Hawaii | 001-35492 | 45-4849780 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
• | Fourth quarter and full-year 2017 basic EPS from continuing operations available to A&B shareholders were $4.31 and $4.63 per share, respectively. Both periods included income tax adjustments of $4.47 per share. In addition, fourth quarter and full-year 2017 basic EPS were each reduced by $0.33 per share as a result of impairments related to three mainland commercial properties that were classified as held for sale at the end of 2017, partially offset by a gain on a mainland commercial property sold during the fourth quarter 2017. Proceeds from the sales of these mainland commercial properties will be used in the financing of the Terramar Hawai`i asset acquisition (“TRC Asset Acquisition”). |
• | In the first quarter of 2018, the Company completed a Special Distribution totaling $783.0 million, or approximately $15.92 per share, comprising $626.4 million of stock, and $156.6 million of cash. The 22.6 million shares of stock distributed was determined using a volume weighted average share price of $27.73 per share during the January 16 to January 18, 2018 period. As of February 27, 2018, the Company had 72.0 million shares outstanding. |
• | CRE operating loss was $6.9 million in the fourth quarter 2017, as compared to a $13.5 million operating profit in the prior year fourth quarter. Operating profit in the fourth quarter included impairments of $22.4 million related to certain mainland commercial properties that were under contract for sale at December 31, 2017 (see CRE Acquisition Highlights below). Operating profit was $34.4 million for the year ended December 31, 2017, as compared to $54.8 million for the prior year. |
• | Same store cash NOI1 increased 5.5% in the fourth quarter 2017, as compared to the prior year fourth quarter, and increased 4.8% for the year ended December 31, 2017, as compared to the prior year. |
• | Signed 65 leases covering 141,000 square feet of gross leasable area (“GLA”) in the fourth quarter and 211 leases covering 909,000 square feet or 23% of the total portfolio during the year ended December 31, 2017. Leasing spreads of signed leases when compared to previously escalated rents on the same spaces were 6.9% for the fourth quarter of 2017, and 13.9% for the |
• | Occupancy increased by 140 basis points to 93.6% as of December 31, 2017, as compared to the prior yearend. |
• | Major strategic lease transactions during the year included: |
◦ | Safeway as the anchor tenant for the 94,000-square-foot, Ho`okele Shopping Center, bringing total pre-leasing to 64%. Construction is scheduled to begin in the first quarter of 2018; |
◦ | ULTA Beauty for locations in Kailua Town and Pearl Highlands Center, two of the first leases executed by ULTA in Hawai`i; |
◦ | Renewal of the 47,000-square-foot Regal Cinema lease at Pearl Highlands Center; |
◦ | Down-to-Earth, a small-format organic grocer at Lau Hala Shops in Kailua; and |
◦ | UFC Gym for the second floor of Lau Hala Shops. |
• | Completed landlord construction for the Pearl Highlands food court, which is 83% leased and is expected to open in the second quarter of 2018. |
• | The Company is nearing completion of landlord construction of the redevelopment of the former Macy’s Kailua space into the 50,500-square-foot Lau Hala Shops retail center, which is 88% pre-leased as of December 31, 2017 and is scheduled to open in late 2018. |
