UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2006
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_ OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to _________________
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Hawaii 99-0032630
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 3440, Honolulu, Hawaii 9680l
822 Bishop Street, Honolulu, Hawaii 96813
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(Address of principal executive offices) (Zip Code)
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Number of shares of common stock outstanding as of June 30, 2006: 43,067,453
PART I. FINANCIAL INFORMATION
The unaudited, condensed financial statements and notes for the second quarter and first six months of 2006 are presented below, with comparative figures from the 2005 financial statements.
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(In millions, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
---- ---- ---- ----
Revenue:
Operating revenue $ 418.2 $ 391.2 $ 779.5 $ 755.0
---------- ---------- ----------- -----------
Costs and Expenses:
Costs of goods sold, services and rentals 347.7 308.1 641.4 585.5
Loss on investment -- 2.2 -- 2.2
Selling, general and administrative 36.3 33.4 72.1 65.5
---------- ---------- ----------- -----------
Operating costs and expenses 384.0 343.7 713.5 653.2
---------- ---------- ----------- -----------
Operating Income 34.2 47.5 66.0 101.8
Other Income and (Expense):
Equity in (loss) income of real estate
affiliates (1.7) 0.8 12.2 1.8
Interest income 2.7 1.2 4.9 2.1
Interest expense (3.0) (3.0) (6.2) (5.8)
---------- ---------- ----------- -----------
Income Before Taxes 32.2 46.5 76.9 99.9
Income taxes 11.7 17.7 28.7 38.0
---------- ---------- ----------- -----------
Income From Continuing Operations 20.5 28.8 48.2 61.9
Discontinued Operations (net of income taxes) 9.7 0.6 19.4 5.2
---------- ---------- ----------- -----------
Net Income $ 30.2 $ 29.4 $ 67.6 $ 67.1
========== ========== =========== ===========
Basic Earnings Per Share:
Continuing operations $ 0.47 $ 0.66 $ 1.10 $ 1.42
Discontinued operations 0.22 0.01 0.44 0.12
---------- ---------- ----------- -----------
Net income $ 0.69 $ 0.67 $ 1.54 $ 1.54
========== ========== =========== ===========
Diluted Earnings Per Share:
Continuing operations $ 0.46 $ 0.65 $ 1.09 $ 1.40
Discontinued operations 0.22 0.01 0.44 0.12
---------- ---------- ----------- -----------
Net income $ 0.68 $ 0.66 $ 1.53 $ 1.52
========== ========== =========== ===========
Average Number of Shares Outstanding 44.0 43.6 43.9 43.5
Average Number of Dilutive Shares Outstanding 44.3 44.2 44.3 44.1
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See Notes to Condensed Consolidated Financial Statements.
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
Industry Segment Data, Net Income
(In millions)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
---- ---- ---- ----
Revenue:
Transportation:
Ocean transportation $ 243.6 $ 221.0 $ 462.9 $ 427.2
Logistics services 116.4 106.6 224.8 202.7
Real Estate:
Leasing 24.4 21.3 49.0 43.2
Sales 36.8 14.6 60.6 60.5
Less amounts reported in discontinued
operations (37.5) (2.6) (61.7) (29.8)
Food Products 37.8 32.2 53.3 54.6
Reconciling Items (3.3) (1.9) (9.4) (3.4)
---------- ---------- ----------- -----------
Total revenue $ 418.2 $ 391.2 $ 779.5 $ 755.0
========== ========== =========== ===========
Operating Profit, Net Income:
Transportation:
Ocean transportation $ 24.4 $ 38.7 $ 42.7 $ 68.4
Logistics services 5.3 3.6 10.0 6.6
Real Estate:
Leasing 12.2 10.5 24.3 21.2
Sales 10.9 4.8 38.0 21.3
Less amounts reported in discontinued
operations (15.6) (1.0) (31.2) (8.4)
Food Products 3.1 0.3 9.6 9.3
---------- ---------- ----------- -----------
Total operating profit 40.3 56.9 93.4 118.4
Loss on Investment -- (2.2) -- (2.2)
Interest Expense (3.0) (3.0) (6.2) (5.8)
General Corporate Expenses (5.1) (5.2) (10.3) (10.5)
---------- ---------- ----------- -----------
Income From Continuing Operations Before
Income Taxes 32.2 46.5 76.9 99.9
Income Taxes (11.7) (17.7) (28.7) (38.0)
---------- ---------- ----------- -----------
Income From Continuing Operations 20.5 28.8 48.2 61.9
Discontinued Operations (net of income taxes) 9.7 0.6 19.4 5.2
---------- ---------- ----------- -----------
Net Income $ 30.2 $ 29.4 $ 67.6 $ 67.1
========== ========== =========== ===========
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See Notes to Condensed Consolidated Financial Statements.
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In millions)
June 30, December 31,
2006 2005
---- ----
ASSETS
Current Assets:
Cash and cash equivalents $ 34 $ 57
Accounts and notes receivable, net 187 177
Inventories 32 18
Real estate held for sale 2 9
Deferred income taxes 16 16
Prepaid expenses and other assets 25 25
Accrued withdrawals, net to Capital Construction Fund -- 1
--------- ---------
Total current assets 296 303
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Investments 124 154
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Real Estate Developments 105 71
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Property, at cost 2,292 2,222
Less accumulated depreciation and amortization 951 933
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Property - net 1,341 1,289
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Capital Construction Fund 112 93
--------- ---------
Other Assets 179 161
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Total $ 2,157 $ 2,071
========= =========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable and current portion of long-term debt $ 54 $ 31
Accounts payable 135 134
Other 78 89
--------- ---------
Total current liabilities 267 254
--------- ---------
Long-term Liabilities:
Long-term debt 353 296
Deferred income taxes 437 415
Post-retirement benefit obligations 48 47
Other 64 45
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Total long-term liabilities 902 803
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Commitments and Contingencies
Shareholders' Equity:
Capital stock 35 36
Additional capital 174 175
Deferred compensation -- (6)
Accumulated other comprehensive loss (7) (7)
Retained earnings 797 827
Cost of treasury stock (11) (11)
--------- ---------
Total shareholders' equity 988 1,014
--------- ---------
Total $ 2,157 $ 2,071
========= =========
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See Notes to Condensed Consolidated Financial Statements.
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In millions)
Six Months Ended
June 30,
2006 2005
---- ----
Cash Flows from Operating Activities $ 40 $ 129
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Cash Flows from Investing Activities:
Capital expenditures (87) (174)
Proceeds from disposal of property and other assets 31 19
Deposits into Capital Construction Fund (22) (158)
Withdrawals from Capital Construction Fund 4 146
Sales (purchases) of investments, net 21 (13)
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Net cash used in investing activities (53) (180)
--------- ---------
Cash Flows from Financing Activities:
Proceeds from issuances of long-term debt 70 105
Payments of long-term debt (13) (10)
Proceeds (payments) from short-term borrowings, net 23 (5)
Proceeds from issuances of capital stock, including
excess tax benefit 3 8
Repurchase of capital stock (72) --
Dividends paid (21) (20)
--------- ---------
Net cash provided by (used in) financing activities (10) 78
--------- ---------
Net (Decrease) Increase in Cash and Cash Equivalents $ (23) $ 27
========= =========
Other Cash Flow Information:
Interest paid, net of amounts capitalized $ (6) $ (7)
Income taxes refunded (paid) (32) 22
Other Non-cash Information:
Depreciation expense 41 41
Tax-deferred real estate sales 58 28
Tax-deferred property purchases (33) (28)
Debt assumed in real estate acquisition -- 11
Common stock dividends declared but not yet paid 11 10
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See Notes to Condensed Consolidated Financial Statements.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) The Condensed Consolidated Financial Statements are unaudited. Because of the nature of the Company's operations, the results for interim periods are not necessarily indicative of results to be expected for the year. While these statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. Therefore, the interim Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company's annual report filed on Form 10-K for the year ended December 31, 2005.
(2) On July 13, 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes--an interpretation of FASB Statement No. 109" (FIN 48). This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The new rules will be effective for the Company in 2007. At this time, the Company has not completed its review and assessment of the impact of adoption of FIN 48.
(3) The 2006 estimated effective income tax rate of 37.5 percent differs from the statutory rate, due primarily to a land donation and tax credits.
(4) Commitments and Contingencies: Commitments and financial arrangements that are not recorded on the Company's balance sheet at June 30, 2006, other than operating lease obligations, included the following (in millions):
Vessel purchase (a) $ 147 Guarantee of HS&TC debt (b) $ -- Standby letters of credit (c) $ 20 Bonds (d) $ 8 Benefit plan withdrawal obligations (e) $ 65 |
These amounts are not recorded on the Company's balance sheet and, with the exception of item (a), it is not expected that the Company or its subsidiaries will be called upon to advance funds under these commitments.
(a) In February 2005, Matson Navigation Company, Inc. ("Matson") entered into an agreement with Kvaerner Philadelphia Shipyard Inc. to purchase two containerships. The first of these two ships, the MV Manulani, was delivered during the second quarter of 2005, and the second ship, the MV Maunalei, was delivered in July 2006, as further described in footnote 11. The purchase price for the MV Maunalei was approximately $147 million. The purchase of the MV Maunalei was funded with the Capital Construction Fund ("CCF"), cash from operations and draws on a revolving credit facility with DnB NOR Bank ASA and ING Bank N.V. Payment in full was made upon the delivery of the containership and no further obligations exist after the date of the delivery. As of June 30, 2006, no obligation was recorded on the financial statements for the MV Maunalei because conditions necessary to record either a liability or an asset were not met.
(b) The Company has guaranteed up to $21.5 million of a $30 million Hawaiian Sugar & Transportation Cooperative ("HS&TC") revolving credit line. HS&TC is a raw-sugar marketing and transportation cooperative that is used to market and transport the Company's raw sugar to C&H Sugar Company, Inc. ("C&H"). The Company is a member of HS&TC. Under normal circumstances, the guarantee would not exceed $15 million. The amount would only increase to $21.5 million if the amounts owed by C&H are outstanding beyond normal 10-day terms. No amounts were borrowed under the facility at the end of the second quarter.
(c) At June 30, 2006, the Company has arranged for standby letters of credit totaling $20 million. This includes letters of credit, totaling approximately $14 million, which enable the Company to qualify as a self-insurer for state and federal workers' compensation liabilities. This balance also includes approximately $6 million for performance guarantees related to real estate projects.
(d) Consists of $6 million in U.S. customs bonds, $1 million relates to real estate construction projects in Hawaii, and $1 million relates to ocean transportation matters.
(e) The withdrawal liabilities for multiemployer pension plans, in which Matson is a participant, aggregated approximately $65 million as of the most recent valuation dates. Management has no present intention of withdrawing from and does not anticipate termination of any of the aforementioned plans.
Other Contingencies: On June 14, 2006, the Company, Kukui'ula Development Company (Hawaii), LLC ("Kukui'ula"), and various DMB entities ("DMB") entered into a General Contract of Indemnity ("Indemnity") in favor of Travelers Casualty and Surety Company of America ("Travelers"). The Indemnity was described in the Company's Form 8-K dated June 14, 2006 and filed with the Securities and Exchange Commission on June 16, 2006. The Indemnity was entered into in connection with Travelers' execution of an agreement with the Kukui'ula joint venture for the delivery of one or more bonds. The bonds are being issued to secure final subdivision approvals, which will allow for closing of the Kukui'ula lots to take place, and will cover various construction activities at Kukui'ula, such as project amenities, roads, utilities and other infrastructure, and subdivision improvements.
Under the Indemnity, the Company, Kukui'ula, and DMB, jointly and severally, agree to indemnify and exonerate Travelers from all loss which Travelers incurs in connection with any of the bond(s) issued. In connection with the Indemnity, the Company, Kukui'ula, and DMB have separately entered into a Mutual Indemnification Agreement ("Agreement") under which the parties agree that they shall each be proportionately liable (60% for DMB and 40% for the Company) for all payments required to be made under the Indemnity.
The Company accounts for guarantees in accordance with FASB Interpretation No. 45 (" FIN 45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." Under the provisions of FIN 45, the Company recorded a liability for the Indemnity based on its fair value. The fair value of the liability recorded by the Company in connection with the Indemnity was not material.
Financing Agreement: On April 20, 2006, the Company entered into a three-year unsecured note purchase and private shelf agreement with Prudential Investment Management, Inc. and its affiliates (collectively, "Prudential") under which the Company may issue notes in an aggregate amount up to $400 million less the sum of all principal amounts then outstanding on any notes issued by the Company or any of its subsidiaries to Prudential and the amount of any such notes then committed to be purchased by Prudential. The Agreement also provides for the commitment by Prudential to purchase and, subject to a right of cancellation by the Company, the commitment by the Company to issue three new series of senior promissory notes totaling $125 million. The note purchase and shelf agreement is more fully described in a Form 8-K filed on April 21, 2006.
Litigation: The Company and certain subsidiaries are parties to various legal actions and are contingently liable in connection with claims and contracts arising in the normal course of business, the outcome of which, in the opinion of management after consultation with legal counsel, will not have a material adverse effect on the Company's financial position or results of operations.
(5) Earnings Per Share: The denominator used to compute basic and diluted earnings per share is as follows (in millions):
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
---- ---- ---- ----
Denominator for basic EPS - weighted average shares
Effect of dilutive securities: 44.0 43.6 43.9 43.5
Employee/director stock options and
non-vested restricted stock 0.3 0.6 0.4 0.6
------ ------ ------ ------
Denominator for diluted earnings per share 44.3 44.2 44.3 44.1
====== ====== ====== ======
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(6) Share-Based Compensation: The Company may grant incentive and non-qualified options to purchase shares of the Company's stock at an exercise price equal to the fair market value at the grant date, as determined by the Compensation Committee of the Board of Directors. The options vest ratably over three years and, if not exercised, expire 10 years after grant. Shares issued as a result of stock option exercises are funded with the issuance of new shares. Shares tendered to the Company in connection with stock option exercises are retired.
The Company may also issue shares of the Company's common stock, in connection with the stock option plans, as a reward for past service rendered or as an incentive for future service. Service-based restricted shares generally vest over three years. The Company may also issue performance-based restricted shares that vest one year after grant, with the number of shares earned based on the achievement of annual financial targets established at the beginning of the fiscal year.
The Company's various stock option plans are more fully described in its most recent Form 10-K and in other filings with the Securities and Exchange Commission. As of June 30, 2006, 1,463,588 shares have been authorized for issuance under the equity compensation plans but had not been granted.
On January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment" (SFAS No. 123R), which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors. Prior to January 1, 2006, the Company accounted for share-based compensation under Accounting Principles Board ("APB") Opinion No. 25, which required recognition of compensation expense based on the intrinsic value of the equity instrument awarded. Consequently, no share-based compensation expense for stock option grants was reflected in net income since all options granted had an exercise price equal to the market value of the underlying common stock on the date of grant. If the Company had applied the fair value recognition provisions of SFAS No. 123, as amended by SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure," the effect on net income and earnings per share for the three and six month periods ended June 30, 2005 would have been as follows (in millions, except per-share amounts):
2005
---------------------------------------
Quarter Six Months
Ended Ended
June 30 June 30
------- -------
Net Income:
As reported $ 29.4 $ 67.1
Stock-based compensation expense determined under
fair value based method for all awards, net of related
tax effects (0.4) (0.8)
--------- --------
Pro forma $ 29.0 $ 66.3
========= ========
Net Income Per Share:
Basic, as reported $ 0.67 $ 1.54
Basic, pro forma $ 0.66 $ 1.52
Diluted, as reported $ 0.66 $ 1.52
Diluted, pro forma $ 0.65 $ 1.50
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SFAS No. 123R requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The Company estimates the grant-date fair value of its stock options using a Black-Scholes valuation model, consistent with the provisions of SFAS No. 123R and Securities and Exchange Commission ("SEC") Staff Accounting Bulletin No. 107, "Share-Based Payment," using the range of assumptions provided in the table below:
2006 2005
---- ----
Expected volatility 22.1%-22.7% 22.2%-22.3%
Expected term (in years) 6.3-8.1 6.4
Risk-free interest rate 4.5%-5.1% 3.9%-4.0%
Dividend yield 1.7%-2.4% 1.9%-2.2%
Fair value of options granted $10.56-$14.86 $9.70-$10.36
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o Expected volatility was primarily determined using the historical volatility of A&B common stock over a 6-year period, but the Company may also consider future events that it reasonably concludes marketplace participants might consider. Accordingly, the Company believes that the expected volatility estimate is representative of the stock's future volatility over the expected term of its employee share options. An increase in the expected volatility assumption will increase stock compensation expense.
o The expected term of the awards represents expectations of future employee exercise and post-vesting termination behavior and was primarily based on historical experience. The Company analyzed various groups of employees and considered expected or unusual trends that would likely affect this assumption and determined that the historical term of 6.7 years was reasonable for 2006. An increase in the expected term assumption will increase stock compensation expense.
o The risk free interest rate was based on U.S. Government treasury yields for periods equal to the expected term of the option on the grant date. An increase in the risk-free interest rate will increase stock compensation expense.
o The expected dividend yield is based on the Company's current and historical dividend policy. An increase in the dividend yield will decrease stock compensation expense.
Application of alternative assumptions could produce significantly different estimates of the fair value of stock-based compensation, and consequently, the related amounts recognized in the Condensed Consolidated Statements of Income.
