EX-99.2 3 a12-9301_1ex99d2.htm EX-99.2

Exhibit 99.2

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

On December 1, 2011, Alexander & Baldwin, Inc. (“A&B” or the “Company”), announced that its Board of Directors unanimously approved a plan to pursue the separation (the “Separation”) of the Company to create two independent, publicly traded companies:

 

A Hawaii-based land company with interests in real estate development, commercial real estate and agriculture, which will retain the Alexander & Baldwin, Inc. name (“Alexander & Baldwin”); and

 

An ocean transportation company serving the U.S. West Coast, Hawaii, Guam, Micronesia and China, and a domestic logistics company all under the Matson name (“Matson”).

 

The separation is expected to be completed in the third quarter of 2012 through a tax-free Spin-off of Alexander & Baldwin from Matson.

 

On February 13, 2012, A&B entered into an Agreement and Plan of Merger to reorganize itself as a holding company incorporated in Hawaii.  The holding company structure will help facilitate the separation by allowing A&B to organize and segregate the assets of its different businesses in an efficient manner prior to the separation and facilitate the third party and governmental consent and approval process.  In addition, the holding company reorganization will help preserve A&B’s status as a U.S. citizen under certain U.S. maritime and vessel documentation laws (popularly referred to as the Jones Act) by, among other things, limiting the percentage of outstanding shares of common stock in the holding company that may be owned (of record or beneficially) or controlled in the aggregate by non-U.S. citizens (as defined by the Jones Act) to a maximum permitted percentage of 22%.

 

Promptly following the holding company merger, the Company will reorganize its assets so that A&B’s real estate development, real estate leasing and agricultural businesses are contributed to a newly formed subsidiary, A&B II, Inc. (“New A&B”).  The Company will complete the Separation by distributing to its shareholders, on a pro rata basis, all of the issued and outstanding shares of New A&B common stock.  In connection with the Separation, New A&B will file a registration statement on Form 10 with the SEC and, when declared effective, shareholders will receive an information statement with extensive disclosure concerning the Separation, New A&B and the A&B businesses.

 

The unaudited pro forma condensed consolidated financial statements are derived from the historical consolidated financial statements of A&B.  The unaudited pro forma condensed consolidated financial statements are being presented to give effect to the Separation, as a result of which, A&B’s real estate development, real estate leasing and agricultural businesses will be excluded.  The remaining company will operate the ocean transportation and logistics businesses and be renamed Matson, Inc. (“Matson”).  The following unaudited pro forma condensed consolidated financial statements should be read in conjunction with the Company’s annual reports on Form 10-K and other filings with the Securities and Exchange Commission.  The presentation of the unaudited pro forma condensed consolidated financial statements assumes that the Separation occurred on December 31, 2011 for the condensed consolidated balance sheet and at the beginning of the year for the condensed consolidated statement of income for the year ended December 31, 2011.  For the years ended December 31, 2010 and 2009 the unaudited pro forma condensed consolidated statements of income give effect to the seperation and exclude the results of Alexander & Baldwin.  The unaudited pro forma condensed consolidated financial statements are not intended to be a complete presentation of Matson’s financial position or results of operations had the Separation and related transactions contemplated by the Agreement and Plan of Merger and related agreements occurred for the period indicated.  In addition, the unaudited pro forma condensed consolidated financial statements are provided for illustrative and informational purposes only and are not necessarily indicative of Matson’s future results of operations or financial condition had the Separation been completed on the dates assumed.  The pro forma adjustments are based on available information and assumptions that A&B management believes are reasonable, reflect the impacts of events directly attributable to the Separation, are factually supportable, and for purposes of the statements of income, are expected to have a continuing impact on Matson.

 


 

The unaudited pro forma condensed consolidated statement of income for the year ended December 31, 2011 reflects Matson’s results as if the Separation and related transactions described below had occurred as of January 1, 2011.  The unaudited pro forma condensed consolidated balance sheet as of December 31, 2011 reflects Matson’s results as if the Separation and related transactions described below had occurred on December 31, 2011.  The unaudited pro forma condensed consolidated statements of income for the years December 31, 2010 and 2009 exclude the results of Alexander & Baldwin.