• | In February 2018, closed on the TRC Asset Acquisition, a 390,000-square-foot portfolio of three, newly constructed premier retail centers located in Hawai`i, for $254.1 million. The acquisition will be largely financed with proceeds from the sales of mainland properties and assumption of mortgage debt (see Financial Highlights below). This transaction facilitates the completion of the Company’s migration of mainland property investments to Hawai`i. |
• | In the fourth quarter of 2017, closed on the sale of Midstate 99 Distribution Center in Visalia, California, for a sales price of $33.4 million. In the first quarter of 2018, closed on the sale of Concorde Commerce Center and Deer Valley Financial Center, both in Phoenix, Arizona, for an aggregate sales price of $24.5 million. Additionally, in the first quarter of 2018, entered into binding contracts for the sale of Preston Park in Plano, Texas and Little Cottonwood Shopping Center in Sandy, Utah, which are expected to close prior to the end of the second quarter 2018. Sales are intended to provide §1031 proceeds for the aforementioned TRC Asset Acquisition. |
• | Land Operations operating profit was $4.5 million for the fourth quarter 2017, as compared to $13.9 million in the prior year fourth quarter, and was $14.2 million for the year ended December 31, 2017, as compared to $7.0 million for the prior year. |
• | The Company generated revenue of $60.6 million during the year ended December 31, 2017, related to development projects and land sales, including 35 units that closed at its Kamalani residential project on Maui. |
• | Progress was made in transitioning the Company's former sugarcane lands on Maui into diversified agriculture, with farming and ranching operations now utilizing 4,500 acres and lease negotiations progressing for a variety of uses totaling approximately 15,000 additional acres. |
• | Materials & Construction operating profit was $3.0 million for the fourth quarter 2017, as compared to $4.8 million in the prior year fourth quarter, and was $22.0 million for the year ended December 31, 2017, as compared to $23.3 million for the prior year. Adjusted EBITDA1 was $32.0 million for the year ended December 31, 2017, as compared to $33.2 million for the prior year. |
• | Tons of paving asphalt deliveries increased 24.5% to 554,000 tons at reduced margins during the year ended December 31, 2017, as compared to the prior year. Backlog2 for the Company’s Materials & Construction segment was $202.1 million as of December 31, 2017, as compared to $242.9 million for the prior year. |
• | Financings in 2017 included the following: |
◦ | Closed on unsecured financings totaling $100 million during the fourth quarter including the following: |
▪ | $50 million, 4.04% fixed rate term note maturing in 2026; |
▪ | $25 million, 4.16% fixed rate term note maturing in 2028; and |
▪ | $25 million, 4.30% fixed rate term note maturing in 2029. |
◦ | In the third quarter, the Company's revolving credit facility was increased by $100 million to $450 million and the cost of borrowing was lowered. The facility, which matures in 2022, additionally amended the revolving credit facility and private note shelf terms to increase flexibility under financial covenants. |
• | At December 31, 2017, the Company’s average maturity was 6.1 years with a weighted average interest rate of 4.34%. Eighty-eight percent of debt was at a fixed rate. |