Activity in the Company's stock option plans for the first two quarters of 2006 was as follows (in thousands, except exercise price amounts):
Employee Plans Directors' Plans
------------------------- ------------------------ Weighted
1998 1989 Average
1998 1989 Directors' Directors' Total Exercise
Plan Plan Plan Plan Shares Price
---- ---- ---------- ---------- ------ ---------
December 31, 2005 1,190.1 38.2 215.8 42.0 1,486.1 $ 31.16
Granted 174.1 -- 56.0 -- 230.1 $ 51.54
Exercised (62.6) (11.2) (6.0) (12.0) (91.8) $ 26.72
Forfeited & Expired (20.1) -- -- -- (20.1) $ 40.92
---------- ---------- -------- ------- -----------
June 30, 2006 1,281.5 27.0 265.8 30.0 1,604.3 $ 34.21
========== ========== ======== ======== ===========
Exercisable 872.4 27.0 140.6 30.0 1,070.0 $ 29.19
---------- ---------- -------- -------- -----------
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The following table summarizes stock option information as of June 30, 2006 (excludes restricted stock, in thousands, except exercise price amounts):
Weighted Weighted
Options Average Weighted Options Average
Range of Outstanding Remaining Average Exercisable Price of
Exercise as of Contractual Life Exercise as of Exercisable
Prices 6/30/2006 (in Years) Price 6/30/2006 Options
------------------- --------- ------------- ------------ --------- -------
$20.00 - 24.00 95.9 3.3 $ 21.39 95.9 $ 21.39
$24.01 - 28.00 453.3 5.5 $ 26.29 453.3 $ 26.29
$28.01 - 32.00 211.5 4.3 $ 28.54 209.4 $ 28.51
$32.01 - 36.00 355.5 7.4 $ 33.48 223.0 $ 33.48
$36.01 - 40.00 0.2 5.1 $ 37.98 -- --
$40.01 - 44.00 74.8 7.5 $ 40.46 24.0 $ 40.38
$44.01 - 48.00 191.2 8.5 $ 44.45 64.4 $ 44.45
$48.01 - 53.00 221.9 9.6 $ 51.59 -- --
------- -------
$20.00 - 53.00 1,604.3 6.7 $ 34.21 1,070.0 $ 29.19
======= =======
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A summary of the compensation cost and other measures related to share-based payments is as follows (in millions):
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
---- ---- ---- ----
Share-based expense (net of estimated
forfeitures):
Stock options $ 0.7 $ -- $ 1.4 $ --
Restricted stock 1.4 0.6 2.6 1.0
---------- ---------- ----------- -----------
Total share-based expense $ 2.1 $ 0.6 $ 4.0 $ 1.0
========== ========== =========== ===========
Income tax benefit realized $ 0.2 $ 0.4 $ 1.9 $ 2.5
Intrinsic value of options exercised $ 0.5 $ 0.9 $ 2.1 $ 5.9
Fair value of stock vested $ -- $ -- $ 3.0 $ 0.6
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As of June 30, 2006, there was $4.9 million of total unrecognized compensation cost related to unvested stock options. That cost is expected to be recognized over a weighted average period of approximately 1.6 years.
The following table summarizes restricted stock information as of June 30, 2006 (in thousands, except weighted-average, grant-date fair value amounts):
Weighted
Restricted Average
Stock Grant-Date
Shares Fair Value
------ ----------
December 31, 2005 184.3 $ 41.38
Granted 128.4 $ 52.37
Vested (57.1) $ 41.97
Forfeited (8.0) $ 38.06
-------
June 30, 2006 247.6 $ 46.73
=======
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Unrecognized compensation cost related to unvested restricted stock was $9.2 million, with the cost expected to be recognized over a weighted average period of 1.4 years.
(7) Accounting for and Classification of Discontinued Operations: As required by Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS No. 144), the sales of certain income-producing assets are classified as discontinued operations if (i) the operations and cash flows of the assets can be clearly distinguished from the remaining assets of the Company, (ii) the cash flows that are specific to the assets sold have been, or will be, eliminated from the ongoing operations of the Company, (iii) the Company will not have a significant continuing involvement in the operations of the assets sold, and (iv) the amount is considered material. Certain assets that are "held for sale," based on the likelihood and intention of selling the property within 12 months, are also treated as discontinued operations. Depreciation on these assets is discontinued upon reclassification. Sales of land, residential houses, and office condominium units are generally considered inventory and are not included in discontinued operations.
Discontinued operations were as follows (in millions):
Quarter Ended Six Months Ended
June 30, June 30,
-------- --------
2006 2005 2006 2005
---- ---- ---- ----
Discontinued Operations (net of tax)
Sales of Assets $ 9.4 $ -- $ 18.7 $ 3.9
Leasing Operations 0.3 0.6 0.7 1.3
-------- -------- -------- --------
Total $ 9.7 $ 0.6 $ 19.4 $ 5.2
======== ======== ======== ========
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(8) Other Comprehensive Income for the three and six months ended June 30, 2006 and 2005 was as follows (in millions):
Quarter Ended Six Months Ended
June 30, June 30,
-------- --------
2006 2005 2006 2005
---- ---- ---- ----
Net Income $ 30.2 $ 29.4 $ 67.6 $ 67.1
Company's share of investee's
minimum pension liability
adjustment -- (0.4) 0.1 (0.4)
Change in valuation of derivative (0.1) -- (0.1) 0.1
-------- -------- -------- --------
Comprehensive Income $ 30.1 $ 29.0 $ 67.6 $ 66.8
======== ======== ======== ========
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(9) Pension and Post-retirement Plans: The Company has defined benefit pension plans that cover substantially all non-bargaining unit and certain bargaining unit employees. The Company also has unfunded non-qualified plans that provide benefits in excess of the amounts permitted to be paid under the provisions of the tax law to participants in qualified plans. The assumptions related to discount rates, expected long-term rates of return on invested plan assets, salary increases, age, mortality and health care cost trend rates, along with other factors, are used in determining the assets, liabilities and expenses associated with pension benefits. Management reviews the assumptions annually with its independent actuaries, taking into consideration existing and future economic conditions and the Company's intentions with respect to these plans. Management believes that its assumptions and estimates for 2006 are reasonable. Different assumptions, however, could result in material changes to the assets, obligations and costs associated with benefit plans.
The Components of Net Periodic Benefit Cost for the second quarter of 2006 and 2005 were as follows (in millions):
Pension Benefits Post-retirement Benefits
---------------- ------------------------
2006 2005 2006 2005
---- ---- ---- ----
Service Cost $ 1.9 $ 1.6 $ 0.2 $ 0.2
Interest Cost 4.1 4.0 0.8 0.8
Expected Return on Plan Assets (6.5) (6.1) -- --
Amortization of Prior Service Cost 0.1 0.1 -- --
Amortization of Net (Gain) Loss 0.4 0.4 0.3 0.3
-------- -------- -------- --------
Net Periodic Benefit Cost $ -- $ -- $ 1.3 $ 1.3
======== ======== ======== ========
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The Components of Net Periodic Benefit Cost for the first half of 2006 and 2005 were as follows (in millions):
Pension Benefits Post-retirement Benefits
---------------- ------------------------
2006 2005 2006 2005
---- ---- ---- ----
Service Cost $ 3.7 $ 3.0 $ 0.5 $ 0.5
Interest Cost 8.2 8.0 1.6 1.6
Expected Return on Plan Assets (13.0) (12.2) -- --
Amortization of Prior Service Cost 0.2 0.2 -- --
Amortization of Net (Gain) Loss 0.8 0.8 0.5 0.6
-------- -------- -------- --------
Net Periodic Benefit Cost (Credit) $ (0.1) $ (0.2) $ 2.6 $ 2.7
======== ======== ======== ========
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The 2006 return on plan assets is expected to be nearly the same as the sum of the service cost, interest cost and amortization components, resulting in an expected net periodic pension credit of approximately $0.2 million for 2006. No contributions to the Company's pension plans are expected to be required during 2006.
(10) Accelerated Share Repurchase Program: On December 9, 2004, A&B's Board of Directors authorized A&B to repurchase up to two million shares of its common stock through December 31, 2006. In June 2006, A&B purchased 200,000 shares on the open market at an average price of $42.35. Additionally, the Company also entered into an accelerated share repurchase agreement ("ASR") with Goldman, Sachs & Co. on June 27, 2006 to repurchase shares of A&B's common stock for an aggregate purchase price of approximately $63 million, which is more fully described in a Form 8-K filed on July 11, 2006. The maximum average price per share that will be paid under the ASR is $46.83, which is based on 984,000 and 361,342 shares delivered on June 30 and July 12, 2006, respectively. The average price per share paid to date under the ASR may not be representative of the final average repurchase price per share because A&B may receive additional shares for no additional consideration. Under the terms of the ASR, the Company may receive up to an additional 184,099 shares upon termination of the agreement in a third installment based on the volume weighted average price of A&B's common stock from July 8, 2006 through to the end of the termination period, which may be determined by Goldman in its discretion from September 8, 2006 through November 10, 2006. A&B has no further obligation to provide additional cash or to issue additional shares under the agreement, and consequently, any additional shares received would reduce the final average price paid per share. The final average repurchase price per share under the ASR will range from $41.19 to $46.83 based on the collar established by the agreement. Through July 28, 2006, our total share repurchases totaled 1,545,342 shares for $71.5 million at an average price of $46.25 per share. Upon completion of the ASR, A&B will have repurchased between 1,545,342 and 1,729,441 shares of its stock during 2006 and will have between 270,559 and 454,658 shares remaining under its existing share repurchase authorization.
(11) Subsequent Events: On July 12, 2006, Matson took delivery of its newest ship, the MV Maunalei. The purchase price for the MV Maunalei was $147 million. The purchase of the MV Maunalei was funded with the CCF, cash from operations, and borrowings under the DnB NOR revolving credit facility. The amount drawn under the DnB NOR revolving credit facility upon delivery of the ship totaled approximately $70 million, of which $36 million was applied to the purchase price of the ship and the remainder was used for other general corporate purposes.
On July 12, 2006, a bill prohibiting residential development and the sale of the State's fee simple interest in the Kaka'ako Waterfront project was enacted into law. Consequently, the Company has terminated its development activities related to the Kaka'ako Waterfront project. The incurred costs related to the project were immaterial and were expensed.
The following analysis of the consolidated financial condition and results of operations of Alexander & Baldwin, Inc. and its subsidiaries (collectively, the "Company") should be read in conjunction with the condensed consolidated financial statements and related notes thereto included in Item 1 of this Form 10-Q.
FORWARD-LOOKING STATEMENTS
The Company, from time to time, may make or may have made certain forward-looking statements, whether orally or in writing, such as forecasts and projections of the Company's future performance or statements of management's plans and objectives. These statements are "forward-looking" statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may be contained in, among other things, Securities and Exchange Commission ("SEC") filings, such as the Forms 10-K, 10-Q and 8-K, press releases made by the Company, the Company's Internet Web sites (including Web sites of its subsidiaries), and oral statements made by the officers of the Company. Except for historical information contained in these written or oral communications, such communications contain forward-looking statements. These forward-looking statements are not guarantees of future performance, and involve a number of risks and uncertainties that could cause actual results to differ materially from those projected in the statements, including, but not limited to those matters discussed in Item 1A of the Company's 2005 10-K.
CONSOLIDATED REVENUE & NET INCOME
Consolidated - Second quarter of 2006 compared with 2005
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Quarter Ended June 30,
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(dollars in millions) 2006 2005 Change
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Revenue $ 418.2 $ 391.2 7%
Cost of goods sold, services and rentals $ 347.7 $ 308.1 13%
Selling, general and administrative $ 36.3 $ 33.4 9%
Loss on investment $ -- $ 2.2 -100%
Income taxes $ 11.7 $ 17.7 -34%
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Net income $ 30.2 $ 29.4 3%
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Consolidated revenue for the second quarter of 2006 increased $27.0 million, or 7 percent, compared with the second quarter of 2005. This increase was due principally to $22.6 million higher revenue for ocean transportation, $9.8 million growth in logistics services revenue, $5.6 million higher revenue for food products and $5.0 million higher revenue from real estate leasing (after excluding leasing revenue from assets classified as discontinued operations), partially offset by $14.5 million in lower revenue from real estate sales (after excluding revenue from discontinued operations). The reasons for the revenue growth are described below, by business segment, in the Analysis of Operating Revenue and Profit.
Costs of goods sold, services and rentals for the second quarter of 2006 increased $39.6 million, or 13 percent, compared with the second quarter of 2005 due to $36.7 million higher costs for ocean transportation, $7.9 million in higher purchased transportation costs at the Matson Integrated Logistics business, $3.1 million in higher costs for the food products segment (primarily as a result of higher sugar sales volume), partially offset by $9.1 million lower cost of real estate sales (after excluding real estate sales classified as discontinued operations).
Selling, general and administrative costs for the second quarter of 2006 were $2.9 million, or 9 percent, higher than the second quarter of 2005 due principally to higher professional service fees, salaries, and related employee benefit costs.
Income taxes were lower than the second quarter of 2005, on a percentage basis, due to a change in the effective income tax rate. The effective tax rate for 2006 was reduced from 38% to 37.5% as a result of a land donation and tax credits.
Consolidated - First half of 2006 compared with 2005
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Six Months Ended June 30,
-------------------------------------------------------------------------------------------
(dollars in millions) 2006 2005 Change
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Revenue $ 779.5 $ 755.0 3%
Cost of goods sold, services and rentals $ 641.4 $ 585.5 10%
Selling, general and administrative $ 72.1 $ 65.5 10%
Loss on investment $ -- $ 2.2 -100%
Income taxes $ 28.7 $ 38.0 -24%
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Net income $ 67.6 $ 67.1 1%
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Consolidated revenue for the first half of 2006 increased $24.5 million, or 3 percent, compared with the first half of 2005. This increase was due principally to $35.7 million higher revenue for ocean transportation, $22.1 million growth in logistics services revenue, and $9.0 million higher revenue from real estate leasing (after excluding leasing revenue from assets classified as discontinued operations), partially offset by $34.9 million in lower revenue from real estate sales (after excluding revenue from discontinued operations). The reasons for the revenue growth are described below, by business segment, in the Analysis of Operating Revenue and Profit.
Costs of goods sold, services and rentals for the first half of 2006 increased $55.9 million, or 10 percent, compared with the first half of 2005 due to $58.7 million in higher costs for ocean transportation, $17.8 million in higher purchased transportation costs for the logistics business, partially offset by $19.0 million in lower cost of real estate sales (after excluding real estate sales classified as discontinued operations) and $3.3 million gain on the sale of two surplus and obsolete vessels.
Selling, general and administrative costs for the first half of 2006 were $6.6 million, or 10 percent, higher than the first half of 2005 due to the same factors cited for the second quarter increase.
Income taxes were lower than the first half of 2005 due primarily to the same factors cited for the second quarter decrease.
ANALYSIS OF OPERATING REVENUE AND PROFIT
TRANSPORTATION INDUSTRY
Ocean Transportation - Second quarter of 2006 compared with 2005
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Quarter Ended June 30,
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(dollars in millions) 2006 2005 Change
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Revenue $ 243.6 $ 221.0 10%
Operating profit $ 24.4 $ 38.7 -37%
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Volume (Units)
Hawaii containers 44,600 44,700 --
Hawaii automobiles 33,800 43,300 -22%
Guam containers 3,900 4,200 -7%
China containers 7,500 -- NM
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Ocean Transportation revenue for the second quarter of 2006 was $22.6 million, or 10 percent, higher than the second quarter of 2005. Of this increase, approximately $16.3 million was due to overall container volume increases for Matson's services, $13.3 million was due to increases in fuel surcharge revenues, and $4.6 million was due to improved yields and cargo mix. These increases were partially offset by approximately $8.9 million from the loss of vessel charter revenue resulting from the expiration of the APL Alliance in the first quarter of 2006. Matson's Hawaii automobile volume for the quarter was 22 percent lower than the first quarter of last year, due primarily to the impact of reduced auto manufacturer incentives for rental car agencies, which resulted in lower rental car turnover, as well as competitive pressures. Total Hawaii container volume was down slightly from the second quarter of 2005, reflecting primarily a reduction in eastbound volumes, including lower shipments of agricultural products and lower military-related household good movements. Guam container volume was down slightly from the second quarter of 2005, primarily due to the transition in vessel schedules.
Operating profit was $14.3 million, or 37 percent, lower than the second quarter of 2005. This decrease was primarily the result of the following operating expense changes, which offset revenue increases. Direct fuel costs increased by $15.9 million, vessel operating and overhead expenses increased $5.6 million primarily due to the China service startup, and terminal handling costs increased $3.8 million due to increased rates. Outside transportation costs, which include barge and trucking expenses paid to third parties, increased $2.4 million and G&A expense increased $2.1 million. Earnings from Matson's SSAT joint venture contributed $0.7 million more than the second quarter of 2005. Earnings from joint ventures are not included in revenue, but are included in operating profit.
Ocean Transportation - First half of 2006 compared with 2005
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Six Months Ended June 30,
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(dollars in millions) 2006 2005 Change
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Revenue $ 462.9 $ 427.2 8%
Operating profit $ 42.7 $ 68.4 -38%
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Volume (Units)
Hawaii containers 86,400 86,100 --
Hawaii automobiles 65,600 78,900 -17%
Guam containers 7,700 8,200 -6%
China containers 9,500 -- NM
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Ocean Transportation revenue for the first half of 2006 was $35.7 million, or 8 percent, higher than the first half of 2005. Of this increase, approximately $21.0 million was due to increases in fuel surcharge revenues, $17.9 million was due to overall container volume increases for Matson's services, and $7.2 million was due to improved yields and cargo mix. These increases were partially offset by $11.4 million of lower vessel charter revenue, resulting from the expiration of the APL Alliance. Total Hawaii automobile volume was 17 percent lower, due primarily to competitive pressures and reduced shipments to rental agencies as noted previously. Guam container volume was 6 percent lower than in the first half of 2005, due primarily to changes in vessel schedules.
Operating profit was $25.7 million, or 38 percent, lower than the first half of 2005. This decrease was primarily the result of the following operating expense changes, which offset revenue increases. Direct fuel costs increased $28.2 million, vessel operating and overhead expenses increased $5.6 million primarily due to the China service startup, and terminal handling costs increased $7.4 million due to increased rates. Outside transportation costs increased $3.8 million and G&A expense increased $3.3 million. Matson's SSAT joint venture contributed $3.6 million less than the first half of 2005, due primarily to a favorable adjustment made during the first half of 2005. Earnings from this venture are not included in revenue, but are included in operating profit. These decreases were partially offset by a $3.3 million gain on the sale of two surplus and obsolete vessels.
Logistics Services - Second quarter of 2006 compared with 2005
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Quarter Ended June 30,
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(dollars in millions) 2006 2005 Change
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Revenue $ 116.4 $ 106.6 9%
Operating profit $ 5.3 $ 3.6 47%
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Integrated logistics revenue increased by $9.8 million, or 9 percent, for the second quarter of 2006 compared with the second quarter of 2005. This growth was the result of continued improvements in yields and an 11 percent increase in highway and less-than-truckload volumes, partially offset by lower volumes in domestic and international intermodal services.
Integrated logistics operating profit increased by $1.7 million, or 47 percent, for the second quarter of 2006 compared with the second quarter of 2005. The increased operating profit was the result of higher yields in all service categories and lower general and administrative costs as a percentage of revenue.
The revenue for integrated logistics services includes the total amount billed to customers for transportation services. The primary costs include purchased transportation services. As a result, the operating profit margins for this business are narrower than other A&B businesses. The primary operating profit and investment risk for this business is the quality of receivables, which is monitored closely.
Logistics Services - First half of 2006 compared with 2005
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Six Months Ended June 30,
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(dollars in millions) 2006 2005 Change
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Revenue $ 224.8 $ 202.7 11%
Operating profit $ 10.0 $ 6.6 52%
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Integrated logistics revenue increased by $22.1 million, or 11 percent, for the first half of 2006 compared with the first half of 2005. This growth was the result of continued improvements in mix of business and rates, and a 15 percent increase in highway and less-than-truckload volumes, partially offset by a 22 percent decrease in international intermodal volume.