 

The unaudited pro forma consolidated condensed financial statements give effect to the following:

 

·                  the distribution, upon the Separation, of the assets, liabilities and equity of Alexander & Baldwin;

 

·                  the issuance of debt, the related debt issuance costs and interest for the period required for the tax-free contribution of cash from Matson to Alexander & Baldwin;

 

·                  a tax-free contribution of cash from Matson to Alexander & Baldwin.

 

Matson estimates that additional administrative expenses, not included in the pro forma financial statements, amounting to approximately $8 to $10 million annually will be incurred in future periods related directly to costs associated with operating as a publicly traded company.  These costs include incremental employee related costs for additional headcount, higher external audit fees and expenses, Board of Director fees and expenses and other costs required to operate as an independent publicly traded company.

 

See the notes to the unaudited pro forma consolidated financial information for a more detailed discussion of these transactions.

 


 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME

 

YEAR ENDED DECEMBER 31, 2011

 

 

 

 

 

Pro forma Adjustments

 

 

 

(in millions, except per share amounts)

 

A&B
Historical

 

Distribution
of Alexander
& Baldwin

 

Issuance of
debt and
contribution
of cash

 

Matson
Pro forma
for the
Spin-off

 

Revenue

 

$

1,722.4

 

$

(259.7

)(a)

$

—

 

$

1,462.7

 

Operating Costs and Expenses:

 

 

 

 

 

 

 

 

 

Operating costs

 

1,463.5

 

(182.1

)

—

 

1,281.4

 

Equity in income of terminal joint venture

 

(8.6

)

—

 

—

 

(8.6

)

Selling, general and administrative

 

154.0

 

(42.0

)

0.2

(b)

112.2

 

Total operating costs and expenses

 

1,608.9

 

(224.1

)(a)

0.2

 

1,385.0

 

Operating Income

 

113.5

 

(35.6

)

(0.2

)

77.7

 

Other Income and (Expense):

 

 

 

 

 

 

 

 

 

Other income and (expense)

 

(1.5

)

2.8

(a)

 

 

1.3

 

Interest expense

 

(24.8

)

17.1

(a)

(7.0

)(c)

(14.7

)

Income From Continuing Operations Before Income Taxes (e)

 

87.2

 

(15.7

)

(7.2

)

64.3

 

Income taxes

 

32.3

 

(7.2

)(a)

(2.8

)(d)

22.3

 

Income From Continuing Operations

 

$

54.9

 

$

(8.5

)

$

(4.4

)

$

42.0

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings per Share of Common Stock:

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

1.32

 

 

 

 

 

$

1.01

 

Diluted Earnings per Share of Common Stock:

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

1.31

 

 

 

 

 

$

1.00

 

Weighted Average Number of Shares Outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

41.6

 

 

 

 

 

41.6

 

Diluted

 

42.0

 

 

 

 

 

42.0

 

 


 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME

 

YEAR ENDED DECEMBER 31, 2010

 

 

 

 

 

Pro forma
Adjustments

 

 

 

(in millions, except per share amounts)

 

A&B
Historical

 

Distribution
of
Alexander &
Baldwin

 

Matson
Pro forma for
the Spin-off

 

Revenue

 

$

1,613.5

 

$

(242.9

)(a)

$

1,370.6

 

Operating Costs and Expenses:

 

 

 

 

 

 

 

Operating costs

 

1,342.2

 

(196.1

)

1,146.1

 

Equity in income of terminal joint venture

 

(12.8

)

—

 

(12.8

)

Selling, general and administrative

 

157.9

 

(45.1

)

112.8

 

Total operating costs and expenses

 

1,487.3

 

(241.2

)(a)

1,246.1

 

Operating Income

 

126.2

 

(1.7

)

124.5

 

Other Income and (Expense):

 

 

 

 

 

 

 

Other income and (expense)

 

13.6

 

(12.1

)(a)

1.5

 

Interest expense

 

(25.5

)

17.3

(a)

(8.2

)

Income From Continuing Operations Before Income Taxes

 

114.3

 

3.5

 

117.8

 

Income taxes

 

44.9

 

