HONOLULU, Oct. 27, 2016
/PRNewswire/ -- Alexander & Baldwin, Inc. (NYSE:ALEX)
("A&B" or "Company") today announced its financial results for
the three and nine months ended September
30, 2016.
"We continued to enjoy solid performance in our Commercial Real
Estate segment during the quarter. Our portfolio delivered strong
year-over-year growth, with operating profit and net operating
income (NOI) up 9.6% and 3.4%1, respectively, compared
to last year's third quarter," said Chris
Benjamin, A&B president and chief executive officer.
"Development & Sales and Materials & Construction both
remain significant contributors to overall earnings. We sold a
large agricultural parcel on Maui
for $9.5 million, a Kahala Avenue lot
and several joint venture units. Materials & Construction
adjusted EBITDA for the third quarter was roughly in line with last
year's third quarter, and backlog remains robust at $242.5 million2. Agribusiness
operating profit, excluding sugar cessation costs, was a positive
$1.9 million in the quarter and has
been better than anticipated year to date thanks to a favorable
harvest. As a result, we now anticipate that the full-year
2016 pre-tax loss for Agribusiness operations will be closer to the
favorable end of the $5-$15 million
loss guidance previously provided."
"While our financial performance in the quarter was solid, we
are most pleased with our strategic progress. Since redoubling our
focus on Hawaii in 2012, we've
migrated the capital from 17 mainland commercial properties to
Hawaii in a tax efficient manner,
significantly enhancing the quality and concentration of the
portfolio. Over the same period, we've grown the recurring income
stream from our commercial portfolio by over 40% and, today,
over 85% of portfolio NOI comes from Hawaii compared to 40% at the beginning of
2012. A&B is now the largest owner of grocery-anchored retail
properties in the state. With this concentration comes the
opportunity to serve our communities and tenants better, and we are
leveraging our development expertise in the redevelopment of
existing commercial assets, like the Lau Hala Shops in Kailua and the food court at Pearl Highlands
Center."
"As we strategically grow our commercial portfolio in
Hawaii, it's important that we
assess the optimal structure for the Company going forward and take
a serious look at organizing our Company like other large
commercial real estate owner/operators. Over the last several
months, management has undertaken a preliminary analysis of the
potential for conversion to a real estate investment trust (REIT).
Based on the findings of this analysis, our Board has approved an
in-depth exploration of a conversion to a REIT, which could greatly
enhance A&B's ability to pursue its core strategy of investing
in Hawaii assets and communities.
In particular, the structure could provide A&B with greater
ability to compete on a level playing field with out-of-state
investors for Hawaii commercial
properties, positioning A&B to increase investment in the state
and keep more Hawaii properties in
local hands."
"As a major developer, quarry operator, infrastructure firm and
agricultural enterprise in Hawaii,
we also want to ensure that a REIT conversion would not adversely
impact these operations. A possible REIT conversion will be
evaluated in careful detail before a conclusion about whether or
not to convert is reached. In the near term, shareholders can
expect to see increased expenses associated with the evaluation,
which we will reflect as a separate line item in our income
statement."
Quarter Highlights & Recent Activity
Commercial Real Estate (formerly "Leasing")
- Operating profit was up 9.6% to $13.7
million and NOI increased by 3.4% to $21.1 million1 compared to the same
period last year.
Development & Sales
- Construction of The Collection remains on schedule for
commencement of deliveries in November.
- Sold a 268-acre agriculture parcel to Maui County for $9.5
million and a lot on Kahala Avenue for $3.0 million.
Materials & Construction
- Backlog remains healthy at $242.5
million2.
- Operating profit was $5.6
million, which included a $1.6
million noncash write-down of a surplus vacant land parcel
held by an unconsolidated joint venture.
- Adjusted EBITDA was $9.6
million1 excluding the aforementioned noncash
write-down.
Agribusiness
- Final harvest sugar production outlook is toward the higher end
of the expected range, facilitating an improvement in operating
loss guidance, though operational and weather risks still
remain.