Integrated logistics operating profit increased by $3.4 million, or 52 percent, for the first half of 2006 compared with the first half of 2005. The operating profit improvement was the result of higher yields in all service categories and lower general and administrative costs as a percentage of revenue.
REAL ESTATE INDUSTRY
Real estate leasing and sales revenue and operating profit are analyzed before subtracting amounts related to discontinued operations. This is consistent with how the Company's management evaluates and makes decisions for the Company's real estate businesses. A discussion of discontinued operations for the real estate business is included separately.
Leasing- Second quarter of 2006 compared with 2005
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Quarter Ended June 30,
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(dollars in millions) 2006 2005 Change
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Revenue $ 24.4 $ 21.3 15%
Operating profit $ 12.2 $ 10.5 16%
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Occupancy Rates:
Mainland 98% 95% 3%
Hawaii 98% 92% 6%
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Leasable Space (million sq. ft.):
Mainland 3.7 3.5 6%
Hawaii 1.5 1.7 -12%
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Real estate leasing revenue and operating profit for the second quarter of 2006 were 15 percent and 16 percent higher, respectively, than the amounts reported for the second quarter of 2005. These increases were due principally to $2.8 million of revenue and $1.4 million of contribution margin from four properties acquired subsequent to the second quarter of 2005, the results from the completion of a new Oahu commercial development during the second half of 2005, and higher interest income earned on 1031 escrow funds. The higher occupancy rate for the Hawaii commercial leasing portfolio was principally due to the addition of Kunia Shopping Center, a new Oahu commercial development that was fully leased upon completion, the addition of Lanihau Shopping Center, a fully-leased retail center in Kailua-Kona on the island of Hawaii subsequent to the first half of 2005, and higher leasing activity at existing properties.
Leasing- First half of 2006 compared with 2005
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Six Months Ended June 30,
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(dollars in millions) 2006 2005 Change
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Revenue $ 49.0 $ 43.2 13%
Operating profit $ 24.3 $ 21.2 15%
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Occupancy Rates:
Mainland 97% 95% 2%
Hawaii 98% 91% 7%
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Real estate leasing revenue and operating profit for the first half of 2006 were 13 percent and 15 percent higher, respectively, than the amounts reported for the first half of 2005. Additionally, the Hawaii commercial leasing portfolio's occupancy rate increased by 7 percent. These increases were due to the same reasons as cited for the quarter.
Real Estate Sales - Second quarter and first half of 2006 compared with 2005
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Quarter Ended June 30,
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(dollars in millions) 2006 2005 Change
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Revenue $ 36.8 $ 14.6 2.5x
Operating profit $ 10.9 $ 4.8 2.3x
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Six Months Ended June 30,
--------------------------------------------------------------------------------
(dollars in millions) 2006 2005 Change
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Revenue $ 60.6 $ 60.5 --
Operating profit $ 38.0 $ 21.3 78%
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2006 Second Quarter: Real estate sales revenue, before subtracting amounts treated as discontinued operations, was $36.8 million and was principally comprised of the sale of two retail centers in Phoenix, Arizona and one commercial parcel on Maui. Operating profit for the second quarter of 2006 included the Company's share of $1.7 million in marketing and other operating expenses of its real estate joint ventures.
2006 First Half: Revenue for the first half of 2006 also included first quarter revenue of $23.8 million, principally related to the sales of a Maui office building, four commercial parcels on Maui, a commercial property on Oahu and a vacant parcel on Kauai. Operating profit for the first half of 2006 also included $12.2 million for the Company's earnings from its real estate joint ventures (which are not included in revenue for the segment). The $12.2 million in joint venture earnings principally relates to a portion of the Company's earnings from its Hokua joint venture, which completed sales of all 247 residential condominium units in the first quarter.
2005 Second Quarter: Revenue for the second quarter of 2005, before subtracting amounts treated as discontinued operations, was principally due to the receipt of the final 80-percent installment payment of $14.1 million for a 30-acre development parcel at Wailea. In addition to the profit contribution from that sale, 2005 second quarter operating profit included $0.8 million for the Company's share of earnings from its real estate joint ventures.
2005 First Half: Real estate sales for the first half of 2005 also included first quarter sales revenue from the sale of a warehouse/distribution complex in Ontario, California for $17.8 million, seven Maui and Oahu commercial properties for $7.6 million, a residential development parcel and three residential properties for $7.5 million, a service center/warehouse complex comprised of three buildings in San Antonio, Texas for $6.3 million, and 5.5 office condominium floors for $5.5 million. In addition to the profit contribution from these sales, 2005 first half operating profit included approximately $1.8 million for the Company's share of earnings from its real estate joint ventures.
The mix of real estate sales in any year or quarter can be diverse. Sales can include developed residential real estate, commercial properties, developable subdivision lots, undeveloped land, and property sold under threat of condemnation. The sale of undeveloped land and vacant parcels in Hawaii generally provides a greater contribution to earnings than does the sale of developed and commercial property, due to the low historical-cost basis of the Company's Hawaii land. Consequently, real estate sales revenue trends, cash flows from the sales of real estate and the amount of real estate held for sale on the balance sheets do not necessarily indicate future profitability trends for this segment. Additionally, the operating profit reported in each quarter does not necessarily follow a percentage of sales trends because the cost basis of property sold can differ significantly between transactions. The reporting of real estate sales is also affected by the classification of certain real estate sales as discontinued operations.
Real Estate Discontinued Operations - 2006 compared with 2005
The revenue and operating profit on real estate discontinued operations for the second quarter and first half of 2006 and 2005 were as follows:
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Quarter Ended June 30, Six Months Ended June 30,
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(dollars in millions, before tax) 2006 2005 2006 2005
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Sales revenue $ 36.7 -- $ 59.6 $ 24.5
Leasing revenue $ 0.8 $ 2.6 $ 2.1 $ 5.3
Sales operating profit $ 15.0 -- $ 30.0 $ 6.3
Leasing operating profit $ 0.6 $ 1.0 $ 1.2 $ 2.1
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2006: The sales of two retail centers in Phoenix, Arizona for $35.6 million, an office building on Maui for $15.7, and several commercial parcels in Hawaii. Additionally, the revenue and expenses of a commercial parcel on Maui have been classified as discontinued operations because of the Company's plan to sell this property.
2005: The sales of one warehouse/distribution complex in Ontario, California, for $17.8 million, one service center/warehouse complex, consisting of three buildings in San Antonio, Texas, for $6.3 million, an office building in Wailuku, Maui, two office buildings in downtown Honolulu, and the fee interest in a parcel in Maui were included in discontinued operations.
The leasing revenue and operating profit noted above includes the results for properties that were sold through June 30, 2006 and the operating results of a commercial parcel on Maui that the Company intends to sell within the next 12 months. The leasing revenue and operating profit for the second quarter of 2005 have been restated to reflect property that was classified as discontinued operations subsequent to June 30, 2005.
FOOD PRODUCTS INDUSTRY
Food Products - Second quarter of 2006 compared with 2005
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Quarter Ended June 30,
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(dollars in millions) 2006 2005 Change
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Revenue $ 37.8 $ 32.2 17%
Operating profit $ 3.1 $ 0.3 10.3x
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Tons sugar produced 61,400 58,400 5%
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Food products revenue increased 17 percent for the second quarter of 2006 compared with 2005 due mainly to $2.1 million in equipment rentals, repair services and trucking, $1.6 million from higher bulk raw sugar sales stemming from higher sugar prices and increased sales volume, $1.5 million from higher power sales prices and volume, and $0.6 million in higher molasses sales prices.
Operating profit increased tenfold from the second quarter of 2005 due principally to $1.5 million in higher power sales, $0.8 million in higher equipment rentals, and $0.8 million in higher molasses and specialty sugar sales.
Food Products - First half of 2006 compared with 2005
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Six Months Ended June 30,
--------------------------------------------------------------------------------
(dollars in millions) 2006 2005 Change
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Revenue $ 53.3 $ 54.6 -2%
Operating profit $ 9.6 $ 9.3 3%
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Tons sugar produced 62,200 77,900 -20%
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Food products revenue decreased 2 percent for the first half of 2006 compared with 2005. Excluding the $5.5 million disaster relief payment received in 2005, revenue increased 9 percent due mainly to $2.9 million from higher power sales, $2.1 million in higher repair services and trucking revenue, $1.6 million in higher specialty sugar and molasses sales, and $1.1 million in higher equipment rentals and soil sales. Lower revenue of $4.2 million from lower sugar sales partially offset the previously noted increases.
Operating profit was 3 percent higher than the first half of 2005. However, excluding the $5.5 million disaster relief payment received in 2005, operating profit improved more than 150 percent, primarily due to $2.9 million in higher power sales, $1.5 million in higher equipment rentals, soil sales, repair services and trucking, $0.9 million in higher sugar sales margin as a result of higher sugar prices, and $0.4 in higher molasses sales.
Sugar production was 20 percent lower in 2006 than in 2005 because operations commenced one month later, as planned by the Company, than in the prior year. While the Company expects to make up the difference in production, any future impacts to the harvesting schedule, or unanticipated impacts to yields, could affect total year production.
As reported by national media, the island of Kauai experienced the heaviest rainfall in its recent history during March. Based on preliminary inspections of Company-owned reservoirs by both the Company and the State of Hawaii, it is believed that the facilities are sound, although certain remedial action will have to be taken. The Company is currently evaluating both the Kauai and the Maui reservoirs for any necessary follow-up action; the ultimate cost of the reservoir studies and remediation activities is not known at this time.
2006 OUTLOOK
The statements included herein contain forward looking information. The economic, operating results, trends and expectations noted below may be different from actual events; those differences might be significant and might affect, among other measures and trends, revenues, expenses, assets, liabilities, shareholders' equity and cash flows.
Although expectations for statewide economic growth in 2006 and beyond remain favorable, they are below the high rates of growth experienced in 2004 and 2005. However, the Company believes that the current economic outlook will continue to support its earnings growth expectations for 2006.
The first half's financial results were accompanied by favorable progress on major initiatives in both our ocean transportation and real estate segments. Based on the encouraging results of the strong start in 2006, the Company remains confident that progress on major real estate development projects and Matson's trans-Pacific expansion will position the Company for even stronger performance in the years to come.
Starting in the third quarter, revenue from the China Service should increasingly offset the fixed operating costs of the Guam and China services and the loss of charter revenue from the APL Alliance. As a result, the Company anticipates comparisons in the second half of 2006 will be much more favorable, with second half earnings to approach or perhaps match second half 2005. China volumes in the second quarter continued to ramp up nicely, offsetting lower than planned rates. In the Hawaii trade, cost increases will continue to be an important factor, with negotiated wage increases effective July 1, 2006 and an expectation of continued, but moderate, fuel cost increases. Matson Integrated Logistics produced an outstanding quarter, with positive year-over-year comparisons forecast for the remainder of 2006. The logistics segment is poised for continued growth, though margins may moderate somewhat from very high second quarter levels.
Real estate industry results for the second quarter reaffirm the expectation of full year growth that meets or exceeds the company's long-term annual growth target of 13-15%. For real estate sales, the majority of the Company's remaining property sales for 2006 are likely to take place in the fourth quarter. While the Hawaii residential market appears to be in transition, with lower sales volumes, and prices that appear to be leveling off, the Company's development projects and joint venture investments continue to perform well. At the Company's Kukui'ula project, which is being developed in a partnership with an affiliate of DMB Associates, Inc., 123 lots in the first two phases are being offered to members of the Founders program. As of late July 2006, approximately 70 non-binding letters of intent to purchase have been signed, and an additional 30 letters of intent are pending. Remaining lots are now being offered to members of Kukui'ula's Discoverers program, which consists of approximately 120 potential buyers. As reported in the Company's April 2006 quarterly earnings call, the Founders program had approximately 260 subscriptions. As of late July 2006, besides the 100 executed or pending letters of intent described above, approximately 40 Founders have cancelled their subscriptions, and the remaining 120 Founders will be making their decision on whether to purchase a lot in 2007. Sales contracts will be issued to buyers in the third quarter, with closings scheduled for the fourth quarter.
The Company projects that only a negligible amount of the Company's projected 2006 operating profit, and between 10% to 15% of its 2007 projected operating profit, both as a percentage of consolidated operating profit, is expected to be generated from residential sales that are not currently under binding contracts.
The real estate industry segment outlook is reinforced by continuing robust commercial real estate conditions that are reflected in particularly strong leased properties portfolio occupancy rates which reached a Company record 98% occupancy across its Hawaii and Mainland U.S. properties.
Should current market prices for sugar, power and molasses hold throughout the year, the food products segment should be modestly profitable for the balance of the year. Despite the absence of the one-time payment of $5.5 million received in 2005, the Company anticipates profitability at or near 2005 levels.
FINANCIAL CONDITION, LIQUIDITY, FINANCING ARRANGEMENTS AND CASH FLOWS
Liquid Resources: The Company's principal liquid resources, comprising cash and cash equivalents, receivables, sugar and coffee inventories and unused borrowing capacity on revolving credit and private placement shelf facilities, less accrued deposits to the CCF, totaled approximately $665 million at June 30, 2006, an increase of $45 million from December 31, 2005. The increase was due primarily to $44 million in higher available balances on revolving credit and private placement shelf facilities, $15 million in higher sugar and coffee inventories and $10 million in higher receivables balances, partially offset by $23 million of lower cash balances.
Balance Sheet: Working capital was $29 million at June 30, 2006, a decrease of $20 million from the balance carried at the end of 2005. The decrease in working capital was due primarily to lower cash balances, lower balances for real estate held for sale, and higher balances on revolving credit facilities. These factors were partially offset by higher balances for accounts receivable and higher inventory balances.
Cash and cash equivalents totaled $34 million at the end of the second quarter compared with $57 million at the beginning of the year. The lower balance is due principally to share repurchases, net deposits into the CCF, and capital expenditures.
Long-term Debt, including current portion, totaled $407 million at June 30, 2006 compared with a balance of $327 million at December 31, 2005. This $80 million increase was due mainly to capital expenditure financing and share repurchases.
The Company's net deferred tax obligation was $421 million at June 30, 2006 compared with $399 million at December 31, 2005. This $22 million increase was due principally to CCF deposits, and to a lesser extent, tax-deferred real estate sales.
Cash Flows and Capital Expenditures: Cash Flows from Operating Activities totaled $40 million for the first half of 2006, compared with $129 million for the first half of 2005. This decrease was principally the result of gains on the sale of properties that are classified as either investing cash flows or non-cash transactions, changes in current and deferred income tax and accounts receivable balances, and lower Matson earnings.
Capital expenditures for the first half of 2006 totaled $87 million compared with $174 million for the first half of 2005. The expenditures for the first half of 2006 relate primarily to equipment purchases for the ocean transportation segment and expenditures related to property development activities. The $174 million for the first half of 2005 relates primarily to the purchase of the MV Manulani for $144 million. The amounts reported in Capital Expenditures on the Statement of Cash Flows for the first half of 2006 exclude $33 million of tax-deferred purchases since the Company did not actually take control of the cash during the exchange period.
On July 12, 2006, the Company took delivery of the MV Maunalei. The purchase price for the MV Maunalei was $147 million. The purchase of the MV Maunalei was funded with the CCF, cash from operations, and borrowings under the DnB NOR revolving credit facility. The amount drawn under the DnB NOR revolving credit facility upon delivery of the ship totaled approximately $70 million and, in addition to providing partial financing for the ship, was used for other general corporate purposes.
On April 27, 2006, the Company announced a joint venture partnership with Gentry Investment Properties to develop Phase I of the Waiawa master-planned community in Central Oahu. The joint venture will act as the master developer for Phase I, selling development parcels to homebuilders. Phase I is planned and entitled for approximately 5,000 residential units, to be developed over a 10-year time frame. The Company's total equity contribution is expected to be approximately $50 million. Equity contributions will be made over the course of development, commencing upon the satisfaction of certain conditions that are expected to be met in the third quarter of 2006.
Tax-Deferred Real Estate Exchanges: Sales - During the first half of 2006, sales and condemnations proceeds which qualified for potential tax-deferral treatment under the Internal Revenue Code Sections 1031 and 1033 totaled approximately $58 million. The proceeds included the sales of two retail centers in Phoenix, Arizona, a Maui office building, three commercial parcels on Maui, and a vacant parcel on Kauai.
Purchases - During the first half of 2006, the Company acquired, using the proceeds from tax-deferred sales (including reverse 1031 transactions), property totaling approximately $66 million. The properties acquired with tax-deferred proceeds principally included a two-building office property in Salt Lake City, Utah, a two-building office complex in Plano, Texas, and a two-story office building in Sacramento, California.
The proceeds from 1031 tax-deferred sales are held in escrow pending future use to purchase new real estate assets. The proceeds from 1033 condemnations are held by the Company until the funds are redeployed.
The funds related to 1031 transactions are not included in the Statement of Cash Flows but are included as non-cash information below the Statement. For "reverse 1031" transactions, the Company purchases a property in anticipation of receiving funds in a future property sale. Funds used for reverse 1031 purchases are included as capital expenditures on the Statement of Cash Flows and the related sales of property, for which the proceeds are linked, are included as real estate sales in the Statement.
Commitments, Contingencies and Environmental Matters: A description of commitments and contingencies at June 30, 2006 is described in Note 3 to the financial statements of Item 1.
OTHER MATTERS
Investments: The Company's joint ventures are described in Item 8 of the Company's most recently filed Form 10-K.
Dividends: On April 27, 2006, A&B announced an increase in the second quarter 2006 dividend to 25 cents per share. The previous dividend was 22.5 cents per share. On June 22, 2006, the Company's Board of Directors announced a third-quarter 2006 dividend of 25 cents per share, payable on September 7, 2006 to shareholders of record as of the close of business on August 3, 2006.
Significant Accounting Policies: The Company's significant accounting policies are described in Note 1 of the consolidated financial statements included in Item 8 of the Company's most recently filed Form 10-K.
Critical Accounting Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, upon which the Management's Discussion and Analysis is based, requires that Management exercise judgment when making estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty and actual results will, inevitably, differ from those estimates. These differences could be material. The most significant accounting estimates inherent in the preparation of A&B's financial statements were described in Item 7 of the Company's 2005 Form 10-K.
New Accounting Standards: On July 13, 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes--an interpretation of FASB Statement No. 109" (FIN 48). This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The new rules will be effective for the Company in 2007. At this time, the Company has not completed its review and assessment of the impact of adoption of FIN 48.