1.8

(a)

46.7

 

Income From Continuing Operations

 

$

69.4

 

$

1.7

 

$

71.1

 

 

 

 

 

 

 

 

 

Basic Earnings per Share of Common Stock:

 

 

 

 

 

 

 

Continuing operations

 

$

1.68

 

 

 

$

1.72

 

Diluted Earnings per Share of Common Stock:

 

 

 

 

 

 

 

Continuing operations

 

$

1.67

 

 

 

$

1.71

 

Weighted Average Number of Shares Outstanding:

 

 

 

 

 

 

 

Basic

 

41.2

 

 

 

41.2

 

Diluted

 

41.5

 

 

 

41.5

 

 


 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME

 

YEAR ENDED DECEMBER 31, 2009

 

 

 

 

 

Pro forma
Adjustments

 

 

 

(in millions, except per share amounts)

 

A&B
Historical

 

Distribution
of Alexander
& Baldwin

 

Matson
Pro forma for
the Spin-off

 

Revenue

 

$

1,392.4

 

$

(183.3

)(a)

$

1,209.1

 

Operating Costs and Expenses:

 

 

 

 

 

 

 

Operating costs

 

1,209.5

 

(172.5

)

1,037.0

 

Equity in income of terminal joint venture

 

(6.2

)

—

 

(6.2

)

Selling, general and administrative

 

154.2

 

(40.6

)

113.6

 

Total operating costs and expenses

 

1,357.5

 

(213.1

)(a)

1,144.4

 

Operating Income

 

34.9

 

29.8

 

64.7

 

Other Income and (Expense):

 

 

 

 

 

 

 

Other income and (expense)

 

3.6

 

(3.2

)(a)

0.4

 

Interest expense

 

(25.9

)

16.8

(a)

(9.1

)

Income From Continuing Operations Before Income Taxes

 

12.6

 

43.4

 

56.0

 

Income taxes

 

5.0

 

17.5

(a)

22.5

 

Income From Continuing Operations

 

$

7.6

 

$

25.9

 

$

33.5

 

 

 

 

 

 

 

 

 

Basic Earnings per Share of Common Stock:

 

 

 

 

 

 

 

Continuing operations

 

$

0.19

 

 

 

$

0.82

 

Diluted Earnings per Share of Common Stock:

 

 

 

 

 

 

 

Continuing operations

 

$

0.19

 

 

 

$

0.82

 

Weighted Average Number of Shares Outstanding:

 

 

 

 

 

 

 

Basic

 

41.0

 

 

 

41.0

 

Diluted

 

41.1

 

 

 

41.1

 

 


 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

 

YEAR ENDED DECEMBER 31, 2011

 

 

 

 

 

Pro forma Adjustments

 

 

 

(in millions)

 

A&B
Historical

 

Distribution of
Alexander &
Baldwin (a)

 

Issuance of
debt and
contribution
of cash

 

Matson
Pro forma for
the Spin-off

 

ASSETS

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

21.5

 

$

(11.7

)

$

(2.3

)(f)

$

7.5

 

Accounts and note receivable

 

173.2

 

(5.5

)

—

 

167.7

 

Inventories

 

40.5

 

(36.3

)

—

 

4.2

 

Real Estate held for sale

 

2.8

 

(2.8

)

—

 

—

 

Deferred income taxes

 

5.3

 

(4.0

)

—

 

1.3

 

Prepaid expense and other current assets

 

31.7

 

(4.5

)

—

 

27.2

 

Total current assets

 

275.0

 

(64.8

)

(2.3

)

207.9

 

Investments in Affiliates

 

347.3

 

(290.8

)

—

 

56.5

 

Real Estate Developments

 

143.3

 

(143.3

)

—

 

—

 

Property - net

 

1,633.7

 

(833.2

)

—

 

800.5

 

Employee Benefit Plan Assets

 

1.4

 

(1.4

)

—

 

—

 

Other Assets

 

143.6

 

(48.4

)

2.1

(g)

97.3

 

Total

 

$

2,544.3

 

$

(1,381.9

)

$

(0.2

)

$

1,162.2

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

 

Notes payable and current portion of long-term debt

 