- Diversified agriculture plans continued to advance, including
crop and grazing trials, technology research and financial
analysis.
- Expanded grazing lands on Maui
based on initial trial results to date. Commencing conversion of
3,700+ acres of additional working lands to improved pasture; some
with supplemental irrigation for drought resistance.
Financial/Other
- The board of directors authorized an increase in the quarterly
dividend and an in-depth evaluation of a REIT conversion.
- In August 2016, borrowed
$60 million of secured debt:
- 13-year term.
- 3.135% interest rate fixed by an interest rate swap
agreement.
- Increased weighted average maturity to approximately six years
with only a negligible increase in the weighted average cost of
debt.
Financial Performance
Third Quarter 2016
The Company reported a net loss for the third quarter of 2016 of
$1.9 million, or $0.03 per diluted share, which included a
$9.6 million after-tax loss from the
Agribusiness segment, or $0.20 per
diluted share, principally related to the previously disclosed
cessation of sugar operations at Hawaiian Commercial & Sugar
Company (HC&S). Earnings for the third quarter of 2015 were
$6.7 million, or $0.11 per diluted share, and included after-tax
losses from the Agribusiness segment of $5.6
million, or $0.11 per diluted
share.
Revenue for the third quarter of 2016 was $138.7 million, compared to revenue of
$144.7 million for the third quarter
of last year. Revenue declined primarily due to lower development
sales revenue.
Segment and other results:
Commercial Real Estate operating profit increased 9.6% in
the third quarter from $12.5 million
in 2015 to $13.7 million in 2016,
primarily due to improved same store performance. Leasing NOI
increased in the third quarter compared to last year by
3.4%1. Portfolio occupancy was lower at 92% compared to
95% in 2015. Hawaii occupancy
remained stable at 93%, however, mainland occupancy fell from 96%
to 90% due to a large industrial tenant downsizing in
July.
Development & Sales reported operating profit of
$6.6 million in the third quarter of
2016 due primarily to the sale of a 268-acre agricultural parcel to
the County of Maui for
$9.5 million, and a Kahala lot sale
for $3.0 million, but also included
joint venture closings of a unit at Kukui'ula and six units at Ka
Milo. Operating profit from Development & Sales in the third
quarter of 2015 was $11.2 million and
primarily included the sale of 11.0 acres at Maui Business Park to
Lowe's, and joint venture sales of five units at Kukui'ula and
seven units at Ka Milo.
The Materials & Construction segment contributed
$5.6 million of operating profit in
the third quarter of 2016, net of a $1.6
million noncash write-down of a surplus vacant land parcel
held by an unconsolidated joint venture, compared to $7.5 million in last year's third quarter. EBITDA
for the third quarter, adjusted to exclude the previously described
$1.6 million write-down, was
$9.6 million1 compared to
$10.2 million1 last year.
Segment performance for the quarter compared to last year's third
quarter was also impacted by lower materials sales and lower paving
revenues per ton, but was partially offset by lower quarry costs.
Wet weather and delays in notices to proceed affected both periods
under comparison. The percentage of rained out crew days in these
two quarters were materially higher than the average over the
preceding three years. However, additional crews were added midway
through the third quarter of 2016, which helped increase tons paved
by 18.7% compared to last year.
Total Agribusiness operating losses for the third quarter
of 2016 were $15.7 million and
included $17.6 million of sugar
cessation-related expenses. Agribusiness operating profit excluding
sugar cessation expenses was $1.9
million in the third quarter of 2016, compared to a loss of
$9.0 million in the third quarter of
2015. The improvement primarily was due to lower sugar production
costs, partially offset by lower power margin. As a result of
favorable experience so far this year, full-year pre-tax operating
losses and cessation costs are expected to be at the favorable end
of their previously provided ranges—$(5)-$(15) million and $(75)-$(90) million,
respectively.
Corporate finance and other:
- Interest expense decreased slightly to $6.4 million for the third quarter of 2016 from
$6.5 million for the third quarter of
2015.
