 $ 2.63 $ 2.48 �
Diluted Earnings Per Share, Continuing Operations $ 0.48 $ 0.61 $
2.06 $ 1.86 Diluted Earnings Per Share, Net Income $ 0.89 $ 1.14 $
2.61 $ 2.46 � Weighted Average Number of Basic Shares Outstanding
41.3 42.6 41.3 42.6 Weighted Average Number of Diluted Shares 41.5
43.0 41.6 43.0 � Consolidated Balance Sheet (Condensed) (In
Millions, Unaudited) � � September 30, December 31, 2008 2007 �
ASSETS Current Assets $ 341 $ 421 Investments 207 184 Real Estate
Developments 78 99 Property, Net 1,584 1,582 Other Assets � 272 � �
193 � Total $ 2,482 � $ 2,479 � � LIABILITIES & EQUITY Current
Liabilities $ 264 $ 322 Long-Term Debt 476 452 Employee Benefit
Plans 51 50 Other Long-Term Liabilities 57 57 Deferred Income Taxes
474 468 Shareholders� Equity � 1,160 � � 1,130 � Total $ 2,482 � $
2,479 �
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