Information about the impacts of other newly issued accounting standards are discussed in the Company's most recently filed Form 10-K.
Officer and Management Changes: The following management changes occurred between April 1, 2006 and July 28, 2006.
Christopher J. Benjamin was named treasurer of A&B effective May 1, 2006. Mr. Benjamin was also named treasurer of A&B Properties, Inc, and continues in the positions of senior vice president and chief financial officer of A&B.
W. Allen Doane was named chairman of the boards of A&B and Matson effective April 28, 2006. Mr. Doane is also president and chief executive officer of A&B.
Paul K. Ito was promoted to controller of A&B effective May 1, 2006.
Charles M. Stockholm retired as chairman of the boards of A&B and Matson effective April 27, 2006.
Thomas A. Wellman resigned as vice president, treasurer and controller of A&B effective May 1, 2006. He also resigned from other subsidiaries in which he held officer positions.
Ruthann S. Yamanaka resigned as vice president human resources of A&B, effective May 13, 2006.
John B. Kelley, vice president investor relations of A&B, passed away on May 24, 2006.
Information concerning market risk is incorporated herein by reference to Item 7A of the Company's Form 10-K for the fiscal year ended December 31, 2005. There has been no material change in the quantitative and qualitative disclosure about market risk since December 31, 2005.
(a) Disclosure Controls and Procedures. The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company's disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act.
(b) Internal Control Over Financial Reporting. There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II. OTHER INFORMATION
Issuer Purchases of Equity Securities
-------------------------------------------------------------------------------------------------------------------------------
Total Number of Maximum Number
Shares Purchased as of Shares that
Part of Publicly May Yet Be Purchased
Total Number of Average Price Announced Plans Under the Plans
Period Shares Purchased Paid per Share or Programs or Programs
-------------------------------------------------------------------------------------------------------------------------------
Apr 1 - 30, 2006 -- -- -- --
-------------------------------------------------------------------------------------------------------------------------------
May 1 - 31, 2006 -- -- -- --
-------------------------------------------------------------------------------------------------------------------------------
Jun 1 - 30, 2006 1,184,000 $46.25 (1) 1,184,000 816,000
-------------------------------------------------------------------------------------------------------------------------------
|
(1) On December 9, 2004, A&B's Board of Directors authorized A&B to repurchase up to two million shares of its common stock through December 31, 2006. In June 2006, A&B purchased 200,000 shares on the open market at an average price of $42.35. Additionally, the Company also entered into an accelerated share repurchase agreement ("ASR") with Goldman, Sachs & Co. ("Goldman") on June 27, 2006 to repurchase shares of A&B's common stock for an aggregate purchase price of approximately $63 million. The maximum average price paid per share that will be paid under the ASR is $46.83, which is based on 984,000 and 361,342 shares delivered on June 30, 2006 and July 12, 2006, respectively. The average price per share paid to date under the ASR may not be representative of the final average repurchase price per share because A&B may receive additional shares for no additional consideration. Under the terms of the ASR, the Company may receive up to an additional 184,099 shares upon termination of the agreement in a third installment based on the volume weighted average price of A&B's common stock from July 8, 2006 through to the end of the termination period, which may be determined by Goldman in its discretion from September 8, 2006 through November 10, 2006. A&B has no further obligation to provide additional cash or to issue additional shares under the agreement, and consequently, any additional shares received would reduce the final average price paid per share. The final average repurchase price per share under the ASR is expected to range from $41.19 to $46.83. Through July 28, 2006, our total share repurchases totaled 1,545,342 shares for $71.5 million at an average price of $46.25 per share.
10.a.(lv) Amendment No. 3 dated July 7, 2006, to Shipbuilding Contract (Hull BN460) between Aker Philadelphia Shipyard, Inc. and Matson Navigation Company, Inc., dated February 14, 2005.
10.b.1.(xiv) Amendment No. 4 to the Alexander & Baldwin, Inc. 1998 Stock Option/Stock Incentive Plan, effective June 22, 2006.
10.b.1.(xv) Form of Restricted Stock Issuance Agreement pursuant to the Alexander & Baldwin, Inc. 1998 Stock Option/Stock Incentive Plan.
10.b.1.(xvi) Form of Non-Qualified Stock Option Agreement pursuant to the Alexander & Baldwin, Inc. 1998 Stock Option/Stock Incentive Plan.
10.b.1.(xxiv) A&B Deferred Compensation Plan for Outside Directors, amended and restated effective January 1, 2005.
10.b.1.(xxv) A&B Excess Benefit Plan, amended and restated effective January 1, 2005.
10.b.1.(xxvi) A&B Executive Survivor/Retirement Benefit Plan, amended and restated effective January 1, 2005.
10.b.1.(xxvii) A&B 1985 Supplemental Executive Retirement Plan, amended and restated effective January 1, 2005.
10.b.1.(xlii) Alexander & Baldwin, Inc. Deferred Compensation Plan, amended and restated effective January 1, 2005.
31.1 Certification of Chief Executive Officer, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32 Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: July 28, 2006 /s/ Christopher J. Benjamin
--------------------------------------
Christopher J. Benjamin
Senior Vice President,
Chief Financial Officer and
Treasurer
Date: July 28, 2006 /s/ Paul K. Ito
--------------------------------------
Paul K. Ito
Controller
|
EXHIBIT INDEX
10.a.(lv) Amendment No. 3 dated July 7, 2006, to Shipbuilding Contract (Hull BN460) between Aker Philadelphia Shipyard, Inc. and Matson Navigation Company, Inc., dated February 14, 2005.
10.b.1.(xiv) Amendment No. 4 to the Alexander & Baldwin, Inc. 1998 Stock Option/Stock Incentive Plan, effective June 22, 2006.
10.b.1.(xv) Form of Restricted Stock Issuance Agreement pursuant to the Alexander & Baldwin, Inc. 1998 Stock Option/Stock Incentive Plan.
10.b.1.(xvi) Form of Non-Qualified Stock Option Agreement pursuant to the Alexander & Baldwin, Inc. 1998 Stock Option/Stock Incentive Plan.
10.b.1.(xxiv) A&B Deferred Compensation Plan for Outside Directors, amended and restated effective January 1, 2005.
10.b.1.(xxv) A&B Excess Benefit Plan, amended and restated effective January 1, 2005.
10.b.1.(xxvi) A&B Executive Survivor/Retirement Benefit Plan, amended and restated effective January 1, 2005.
10.b.1.(xxvii) A&B 1985 Supplemental Executive Retirement Plan, amended and restated effective January 1, 2005.
10.b.1.(xlii) Alexander & Baldwin, Inc. Deferred Compensation Plan, amended and restated effective January 1, 2005.
31.1 Certification of Chief Executive Officer, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
ALEXANDER & BALDWIN, INC.
1998 STOCK OPTION/STOCK INCENTIVE PLAN
The Alexander & Baldwin, Inc. 1998 Stock Option/Stock Incentive Plan, as previously amended (the "Plan"), is hereby further amended, effective as of June 22, 2006, as follows:
1. Section I.B of Article Five of the Plan is hereby amended in its entirety to read as follows:
B. The Plan Administrator may, in its discretion, provide any or all holders of options, restricted stock awards or any other share right awards pursuant to which shares of Common Stock are to be issued under the Plan with the right to use shares of Common Stock in satisfaction of all or part of the Withholding Taxes to which such holders may become subject in connection with the exercise of their options, the issuance to them of vested shares or the subsequent vesting of shares of restricted stock issued to them. Such right may be provided to any such holder in either or both of the following formats and shall be subject to such terms, procedures and conditions governing its exercise as the Plan Administrator may establish at the time such right is granted:
The following limitations shall be in effect for restricted stock awards and other share right awards (other than stock options):
(i) The right to use shares of Common Stock in satisfaction of all or part of the Withholding Taxes which become due upon the issuance of vested shares pursuant to a share right award or the subsequent vesting of a restricted stock award shall apply to share right awards or restricted stock awards outstanding on June 22, 2006 or made at any time on or after that date.
(ii) The shares of Common Stock withheld in satisfaction of all or part of the Withholding Taxes which become due upon the issuance of vested shares pursuant to a share right award or the vesting of a restricted stock award shall reduce on a share-for-share basis the number of shares of Common Stock authorized for issuance under the Plan. Accordingly, the share reserve under Section V of Article One shall be reduced by the gross number of shares of Common Stock which vest under such share right award or restricted stock award, and not by the net number of shares actually issued after the applicable Withholding Taxes have been collected.
(iii) The shares of Common Stock delivered in satisfaction of all or part of the Withholding Taxes which become due upon the subsequent vesting of restricted stock awards shall not be added to the shares of Common Stock authorized for issuance under the Plan and, accordingly, shall not increase the share reserve under Section V of Article One.
For purposes of this Section I.B, the term Withholding Taxes shall mean the minimum federal, state and local income taxes and the employee portion of the federal, state and local employment taxes required to be withheld by the Corporation in connection with the issuance of shares of Common Stock under the Plan, whether pursuant to a stock option exercise or the vesting of any restricted stock or other stock-based award.
2. Except as modified by this Amendment No. 4, all the terms and provisions of the Plan as currently in effect shall continue in full force and effect.
IN WITNESS WHEREOF, Alexander & Baldwin, Inc. has caused this Amendment No. 4 to be executed on its behalf by its duly-authorized office as of the date first written above.
ALEXANDER & BALDWIN, INC.
By /s/ Nelson N. S. Chun ------------------------------ Its Senior Vice President By /s/ Alyson J. Nakamura ------------------------------ Its Secretary |
A&B DEFERRED COMPENSATION PLAN
FOR OUTSIDE DIRECTORS
(Amended and Restated Effective as of January 1, 2005)
Alexander & Baldwin, Inc. ("A&B") hereby provides Directors of A&B who are not A&B employees ("Outside Directors") the opportunity to defer payment of retainer and meeting fees in accordance with the following:
IN WITNESS WHEREOF, Alexander & Baldwin, Inc. has caused this plan to be executed and its seal to be affixed hereunder by its officers thereunto duly authorized, effective as of January 1, 2005.
ALEXANDER & BALDWIN, INC.
By /s/ Nelson N. S. Chun ------------------------------ Its Senior Vice President By /s/ Alyson J. Nakamura ------------------------------ Its Secretary |
As a participant in the A&B Deferred Compensation Plan For Outside Directors, I make the following elections with respect to deferral of director's fees. I understand that my elections will apply to all future director's fees I may earn and that my elections will remain in effect until changed or revoked in writing.
2. Deferral (for those who did not mark "No Deferral") I elect to defer payment of all or a portion of my director's fees as indicated below:
Board and Committee
Annual Retainer Fee Meeting Attendance Fees
------------------- -----------------------
50% [ ] [ ]
l00% [ ] [ ]
|
I understand that all deferred payments are expected to be made on or about January 15 of the year in which they are scheduled to be made.
I acknowledge that all deferred amounts will be subject to the terms of the A&B Deferred Compensation Plan For Outside Directors, a copy of which I have received.
--------------------------------------
Outside Director
State of Hawaii )
) SS:
City and County of Honolulu )
|
On this _____ day of ________________, 20____, before me appeared ______________________________________, to me known to be the person described in and who executed the foregoing instrument and acknowledged that he/she executed the foregoing instrument and acknowledged that he/she executed the same as his/her free act and deed.
Accepted and approved this
_____ day of _____________, 20____
ALEXANDER & BALDWIN, INC.
By _______________________________
Attachment 1 (cont'd.)
As a participant in the A&B Deferred Compensation Plan For Outside Directors, I make the following elections with respect to deferral of director's fees. I understand that my elections will apply to all future director's fees I may earn and that my elections will remain in effect until changed or revoked in writing.
2. Deferral (for those who did not mark "No Deferral") I elect to defer payment of all or a portion of my director's fees as indicated below:
Board and Committee
Annual Retainer Fee Meeting Attendance Fees
------------------- -----------------------
50% [ ] [ ]
l00% [ ] [ ]
|
I understand that all deferred payments are expected to be made on or about January 15 of the year in which they are scheduled to be made.
I acknowledge that all deferred amounts will be subject to the terms of the A&B Deferred Compensation Plan For Outside Directors, a copy of which I have received.
--------------------------------------
Outside Director
State of California )
) SS:
County of _________________ )
|
On this _____ day of ________________, 20____, before me, a Notary
Public in and for the State of California, personally appeared
___________________________, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person whose name is subscribed to
this instrument, and acknowledged that such person executed it.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal in the County of _________________ the day and year in this certificate
first above written.
Accepted and approved this
_____ day of _____________, 20____
ALEXANDER & BALDWIN, INC.
By _______________________________
A&B DEFERRED COMPENSATION PLAN FOR OUTSIDE DIRECTORS
(please type or print)
________________________________________ _________________________
Outside Director Social Security No.
Last Name, First Name, Middle Initial
Check appropriate box:
[ ] Initial Designation [ ] Beneficiary Change
|
I hereby designate the following beneficiaries to receive after my death all payments otherwise due me under the A&B Deferred Compensation Plan For Outside Directors after the date of my death, in such amounts and at such times as such payments would have been made to me had I lived (one or more beneficiaries may be designated):
Primary Beneficiary
-------------------
Name ______________________________ Relationship _________________
Address ___________________________
___________________________
Contingent Beneficiary
----------------------
Name ______________________________ Relationship _________________
Address ___________________________
___________________________
|
Payment under the Plan shall be made to my Primary Beneficiary unless my Primary Beneficiary does not survive me for thirty (30) days, in which event payment shall be made to my Contingent Beneficiary, provided that he or she survives me for thirty (30) days. This designation shall supersede all previous designations made by me under the Plan. I reserve the right to change this designation at any time.
Forward this form to the A&B Human Relations Department, 822 Bishop Street, Honolulu, Hawaii 96813.
Acknowledged by ______________________________ Date ___________________ A&B Human Relations Dept.
A&B EXCESS BENEFITS PLAN
Amended and Restated Effective January 1, 2005
ARTICLE I
ESTABLISHMENT AND PURPOSE
ARTICLE II
DEFINITIONS
The following terms have the meanings indicated:
2.00. "Actuarial Equivalent" means a form of benefit differing in time period, or manner of payment from a specified benefit provided in the Plan, but having the same present value when determined in accordance with generally accepted actuarial practice and the rules contained in Appendix C of this Plan.
2.01. "A&B" means Alexander & Baldwin, Inc. and its affiliates and their successors.
2.02. "A&B Master Trust Agreement" means the Alexander & Baldwin, Inc. Retirement and Pension Trust Agreement, as amended from time to time.
2.03. "A&B Retirement Plan" means the A&B Retirement Plan for Salaried Employees.
2.04. "A&B Profit Sharing Plan" means the Alexander & Baldwin, Inc. Profit Sharing Retirement Plan, as amended from time to time.
2.05. "Administrator" means the person specified in Section 5.01.
2.06. "Beneficiary" means the person or persons designated by the Participant as such in accordance with the provisions of Section 4.01(f) and to whom the benefit, if any, provided for in Section 4.01(e) is payable.
2.07. "Board of Directors" means the Board of Directors of Alexander & Baldwin, Inc.
2.08. "Fair Market Value" shall, with respect to the per share valuation of A&B common stock on any relevant date, be the mean between the highest and lowest selling prices per share of A&B common stock on such date, as quoted on the NASDAQ National Market (or any successor system). Should A&B common stock become traded on a national securities exchange, then the Fair Market Value per share shall be the mean between the highest and lowest selling prices on such exchange on the date in question, as such prices are quoted on the composite tape of transactions on such exchange. If there is no reported sale of A&B common stock on the NASDAQ National Market (or national securities exchange) on the date in question, then the Fair Market Value shall be the mean between the highest and lowest selling prices on the NASDAQ National Market (or such securities exchange) on the last preceding date for which such quotation exists.
2.09. "Participant" means an eligible employee selected by the Administrator pursuant to Section 3.02.
2.10. "Plan" means the plan set forth in this document, as amended from time to time.
2.11. "Section 16 Insider" shall mean any Participant who is, at the time of the relevant determination or was at any time within the immediately preceding six (6) months, an officer or director of A&B subject to the short-swing profit restrictions of Section 16(b) of the Securities Exchange Act of 1934, as amended.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
(a) transfer from Alexander & Baldwin, Inc. to a subsidiary of Alexander & Baldwin, Inc.;
(b) transfer from a subsidiary of Alexander & Baldwin, Inc. to Alexander & Baldwin, Inc.; and
(c) transfer from one subsidiary of Alexander & Baldwin, Inc. to another subsidiary of Alexander & Baldwin, Inc. Beginning with such transfer, and for the period of employment with the new employer, the new employer shall be obligated for all payments to the Participant required by Article IV of this Plan. The prior employer shall remain responsible for any payments to be made that pertain to the period of the Participant's participation while employed by that prior employer.
ARTICLE IV
BENEFITS
(1) An amount which is the Actuarial Equivalent of the benefit described in paragraphs (a) and (b) above.
(2) An amount which is the before-tax equivalent of the lower of two quotations obtained by the Administrator from insurance companies for the cost of a lifetime annuity that provides after-tax monthly benefits equivalent to those that a Participant would receive under this Plan if this Plan allowed monthly payments of the pension benefits hereunder.
Notwithstanding the foregoing, payment of any benefit described in this Section 4.01(c) may only be made following the Participant's "separation from service" within the meaning of section 409A of the Internal Revenue Code. In the case of a Participant who is a "key employee" (as defined in section 416(i) of the Internal Revenue Code without regard to paragraph (5) thereof), payment of any benefit described in this Section 4.01(c) may not be made until at least six months following the Participant's "separation from service" within the meaning of section 409A of the Internal Revenue Code.
(1) Prior to the closing of the transactions contemplated by the Asset Purchase Agreement by and among California and Hawaiian Sugar Company, Inc., A&B-Hawaii, Inc., McBryde Sugar Company, Limited, and Sugar Acquisition Corporation, and the Stock Sale Agreement by and between California and Hawaiian Sugar Company, Inc. and Citicorp Venture Capital, Ltd. (the "Closing Date"), all other provisions of the Plan notwithstanding, the retired former employees of California and Hawaiian Sugar Company who are listed in Appendix B of this Plan shall be eligible to receive the benefits shown in Appendix B, and no other benefits shall be paid to such retired former employees under the provisions of this Plan. Payment of these benefits shall be according to the terms shown in Appendix B, and no other provisions of this Plan shall affect the amount or the form of payment of these benefits.
(2) As of the Closing Date, all other provisions of this Plan notwithstanding, the obligation of this Plan to pay any benefit shown in Appendix B to the retired former employees of California and Hawaiian Sugar Company, Inc. listed in Appendix B shall cease, and the obligation to pay such benefits, with respect to any period on and after such date, is assumed by Sugar Acquisition Company.