- General corporate expenses increased to $5.5 million for the third quarter of 2016 from
$4.8 million for the third quarter of
2015, primarily due to increased professional fees and other
expenses.
- Professional fees and other expenses associated with the
evaluation of a potential REIT conversion amounted to $1.9 million for the third quarter of 2016.
- The Company reported an income tax benefit of $2.4 million in the quarter due to a net loss
before taxes resulting primarily from Agribusiness losses for the
quarter.
Year-To-Date
The Company reported a net loss for the first nine months of
2016 of $10.1 million, or
$0.19 per diluted share, which
included a $30.4 million after-tax
loss from the Agribusiness segment, or $0.62 per diluted share, principally related to
the cessation of sugar operations at HC&S. Earnings for the
first nine months of 2015 were $41.8
million, or $0.82 per diluted
share, and included after-tax losses from the Agribusiness segment
of $7.4 million, or $0.15 per diluted share.
Revenue for the first nine months of 2016 was $350.2 million compared to revenue of
$449.1 million for the first nine
months of last year. Revenue declined principally due to lower
development sales, and lower paving and asphalt revenue.
ALEXANDER &
BALDWIN, INC. AND SUBSIDIARIES
|
CONDENSED INDUSTRY
SEGMENT DATA, NET INCOME (LOSS)
|
(In Millions, Except
Per Share Amounts, Unaudited)
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
Revenue:3
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Real
Estate:
|
|
|
|
|
|
|
|
Commercial Real
Estate
|
$
|
32.9
|
|
|
$
|
33.0
|
|
|
$
|
102.3
|
|
|
$
|
100.5
|
|
Development &
Sales
|
12.8
|
|
|
19.9
|
|
|
74.1
|
|
|
108.8
|
|
Reconciling
item4
|
—
|
|
|
—
|
|
|
(60.7)
|
|
|
(21.0)
|
|
Materials &
Construction
|
52.1
|
|
|
51.0
|
|
|
144.8
|
|
|
165.3
|
|
Agribusiness
|
40.9
|
|
|
40.8
|
|
|
89.7
|
|
|
95.5
|
|
Total
revenue
|
$
|
138.7
|
|
|
$
|
144.7
|
|
|
$
|
350.2
|
|
|
$
|
449.1
|
|
|
|
|
|
|
|
|
|
Operating Profit
(Loss):
|
|
|
|
|
|
|
|
Real
Estate:
|
|
|
|
|
|
|
|
Commercial Real
Estate
|
$
|
13.7
|
|
|
$
|
12.5
|
|
|
$
|
42.6
|
|
|
$
|
39.6
|
|
Development &
Sales
|
6.6
|
|
|
11.2
|
|
|
7.8
|
|
|
57.5
|
|
Materials &
Construction
|
5.6
|
|
|
7.5
|
|
|
18.5
|
|
|
21.7
|
|
Agribusiness:
|
|
|
|
|
|
|
|
Agribusiness
operations
|
1.9
|
|
|
(9.0)
|
|
|
1.7
|
|
|
(11.8)
|
|
HC&S cessation
costs
|
(17.6)
|
|
|
—
|
|
|
(51.6)
|
|
|
—
|
|
Total operating
profit
|
10.2
|
|
|
22.2
|
|
|
19.0
|
|
|
107.0
|
|
Interest
expense
|
(6.4)
|
|
|
(6.5)
|
|
|
(20.1)
|
|
|
(20.2)
|
|
General corporate
expenses
|
(5.5)
|
|
|
(4.8)
|
|
|
(16.0)
|
|
|
(15.7)
|
|
REIT evaluation
costs
|
(1.9)
|
|
|
—
|
|
|
(3.8)
|
|
|
—
|
|
Reduction in solar
investments
|
(0.2)
|
|
|
(0.1)
|
|
|
(9.7)
|
|
|
(1.7)
|
|
Income (loss) before
income taxes
|
(3.8)
|
|
|
10.8
|
|
|
(30.6)
|
|
|
69.4
|
|
Income tax expense
(benefit)
|
(2.4)
|
|
|
3.8
|
|
|
(21.6)
|
|
|
26.4
|
|
Net income
(loss)
|
(1.4)
|
|
|
7.0
|
|
|
(9.0)
|
|
|
43.0
|
|
Income attributable
to noncontrolling interest
|
(0.5)
|
|
|
(0.3)
|
|
|
(1.1)
|
|
|
(1.2)
|
|
Net income (loss)
attributable to A&B shareholders
|
$
|
(1.9)
|
|
|
$
|
6.7
|
|
|
$
|
(10.1)
|
|
|
$
|
41.8
|
|
|
|
|
|
|
|
|
|
Earnings (Loss) Per
Share:5
|
|
|
|
|
|
|
|
Basic - Net income
(loss) available to A&B shareholders
|
$
|
(0.03)
|
|
|
$
|
0.11
|
|
|
$
|
(0.19)
|
|
|
$
|
0.83
|
|
