ALEXANDER & BALDWIN, INC. HONOLULU, Hawaii, May 5, 2016 /PRNewswire/ -- Alexander & Baldwin, Inc. (NYSE: ALEX) ("A&B" or "Company") today announced its financial results for the three months ended March 31, 2016.
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"We are very pleased with the performance of our commercial assets during the quarter and the progress we're making in repositioning the portfolio. Leasing Net Operating Income (NOI) was up 7.2% to $22.4 million(1), while occupancy remained high at 94%. More importantly, we advanced the migration and expansion of our commercial assets through both the January acquisition of the 139,300-square-foot Manoa Marketplace--the second largest grocery-anchored center in urban Honolulu--and the continued identification and execution of growth opportunities in our existing Hawaii assets," said Chris Benjamin, A&B president & CEO. "A lull in real estate sales during the quarter resulted in an operating loss from our Development business, but we look forward to stronger sales later in the year, particularly the closings of units at The Collection in the fourth quarter. Our Materials & Construction segment continues to perform well, generating EBITDA in the quarter of $10.4 million(1), and its outlook remains positive due to a healthy paving backlog. Notwithstanding the significant book losses related to the cessation of sugar operations, the final harvest is progressing on schedule and we continue to expect that the cessation will be neutral from a cash perspective. Additionally, we're advancing our crop trials and diversified agriculture research."
Quarter Highlights & Recent Activity
Commercial Portfolio
-- Increased NOI by 7.2% to $22.4 million(1) and Leasing operating profit
by 6.8% to $14.1 million.
-- Acquired the 139,300-square-foot Manoa Marketplace in January,
materially enhancing the Hawaii commercial portfolio with a strategic
asset.
-- Took ownership of the Kailua Macy's building in March and are finalizing
plans for repositioning the asset. Pre-leasing demand has been
favorable.
Development/Sales
-- "Topped off" The Collection in April and remain on schedule for late
2016 delivery.
-- Broke ground at the Kamalani project in Kihei, Maui in January and
commenced presales of the first 170 units in late April.
-- Achieved positive presales and advanced site work at Keala o Wailea, a
70-unit resort residential condominium joint venture development on
Maui.
Materials & Construction
-- Segment contributed $10.4 million(1) of EBITDA, up from $9.5 million(1)
in prior year, and operating profit of $8.0 million, up from $7.2
million in prior year.
-- Backlog remains healthy at $226.7 million(2).
Agribusiness
-- Announced sugar cessation in January; final harvest underway.
-- Cessation on track and expected to be cash flow neutral.
-- Furthered the Company's plans for diversified agriculture through crop
and grazing trials, technology research and financial analysis.
Financial/Other
-- Agreed to invest $13.5 million in the development of two solar
facilities in Mililani, Oahu totaling 6.5 megawatts.
-- Entered into a forward interest rate swap to lock in a fixed rate of
3.135% on $60 million of future financing.
Financial Performance
The Company reported a net loss for the first quarter of 2016 of $7.5 million, or $0.15 per diluted share, which included a $10.3 million after-tax loss from the Agribusiness segment, or $0.21 per diluted share, principally related to the previously disclosed cessation of sugar operations at Hawaiian Commercial & Sugar Company (HC&S). Earnings for the first quarter of 2015 were $25.3 million, or $0.51 per diluted share, and included positive after-tax earnings from the Agribusiness segment of $1.2 million, or $0.02 per diluted share. Excluding the Agribusiness impact, the largest negative variance in the quarter-over-quarter comparison relates to the first quarter 2015 closing of 328 units at the Waihonua condominium joint venture project.
Revenue for the first quarter of 2016 was $108.8 million, compared to revenue of $150.7 million for the first quarter of last year. Revenue declined due to fewer development sales, a decrease in asphalt prices and lower Agribusiness revenue due to lower sugar deliveries and power sales.
Segment results:
-- Leasing operating profit increased 6.8% in the first quarter from $13.2
million in 2015 to $14.1 million in 2016, due to the timing of
acquisitions and dispositions and improved same-store performance.
-- Development & Sales reported an operating loss of $3.8 million in the
quarter as sales of five joint venture units on Kauai were more than
offset by Manoa Marketplace acquisition costs, and joint venture and
other segment operating expenses. Operating profit from Development &
Sales in the first quarter of 2015 was $32.0 million and primarily
included the sale of 328 Waihonua condominium units.
-- The Materials & Construction segment contributed $8.0 million of
operating profit in the first quarter of 2016, compared to $7.2 million
in last year's first quarter, an increase of 11.1%. Increased material
sales, increased tons paved and quarrying efficiency gains were the
primary drivers of the improved quarter-over-quarter results.
-- Agribusiness operating losses for the first quarter of 2016 were $14.3
million and included $15.5 million of sugar cessation-related expenses.