• | As a result of contributions during 2017, the Company’s qualified pension plans are 97% funded. |
• | In the first quarter of 2018, assumed a $62.0 million mortgage secured by the Laulani Village Shopping Center, which was acquired in the TRC Asset Acquisition. The loan carries a fixed interest rate of 3.93% and matures in 2024. |
• | In the first quarter of 2018, closed a $50 million, bank term loan facility maturing in 2023, which carries an interest rate based on LIBOR. |
Quarter Ended December 31, | Year Ended December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenue: | |||||||||||||||
Commercial Real Estate | $ | 35.5 | $ | 32.7 | $ | 136.9 | $ | 134.7 | |||||||
Land Operations | 38.8 | 32.3 | 84.5 | 61.9 | |||||||||||
Materials & Construction | 48.4 | 46.2 | 204.1 | 190.9 | |||||||||||
Total revenue | 122.7 | 111.2 | 425.5 | 387.5 | |||||||||||
Operating Profit (Loss): | |||||||||||||||
Commercial Real Estate | (6.9 | ) | 13.5 | 34.4 | 54.8 | ||||||||||
Land Operations | 4.5 | 13.9 | 14.2 | 7.0 | |||||||||||
Materials & Construction | 3.0 | 4.8 | 22.0 | 23.3 | |||||||||||
Total operating profit | 0.6 | 32.2 | 70.6 | 85.1 | |||||||||||
Interest expense | (7.1 | ) | (6.2 | ) | (25.6 | ) | (26.3 | ) | |||||||
General corporate expenses | (8.7 | ) | (5.7 | ) | (29.2 | ) | (22.1 | ) | |||||||
REIT evaluation/conversion costs | (3.8 | ) | (5.7 | ) | (15.2 | ) | (9.5 | ) | |||||||
Income (Loss) from Continuing Operations Before Income Taxes and Net Gain on Sale of Improved Properties | (19.0 | ) | 14.6 | 0.6 | 27.2 | ||||||||||
Income tax benefit (expense) | 224.6 | (1.0 | ) | 218.2 | 0.5 | ||||||||||
Income from Continuing Operations Before Net Gain on Sale of Improved Properties | 205.6 | 13.6 | 218.8 | 27.7 | |||||||||||
Net gain on the sale of improved properties, net of income taxes | 6.3 | — | 9.3 | 5.0 | |||||||||||
Income from Continuing Operations | 211.9 | 13.6 | 228.1 | 32.7 | |||||||||||
Income (loss) from discontinued operations, net of income taxes | — | (13.0 | ) | 2.4 | (41.1 | ) | |||||||||
Net Income (Loss) | 211.9 | 0.6 | 230.5 | (8.4 | ) | ||||||||||
Income attributable to noncontrolling interest | (0.3 | ) | (0.7 | ) | (2.2 | ) | (1.8 | ) | |||||||
Net Income (Loss) Attributable to A&B Shareholders | $ | 211.6 | $ | (0.1 | ) | $ | 228.3 | $ | (10.2 | ) | |||||
Basic Earnings (Loss) Per Share Available to A&B Shareholders: | |||||||||||||||
Continuing operations | $ | 4.31 | $ | 0.27 | $ | 4.63 | $ | 0.66 | |||||||
Discontinued operations | — | (0.26 | ) | 0.05 | (0.84 | ) | |||||||||
Net income (loss) | $ | 4.31 | $ | 0.01 | $ | 4.68 | $ | (0.18 | ) | ||||||
Diluted Earnings (Loss) Per Share Available to A&B Shareholders: | |||||||||||||||
Continuing operations | $ | 3.42 | $ | 0.27 | $ | 4.30 | $ | 0.65 | |||||||
Discontinued operations | — | (0.26 | ) | 0.04 | (0.83 | ) | |||||||||
Net income (loss) | $ | 3.42 | $ | 0.01 | $ | 4.34 | $ | (0.18 | ) | ||||||
Weighted-Average Number of Shares Outstanding: | |||||||||||||||
Basic | 49.2 | 49.0 | 49.2 | 49.0 | |||||||||||
Diluted | 62.0 | 49.4 | 53.0 | 49.4 | |||||||||||
Amounts Available to A&B Shareholders: | |||||||||||||||
Continuing operations, net of income taxes | $ | 212.2 | $ | 13.3 | $ | 227.7 | $ | 32.2 | |||||||
Discontinued operations, net of income taxes | — | (13.0 | ) | 2.4 | (41.1 | ) | |||||||||
Net income (loss) | $ | 212.2 | $ | 0.3 | $ | 230.1 | $ | (8.9 | ) |
December 31, 2017 | December 31, 2016 | ||||||