$

51.9

 

$

(34.4

)

$

—

 

$

17.5

 

Accounts payable

 

156.2

 

(20.7

)

—

 

135.5

 

Payroll and vacation benefits

 

19.8

 

(3.8

)

—

 

16.0

 

Uninsured claims

 

8.1

 

(1.5

)

—

 

6.6

 

Due to affiliate

 

—

 

2.2

 

—

 

2.2

 

Accrued and other liabilities

 

42.7

 

(28.9

)

—

 

13.8

 

Total current liabilities

 

278.7

 

(87.1

)

—

 

191.6

 

Long-term Liabilities

 

 

 

 

 

 

 

 

 

Long-term debt

 

507.3

 

(327.2

)

160.0

(h)

340.1

 

Deferred income taxes

 

417.6

 

(162.5

)

—

 

255.1

 

Employee benefit plans

 

167.6

 

(54.6

)

—

 

113.0

 

Due to affiliate

 

—

 

0.5

 

—

 

0.5

 

Uninsured claims and other liabilities

 

50.6

 

(26.3

)

—

 

24.3

 

Total long-term liabilities

 

1,143.1

 

(570.1

)

160.0

 

733.0

 

 

 

 

 

 

 

 

 

 

 

Total Shareholders’ Equity

 

1,122.5

 

(724.7

)

(160.2

)(i)

237.6

 

Total

 

$

2,544.3

 

$

(1,381.9

)

$

(0.2

)

$

1,162.2

 

 


 

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(a)          Reflects the operations, assets, liabilities and equity of Alexander & Baldwin which are expected to be distributed to shareholders upon Separation in the third quarter of 2012, and other adjustments as shown below.

 

(in millions)

 

2011

 

2010

 

2009

 

Revenue

 

 

 

 

 

 

 

Revenue (A&B Historical)

 

$

1,722.4

 

$

1,613.5

 

$

1,392.4

 

Effect of A&B Distribution

 

 

 

 

 

 

 

Real estate leasing revenue (1)

 

(93.3

)

(80.5

)

(72.1

)

Real estate sales revenue (1)

 

(14.3

)

(13.8

)

(15.9

)

Agribusiness revenue (1)

 

(154.9

)

(152.2

)

(97.2

)

Affiliate Revenue (2)

 

4.1

 

5.1

 

2.2

 

Other

 

(1.3

)

(1.5

)

(0.3

)

Matson Pro forma Revenue

 

$

1,462.7

 

$

1,370.6

 

$

1,209.1

 

 

(1)          As disclosed in A&B’s 2011 Form 10-K.

(2)          Represents revenue earned from services provided to Alexander & Baldwin affiliates for transportation and other services.

 

(in millions)

 

2011

 

2010

 

2009

 

Operating Costs and Expenses

 

 

 

 

 

 

 

Total Operating Costs and Expenses (A&B Historical)

 

$

1,608.9

 

$

1,487.3

 

$

1,357.5

 

Effect of A&B Distribution

 

 

 

 

 

 

 

Real estate sales and leasing expense (1)

 

(66.9

)

(60.1

)

(53.3

)

Agribusiness expense (1)

 

(131.0

)

(149.7

)

(130.5

)

Real estate and corporate selling, general and administrative expenses

 

(33.2

)

(37.5

)

(35.1

)

Affiliate Expenses (3)

 

7.0

 

6.1

 

5.8

 

Pro forma debt issuance costs (b)

 

0.2

 

—

 

—

 

Matson Pro forma Operating Costs and Expenses

 

$

1,385.0

 

$

1,246.1

 

$

1,144.4

 

 

(3)          Represents lease rent and equipment and repair expenses for services provided by Alexander & Baldwin affiliates.