Diluted - Net income
(loss) available to A&B shareholders
|
$
|
(0.03)
|
|
|
$
|
0.11
|
|
|
$
|
(0.19)
|
|
|
$
|
0.82
|
|
|
|
|
|
|
|
|
|
Weighted Average
Number of Shares Outstanding:
|
|
|
|
|
|
|
|
Basic
|
49.0
|
|
|
48.9
|
|
|
49.0
|
|
|
48.8
|
|
Diluted
|
49.0
|
|
|
49.4
|
|
|
49.0
|
|
|
49.3
|
|
|
|
|
|
|
|
|
|
Cash Dividends Per
Share
|
$0.06
|
|
|
$0.05
|
|
|
$0.18
|
|
|
$0.15
|
|
ALEXANDER &
BALDWIN, INC. AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED BALANCE SHEET
|
(In Millions,
Unaudited)
|
|
|
September 30,
2016
|
|
December 31,
2015
|
Assets
|
|
|
|
Current
assets
|
$
|
144.6
|
|
|
$
|
152.5
|
|
Investments in
affiliates
|
430.8
|
|
|
416.4
|
|
Real estate
developments
|
192.6
|
|
|
183.5
|
|
Property,
net
|
1,256.1
|
|
|
1,269.4
|
|
Intangible assets,
net
|
55.8
|
|
|
54.4
|
|
Goodwill
|
102.3
|
|
|
102.3
|
|
Other
assets
|
42.0
|
|
|
63.8
|
|
|
$
|
2,224.2
|
|
|
$
|
2,242.3
|
|
|
|
|
|
Liabilities &
equity
|
|
|
|
Current
liabilities
|
$
|
181.5
|
|
|
$
|
184.7
|
|
Long-term debt,
non-current portion
|
523.9
|
|
|
496.6
|
|
Deferred income
taxes
|
184.2
|
|
|
202.1
|
|
Accrued pension and
post-retirement benefits
|
58.6
|
|
|
59.7
|
|
Other non-current
liabilities
|
49.6
|
|
|
60.5
|
|
Redeemable
noncontrolling interest
|
11.6
|
|
|
11.6
|
|
Equity
|
1,214.8
|
|
|
1,227.1
|
|
|
$
|
2,224.2
|
|
|
$
|
2,242.3
|
|
ALEXANDER &
BALDWIN, INC. AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED CASH FLOW TABLE
|
(In Millions,
Unaudited)
|
|
|
Nine Months
Ended September 30,
|
|
2016
|
|
2015
|
|
|
|
|
Cash flows from
operating activities:
|
$
|
48.4
|
|
|
$
|
115.3
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Capital expenditures
for property, plant and equipment
|
(105.3)
|
|
|
(34.9)
|
|
Capital expenditures
related to 1031 commercial property transactions
|
(6.2)
|
|
|
(1.3)
|
|
Proceeds from
disposal of property and other assets
|
11.4
|
|
|
5.1
|
|
Proceeds from
disposals related to 1031 commercial property
transactions
|
59.3
|
|
|
25.2
|
|
Payments for
purchases of investments in affiliates and investments
|
(36.0)
|
|
|
(22.5)
|
|
Proceeds from
investments in affiliates
|
6.0
|
|
|
37.6
|
|
Change in restricted
cash associated with 1031 transactions
|
16.2
|
|
|
(2.7)
|
|
Net cash provided by
(used in) investing activities
|
$
|
(54.6)
|
|
|
$
|
6.5
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from the
issuance of long-term debt
|
$
|
222.0
|
|
|
$
|
71.0
|
|
Payments of long-term
debt and deferred financing costs
|
(191.1)
|
|
|
(182.1)
|
|
Payments under
line-of-credit, net
|
(11.8)
|
|
|
(0.4)
|
|
Dividends
paid
|
(8.8)
|
|
|
(7.4)
|
|
Distributions to
non-controlling interests
|
(0.5)
|
|
|
(1.1)
|
|
(Tax withholding
payments) proceeds from issuance of capital stock and other,
net
|
0.9
|
|
|
(0.5)
|
|
Net cash provided by
(used in) financing activities
|
$
|
10.7
|
|
|
$
|
(120.5)
|
|
|
|
|
|
Net increase in cash
and cash equivalents
|
$
|
4.5
|
|
|
$
|
1.3
|
|
Cash and cash
equivalents, beginning of period
|
|
1.3
|
|
|
|
2.8
|
|
Cash and cash
equivalents, end of period
|
$
|
5.8
|
|
|
$
|
4.1
|
|
USE OF NON-GAAP FINANCIAL MEASURES
The Company calculates NOI as Commercial Real Estate operating
profit from continuing operations, and adjusted for general and
administrative expenses, straight-line rental adjustments, interest
income, interest expense, depreciation and amortization, and gains