(e) Entitlement to Alternate Death Benefits. In the event that a Participant dies prior to retirement, or prior to termination of employment, such Participant's Beneficiary shall be entitled to a death benefit determined as provided in Sections 4.01(e)(1), (2) and (3) in lieu of any other benefit provided by this Plan.
(1) The amount of the benefit provided by this
Section 4.01(e) shall equal the lump sum payment, if any, to which the
Participant would have been eligible if he/she had retired, or
terminated employment, immediately prior to his/her death.
(2) The amount in Section 4.01(e)(1) above shall be determined by assuming the Participant did not elect any optional form of payment under the A&B Retirement Plan.
(3) Payment of this benefit shall be made in a lump sum payment to the Beneficiary as soon as practicable after the death of the Participant.
(f) Beneficiary Designation. Each Participant shall, at the time he/she becomes a Participant, designate one or more persons as his/her Beneficiary for purposes of Section 4.01(e). The designation shall be made in the form prescribed by the Administrator and shall become effective when filed with the Administrator. A Participant may from time to time change his/her Beneficiary by filing a new designation form with the Administrator. Should the Participant die without having any effectively-designated surviving Beneficiary, then the Beneficiary shall be the spouse of the Participant, if then living. If there is no surviving spouse, then the Beneficiary shall be the Participant's children then living. If there are no living children, then the Beneficiary shall be the estate of the Participant.
No amount shall be credited to a Participant's account for a year unless the Participant is a participant in the A&B Profit Sharing Plan for that year.
From time to time, the value of each account shall be adjusted to reflect an investment return on the balance credited to such account, and such value and adjustments periodically shall be communicated to each Participant. Such periodic valuation shall be made as follows:
(1) The common stock-equivalent units will be credited, at the time dividends are paid on outstanding shares of A&B common stock, with an amount ("dividend-equivalent credits") equal to the dividends which otherwise would be paid if the number of common stock-equivalent units in the Participant's account were actually outstanding shares of A&B Common Stock.
(2) Dividend-equivalent credits will be applied in the manner of a dividend reinvestment plan to purchase additional common stock-equivalent units valued at Fair Market Value on the applicable dividend payment date.
(3) Pursuant to procedures determined by the Compensation and Stock Option Committee of the Board of Directors, or by the committee or individual(s) to which such authority is delegated, a Participant may elect to have all or a portion of the Participant's common stock-equivalent units converted into cash on the basis of the Fair Market Value (at date of conversion) of the shares of A&B common stock represented by such units; provided, however, that Participants may not make such an election if they are Section 16 Insiders at the time of such election. Any portion so converted to cash shall begin to earn interest in accordance with paragraph (a) above, and shall stop earning dividend-equivalent credits.
(4) Any common stock-equivalent units credited to a Participant's account shall automatically be converted into cash, on the basis of the Fair Market Value (at the date of conversion) of the shares of A&B common stock represented by such units, upon the Participant's termination of employment with A&B for any reason. Any amounts so converted to cash shall begin to earn interest in accordance with paragraph (a) above.
The account of each Participant shall be entered on the employer's books as a liability, payable when due out of general assets. Participant accounts shall not be funded by any trust or insurance contract; nor shall any assets be segregated or identified with any such account; nor shall any property or assets be pledged, encumbered, or otherwise subjected to a lien or security interest for payment of benefits.
ARTICLE V
ADMINISTRATION OF THE PLAN
ARTICLE VI
AMENDMENT AND TERMINATION
ARTICLE VII
MISCELLANEOUS PROVISIONS
ARTICLE VIII
ADOPTION BY SUBSIDIARIES
Any subsidiary of Alexander & Baldwin, Inc. that has adopted either the A&B Retirement Plan or the A&B Profit Sharing Plan may adopt this Plan for the benefit of its employees when one of its employees has been selected as a participant by the Administrator. Such adoption shall be authorized by a resolution of the Board of Directors of such subsidiary. In the event of such adoption of the Plan by a subsidiary of Alexander & Baldwin, Inc., the Administrator shall serve as agent of the subsidiary in administering the Plan. All power to amend, modify, or terminate the Plan shall continue as the unfettered prerogative of the Compensation and Stock Option Committee of the Board of Directors.
IN WITNESS WHEREOF, Alexander & Baldwin, Inc. has caused this Restatement to be executed on its behalf by its duly authorized officers, effective as of January 1, 2005.
ALEXANDER & BALDWIN, INC.
By /s/ Nelson N. S. Chun ------------------------------ Its Senior Vice President By /s/ Alyson J. Nakamura ------------------------------ Its Secretary |
APPENDIX A
1. R. F. Cameron
2. J. C. Couch
3. R. J. Donohue
4. F. L. Fleischmann
5. A. J. Haskell
6. G. S. Holaday
7. J. B. Kelley
8. M. J. Marks
9. C. B. Mulholland
10. G. Y. Nakamatsu
11. G. J. North
12. R. J. Pfeiffer
13. G. R. Rogers
14. R. H. Rothman
15. R. K. Sasaki
16. D. P. Scott
APPENDIX B
Participant's Name Fixed Spouse's Name
---------------------------- Date of Monthly Variable --------------------------- Date of Monthly
First MI Last Birth Benefit* Units First MI Last Birth Benefit**
----- -- ---- ------- -------- -------- ----- -- ---- ------- ---------
Paul A. Cooper 7/15/05 437.67 None
Edwin R. Duncan 4/08/20 396.36 Jean K. Duncan 4/02/19 66 2/3%
Harry J. Fitzgerald 10/26/19 358.58 Kathryn T. Fitzgerald 5/16/26 50%
Donald W. Hare 5/14/19 748.20 Dorothy P. Hare 5/21/19 66 2/3%
Lawrence A. Lindsay 2/25/25 786.04 Rita A. Lindsay 4/05/25 66 2/3%
Neil L. Pennington 5/12/23 613.16 Frances M. Pennington 5/28/25 66 2/3%
Frederick W. Schwer 4/26/19 228.40 Christine W. Schwer 8/14/18 66 2/3%
Lawson U. Williams 1/01/19 350.33 Mildred A. Williams 7/03/20 66 2/3%
Emmett V. Donovan (d) 11/06/18 304.05 June Donovan 6/10/22 66 2/3%
Edward F. Harder (d) 1/07/19 605.28 Bette Harder 3/02/20 66 2/3%
Robert O. Nagle (Note 1) 2/10/29 1333.50 658.85 Louise H. Nagle 2/06/28 100%
Robert O. Nagle (Note 2) 2/10/29 222.53 658.85 Louise H. Nagle 2/06/28 100%
Harold R. Somerset 9/25/35 801.30 190.69 Jean M. Somerset 10/26/36 66 2/3%
William H. Stewart 9/01/29 156.51 Margaret C. Stewart 5/23/29 66 2/3%
Deferred Vested Participant
---------------------------
Raymond L. Knecht 4/19/48 48.43
|
* The fixed monthly benefit payable plus the current value of the variable units are payable to the participant during the participant's lifetime except if payment option is a 66-2/3% (last survivor). In such case, if either participant or spouse dies, the survivor will receive 66-2/3% of the fixed monthly benefit or the current value of the variable units. The current value of the variable units shall be determined in the same way such value is determined under the provisions of the C and H Pension Plan for Salaried Employees.
** The monthly benefit equal to the percentage shown multiplied times the participant's monthly benefit is payable to the spouse named above after the death of the participant during the spouse's lifetime.
(d) Deceased.
Note 1: The preceding footnotes notwithstanding, this benefit shall not be
payable to Mr. Nagle or his surviving spouse on or after March 1, 1994.
Note 2: The preceding footnotes notwithstanding, this benefit shall only
be payable to Mr. Nagle or his surviving spouse on or after March 1,
1994.
APPENDIX C
When the terms of this Plan require the determination of a lump sum payment which is the Actuarial Equivalent of any other benefit provided by this Plan, the following rules shall apply to the calculation of such lump sum payment:
1. The mortality table used shall be the mortality table then in use by the A&B Retirement Plan for the purpose of determining lump sum payments to participants of such plan who are entitled to such payments.
2. The discount rate shall be the after-tax equivalent of the discount rate then in use by the A&B Retirement Plan for the purpose of determining lump sum payments to participants of such plan who are entitled to such payments. The after-tax equivalent rate shall be determined by multiplying discount rate in use by the A&B Retirement Plan by the excess of 100% over the tax effected marginal tax rate declared by the Committee.
3. The Committee shall declare the tax effected marginal tax rate at the beginning of each calendar year.
4. The tax effected marginal tax rate shall apply to lump sum payments made at any time during such calendar year and may not be changed during the year.
5. The value of the benefit to a Surviving Spouse which is included in a Participant's Retirement Income shall be included in the calculation of the lump sum payment to which the Participant is entitled. Unless stated otherwise, the benefit to the Surviving Spouse shall be deemed to apply only if the death of the Participant occurs on or after the date the Retirement Income is deemed to commence under the terms of the provision giving rise to the Participant's right to a lump sum payment.
6. If the terms of the Plan provide for a benefit such that if it were paid as a monthly benefit it could have commenced at more that one future date, then for purposes of calculating the lump sum that is the Actuarial Equivalent of such benefit, it shall be deemed that the benefit would have commenced at the earliest possible date.
7. The early retirement reduction factors, if any, used to calculate the lump sum which is the Actuarial Equivalent of the benefit provided by the provisions of paragraph 6.02(a) as a result of a Change in Control, shall be the factors applicable to Participants of the A&B Retirement Plan who terminate employment after attaining eligibility for early retirement regardless of the Participant's age as of the Change in Control date.
A&B EXECUTIVE SURVIVOR/RETIREMENT BENEFIT PLAN
Amended and Restated Effective January 1, 2005
ARTICLE I
l.0l Establishment of Plan. Alexander & Baldwin, Inc. established the A&B
---------------------
Executive Survivor/Retirement Benefit Plan (the "Plan"), effective
January 1, 1986.
l.02 Purpose of Plan. It is the purpose of the Plan to provide supplemental
---------------
retirement benefits and an optional supplemental death benefit for
certain designated executives of A&B. The Plan is intended to be exempt
from the participation, vesting, funding and fiduciary requirements of
Title I of the Employee Retirement Income Security Act of 1974 because
it provides benefits for a select group of highly compensated
management employees.
|
ARTICLE II
2.0l "Actuarial Equivalent" means a form of benefit differing in time,
period, or manner of payment from a specified benefit provided in the
Plan, but having the same present value when determined in accordance
with generally accepted actuarial practices, as more particularly
specified by the definition of the same term in the A&B Retirement
Plan.
2.02 "A&B" means Alexander & Baldwin, Inc., its affiliates, and their
successors.
2.03 "A&B Retirement Plan" means the A&B Retirement Plan for Salaried
Employees, as amended from time to time.
2.04 "Approved Early Retirement Date" means a date which meets each of the
following requirements:
(a) The Participant has attained age 55,
(b) The Participant has at least five Years of Service,
(c) The date has been approved by the Chief Executive Officer of A&B.
2.05 "Base Compensation" means base salary, including amounts deferred under
any deferral plan or arrangement with A&B, but excluding incentive
compensation and all other plans or forms of remuneration.
2.06 "Beneficiary" means the person, persons or entity designated pursuant
to Section 4.10.
2.07 "Board" means the Board of Directors of A&B.
2.08 "Change in Control" means a "Change in Control Event" as defined in
Internal Revenue Service Notice 2005-1 or any successor guidance issued
by the Internal Revenue Service. If a Change in Control shall take
place with respect to any company, a Change in Control shall be deemed
to have taken place with respect to any subsidiary of such company.
2.09 "Code" means the Internal Revenue Code of 1986, as amended.
2.10 "Committee" means the Compensation Committee of the Board.
2.11 "Disabled Participant." "Disabled" means a Participant who is unable to
perform substantially all of the material and substantial duties of her
or his regular position because of accidental bodily injury sustained
or disease originating after the date of such person's designation as a
Participant under this Plan. Notwithstanding the foregoing:
(i) if a Participant has been Disabled for a continuous period of
24 months, the Participant will cease to be considered
Disabled unless he or she is unable to perform any occupation
for which the Participant is or becomes reasonably qualified
by education, training or experience because of such bodily
injury or sickness; and
(ii) a Participant is not Disabled at any time that the Participant
is working for pay or profit at any occupation.
2.12 "Early Retirement Factor" means the reduction factors used to calculate
early retirement benefits under the A&B Retirement Plan for
participants of such plan who retire from active service at or after
attaining age 55.
2.13 "Final Base Compensation" means a Participant's Base Compensation in
effect at the time of the Participant's retirement, termination of
employment, termination of participation, death or disability,
whichever is applicable, computed as an annual amount by multiplying
the then applicable monthly Base Compensation in effect by 12.
2.14 "Immediate Change in Control Benefit" means the benefit described in
subsection 4.08(a).
2.15 "Involuntary Termination Benefit" means the benefit described in
Section 4.05.
2.16 "Normal Retirement Benefit" means ten annual amounts, each equal to the
percentage (which shall be not less than 5% nor greater than 35%) of
the Participant's Final Base Compensation as specified in such
Participant's individual Participating Agreement, payable in monthly
installments.
2.l7 "Normal Retirement Date" means the first day of the month coincident
with or next following the date the Participant attains age 65.
2.18 "Normal Survivor Benefit" means ten annual amounts, each equal to 50%
of the Participant's Final Base Compensation, payable in monthly
installments.
2.19 "Participant" means an employee who meets the conditions set forth in
Section 3.0l.
2.20 "Participation Termination Benefit" means the benefit described in
Section 4.06.
2.21 "Plan" means the plan set forth in this document, as amended from time
to time.
2.22 "Plan Termination Benefit" means the benefit described in Section 4.07.
2.23 "Pre-Retirement Survivor Benefit" means the benefit described in
Section 4.02.
2.24 "Prorated Retirement Benefit" means Normal Retirement Benefit
multiplied by the Proration Factor.
2.25 "Prorated Survivor Benefit" means Normal Survivor Benefit multiplied
by the Proration Factor.
2.26 "Proration Factor" means:
(a) In the case of a Participant who is a Participant in the A&B
1985 Supplemental Executive Retirement Plan, or who was a
former Participant in such plan, the ratio of (i) 300 minus
the number of completed months between the date of calculation
and the Participant's Normal Retirement Date, to (ii) 300.
(b) In the case of all other Participants, the ratio of (i) the
Participant's Years of Service as of the calculation date, to
(ii) the Years of Service the Participant would have earned at
his or her Normal Retirement Date had he or she remained in
employment status until such date.
2.27 "Vested Change in Control Benefit" means the benefit described in
Section 4.08(b).
2.28 "Years of Service" means the number of years and fractions of years
which qualify as Years of Credited Vesting Service as that term is
defined in the A&B Retirement Plan.
ARTICLE III
PARTICIPATION
-------------
3.0l Participation. Participants shall be management or highly compensated
-------------
employees who have been specifically designated as Participants by the
Chief Executive Officer of A&B, who have demonstrated insurability to
the satisfaction of A&B, and who have executed a Participation
Agreement (including a waiver of group life insurance coverage over
$50,000). Participation will begin on the date specified in the
Participation Agreement and shall continue until the earlier of
termination of the Participant's employee status or until a
determination by the Chief Executive Officer of A&B that the
Participant no longer is eligible to participate.
|
ARTICLE IV
4.01 Plan Benefits. A Participant shall be entitled to whichever of the
-------------
benefits provided by Sections 4.02 to 4.09 provides the greatest
benefit. Under no circumstance shall a Participant be entitled to
benefits provided by more than one such Section.
4.02 Pre-Retirement Survivor Benefit. The Beneficiary of a Participant who
-------------------------------
dies before termination of employment shall be entitled to receive a
Pre-Retirement Survivor Benefit consisting of the Normal Survivor
Benefit commencing as soon as practicable after the Participant's
death.
4.03 Normal Retirement Benefit.
-------------------------
(a) Eligibility. A Participant who meets the following
-----------
requirements shall be entitled to the Normal Retirement
Benefit described in subsection (b) below:
(1) The Participant has completed three years of participation
in the Plan; and
(2) The Participant separates from service on or after his or
her Normal Retirement Date.
(b) Benefit. A Participant's Normal Retirement Benefit shall be
-------
the benefit in paragraph (2) below unless prior to retirement,
the Participant has applied in writing to receive the benefit
in paragraph (1) below in lieu of the benefit in paragraph (2)
and the Committee has approved such request; provided that no
such request shall become effective until 12 months after the
date it is received by the Committee. If the Participant
should die before the request becomes effective, the benefit
in paragraph (2) below shall be payable. If the Participant
survives until the request becomes effective, the
Participant's Normal Retirement Benefit shall be the benefit
in paragraph (1) below.
(1) The Participant's Normal Survivor Benefit commencing
as soon as practicable after the Participant's death;
provided that no benefit shall be paid before the
Participant's request for this benefit becomes
effective 12 months after it is received by the
Committee as described above.
(2) The Participant's Normal Retirement Benefit
commencing as of the first day of the month following
his or her retirement; provided that in the case of a
Participant who is a "key employee" (as defined in
section 416(i) of the Internal Revenue Code without
regard to paragraph (5) thereof), the Participant's
Normal Retirement Benefit shall be paid no earlier
than six months following the Participant's
separation from service.
4.04 Approved Early Retirement Benefit.
---------------------------------
(a) Eligibility. A Participant who meets the following
-----------
requirements shall be entitled to the Approved Early
Retirement Benefit described in subsection (b) below:
(1) The Participant has completed three years of
participation in the Plan, and
(2) The Participant separates from service on or after
his or her Approved Early Retirement Date and before
his or her Normal Retirement Date.
(b) Benefit. A Participant's Approved Early Retirement Benefit
-------
shall be the benefit in paragraph (2) below unless prior to
retirement, the Participant has applied in writing to receive
the benefit in paragraph (1) below in lieu of the benefit in
paragraph (2) below and the Committee has approved such
request; provided that no such request shall become effective
until 12 months after the date it is received by the
Committee. If the Participant should die before the request
becomes effective, the benefit in paragraph (2) below shall be
payable. If the Participant survives until the request becomes
effective, the Participant's Approved Early Retirement Benefit
shall be the benefit in paragraph (1) below.
(1) The Participant's Normal Survivor Benefit commencing
as soon as practicable after the Participant's death;
provided that no benefit shall be paid before the
Participant's request for this benefit becomes
effective 12 months after it is received by the
Committee as described above.