First quarter Agribusiness losses were lower than projected due
primarily to the timing of some cost accruals and lower-than-expected
costs for certain cessation-related activities. These results compare to
Agribusiness operating profit of $1.9 million in the first quarter of
2015.
Corporate finance and other:
-- Interest expense declined from $7.1 million for the first quarter of
2015 to $6.9 million for the first quarter of 2016.
-- The Company recently entered into a forward interest rate swap to lock
in an attractive rate of 3.135% on $60 million of future financing that
is expected to be completed in the third quarter of 2016.
-- General corporate expenses were higher, increasing from $5.6 million
from the first quarter of 2015 to $6.8 million for the first quarter of
2016. The increase was primarily due to increased professional services
fees and higher personnel costs.
-- The Company reported an income tax benefit of $2.7 million in the
quarter due to a net loss before taxes, primarily resulting from
Agribusiness losses for the quarter. The Company's effective tax rate of
27.8% in the first quarter of 2016 is lower than the statutory rate due
primarily to the effect of state tax credits and the relative impact of
other permanent differences between pre-tax GAAP income and taxable
income.
Operating Performance
The Company furthered its strategy of increasing recurring income streams by expanding its Hawaii commercial portfolio and pursuing growth opportunities within its existing portfolio.
-- The strategic acquisition of the 139,300-square-foot, Safeway- and
CVS/Longs-anchored Manoa Marketplace in January was a significant
achievement in this regard and continues the steady migration of assets
from the Mainland to Hawaii. The acquisition extends the Company's
retail presence on Oahu, which is home to 70% of the state's population.
Upgrades are planned and the Company is evaluating repositioning
opportunities.
-- The Kailua Macy's building was turned over to A&B at end of the first
quarter. Planning is progressing for a significant renovation of the
existing building, which will bring new dining and retail options to
Kailua. The Company is seeing strong leasing demand and is in active
negotiations with multiple tenants for the anchor spaces in the
building.
-- The 2015 opening of a 10,000-square-foot CVS/Longs drugstore has
positively impacted performance at The Shops at Kukui'ula, A&B's
89,000-square-foot resort retail center adjacent to Kukui'ula. NOI from
The Shops increased 40% in the first quarter of 2016, compared to last
year, due in part to additional traffic drawn to the center by
CVS/Longs.
In Development & Sales, The Collection is progressing on schedule for closings in the fourth quarter, while presales at the Company's 70-unit Keala o Wailea project, located at the Wailea Resort on Maui, have been positive. To date, 38 units have been presold under binding contract at an average price of $1.2 million. Site construction has commenced and the Company expects to begin delivering units in mid-2017. Also on Maui, presales of the first 170 units were launched in late April at Kamalani, a 630-unit master planned residential community on 95 acres in Kihei. These homes are affordably priced, beginning in the high $200,000s for a 2-bedroom home and in the mid-$300,000s for a 3-bedroom home, and are expected to be delivered in late 2017.
The Materials & Construction segment produced $10.4 million(1 )of EBITDA in the first quarter of 2016, compared to $9.5 million(1 )of EBITDA in the first quarter of 2015, primarily due to increased material sales, increased tons paved and quarrying efficiency gains. The segment's outlook continues to be positive with $226.7 million(2) of construction backlog at the end of the first quarter, compared to $206.1 million(2) at the end of the first quarter of 2015, and $226.5 million(2) at the end of 2015.
In Agribusiness, the final sugar harvest began in March and is progressing well so far. The Company's previous full-year guidance regarding expected operating and sugar cessation book losses and the expectation that the cessation of sugar will be a cash neutral event remains unchanged. Several crop and cattle grazing trials are advancing, as is planning for the post-sugar diversified agriculture model.
In March, the Company agreed to invest $13.5 million in two solar facilities located in Mililani, Oahu totaling 6.5 megawatts. The facilities are expected to be placed in service in mid-2016 and will expand the Company's renewable energy portfolio to Oahu.