Assets | |||||||
Current Assets | $ | 274.8 | $ | 138.3 | |||
Investments in Affiliates | 401.7 | 390.8 | |||||
Real Estate Developments | 151.0 | 179.5 | |||||
Property – Net | 1,147.5 | 1,231.6 | |||||
Intangible Assets – Net | 46.9 | 53.8 | |||||
Deferred Tax Asset | 16.5 | — | |||||
Goodwill | 102.3 | 102.3 | |||||
Restricted Cash | 34.3 | 10.1 | |||||
Other Assets | 56.2 | 49.9 | |||||
Total Assets | $ | 2,231.2 | $ | 2,156.3 | |||
Liabilities & Equity | |||||||
Current Liabilities | $ | 926.8 | $ | 165.1 | |||
Long-term Liabilities: | |||||||
Long-term debt | 585.2 | 472.7 | |||||
Deferred income taxes | — | 182.0 | |||||
Accrued pension and post-retirement benefits | 19.9 | 64.8 | |||||
Other non-current liabilities | 40.2 | 47.7 | |||||
Redeemable Noncontrolling Interest | 8.0 | 10.8 | |||||
Equity | 651.1 | 1,213.2 | |||||
Total Liabilities & Equity | $ | 2,231.2 | $ | 2,156.3 |
Year Ended December 31, | |||||||
2017 | 2016 | ||||||
Cash Flows from Operating Activities: | |||||||
Net income (loss) | $ | 230.5 | $ | (8.4 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operations: | |||||||
Depreciation and amortization | 41.4 | 119.5 | |||||
Deferred income taxes | (199.0 | ) | (20.1 | ) | |||
Gains on asset transactions, net of asset write-downs | (12.7 | ) | (11.6 | ) | |||
Share-based compensation expense | 4.4 | 4.1 | |||||
Investments in affiliates, net of distributions | 5.5 | 1.4 | |||||
Changes in operating assets and liabilities: | |||||||
Trade, contracts retention, and other receivables | (0.9 | ) | 4.3 | ||||
Costs and estimated earnings in excess of billings on uncompleted contracts - net | (1.5 | ) | 0.7 | ||||
Inventories | 11.4 | 12.7 | |||||
Prepaid expenses, income tax receivable and other assets | (23.0 | ) | (0.1 | ) | |||
Accrued pension and post-retirement benefits | (47.4 | ) | 6.3 | ||||
Accounts payable and contracts retention | 3.3 | (0.4 | ) | ||||
Accrued and other liabilities | (40.1 | ) | 10.7 | ||||
Real estate inventory sales (real estate developments held for sale) | 47.6 | 7.4 | |||||
Expenditures for real estate inventory (real estate developments held for sale) | (20.8 | ) | (15.3 | ) | |||
Net cash (used in) provided by operations | (1.3 | ) | 111.2 | ||||
Cash Flows from Investing Activities: | |||||||
Capital expenditures for property, plant and equipment | (42.5 | ) | (116.1 | ) | |||
Proceeds from disposal of property and other assets | 47.2 | 88.8 | |||||
Payments for purchases of investments in affiliates and other investments | (41.9 | ) | (47.2 | ) | |||
Proceeds from investments in affiliates and other investments | 33.3 | 41.3 | |||||
Net cash (used in) provided by investing activities | (3.9 | ) | (33.2 | ) | |||
Cash Flows from Financing Activities: | |||||||
Proceeds from issuance of long-term debt | 292.5 | 272.0 | |||||
Payments of long-term debt and deferred financing costs | (181.0 | ) | (334.3 | ) | |||
Borrowings (payments) on line-of-credit agreement, net | 2.6 | (9.9 | ) | ||||
Distribution to noncontrolling interests | (0.5 | ) | (1.4 | ) | |||
Dividends paid | (10.3 | ) | (12.3 | ) | |||
Proceeds from issuance (repurchase) of capital stock and other, net | (7.2 | ) | 1.2 | ||||
Net cash provided by (used in) financing activities | 96.1 | (84.7 | ) | ||||
Cash, Cash Equivalents and Restricted Cash: | |||||||
Net increase (decrease) in cash, cash equivalents, and restricted cash | 90.9 | (6.7 | ) | ||||