(2) The Participant's Normal Retirement Benefit
multiplied by the Early Retirement Factor applicable
at the Participant's age as of his or her Approved
Early Retirement Date and commencing as of the first
day of the month following his or her retirement;
provided that in the case of a Participant who is a
"key employee" (as defined in section 416(i) of the
Internal Revenue Code without regard to paragraph (5)
thereof), the Participant's Approved Early Retirement
Benefit shall be paid no earlier than six months
following the Participant's separation from service.
4.05 Involuntary Termination Benefit.
-------------------------------
(a) Eligibility. A Participant who meets the requirements in
-----------
paragraph (1) and paragraph (2) shall be entitled to the
Involuntary Termination Benefit described in subsection
(b) below:
(1) The Participant has completed three years of
participation in the Plan, and
(2) The Participant separates from service due to
involuntary termination of employment.
(b) Benefit. A Participant's Involuntary Termination Benefit shall
-------
be a lump sum payment which is the greater of the Actuarial
Equivalent of the benefits defined in paragraph (1) below or
the Actuarial Equivalent of the benefits defined in paragraph
(2) below. The Involuntary Termination Benefit shall be paid
as soon as practicable after the date of the Participant's
involuntary termination; provided that in the case of a
Participant who is a "key employee" (as defined in section
416(i) of the Internal Revenue Code without regard to
paragraph (5) thereof), the Participant's Involuntary
Termination Benefit shall be paid no earlier than six months
following the Participant's separation from service.
(1) The Participant's Prorated Survivor Benefit
determined as of the involuntary termination date and
commencing as soon as practicable after the
Participant's death.
(2) The Participant's Prorated Retirement Benefit
commencing on the Participant's Normal Retirement
Date.
4.06 Participation Termination Benefit.
---------------------------------
(a) Eligibility. A Participant who meets the following
-----------
requirements shall be entitled to the Participation
Termination Benefit described in subsection (b) below:
(1) The Participant has completed three years of
participation in the Plan, and
(2) The Participant's participation in the Plan is
terminated prior to the Participant's termination of
employment or retirement as a result of the
determination by the Chief Executive Officer that the
Participant is no longer eligible to participate in
the Plan.
(b) Benefit. A Participant's Participation Termination Benefit
-------
shall be the benefit in paragraph (2) below during the
continuation of the Participant's employment. Upon the
Participant's subsequent (voluntary or involuntary) separation
from service, it shall be the benefit in paragraph (2) below
unless the Participant has applied in writing to receive the
benefit in paragraph (1) below in lieu of the benefit in
paragraph (2) below and the Committee has approved such
request; provided that no such request shall become effective
until 12 months after the date it is received by the
Committee. If the Participant should die before the request
becomes effective, the benefit in paragraph (2) below shall
be payable. If the Participant survives until the request
becomes effective, the Participant's Participation Termination
Benefit shall be the benefit in paragraph (1) below.
(1) The Participant's Prorated Survivor Benefit
determined as of the participation termination date
and commencing as soon as practicable after the
Participant's death.
(2) The Participant's Prorated Retirement Benefit
commencing on the Participant's Normal Retirement
Date or Approved Early Retirement Date, provided that
if the benefit commences on an Approved Early
Retirement Date it shall be reduced by the Early
Retirement Factor applicable to the Participant's age
as of his or her Approved Early Retirement Date, and
provided further that in the case of a Participant
who is a "key employee" (as defined in section 416(i)
of the Internal Revenue Code without regard to
paragraph (5) thereof), the Participant's
Participation Termination Benefit shall be paid no
earlier than six months following the Participant's
separation from service.
4.07 Plan Termination Benefit.
------------------------
(a) Eligibility. A Participant of the Plan as of the date the Plan
-----------
is terminated by the Committee shall be entitled to the Plan
Termination Benefit described in subsection (b) below.
(b) Benefit. A Participant's Plan Termination Benefit shall be
-------
the benefit in paragraph (2) below during the continuation
of employment. Upon the Participant's separation from
service, it shall be the benefit in paragraph (2) below
unless prior to separation from service, the Participant has
applied in writing to receive the benefit in paragraph
(1) below in lieu of the benefit in paragraph (2) below and
the Committee has approved such request; provided that no
such request shall become effective until 12 months after the
date it is received by the Committee. If the Participant
should die before the request becomes effective, the benefit
in paragraph (2) below shall be payable. If the Participant
survives until the request becomes effective, the
Participant's Plan Termination Benefit shall be the benefit
in paragraph (1) below.
(1) The Participant's Prorated Survivor Benefit
commencing as soon as practicable after the
Participant's death.
(2) The Participant's Prorated Retirement Benefit
commencing on the first day of the first month that
would have qualified as the Participant's Approved
Early Retirement Date if he or she had remained
employed as a Participant until such date and then
received approval from the CEO for such early
retirement reduced by the Early Retirement Factor
Applicable to the Participant's age as of such
Approved Early Retirement Date; provided that in the
case of a Participant who is a "key employee" (as
defined in section 416(i) of the Internal Revenue
Code without regard to paragraph (5) thereof), the
Participant's Plan Termination Benefit shall be paid
no earlier than six months following the
Participant's separation from service.
4.08 Change in Control Benefits.
--------------------------
(a) Change in Control of Alexander & Baldwin, Inc. Upon the
---------------------------------------------
occurrence of a Change in Control, as defined in Section 2.08,
with respect to Alexander & Baldwin, Inc., the provisions of
paragraph (1) below shall apply unless the terms of such
Change in Control provide, as a prerequisite to the
consummation of the Change in Control, that the employer
responsibilities under this Plan are to be assumed by the
successor organization. In such later case, the provisions of
paragraph (2) below shall apply.
(1) The Plan shall immediately and automatically
terminate and each Participant shall become entitled
to an Immediate Change in Control Benefit. The
Immediate Change in Control Benefit shall be a lump
sum payment which is the greater of the Actuarial
Equivalent of the benefits defined in paragraph
(b)(1) below or the Actuarial Equivalent of the
benefits defined in (b)(2). The Immediate Change in
Control Benefit shall be immediately due and shall be
paid within thirty days of such Plan termination.
(2) Each Participant, as defined in this paragraph (2),
shall become entitled to a Vested Change in Control
Benefit. Upon future termination of employment or
retirement, the Participant shall be entitled to the
greater of his or her Vested Change in Control
Benefit or the benefits otherwise provided by any
other benefit section of this Plan. During the
Participant's continuation of employment, a
Participant's Vested Change in Control Benefit shall
be the benefit in paragraph (b)(1) below. Upon the
Participant's termination (voluntary or involuntary)
of employment or retirement, however, the
Participant's Vested Change in Control Benefit shall
be a lump sum payment which is the greater of the
Actuarial Equivalent of benefits defined in paragraph
(b)(1) below, the Actuarial Equivalent of the
benefits defined in paragraph (b)(2) below, and the
Actuarial Equivalent of the benefits defined in
paragraph (b)(3) below.
(b) Benefits.
--------
(1) The Participant's Normal Survivor Benefit determined
as of the date of the Change in Control commencing as
soon as practicable after the Participant's death.
(2) The Participant's Normal Retirement Benefit
determined as of the date of the Change in Control:
(i) commencing on the first day of the first
month that would have qualified as the
Participant's Approved Early Retirement Date
if he or she had remained employed as a
Participant until such date and then
received approval from the CEO for such
early retirement, and
(ii) reduced by the Early Retirement Factor
Applicable to the Participant's age at the
date the benefit commences.
(3) Benefits provided by any other Section of this Plan.
4.09 Benefits Upon Change in Control of a Subsidiary. Upon the occurrence of
-----------------------------------------------
a Change in Control, as defined in Section 2.08, with respect to a
subsidiary of Alexander & Baldwin, Inc., (i) a Participant who is an
employee of such subsidiary shall be entitled to the lump-sum
equivalent of a Plan Termination Benefit, determined as if the Plan
terminated as of the date of the Change in Control, which shall be
immediately due and shall be paid within thirty days of the Change in
Control, and (ii) the Plan shall immediately and automatically
terminate with respect to such subsidiary unless the terms of such
Change in Control provide, as a prerequisite to the consummation of the
Change in Control, that the employer responsibilities under this Plan
are to be assumed by the successor organization.
4.10 Designation of Beneficiaries. A Participant may file with the
----------------------------
Administrator on forms provided by the Administrator a written
designation of one or more primary beneficiaries and one or more
contingent beneficiaries to whom benefits otherwise due the Participant
shall be made after the death of the Participant. Such payments will be
divided among the primary beneficiaries who survive the Participant in
such proportion as directed in the written designation. If no primary
beneficiary survives the Participant for 30 days, such payment will be
divided among the contingent beneficiaries who survive the Participant
for 30 days in such proportion as directed in the written designation.
If no primary or contingent beneficiary survives the Participant for 30
days, or if no beneficiary has been designated by the Participant, such
payments will be made to the estate of the Participant.
4.11 Additional Benefits Provisions
------------------------------
(a) Benefit Agreement. The Administrator shall provide to each
-----------------
Participant a form of Participation Agreement which shall set
forth the Participant's acceptance of the benefits provided
under the Plan and the Participant's agreement to be bound by
the terms of the Plan.
(b) Exclusion for Suicide or Self-Inflicted Injury.
----------------------------------------------
Not-withstanding any other provision of the Plan, no benefits
shall be paid to any Participant or Beneficiary in the event
of the death of the Participant as the result of suicide or
self-inflicted injury within two years of the later of the
date he or she first became a Participant or the date the
Participant executed the Participation Agreement referred to
in subsection 4.05(a).
(c) Leave of Absence. A Participant who is on an approved leave
----------------
of absence with salary, or on an approved leave of absence
without salary for a period of not more than 90 days, shall
be deemed to be a Participant employed by A&B during such
leave of absence. A Participant who is on an approved leave
of absence with salary for a period in excess of six months
shall be deemed to have voluntarily terminated his or her
employment as of the end of the first six months of such leave
of absence, if the Participant does not have a contractual or
statutory right to reemployment. A Participant who is on an
approved leave of absence without salary for a period in
excess of 90 days shall be deemed to have voluntarily
terminated his or her employment as of the end of such 90-day
period, if the Participant does not have a contractual or
statutory right to reemployment.
(d) Disability. A Disabled Participant shall continue to be
----------
eligible for retirement benefits under the Plan, regardless of
the nonperformance of services for A&B. Failure to return to
employee status at the termination of the Participant's
disabled status shall be deemed a voluntary termination of
employment if the Participant is offered employment in a
position substantially equivalent to the position held by the
Participant at the time his or her disabled status began.
Otherwise, such failure to return to employee status shall be
deemed an involuntary termination of employment.
(e) Termination for Good Cause. Notwithstanding any other
--------------------------
provision of this Plan, all rights of the Participant, any
Beneficiary, or the rights of their executors or
administrators, or any other person, to receive benefits
under this Plan shall be forfeited if the Participant's
employment with A&B is terminated for Good Cause. For
purposes of this subsection, "Good Cause" means (a) the
willful and continued failure by a Participant to
substantially perform his or her duties with A&B (other than
any such failure resulting from a Participant's incapacity
due to physical or mental illness) or (b) the willful
engaging by the Participant in conduct which is demonstrably
and materially injurious to A&B, monetarily or otherwise.
For purposes of this definition, no act, or failure to act,
shall be considered "willful" unless done, or omitted to be
done, not in good faith and without reasonable belief that
the action or omission was in the best interest of A&B.
(f) Alternative Forms of Benefit. The Board of Directors or the
----------------------------
Committee in its sole discretion may elect to pay a
Participant's spouse or Beneficiary a lump-sum Actuarial
Equivalent or other form of benefit that it deems appropriate
in lieu of the benefit form otherwise provided.
(g) Withholding. Benefit payments hereunder shall be subject to
-----------
applicable federal, state and local withholding for taxes.
4.12 Group Life Insurance. A&B will maintain for each Participant,
--------------------
throughout each Participant's lifetime, group life insurance coverage
in the amount of $50,000. The life insurance benefits payable under
such group life insurance will be in addition to the benefits payable
under the provisions of this plan, and will be in lieu of any life
insurance benefits to which a Participant may otherwise be entitled
under the Alexander & Baldwin, Inc. Retiree Health and Welfare Benefit
Plan.
|
ARTICLE V
5.0l Source of Payments. All benefits payable under this Plan shall be
------------------
paid in cash from the general funds of A&B, and no trust account,
escrow, fiduciary relationship or other security arrangement shall be
established to assure payment. No Participant or Beneficiary shall
have any right, title or interest whatsoever in any investments which
A&B may make to aid it in meeting its obligations hereunder. Nothing
contained in this Plan, and no action taken pursuant to its provisions,
shall create or be construed to create a trust of any kind, or a
fiduciary relationship, between A&B and any Participant, any
Beneficiary or a Participant, or any other person. Any amounts
payable under the Plan shall continue for all purposes to be part of
the general assets of A&B and, thus, subject to the claims of A&B's
creditors. A&B shall in no way be restricted with regard to the
control, investment and use of such amounts. To the extent that any
person acquires a right to receive benefits from A&B under this Plan,
such right shall be no greater than, nor different from, the right of
an unsecured general creditor of A&B.
|
ARTICLE VI
6.0l Administrator. The Administrator of the A&B Retirement Plan shall be
-------------
the Administrator of this Plan. The Administrator shall have full
authority to administer the Plan. The Administrator shall have all of
the powers granted by the A&B Retirement Plan to the Administrator of
such plan and shall be subject to the same procedures and limitations
of authority.
6.02 Claims Procedure. The Administrator shall employ the claims procedures
----------------
as are applicable under the A&B Retirement Plan.
ARTICLE VII
AMENDMENT AND TERMINATION
-------------------------
7.0l The right to amend, modify, partially terminate, or completely
terminate this Plan is reserved to the Committee. However, no
amendment, modification or termination shall adversely affect the right
of any Participant or Beneficiary who is receiving benefits under the
Plan at the time of such amendment, modification or termination or who
is entitled to benefits under the provisions of Section 4.06 as a
former Participant of the Plan. The rights of other Participants as of
the date the Plan is terminated shall be determined under the
provisions of Section 4.07.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
------------------------
8.01 Benefits Not Assignable. No Participant or Beneficiary, or any other
-----------------------
person having or claiming to have any interest of any kind or character
in or under this Plan or in any payment therefrom shall have the right
to sell, assign, transfer, convey, hypothecate, anticipate, pledge or
otherwise dispose of such interest; and to the extent permitted by law,
such interest shall not be subject to any liabilities or obligations of
the Participant or to any bankruptcy proceedings, creditor claims,
attachment, garnishments, execution, levy or other legal process
against such Participant or his or her property.
8.02 Controlling Law. This Plan shall be construed, administered, and
---------------
governed in all respects in accordance with the laws of the State of
Hawaii.
8.03 Not an Employment Contract. The adoption and maintenance of this Plan
--------------------------
shall not be deemed to confer on any Participant any right to continue
in the employ of A&B, and shall not be deemed to interfere with the
right of A&B to discharge any person with or without cause or treat any
person without regard to the effect that such treatment might have on
the person as a Participant.
8.04 Binding Agreement. This Plan shall be binding upon and inure to the
-----------------
benefit of A&B, its successors and assigns, and the Participants and
their Beneficiaries, heirs, executors, administrators and legal
representatives.
|
IN WITNESS WHEREOF, Alexander & Baldwin, Inc. has caused this Restatement to be executed on its behalf by its duly authorized officers this 21st day of June, 2006.
ALEXANDER & BALDWIN, INC.
By /s/ Nelson N. S. Chun ------------------------------ Its Senior Vice President By /s/ Alyson J. Nakamura ------------------------------ Its Secretary |
Amended and Restated Effective January 1, 2005
ARTICLE I
ARTICLE II
2.01. "Actuarial Equivalent" means a form of benefit differing in time period, or manner of payment from a specified benefit provided in the Plan, but having the same present value when determined in accordance with generally accepted actuarial practice and the rules contained in Appendix B of this Plan.
2.02. "Approved Early Retirement Date" means the first day of any month after the Participant has attained age 55 and prior to his or her Normal Retirement Date on which the Participant retires with the approval of the Committee.
2.03. "A&B" and "Company" mean Alexander & Baldwin, Inc. and its affiliates and their successors.
2.04. "A&B Retiree Plan" means the Alexander & Baldwin, Inc. Retiree Health and Welfare Benefit Plan, as amended from time to time.
2.05. "A&B Retirement Plan" means the A&B Retirement Plan for Salaried Employees, as amended from time to time.
2.06. "Beneficiary" means the person or persons designated by the Participant as such in accordance with the provisions of Section 4.07 and to whom the benefit, if any, provided for in Section 4.07 is payable.
2.07. "Benefit Commencement Age" means the greater of age 55 and the Participant's age at the date of determination.
2.08. "Board" means the Board of Directors of Alexander & Baldwin, Inc.
2.09. "Change in Control" means a "Change in Control Event" as defined in Internal Revenue Service Notice 2005-1 or any successor guidance issued by the Internal Revenue Service. If a Change in Control shall take place with respect to any company, a Change in Control shall be deemed to have taken place with respect to any subsidiary of such company.
2.10. "Committee" means the Compensation Committee of the Board.
2.11. "Early Retirement Factor" means the reduction defined in
Section 4.02(e).
2.12. "Eligible Position" means any employee position that is highly compensated or that is one of a select group of management employee positions. Exceptions to the eligibility requirements of this section may be made by the Chief Executive Officer of Alexander & Baldwin, Inc., with the approval of the Committee.
2.13. "Health Care Contributions" means the contributions paid by the Company, under Article IV of the A&B Retiree Plan, towards the cost of premiums for health care insurance coverage.
2.14. "Immediate Change in Control Benefit" means the benefit described in subsection 4.06(a).
2.15. "Involuntary Termination Benefit" means the benefit described in Section 4.03.
2.16. "Normal Retirement Benefit" means the benefit described in Section 4.01.
2.17. "Normal Retirement Date" means the first day of the month coincident with or next following the date the Participant attains age 65.
2.18. "Other Benefits" means the sum of:
(1) The benefit payable under the A&B Retirement Plan;
(2) The benefit payable under the defined benefit provisions of the A&B Excess Benefits Plan; and
(3) Any benefit which the Participant is eligible to receive or has received from the qualified defined benefit pension plan of another employer excluding benefits attributable to the Participant's own contributions.
2.19. "Participant" means an executive in an Eligible Position selected by the Committee pursuant to Section 3.01.
2.20. "Participation Termination Benefit" means the benefit described in Section 4.04.
2.21. "Plan" means the plan set forth in this document, as amended from time to time.
2.22. "Plan Termination Benefit" means the benefit described in Section 4.05.
2.23. "Preretirement Death Benefit" means the benefit described in Section 4.07.