 


 

(in millions)

 

2011

 

2010

 

2009

 

Other Income and (Expense)

 

 

 

 

 

 

 

Other Income and (Expense) (A&B Historical)

 

$

(1.5

)

$

13.6

 

$

3.6

 

Effect of A&B Distribution

 

 

 

 

 

 

 

Equity in (income) losses of real estate affiliates (1)

 

7.9

 

(2.0

)

—

 

Gain on investments and other (1)

 

(6.2

)

(3.4

)

—

 

Agriculture disaster relief payment (1)

 

—

 

(4.9

)

—

 

Impairment loss on investment (1)

 

—

 

0.8

 

2.3

 

Gain on consolidation of HS&TC (1)

 

—

 

—

 

(5.4

)

Interest income

 

 

 

(2.0

)

 

 

Other

 

1.1

 

(0.6

)

(0.1

)

Matson Pro forma Other Income and (Expense)

 

$

1.3

 

$

1.5

 

$

0.4

 

 

(in millions)

 

2011

 

2010

 

2009

 

Interest Expense

 

 

 

 

 

 

 

Interest Expense (A&B Historical)

 

$

(24.8

)

$

(25.5

)

$

(25.9

)

Effect of A&B Distribution

 

 

 

 

 

 

 

Real estate interest expense

 

1.4

 

1.6

 

1.5

 

Corporate interest expense

 

15.7

 

15.7

 

15.4

 

Rounding

 

—

 

—

 

(0.1

)

Pro forma interest expense (c)

 

(7.0

)

—

 

—

 

Matson Pro forma Interest Expense

 

$

(14.7

)

$

(8.2

)

$

(9.1

)

 

(in millions)

 

2011

 

2010

 

2009

 

Income Taxes

 

 

 

 

 

 

 

Interest Expense (A&B Historical)

 

$

32.3

 

$

44.9

 

$

5.0

 

Effect of A&B Distribution

 

 

 

 

 

 

 

Real estate income tax expense

 

11.6

 

16.2

 

12.5

 

Agribusiness income tax expense

 

(19.9

)

(32.2

)

(32.0

)

Corporate income tax expense

 

(7.8

)

(1.9

)

14.3

 

Real estate income tax effect of discontinued operations

 

8.9

 

19.7

 

22.6

 

Rounding

 

 

 

 

 

0.1

 

Pro forma income taxes (d)

 

(2.8

)

—

 

—

 

Matson Pro forma Income Taxes

 

$

22.3

 

$

46.7

 

$

22.5

 

 


 

(in millions)

 

2011

 

Identifiable Assets

 

 

 

Total Identifiable Assets (A&B Historical)

 

$

2,544.3

 

Effect of A&B Distribution

 

 

 

Real estate leasing assets

 

(770.9

)

Real estate sales assets

 

(451.4

)

Agribusiness assets

 

(157.8

)

Other assets

 

(4.8

)

Adjustment to reclassify Matson income tax receivable offset against payables in the consolidated financial statements

 

3.0

 

Pro forma adjustments (f) (g)

 

(0.2

)

Matson Pro forma Assets

 

$

1,162.2

 

 

(b)         Represents $0.2 million of expensed debt issuance costs related to the new credit facilities.  Matson expects to execute a new revolving credit facility and issue fixed long-term debt.

 

(c)          Reflects increased annual interest expense of $6.8 million on borrowings of $160.0 under the new credit facilities and $0.2 million of amortization for the expected issuance costs of these facilities.  Based on the estimated $160.0 million borrowings and 4.25% interest rate, a 0.125% increase in interest rates would increase pro forma interest expense by $0.2 million.

 

(d)         Represents the federal and state combined statutory tax rate of 38.8%.

 

(e)          The income from continuing operations before income taxes includes $7.1 million in shutdown expenses related to Matson’s second China Service which did not qualify for discontinued operations treatment.

 

(f)            The amount includes cash debt issuance costs amounting to $2.3 million associated with the new credit facilities.

 

(g)         The amount includes the capitalized debt issuance costs of $2.1 million associated with the new credit facilities.

 

(h)         Reflects $160.0 million in long-term borrowings under the new credit facilities and new fixed long-term debt.  Matson expects to execute a new revolving credit facility and issue fixed long-term debt with an anticipated interest rate estimated to be approximately 4.25%.  The cash received from the issuance debt will be utilized for the tax-free contribution of cash from Matson to A&B as discuss in note (i).

 

(i)             Reflects the expected tax-free contribution of cash from Matson to A&B amounting to $160.0 million and the $0.2 million of expensed debt issuance costs.