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
CONDENSED INDUSTRY SEGMENT DATA, NET INCOME (LOSS)
(In Millions, Except Per Share Amounts, Unaudited)
Three Months Ended
March 31,
---------
Revenue:
2016 2015
--- ---- ----
Real Estate:
Leasing $34.8 $32.7
Development & Sales 0.3 36.5
Reconciling item(3) - (4.3)
Materials & Construction 50.7 56.9
Agribusiness 23.0 28.9
---- ----
Total revenue $108.8 $150.7
------ ------
Operating Profit (Loss):
------------------------
Real Estate:
Leasing $14.1 $13.2
Development & Sales (3.8) 32.0
Materials & Construction 8.0 7.2
Agribusiness:
Agribusiness operations 1.2 1.9
HC&S cessation costs (15.5) -
----- ---
Total operating profit 4.0 54.3
Interest expense (6.9) (7.1)
General corporate expenses (6.8) (5.6)
Reduction in KRS II carrying
value - (0.1)
--- ----
Income (loss) before income
taxes (9.7) 41.5
Income tax expense (benefit) (2.7) 15.6
---- ----
Net income (loss) (7.0) 25.9
Income attributable to
noncontrolling interest (0.5) (0.6)
---- ----
Net income (loss) attributable
to A&B shareholders $(7.5) $25.3
===== =====
Earnings (Loss) Per Share4:
---------------------------
Basic -Net income (loss)
available to A&B shareholders $(0.15) $0.52
Diluted -Net income (loss)
available to A&B shareholders $(0.15) $0.51
Weighted average number of shares
outstanding:
---------------------------------
Basic 48.9 48.8
Diluted 48.9 49.3
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In Millions, Unaudited)
March 31, December 31,
2016 2015
---------- ------------
Assets
Current assets $157.9 152.5
$
Investments in affiliates 422.7 416.4
Real estate developments 184.9 183.5
Property, net 1,337.1 1,269.4
Intangible assets, net 60.4 54.4
Goodwill 102.3 102.3
Other assets 53.7 63.8
---- ----
$2,319.0 2,242.3
$
===
Liabilities & equity
Current liabilities $186.2 184.7
$
Long-term debt, non-current
portion 591.8 496.6
Deferred income taxes 197.7 202.1
Accrued pension and post-
retirement benefits 59.5 59.7
Other non-current liabilities 52.3 60.5
Redeemable noncontrolling interest 11.6 11.6
Equity 1,219.9 1,227.1
$2,319.0 2,242.3
$
===
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
CONDENSED CASH FLOW TABLE
(In Millions, Unaudited)
Three Months Ended
March 31,
---------
2016 2015
---- ----
Cash flows from operating
activities: $5.5 26.8
$
Cash flows from investing activities:
Capital expenditures for
property, plant and
equipment (92.1) (8.6)
Capital expenditures
related to 1031 commercial
property transactions (6.3) -
Proceeds from disposal of
property and other assets - 5.1
Proceeds from disposals
related to 1031 commercial
property transactions - 4.6
Payments for purchases of
investments in affiliates (5.4) (11.1)
Proceeds from investments
in affiliates 0.3 33.4
Change in restricted cash
associated with 1031
transactions 6.3 -
--- ---
Net cash provided by (used
in) investing activities $(97.2) 23.4
$
---
Cash flows from financing activities:
Proceeds from the issuance
of long-term debt $122.0 20.0
$
Payments of long-term debt
and deferred financing
costs (22.6) (68.5)
Borrowings (payments) under
line-of-credit, net (2.9) 3.3
Dividends paid (2.9) (2.5)
Distributions to non-
controlling interests (0.5) (1.1)
(Repurchase) proceeds from
issuance of capital stock
and other, net 0.8 (0.8)
Net cash provided by (used
in) financing activities $93.9 (49.6)
$
---
Net increase in cash and
cash equivalents $2.2 0.6
$
===
USE OF NON-GAAP FINANCIAL MEASURES
The Company calculates NOI as operating profit, less 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 Real Estate Leasing segment's operating profit is the most directly comparable GAAP measurement to NOI. A reconciliation of Real Estate Leasing segment operating profit to Real Estate Leasing segment NOI is as follows:
Three Months Ended March 31,
----------------------------
(dollars in millions) 2016 2015
---- ----
Real Estate Leasing
segment operating
profit $14.1 $13.2
Adjustments:
Depreciation and
amortization 7.4 7.2
Straight-line lease
adjustments (0.5) (0.6)
General and
administrative expenses 1.4 1.1
Real Estate Leasing
segment NOI $22.4 $20.9
===== =====
Percent change over
prior comparative
period 7.2%
===
The Company presents EBITDA for the Materials & Construction segment, which is a non-GAAP measure. The Company uses 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 EBITDA. A reconciliation of segment operating profit to EBITDA follows:
Three Months Ended March 31,
----------------------------
(dollars in millions) 2016 2015
---- ----
Operating profit $8.0 $7.2
Depreciation & amortization
expense 2.9 2.9
Income attributable to non-
controlling interest (0.5) (0.6)
----
EBITDA $10.4 $9.5
===== ====
Percent change over
comparative period 9.5%
===
(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
Grace (and
consolidated
subsidiaries)
and Maui
Paving, LLC,
a 50-
percent-
owned non-
consolidated
affiliate,
expect to
realize on
contracts
awarded,
primarily
related to
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
March 31,
2016 and 2015
were $12.3
million and
$30.2
million,
respectively.
3 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.
4 Earnings per
share
available to
A&B
shareholders
reflect $0.4
million of
undistributed
earnings
allocated
from
redeemable
noncontrolling
interests.
ABOUT ALEXANDER & BALDWIN
Alexander & Baldwin, Inc. is a Hawaii-based public company, with interests in real estate development, commercial real estate, agriculture, materials and infrastructure construction. With ownership of nearly 88,000 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 about five 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 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
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SOURCE Alexander & Baldwin, Inc.
