UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
November 29, 2004
ALEXANDER & BALDWIN, INC.
(Exact name of registrant as specified in its charter)
Hawaii 0-565 99-0032630
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(State or other (Commission (I.R.S. Employer Identification No.)
jurisdiction of File Number)
incorporation)
822 Bishop Street, P. O. Box 3440
Honolulu, Hawaii 96801
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(Address of principal executive offices and zip code)
(808) 525-6611
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(Registrant's telephone number,
including area code)
Section 8 - Other Events
Item 8.01 Other Events.
On November 23, 2004, Alexander & Baldwin, Inc. ("A&B" or "the Company")
conducted a live webcast of an analyst meeting held in Honolulu, Hawaii with
approximately 20 investment analysts. The webcast will be available on the
Company's website at www.alexanderbaldwin.com until early December 2004. The
webcast was announced in a press release and was broadly accessible to the
public. The Company, however, believes that certain information discussed with
the analysts warrants emphasis through the filing of this Form 8-K.
This Current Report on Form 8-K contains forward-looking statements which should
be considered as subject to many risks and uncertainties that could cause actual
results to differ materially from those contemplated by the relevant
forward-looking statement. These risk factors are identified in A&B's Securities
and Exchange Commission Form 10-Q and Form 10-K filings that were made during
2004. A&B undertakes no obligation to revise or update any forward-looking
statements in order to reflect events or circumstances that may arise after the
date of this filing.
Earnings Outlook
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The economy in the State of Hawaii is strong. The Company believes that the
economic growth in its core markets will continue for at least
the next two to three years. While benefiting from this growth, A&B plans some
shifts in its strategies for A&B Properties and Matson. The Company's growth
strategies will be guided by two primary objectives: (1) sustaining profit
momentum at Matson in spite of recurring external challenges and (2) continued
success in identifying and investing in profitable real estate.
As described in the Company's most recently filed Form 10-Q, 2004 earnings have
been very favorable, surpassing 2003 in just the first nine months of the year.
The Company is targeting long-term earnings growth of approximately 10% to 12%
although the growth will not be linear. Achieving this growth, however, will be
challenging due to increased competition at Matson, transitions in the Guam
service and other factors.
The composition of the Company's assets is currently about half in ocean
transportation and about 40 percent in real estate and less than ten percent in
food products. By the end of 2008, this asset distribution is expected to climb
to about half in real estate and 40 percent in ocean transportation. This change
will occur due principally to a shift of capital spending. About 60% of capital
spending is planned for real-estate related acquisitions, development of new
and current projects and maintenance of income-producing properties. The
principal balance of capital spending will likely be at Matson for the Guam
service strategy, increased Hawaii service efficiencies and business growth
initiatives. Capital spending for the food products businesses is expected to
be modest.
Business growth will be financed by both the Company's cash flow and by
debt facilities. Currently, the Company's debt to total capital ratio is about
23% and it has unused credit facilities in place to finance a significant
portion of its growth plans.
The Company's long-term dividend payout ratio target is approximately 40%.
Although any given year may be higher or lower than this target, the Company
expects to continue balancing its payments to shareholders with its growth
opportunities.
Property Management, Development & Sales
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A&B's real estate businesses have already succeeded in achieving significant
transformational objectives. During the past decade, A&B has diversified its
income earning portfolio and has pursued new development strategies.
A&B is targeting, subject to market demand, approximately 13% to 15% long-term
earnings growth in its real estate businesses. This is expected to be achieved
through completion of existing projects, continued strength in its income
portfolio and maintaining a pipeline of new developments. A number of
opportunities are currently under consideration; some of these new opportunities
may be in new types of properties.
In recent years the Company has begun two significant projects, the acquisition
and ensuing development and sale of 270 acres of undeveloped land at Wailea on
Maui and the development of a 1,000-acre project at Kukui'ula on Kauai in a
partnership with DMB. The Company is looking for a third and fourth investment
to complement these two longer-term projects. A&B, however, will also continue
pursuing projects with a 2-5 year return horizon. Of the Wailea properties, the
Company currently plans to sell about 60 acres in bulk sales and develop, either
by itself or through joint ventures, about 120 acres. The remaining acreage
could be either developed or sold, depending on market factors.
A facet of plans for continued growth of the real estate business will be
expanding the use of joint ventures. Joint ventures have benefited A&B by
dispersing risk among a greater number of projects and enable the Company to
partner with businesses that have complementary expertise, thereby creating
greater value than pursuing the same opportunities alone.
The Company also intends to increase monetization of non-essential lands. These
include lands that are not used for agriculture and that have little or no
foreseeable development potential.
Matson
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Competition in the Hawaii service is expected to increase in 2005 due to the
recently announced entrance into the Hawaii trade by Pasha. This
company has announced that it will introduce into the Hawaii market a vessel
capable of carrying 3,000 automobiles with bi-weekly service. The total
Hawaii-Mainland auto carriage market is approximately 180,000 automobiles per
year, of which Matson has an approximate 80% market share. The entrance of Pasha
into the Hawaii market will have a disruptive effect, but the impact cannot be
estimated at this time. Matson is well positioned to compete with this new
entrant.
The 2004 sale of Matson's primary competitor, Horizon Lines, in a highly
leveraged transaction to a financial investor has had no material effect on
competition in the Hawaii shipping market. Service quality and frequency,
combined with a newer fleet, put Matson in a strong competitive position.
The Company reaffirms its intent to continue serving Guam. This
service will likely require the deployment of new capital, either in the form
of vessel purchases or charters. This could include the construction of new
vessels in foreign shipyards, as permitted by the Jones Act for the Guam trade,
which would be flagged and crewed in the U.S. as required for the service. This
Guam service strategy will likely involve re-deploying into the Hawaii service
three C-9 vessels that currently serve Guam. This could benefit the Hawaii
service due to fuel economies, increased cargo capacity and a deferral of
expenditures for vessel replacement.
A&B is targeting long-term earnings growth at Matson of approximately 8% to 10%,
although this growth will be irregular as the new competitor enters the Hawaii
market and the Guam service change described previously is implemented. This
growth is largely the result of the strong Hawaii economy and core-market
performance, but is also expected to be benefited by anticipated new business
growth opportunities.
Matson Integrated Logistics
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Matson Integrated Logistics ("MIL") is expected to continue growing through both
the development of existing business relationships and through acquisitions. The
intermodal business is fragmented and MIL expects to take advantage of
synergistic acquisitions.
Food Products
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A&B, through its Hawaiian Commercial & Sugar ("HC&S") operations on Maui,
produces approximately 80% of the state's sugar. HC&S' strengths in this
price-constrained business are its irrigation infrastructure, innovative uses
of technology, its workforce and a strong union relationship. While agriculture
remains the best and highest use for much of the Company's land, the business
strategy for food products is to expand its Maui Brand Sugar products and
develop new revenue sources from sugar byproducts. In addition, because raw
sugar production is mostly a fixed cost operation, A&B continues to focus on
higher production volume and yields. It is the Company's current intention to
continue in agribusiness, where it has approximately 1,000 employees, and
continue modest capital investments.
SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 29, 2004
ALEXANDER & BALDWIN, INC.
/s/ Christopher J. Benjamin
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Christopher J. Benjamin
Vice President and Chief Financial Officer