on sales of interests in real estate. NOI is considered by
management to be an important and appropriate supplemental
performance metric because management believes it helps both
investors and management understand the ongoing core operations of
our properties excluding corporate and financing-related costs and
noncash depreciation and amortization. NOI is an unlevered
operating performance metric of our properties and allows for a
useful comparison of the operating performance of individual assets
or groups of assets. This measure thereby provides an operating
perspective not immediately apparent from GAAP income (loss) from
operations or net income (loss). NOI should not be considered as an
alternative to GAAP net income, as an indicator of the Company's
financial performance, or as an alternative to cash flow from
operating activities as a measure of the Company's liquidity. Other
real estate companies may use different methodologies for
calculating NOI, and accordingly, the Company's presentation of NOI
may not be comparable to other real estate companies. The Company
believes that the Commercial Real Estate segment's operating profit
from continuing operations is the most directly comparable GAAP
measurement to NOI. A reconciliation of the Commercial Real Estate
segment operating profit to Commercial Real Estate segment NOI is
as follows:
|
Three Months Ended
September 30,
|
(dollars in
millions)
|
2016
|
|
2015
|
Commercial Real
Estate segment operating profit
|
$
|
13.7
|
|
|
$
|
12.5
|
|
Adjustments:
|
|
|
|
Depreciation and
amortization
|
7.0
|
|
|
7.4
|
|
Straight-line lease
adjustments
|
(0.4)
|
|
|
(0.8)
|
|
General,
administrative and other expenses
|
0.8
|
|
|
1.3
|
|
Commercial Real
Estate segment NOI
|
$
|
21.1
|
|
|
$
|
20.4
|
|
Percent change over
prior comparative period
|
3.4
|
%
|
|
|
The Company presents Adjusted EBITDA for the Materials &
Construction segment, which is a non-GAAP measure. The Company uses
Adjusted EBITDA when evaluating operating performance for the
Materials & Construction segment because management believes
that it provides insight into the segment's core operating results,
future cash flow generation and the underlying business trends
affecting performance on a consistent and comparable basis from
period to period. The Company provides this information to
investors as an additional means of evaluating the segment's
ongoing core operations. The non-GAAP financial information
presented herein should be considered supplemental to, and not as a
substitute for, or superior to, financial measures calculated in
accordance with GAAP. The Company believes that Materials &
Construction operating profit is the most directly comparable GAAP
measurement to the segment's Adjusted EBITDA. A reconciliation of
segment operating profit to Adjusted EBITDA follows:
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
(dollars in
millions)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Operating
profit
|
|
$
|
5.6
|
|
|
$
|
7.5
|
|
|
$
|
18.5
|
|
|
$
|
21.7
|
|
Depreciation &
amortization expense
|
|
2.9
|
|
|
3.0
|
|
|
8.8
|
|
|
8.8
|
|
Income attributable
to noncontrolling interest
|
|
(0.5)
|
|
|
(0.3)
|
|
|
(1.1)
|
|
|
(1.2)
|
|
Noncash write-down of
a surplus vacant land parcel held by an unconsolidated
affiliate
|
|
1.6
|
|
|
—
|
|
|
1.6
|
|
|
—
|
|
Adjusted
EBITDA
|
|
$
|
9.6
|
|