2.24. "Prorated Retirement Income" means Retirement Income, as defined in Section 2.25 multiplied by a fraction, the numerator of which shall be 300 minus the number of months between the date of determination and the Participant's Normal Retirement Date, and the denominator of which shall be 300.
2.25. "Retirement Income" means the amount determined in (a) below paid in accordance with the provisions of (b) or (c), whichever is applicable below:
(a) The amount of Retirement Income shall equal the amount to which the Participant would be entitled as a single life annuity at his or her Normal Retirement Date under the A&B Retirement Plan determined (i) without regard to limitations imposed by the Internal Revenue Code, (ii) as if the Participant had 25 years of credited benefit service, (iii) as if "Monthly Compensation" as defined in Section 1.20 of the A&B Retirement Plan included in the year earned the deferred portion of base salary and each bonus awarded under the Company's One-Year Performance Improvement Incentive Plan and (iv) with respect to Participants listed in Appendix A to this Plan, as if the benefit formula in effect on December 31, 1988 under the A&B Retirement Plan for Salaried Employees had continued in effect (provided such benefit formula produces a higher benefit than the formula subsequently in effect).
(b) In the case of a Participant who is not married at the time a lump sum payment described in Article IV is paid, Retirement Income shall be deemed payable for the life of the Participant.
(c) In the case of a Participant who is married at the time a lump sum payment described in Article IV is paid, 100% of Retirement Income shall be deemed payable for the life of the Participant and 50% of Retirement Income shall be deemed payable to his or her Surviving Spouse for life following the death of the Participant.
2.26. "Surviving Spouse" means the spouse of a Participant who survives the Participant and to whom the Participant was married on the Participant's retirement date or (if earlier) date of death.
2.27. "Vested Change in Control Benefit" means the benefit described in subsection 4.06(b).
2.28. "Years of Service" means the number of years and fractions of years which qualify as Years of Credited Vesting Service as that term is defined in the A&B Retirement Plan.
ARTICLE III
ARTICLE IV
(1) An amount which is the Actuarial Equivalent of the benefit otherwise defined by such Sections.
(2) An amount which is the before-tax equivalent of the lower of two quotations obtained by the Company from insurance companies for the cost of a lifetime annuity that provides after-tax monthly benefits equivalent to those that a Participant would receive under the Plan if the Plan allowed monthly payments of the benefits hereunder.
A Participant shall be entitled to whichever of the benefits provided by Sections 4.01 to 4.06 provides the greatest benefit, and under no circumstances shall a Participant be entitled to benefits provided by more than one such Section.
(1) The benefits described by this paragraph are:
(A) an Approved Early Retirement Benefit,
(B) a Participation Termination Benefit if such termination occurs at of after the Participant attained age 55,
(C) a Plan Termination Benefit if such termination occurs at or after the Participant attained age 55,
(D) a Vested Change in Control Benefit or a prior Immediate Change in Control Benefit if such Change in Control occurred at or after the Participant attained age 55.
(2) A Participant who is subject to the provisions of this paragraph shall automatically become a Participant under the A&B Retiree Plan, without regard to the age and service requirements in Article III of the A&B Retiree Plan. For purposes of determining such Participant's Health Care Contributions under the A&B Retiree Plan, the number of Completed Years of Service of such Participant shall be deemed to be equal to 25 years multiplied by the fraction used to determine such Participant's or former Participant's Prorated Retirement Income, provided however, that on or after such Participant's Normal Retirement Date he or she shall be deemed to have twenty-five (25) Completed Years of Service.
ARTICLE V
ARTICLE VI
ARTICLE VII
ARTICLE VIII
IN WITNESS WHEREOF, Alexander & Baldwin, Inc. has caused this Restatement to be executed on its behalf by its duly authorized officers, effective as of January 1, 2005.
ALEXANDER & BALDWIN, INC.
By /s/ Nelson N. S. Chun ------------------------------ Its Senior Vice President By /s/ Alyson J. Nakamura ------------------------------ Its Secretary |
APPENDIX A
1. R. F. Cameron
2. R. J. Donohue
3. F. L. Fleischmann
4. G. Y. Nakamatsu
5. R. H. Rothman
APPENDIX B
When the terms of this Plan require the determination of a lump sum payment which is the Actuarial Equivalent of any other benefit provided by this Plan, the following rules shall apply to the calculation of such lump sum payment:
1. The mortality table used shall be the mortality table then in use by the A&B Retirement Plan for the purpose of determining lump sum payments to participants of such plan who are entitled to such payments.
2. The discount rate shall be the after-tax equivalent of the discount rate then in use by the A&B Retirement Plan for the purpose of determining lump sum payments to participants of such plan who are entitled to such payments. The after-tax equivalent rate shall be determined by multiplying discount rate in use by the A&B Retirement Plan by the excess of 100% over the tax effected marginal tax rate declared by the Committee.
3. The Committee shall declare the tax effected marginal tax rate at the beginning of each calendar year.
4. The tax effected marginal tax rate shall apply to lump sum payments made at any time during such calendar year and may not be changed during the year.
5. The value of the benefit to a Surviving Spouse which is included in a Participant's Retirement Income shall be included in the calculation of the lump sum payment to which the Participant is entitled. Unless stated otherwise, the benefit to the Surviving Spouse shall be deemed to apply only if the death of the Participant occurs on or after the date the Retirement Income is deemed to commence under the terms of the provision giving rise to the Participant's right to a lump sum payment.
6. If the terms of the Plan provide for a benefit such that if it were paid as a monthly benefit it could have commenced at more that one future date, then for purposes of calculating the lump sum that is the Actuarial Equivalent of such benefit, it shall be deemed that the benefit would have commenced at the earliest possible date.
7. The early retirement reduction factors, if any, used to calculate the lump sum which is the Actuarial Equivalent of the benefit provided by the provisions of Section 4.06 as a result of a Change of Control, shall be the factors applicable to Participants of the A&B Retirement Plan who terminate employment after attaining eligibility for early retirement regardless of the Participant's age as of the Change of Control date.
APPENDIX C
1. Any increase in Other Benefits which occur after termination of employment or retirement shall not be taken into account.
2. In the case of a Participant who is not married at the time benefits are deemed to commence under this Plan, Other Benefits shall be determined as though such payments were made in the form of a straight life annuity.
3. In the case of a Participant who is married at the time a lump sum benefit is payable under this Plan, Other Benefits shall be determined as though such payments were made in the form of joint and 50% survivor form of payment with his or her spouse designated as the contingent annuitant.
4. It shall be assumed that Other Benefit payments (whether or not in payment status) commence under such other plans of the same date benefits commence under this Plan. In all cases, the provisions of the A&B Retirement Plan shall be used to determine the adjustment made to the Other Benefits for commencement prior to a Participant' Normal Retirement Date or to determine the equivalent joint and 50% survivor amount.
ALEXANDER & BALDWIN, INC.
DEFERRED COMPENSATION PLAN
AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2005
I. PURPOSE. Alexander & Baldwin, Inc. (the "Company") established this Deferred Compensation Plan (the "Plan") effective August 25, 1994, to provide participants in the Company's Three-Year Performance Improvement Incentive Plan (the "Three-Year PIIP") with the opportunity to defer payment of the awards made to them under such Plan and/or under the Company's One-Year Performance Improvement Incentive Plan (the "One-Year PIIP") for a period extending until their retirement or other termination of employment or until the expiration of the specific term (at least one full year in duration) elected by the participant.
II. DEFINITIONS. For purposes of this Plan, the following definitions shall be in effect:
III. ADMINISTRATION. The Plan Administrator shall administer the Plan and shall have full power and authority (subject to the provisions of the Plan) to establish such rules and regulations as it may deem appropriate for proper administration and to make such determinations under, and issue such interpretations of, the Plan as it may deem necessary or advisable. Decisions of the Plan Administrator shall be final and binding on all parties who have an interest in the Plan.
IV. DEFERRAL ELECTION. An individual selected for participation in the Three-Year PIIP may elect to defer, for the period of time described below ("Deferral Period"), all or part of his/her award(s) under the Three-Year PIIP and/or One-Year PIIP. Any such election ("Deferral Election") must be made in accordance with the following provisions:
V. CONVERSION ELECTION - COMMON STOCK-EQUIVALENT UNITS. Subject to the provisions stated below and pursuant to procedures determined by the Plan Administrator or by the committee or individual(s) to which such authority is delegated, the participant may make an election ("Conversion Election") to have all or any portion of his/her award under the One-Year or Three-Year PIIP that is credited to his/her Deferred Compensation Account, converted into Common Stock-equivalent units which will be valued from time to time during the Deferral Period on the basis of the Fair Market Value of the Common Stock.
(i) The portion of the award which may be converted into Common Stock-equivalent units shall not exceed fifty percent (50%) of the total dollar amount of such award, including the portion of such award payable currently and the portion deferred under this Plan, and
(ii) The dollar value of the One-Year or Three-Year PIIP award which may be converted into Common-Stock equivalent units under this Plan shall not, when added to the Fair Market Value (at date of issuance) of any shares of Common Stock issued under the Company's Restricted Stock Bonus Plan in payment of all or part of the balance of such award (exclusive of any bonus shares issued under the Restricted Stock Bonus Plan), exceed fifty percent (50%) of the total dollar value of such PIIP award.
VI. VALUATION OF DEFERRED COMPENSATION ACCOUNTS. From time to time during the Deferral Period, the value of each Deferred Compensation Account shall be adjusted to reflect an investment return on the balance credited to such account, and such value and adjustments periodically shall be communicated to each participant. Such periodic valuation shall be made as follows:
(i) The Common Stock-equivalent units (including bonus units) will be credited, at the time dividends are paid on outstanding shares of Common Stock, with an amount ("dividend-equivalent credits") equal to the dividends which otherwise would be paid if the number of Common Stock-equivalent units in the participant's Deferred Compensation Account were actually outstanding shares of Common Stock.
(ii) Dividend-equivalent credits will be applied in the manner of a dividend reinvestment plan to purchase additional Common Stock-equivalent units valued at Fair Market Value on the applicable dividend payment date.
(iii) If the employment of a participant terminates for any reason, other than by reason of normal or approved early retirement, death, or total and permanent disability, then:
(a) such participant shall no longer have any right, title or interest in any Common Stock-equivalent units which were credited as bonus units within three (3) years prior to the date of such termination or discharge, and such participant shall not be entitled to receive any payment with respect to such bonus units, and
(b) the Company shall have the right, exercisable at its discretion, to convert to cash any or all non-bonus Common Stock-equivalent units which were credited to the participant's account within three (3) years prior to the date of such termination or discharge, at an amount equal to the lesser of the original award amount that was converted to these non-bonus Common Stock-equivalent units, and, an amount equal to the Fair Market Value per share of Common Stock on the date of such termination or discharge multiplied by the number of such Common Stock-equivalent units.
(iv) After the Common Stock-equivalent units have been credited to the participant's Deferred Compensation Account for a period of at least three (3) years, that participant may elect, pursuant to procedures determined by the Plan Administrator or by the committee or individual(s) to which such authority is delegated, to have all or a portion of those units converted into cash on the basis of the Fair Market Value (at date of conversion) of the shares of Common Stock represented by such units; provided, however, that participants may not make such an election if they are Section 16 Insiders at the time of such election. Any portion so converted to cash shall begin to earn interest in accordance with Section VI.1. above and shall stop earning dividend-equivalent credits.
(v) Any Common Stock-equivalent units credited to a participant's Deferred Compensation Account shall automatically be converted into cash, on the basis of the Fair Market Value (at the date of conversion) of the shares of Common Stock represented by such units, upon the earlier of (A) the participant's termination of employment with the Company for any reason or (B) the expiration date of the Deferral Period in effect for such account pursuant to the participant's prior election. Any amounts so converted to cash shall begin to earn interest in accordance with Section VI.1. above.
VII. PAYMENT. Upon the participant's separation from service (or at the time specified in the participant's pre-2005 election as described in the last sentence of Section IV.2), each Deferred Compensation Account maintained for the participant shall be paid out either in installments or in a lump sum in accordance with the payment schedule irrevocably designated by the participant for that account in the Deferral Election form executed and filed by him/her in accordance with Section IV. above; provided, however, that in the case of a participant who is a "key employee" (as defined in section 416(i) of the Internal Revenue Code without regard to paragraph (5) thereof), except as otherwise permitted under the last sentence of Section IV.2, the participant's Deferred Compensation Account(s) shall be paid no earlier than six months following the participant's separation from service.
VIII. FUNDING. Deferred Compensation Accounts shall not be funded and shall be maintained by the Company only as book reserves. The Company's obligation to pay such accounts as they become due and payable under the Plan shall be at all times an unfunded and unsecured obligation of the Company, and the participants only shall have the status of general creditors with respect to the amounts credited to their accounts and shall look solely and exclusively to the general assets of the Company for payment.
IX. CHANGE IN CONTROL. Notwithstanding any other provision of this Agreement, upon the occurrence of a Change in Control, all Common Stock-equivalent units which previously were credited as bonus units shall immediately vest, the provisions of Section VI.2.(iii)(b) with respect to the conversion rights of the Company applicable to non-bonus Common Stock-equivalent units shall terminate, all outstanding Common Stock-equivalent units at the time credited to outstanding Deferred Compensation Accounts shall immediately be converted into cash on the basis of the higher of (i) the Fair Market Value of the Common Stock at the time of such Change of Control or (ii) the highest price paid per share of Common Stock in effecting the Change in Control, and the amount outstanding in each Deferred Compensation Account after such conversion shall be paid out in a single lump sum to the participants within thirty (30) days after such Change in Control, whereupon the Plan shall terminate.
X. BENEFICIARY DESIGNATIONS. Each participant may file with the Company a written designation of one or more primary beneficiaries and one or more contingent beneficiaries to whom payments otherwise due the participant under the Plan are to be made after his/her death, in such amounts and at such times as would have been made to the participant had he/she lived. Such payments shall be divided among the primary beneficiaries who survive the participant in such proportion as the participant shall direct in his/her written designation. If no primary beneficiary survives the participant, such payment shall be divided among the contingent beneficiaries who survive the participant in such proportion as the participant shall direct in his/her written designation. If no primary or contingent beneficiary survives the participant or is named by the participant, such payments shall be made to the participant's estate. At the discretion of the Plan Administrator, payments to the participant's estate may be made in a lump sum equal to the total value of the participant's account. The participant may from time to time change his/her beneficiary designation by filing a new written designation with the Company.
XI. INALIENABILITY. No participant or beneficiary, or any other person having or claiming to have any interest of any kind or character in or under this Plan or in any of the Deferred Compensation Accounts or any part thereof or payment therefrom shall have the right to sell, assign, transfer, convey, hypothecate, anticipate, pledge or otherwise dispose of such interest; and to the extent permitted by law, such interest shall not be subject to any liabilities or obligations of the participant or to any bankruptcy proceedings, creditor claims, attachment, garnishments, execution, levy or other legal process against such participant or his/her property.
XII. PLAN DURATION AND AMENDMENT. The Plan shall become effective immediately upon adoption by the Board. The Board may amend, modify or terminate the Plan at any time thereafter; provided, however, that no such action shall adversely affect the rights of participants with respect to their outstanding Deferral Elections under the Plan and the payment of their Deferred Compensation Accounts in accordance with those elections.
XIII. NO EMPLOYMENT RIGHTS. Nothing in the Plan shall confer upon any participant any right to continue in the Company's service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company or of the participant, which rights are hereby expressly reserved by each, to terminate the participant's employment at any time for any reason, with or without cause, except to the extent such right is expressly limited by any written employment in effect between the Company and such participant.
XIV. WITHHOLDING TAXES. All amounts which become payable under the Plan shall be subject to the Company's collection of all applicable Federal, state and local income and employment taxes required to be withheld therefrom.
XV. GOVERNING LAW. The provisions of the Plan shall, to the extent not preempted by the Employee Retirement Income Security Act of 1974, as amended (ERISA), be governed by and construed in accordance with the laws of the State of Hawaii without resort to that State's conflict-of-laws rules.
XVI. MISCELLANEOUS.
A. The liabilities and obligations of the Company hereunder shall be binding upon any successor corporation or entity which succeeds to all or substantially all of the assets and business of the Company by merger, purchase or other transaction.
B. All costs and expenses incurred in the administration of the Plan shall be borne by the Company.
XVII. ARBITRATION. In the event that a participant should dispute the decision of the Committee with respect to such participant's claimed benefit entitlement under the Plan, such dispute shall be settled by arbitration proceedings conducted in Honolulu, Hawaii in accordance with the applicable rules of the American Arbitration Association. If the parties cannot agree upon the individual to serve as arbitrator, then they shall request the American Arbitration Association to submit a list of five (5) potential arbitrators, and in the absence of any agreement as to which of the named individuals shall serve as arbitrator, each party shall have the right to remove two (2) of the named individuals from the list, and the last remaining individual on the list shall accordingly serve as the arbitrator. Such arbitrator shall have full power and authority to settle the dispute through interpretation and application of the express provisions of the Plan, but shall have no authority to amend, revise or supplement such provisions. The costs of such arbitration shall be shared equally by the Company and the participant, and the decision of the arbitrator shall be final and binding on them.
IN WITNESS WHEREOF, Alexander & Baldwin, Inc. has caused this Plan to be executed by its duly authorized officers, effective January 1, 2005.
ALEXANDER & BALDWIN, INC.
By /s/ Nelson N. S. Chun ------------------------------ Its Senior Vice President By /s/ Alyson J. Nakamura ------------------------------ Its Secretary |
ALEXANDER & BALDWIN, INC.
1998 STOCK OPTION/STOCK INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
AGREEMENT made as of _______________, by and between ALEXANDER & BALDWIN, INC., a Hawaii corporation (the "Company"), and ______________ (the "Optionee").
A. The Company has, with the approval of the shareholders, adopted the Alexander & Baldwin, Inc. 1998 Stock Option/Stock Incentive Plan (the "Plan") for the purpose of providing eligible persons with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Company as an incentive for them to join and/or remain in the service of the Company or its subsidiaries.
B. Optionee is an individual who is to render valuable services to the Company or its subsidiaries, and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Company's grant of a stock option to Optionee.
D. For purposes of this Agreement, the following definitions shall be in effect:
NOW, THEREFORE, it is hereby agreed as follows:
Exercise Schedule
-----------------
Number of
Optioned Shares Exercise Date
--------------- -------------
_______________ ________________
_______________ ________________
_______________ ________________
|
(i) Except as otherwise provided in subparagraphs (ii) through (vi) below, should Optionee cease to remain in the Service of the Company at any time during the option term, then the period for exercising this option shall be reduced to a three-month period commencing with the date of such cessation of Service. During such three-month period, this option may not be exercised for more than that number of Optioned Shares (if any) for which this option is exercisable at the time of Optionee's cessation of Service. In no event, however, shall this option be exercisable at any time after the Expiration Date.