Balance, beginning of period | 12.3 | 19.0 | |||||
Balance, end of period | $ | 103.2 | $ | 12.3 |
(in millions, except per share amounts; unaudited) | Quarter Ended December 31, 2017 | Year Ended December 31, 2017 | |||||
Discrete items impacting the quarter and year ended December 31, 2017 | |||||||
Tax benefit related to certain deferred taxes | $ | 220.0 | $ | 220.0 | |||
REIT evaluation/conversion costs | $ | (3.8 | ) | $ | (15.2 | ) | |
Impairment of real estate assets | $ | (22.4 | ) | $ | (22.4 | ) | |
Gain on sale of improved properties, net of taxes | $ | 6.3 | $ | 9.3 | |||
Discrete items per share impacting the quarter and year ended December 31, 2017 | |||||||
Tax benefit related to certain deferred taxes | $ | 4.47 | $ | 4.47 | |||
REIT evaluation/conversion costs | $ | (0.08 | ) | $ | (0.31 | ) | |
Impairment of real estate assets | $ | (0.46 | ) | $ | (0.46 | ) | |
Gain on sale of improved properties, net of taxes | $ | 0.13 | $ | 0.19 |
(in millions, unaudited) | Quarter Ended December 31, 2017 | Year Ended December 31, 2017 | |||
Weighted-Average Number of Shares Outstanding: | |||||
Basic | 49.2 | 49.2 | |||
Diluted | 62.0 | 53.0 |
Quarter Ended December 31, | Year Ended December 31, | |||||||||||||||||
(in millions, unaudited) | 2017 | 2016 | Change | 2017 | 2016 | Change | ||||||||||||
Commercial Real Estate Operating Profit | $ | (6.9 | ) | $ | 13.5 | $ | 34.4 | $ | 54.8 | |||||||||
Plus: Depreciation and amortization | 6.3 | 6.7 | 26.0 | 28.4 | ||||||||||||||
Less: Straight-line lease adjustments | (0.3 | ) | (0.5 | ) | (1.6 | ) | (2.1 | ) | ||||||||||
Plus: Lease incentive amortization | — | — | — | 0.1 | ||||||||||||||
Less: Favorable/(unfavorable) lease amortization | (0.7 | ) | (0.7 | ) | (2.9 | ) | (3.3 | ) | ||||||||||
Less: Termination income | (1.7 | ) | — | (1.7 | ) | (0.1 | ) | |||||||||||
Plus: Other (income)/expense, net | 0.1 | (0.1 | ) | 0.3 | 0.4 | |||||||||||||
Plus: Impairment of real estate assets | 22.4 | — | 22.4 | — | ||||||||||||||
Plus: Selling, general, administrative and other expenses | 1.8 | 1.0 | 7.9 | 4.8 | ||||||||||||||
Commercial Real Estate Cash NOI | 21.0 | 19.9 | 5.5% | 84.8 | 83.0 | 2.2% | ||||||||||||
Acquisitions/disposition and other adjustments | (2.2 | ) | (2.0 | ) | (9.2 | ) | (10.8 | ) | ||||||||||
Commercial Real Estate Same-Store Cash NOI | $ | 18.8 | $ | 17.9 | 5.5% | $ | 75.6 | $ | 72.2 | 4.8% |
Quarter Ended December 31, | Year Ended December 31, | ||||||||||||||
(in millions, unaudited) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Operating Profit | $ | 3.0 | $ | 4.8 | $ | 22.0 | $ | 23.3 | |||||||
Depreciation and amortization | 3.0 | 2.9 | 12.2 | 11.7 | |||||||||||
EBITDA | 6.0 | 7.7 | 34.2 | 35.0 | |||||||||||
Income attributable to noncontrolling interest | (0.3 | ) | (0.7 | ) | (2.2 | ) | (1.8 | ) | |||||||
Adjusted EBITDA | $ | 5.7 | $ | 7.0 | $ | 32.0 | $ | 33.2 |
1 | See above for a discussion of management’s use of non-GAAP financial measures and reconciliations from GAAP to non-GAAP measures. |
2 | Backlog represents the amount of revenue that Grace Pacific and Maui Paving, LLC, a 50-percent-owned unconsolidated affiliate, expect to realize on contracts awarded and government contracts in which Grace Pacific has been confirmed to be the lowest bidder and formal communication of the award is perfunctory. |
Contact: |
Suzy Hollinger |
(808) 525-8422 |
shollinger@abhi.com |
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