|
$
|
10.2
|
|
|
$
|
27.8
|
|
|
$
|
29.3
|
|
Percent change over
comparative period
|
|
(5.9)%
|
|
|
|
|
(5.1)%
|
|
|
|
__________________________________________
1
|
This is a non-GAAP
disclosure. See above for a discussion of management's use of
non-GAAP financial measures and required reconciliations from GAAP
to non-GAAP measures.
|
2
|
Backlog represents
the amount of revenue that the Grace Pacific and Maui Paving, LLC,
a 50-percent-owned unconsolidated affiliate, expect to realize on
contracts awarded or government contracts in which Grace Pacific
has been confirmed to be the lowest bidder and formal communication
of the award is perfunctory. Backlog primarily consists of
asphalt paving and, to a lesser extent, Grace's consolidated
revenue from its construction- and traffic-control-related
products. Backlog includes estimated revenue from the remaining
portion of contracts not yet completed, as well as revenue from
approved change orders. The length of time that projects remain in
backlog can span from a few days for a small volume of work to 36
months for large paving contracts and contracts performed in
phases. Maui Paving's backlog at September 30, 2016 and
2015 was $19.1 million and $18.9 million, respectively.
|
3
|
Inter-segment revenue
during the each of the three and nine month periods ended September
30, 2016 and 2015 were immaterial.
|
4
|
Represents commercial
property sales that are classified as "Gain on sale of improved
property" in the Condensed Consolidated Statements of Income, but
reflected as revenue for segment reporting purposes.
|
5
|
Earnings per share
available to A&B shareholders reflect $0.4 million of
undistributed earnings allocated from redeemable noncontrolling
interests for the third quarter of 2016 and $0.9 million for the
first nine months of 2016. Undistributed losses allocated from
redeemable noncontrolling interests for each of the three and nine
month periods ended September 30, 2015, amounted to $1.3
million.
|
ABOUT ALEXANDER & BALDWIN
Alexander & Baldwin, Inc. is a Hawaii-based public company, with interests in
commercial real estate, real estate development, agriculture,
materials and infrastructure construction. With ownership of 87,500
acres in Hawaii, A&B is the
state's fourth largest private landowner, and one of the state's
most active real estate investors. The Company manages a portfolio
comprising 4.7 million square feet of leasable space in
Hawaii and on the U.S. Mainland
and is the largest owner of grocery-anchored retail assets in the
state. A&B is also Hawaii's
largest materials company and paving contractor. Additional
information about A&B may be found at
www.alexanderbaldwin.com.
FORWARD-LOOKING STATEMENTS
Statements in this press release that are not historical facts,
including potential benefits, consequences and impact of a
potential REIT conversion, 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 pages 17-29 of Alexander &
Baldwin, Inc.'s 2015 Form 10-K and 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.
We do not undertake any obligation to update our forward-looking
statements.
Contact:
Suzy Hollinger
808.525.8422
shollinger@abinc.com
Logo -
http://photos.prnewswire.com/prnh/20120801/LA50085LOGO
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/alexander--baldwin-reports-third-quarter-2016-results-300352880.html
SOURCE Alexander & Baldwin, Inc.