(ii) If Optionee is a Section 16(b) Insider at the time of cessation of Service, then Optionee shall have a period of six months following such cessation of Service in which to exercise this option for any or all of the Optioned Shares for which this option is exercisable at the time of Optionee's cessation of Service. In no event, however, shall this option be exercised at any time after the specified Expiration Date.
(iii) Should Optionee die while this option is outstanding, then (A) this option, to the extent it is not otherwise at the time fully exercisable, shall automatically accelerate so that such option shall become fully exercisable with respect to the total number of Optioned Shares at the time subject to this option, and (B) the personal representative of Optionee's estate (or the person or persons to whom the option is transferred pursuant to Optionee's will or in accordance with the laws of descent and distribution) shall have the right to exercise this option for any or all of the Optioned Shares. Such right shall lapse, and this option shall cease to be exercisable, upon the earlier of (A) the expiration of the twelve-month period measured from the date of Optionee's death or (B) the Expiration Date.
(iv) Should Optionee retire on or after attaining age fifty-five (55) in accordance with the terms of the Company's retirement plan, or become disabled and cease by reason thereof to remain in the Service of the Company, at any time while this option is outstanding, then Optionee shall have a period of three years (commencing with the date of such retirement or cessation of Service) to exercise this option for (i) any or all of the Optioned Shares for which this option is exercisable at the time of Optionee's retirement or cessation of Service and (ii) any additional Optioned Shares for which the option becomes exercisable during the subsequent three-year period. In no event, however, shall this option be exercised at any time after the Expiration Date. For purposes of this Agreement, Optionee shall be deemed to be disabled if Optionee is, by reason of any medically-determinable physical or mental impairment (A) which is expected to result in death or (B) which is expected to be, or is, of continuous duration of twelve consecutive months or more, unable to perform his/her usual duties for the Company (or any Subsidiary or Parent) employing his/her services.
(v) Should Optionee's Service be terminated for Misconduct, or should Optionee (a) engage in any post-Service activity, whether as an Employee, consultant, advisor, or otherwise, competitive with the business operations of the Company (or any Subsidiary or Parent), or (b) engage in any other conduct, while in Service or following cessation of Service, materially detrimental to the business or affairs of the Company (or any Subsidiary or Parent), as determined in the sole discretion of the Plan Administrator, then this option shall terminate immediately and cease to be outstanding. Misconduct shall mean the commission of any act of fraud, embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by such person of confidential information or trade secrets of the Company (or any Subsidiary or Parent), or any other intentional misconduct by such person adversely affecting the business or affairs of the Company (or any Subsidiary or Parent) in a material manner. The foregoing definition shall not be deemed to be inclusive of all the acts or omissions which the Company (or any Subsidiary or Parent) may consider as grounds for the dismissal or discharge of any Optionee or other person in the Service of the Company (or any Subsidiary or Parent).
(vi) Except as otherwise expressly provided in subparagraph 5(iv) above, upon Optionee's cessation of Service, this option shall, to the extent it is not otherwise exercisable at the time, for one or more Optioned Shares, immediately terminate and cease to be outstanding with respect to those shares.
a. In the event any change is made to the Common Stock by reason of any stock dividend, stock split, combination of shares or other change affecting the outstanding Common Stock as a class without the Company's receipt of consideration, the number and/or class of shares purchasable under this option and the Option Price payable per share shall be adjusted appropriately to prevent the dilution or enlargement of Optionee's benefits hereunder.
b. If this option remains outstanding following any merger or other business combination involving the Company, then this option shall be adjusted appropriately to apply and pertain to the number and class of securities which would have been issuable, in the consummation of such merger or business combination, to an actual holder of Common Stock for the same number of shares as are subject to this option immediately prior to such merger or business combination. Appropriate adjustments also shall be made to the Option Price payable per share; provided, however, that the aggregate Option Price shall remain the same.
"Change in Control" shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the 1934 Act, whether or not the Company in fact is required to comply with Regulation 14A thereunder; provided that, without limitation, such a change in control shall be deemed to have occurred if:
(i) any "person" (defined as such term is used in Sections 13(d) and 14(d) of the 1934 Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of securities of the Company representing 35% or more of the combined voting power of the Company's then outstanding securities;
(ii) at least a majority of the Company's Board of Directors (the "Board") ceases to consist of (a) individuals who have served continuously on the Board since January 1, 2001 and (b) new directors (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least two-thirds of the directors then still in office who shall at that time have served continuously on the Board since January 1, 2001 or whose election or nomination was previously so approved;
(iii) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other entity, other than (a) a merger or consolidation immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the board of directors of the Company, the entity surviving such merger or consolidation or any parent thereof or (b) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person is or becomes the beneficial owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its affiliates) representing 35% or more of the combined voting power of the Company's then outstanding securities; or
(iv) the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets, other than a sale or disposition by the Company of all or substantially all of the Company's assets to an entity at least a majority of the board of directors of which or of any parent thereof is comprised of individuals who comprised the Board immediately prior to such sale or disposition.
Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions.
a. In order to exercise this option for one or more of the Optioned Shares, Optionee (or in the case of exercise after Optionee's death, Optionee's legal representative, executor, administrator, heir or legatee, as the case may be) must take the following actions:
(i) Deliver to the Secretary of the Company, or his/her designee, a written notice of exercise (the "Exercise Notice") in which there is specified the number of Optioned Shares for which the Option is being exercised.
(ii) Pay the aggregate Option Price for the purchased shares in one of the following alternative forms:
full payment in cash or cash equivalents, such as a certified check, bank draft, personal check or postal or express money order made payable to the Company's order; or
full payment in shares of Common Stock held by the Optionee for the required period (if any) necessary to avoid a charge to the Company's earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date; or
full payment in a combination of the foregoing.
(iii) Furnish to the Company appropriate documentation that the person or persons exercising the option, if other than Optionee, have the right to exercise this option.
b. For purposes of this Agreement, the following definitions shall be in effect:
c. As soon as practicable after the Exercise Date, the Company shall issue to Optionee (or to the other person or persons exercising this option) a certificate or certificates representing the purchased shares.
d. In no event may this option be exercised for any fractional shares.
a. The exercise of this option and the issuance of Optioned Shares upon such exercise shall be subject to compliance by the Company and Optionee with all applicable requirements of law relating thereto and with all applicable regulations of any stock exchange on which shares of the Common Stock may be listed at the time of such exercise and issuance.
b. In connection with the exercise of this option, Optionee shall execute and deliver to the Company such representations in writing as may be requested by the Company in order for it to comply with the applicable requirements of federal and state securities laws.
a. If the Optioned Shares covered by this Agreement exceed, as of the Grant Date, the number of shares of Common Stock which may without stockholder approval be issued under the Plan, then this option may not be exercised with respect to any of those excess shares unless and until stockholder approval of an amendment to the Plan sufficiently increasing the number of shares of Common Stock issuable thereunder is obtained in accordance with the provisions of the Plan and shall become void with respect to those excess shares if such stockholder approval is not obtained.
b. The inability of the Company to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance and sale of any Common Stock pursuant to this option shall relieve the Company of any liability with respect to the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained. However, the Company shall use reasonable efforts to obtain all such approvals.
a. The Company's obligation to deliver shares of Common Stock upon the exercise of this option shall be subject to the satisfaction of all applicable Federal, State and local income and employment tax withholding requirements.
b. Optionee may elect to have the Company withhold, at the time this option is exercised, a portion of the shares purchased under the option with an aggregate Fair Market Value equal to the designated percentage (any multiple of 5% up to 100% as specified by Optionee) of the applicable Federal and State income tax withholding liability incurred by Optionee in connection with the option exercise (the "Withholding Taxes").
Any such exercise of the election must be effected in accordance with the following terms and conditions:
(i) The election must be made on or before the date the amount of the Withholding Taxes incurred by Optionee in connection with the exercise of the option is determined (the "Tax Determination Date").
(ii) The election shall be irrevocable.
(iii) The election shall be subject to the approval of the Plan Administrator, either at the time the election is made or at any earlier time, and none of the shares purchased under the option actually shall be withheld in satisfaction of the Withholding Taxes incurred in connection with the exercise of the option, except to the extent the election is so approved by the Plan Administrator.
(iv) The shares withheld pursuant to the election shall be valued at Fair Market Value on the Tax Determination Date in accordance with the valuation provisions of paragraph 9.b of this Agreement.
(v) In no event may the number of shares of Common Stock requested to be withheld exceed in Fair Market Value the dollar amount of the Withholding Taxes incurred by Optionee in connection with the exercise of the option.
c. Optionee may elect to deliver to the Company, at the time the option is exercised, shares of Common Stock previously acquired by such individual (other than in connection with such option exercise) with an aggregate Fair Market Value equal to the designated percentage (any multiple of 5% up to 100% as specified by Optionee) of the Withholding Taxes incurred by Optionee in connection with the option exercise.
Any such exercise of the election must be effected in accordance with the following terms and conditions:
(i) The election must be made on or before the Tax Determination Date.
(ii) The election shall be irrevocable.
(iii) The election shall be subject to the approval of the Plan Administrator, either at the time the election is made or at any earlier time, and none of the delivered shares shall be accepted in satisfaction of the Withholding Taxes, except to the extent the election is so approved by the Plan Administrator.
(iv) The delivered shares shall be valued at Fair Market Value on the Tax Determination Date in accordance with the valuation provisions of paragraph 9.b of this Agreement.
(v) In no event may the number of delivered shares exceed in Fair Market Value the dollar amount of the Withholding Taxes incurred by the Optionee in connection with the exercise of the option.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in duplicate on its behalf by its duly authorized officer, and Optionee also has executed this Agreement in duplicate, all as of the day and year indicated above.
ALEXANDER & BALDWIN, INC.
By ________________________________
Its Vice President
Address:
ALEXANDER & BALDWIN, INC.
AGREEMENT made as of ____________, by and between ALEXANDER & BALDWIN, INC., a Hawaii corporation (the "Corporation"), and ____________ (the "Participant").
All capitalized terms in this Agreement shall have the meaning assigned to them in this Agreement or in the Corporation's 1998 Stock Option/Stock Incentive Plan, as amended (the "Plan").
"THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY HAVE BEEN ISSUED PURSUANT TO THE PROVISIONS OF THE STOCK ISSUANCE PROGRAM OF THE ALEXANDER & BALDWIN, INC. 1998 STOCK OPTION/STOCK INCENTIVE PLAN, AS AMENDED ("PLAN") AND ARE SUBJECT TO CANCELLATION BY THE CORPORATION, UPON THE TERMS AND CONDITIONS SPECIFIED IN A WRITTEN AGREEMENT DATED AS OF _____________ BETWEEN THE CORPORATION AND THE REGISTERED HOLDER OF THE SHARES. A COPY OF SUCH AGREEMENT IS MAINTAINED AT THE CORPORATION'S PRINCIPAL CORPORATE OFFICES. WHILE SUCH CANCELLATION RIGHT IS IN EFFECT, THE CERTIFICATE AND THE SHARES REPRESENTED HEREBY MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR PLEDGED."
One third (33.3%) of the Issued Shares shall vest in three (3) successive equal annual installments upon Participant's completion of each year of Service over a three-year period measured from the date of this Agreement; provided, however, that any unvested shares shall automatically vest upon the occurrence of:
(i) the Participant's normal retirement (age 65) or approved early retirement (age 55 plus 5 years Service), or
(ii) the Participant's termination of Service by reason of death or Permanent Disability.
Upon vesting, the Participant shall acquire a fully-vested interest in, and the transfer restrictions of Paragraph B hereof and the cancellation provisions of Paragraph C.2 hereof shall terminate with respect to, the vested Issued Shares.
For purposes of the vesting provisions of this Paragraph C.1, Service shall mean the Participant's performance of services for the Corporation (or any Parent or Subsidiary) in the capacity of an Employee or a non-employee member of the board of directors of any Subsidiary. Participant shall be deemed to cease such Service immediately upon the occurrence of either of the following events: (i) Participant no longer performs services in any of the foregoing capacities for the Corporation (or any Parent or Subsidiary) or (ii) the entity for which Participant performs such services ceases to remain a Parent or Subsidiary of the Corporation, even though Participant may subsequently continue to perform services for that entity. Service shall not be deemed to cease during a period of military leave, sick leave or other personal leave approved by the Corporation; provided, however, that except to the extent otherwise required by law or expressly authorized by the Plan Administrator or the Corporation's written leave of absence policy, no Service credit shall be given for vesting purposes for any period the Participant is on a leave of absence.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first indicated above.
ALEXANDER & BALDWIN, INC.
By _______________________________
Its Vice President
Address:
Amendment No. 3 to Shipbuilding Contract
(Hull BN 460)
THIS AMENDMENT NO. 3 TO SHIPBUILDING CONTRACT is made as of July 7, 2006 by and between AKER PHILADELPHIA SHIPYARD, INC., a corporation organized under the laws of Pennsylvania, having its principal office at 2100 Kitty Hawk Avenue, Philadelphia, PA 19112 (the "BUILDER") and MATSON NAVIGATION COMPANY, INC., a corporation organization under the laws of Hawaii, having its principal office at 555 12th Street, Oakland, CA 94607 (the "BUYER").
R E C I T A L S
WHEREAS, the parties entered into that certain Shipbuilding Contract dated as of February, 14, 2005 for the purchase of one (1) CV 2500 type container vessel, designated as Builder's Hull No. BN 460 (the "Shipbuilding Contract"); and
WHEREAS, the parties wish to amend the Shipbuilding Contract to reflect certain agreements as to priority work remaining to be performed on the Vessel and their status upon delivery of the Vessel.
NOW, THEREFORE, in consideration of the foregoing premises, and for other good and valuable consideration, the receipt and adequacy of which are acknowledged, the parties hereby agree as follows:
1. ARTICLE VII, 2, second paragraph, of the Shipbuilding Contract shall be deleted and the following paragraphs substituted therefor:
The BUYER shall take delivery of the VESSEL if it is substantially complete. The VESSEL shall not be deemed to be "substantially complete" if the aggregate value of the delivery deficiencies excluding those items of work as provided in the next paragraph is in excess of ONE MILLION DOLLARS ($1,000,000.00) or if any of the items identified as required for delivery in Exhibit 1A are not completed.
2. The BUYER and the BUILDER also agree as follows:
a. The BUYER and the BUILDER have agreed that:
(i) The items of work listed in Exhibit 1B constitute priority work items that must be completed by the BUILDER before the VESSEL sails (the "Sailing Work"); and if the VESSEL is delivered without any of such work items having been completed delivery of the Vessel will proceed, but the remaining items will be included in Exhibit 1 to the PROTOCOL OF DELIVERY AND ACCEPTANCE and no funds will be released from the related escrow fund holdback for any work until all Exhibit 1B items are completed or the Vessel sails.
(ii) BUYER has prepared a list of deficiency items and has identified among the deficiencies the work items that BUYER desires to have completed prior to sailing. A list of second priority items is attached as Exhibit 1C (the "Second Priority Sailing Work"). If the VESSEL is delivered without such work items having been completed, the remaining items will be included in Exhibit 1 to the PROTOCOL OF DELIVERY AND ACCEPTANCE and funds will be released as work on such items is completed provided the precondition to payment in (i) above is satisfied.
(iii) BUYER and BUILDER have entered into two change orders for modifications to the galley area, COA-44 and 44b, that were anticipated to be completed by BUILDER after delivery but before sailing of the Vessel (the "Galley Modifications"). BUYER has also provided BUILDER with a list of additional items of work as described in Exhibit 1D (the "Additional Work") that BUYER has requested that BUILDER complete under the Agreement Concerning Post Delivery Work prior to sailing.
(iv) BUYER's planned sailing of the Vessel is now scheduled for August 5, 2006. BUILDER will provide BUYER by July 11, 2006 with a Production Schedule detailing completion of the Sailing Work, the Second Priority Sailing Work, the Galley Modifications and the Additional Work prior August 5, 2006. The Production Schedule must include the following details: estimated major milestones for galley completion, estimated compartment completion of accommodations by deck, estimated completion of open test memos by test memo and estimated final completion date for Vessel departure. Except as provided in (i) and (ii) above and in COA-44 and 44b, payment for such work to be paid as completed. Additional details regarding payment for such work, as well as other matters relating to the Post Delivery availability period contemplated herein shall be set forth in a separate Agreement Concerning Post Delivery Work to be executed at delivery.
b. The BUYER will accept the BUILDER'S force majeure claim of 54 days relating to the late delivery of the main engine and to change the Contract Delivery Date from May 7, 2006 to June 30, 2006.
c. For the purpose of calculating interest pursuant to ARTICLE II, 1, c, the date for the "Float out of the Vessel" shall be May 10, 2006.
d. The BUYER will commit on July 7, 2006 with its lender to have funds available for the planned Vessel delivery on July 12, 2006. If the Vessel is not or cannot be delivered on July 12, 2006 either because of the Vessel is not substantially complete in accordance with the requirements of ARTICLE VII, 2 of the Shipbuilding Contract or because of any other actions or failures of the BUILDER, then the BUILDER will pay the breakage costs actually incurred by the BUYER to its lender.
IN WITNESS WHEREOF, the parties have duly executed this Amendment No. 3 to Shipbuilding Contract as of the date first set forth.
AKER PHILADELPHIA SHIPYARD, INC.
By: /s/ David E. Meehan
----------------------------
David E. Meehan
Title: President and CEO
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MATSON NAVIGATION COMPANY, INC.
By: /s/ K. C. O'Rourke
----------------------------
K. C. O'Rourke
Title: Senior Vice President
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Exhibit 1A
MAUNALEI - DELIVERY REQUIREMENTS
USCG WORKLIST ITEMS
7 JULY 2006
1. Show proper operation of OWS, and post pollution placard.
2. Show proper operation of Water Mist system.
3. Ensure G/A alarm, enunciators, is working properly, non-volume controlled.
WORKLIST ITEMS TO BE COMPLETED PRIOR TO DELIVERY
3 JULY 2006
REFERENCE DOC. ITEM # DESCRIPTION
-------------- ------ -----------
UNFINISHED WORK
4. ITEMS 178 Replace damaged monorail crane cable
UNFINISHED WORK
5. ITEMS 232 Ballast System TLE's Tks 1.04&1.05
UNFINISHED WORK
6. ITEMS 267 Prove Bilge Suctions to three valve nitches
TEST MEMO
7. STATUS #460 C1 ALFAL LAVAL SEPARATORS
TEST MEMO
8. STATUS #460 C18 FIXED WATER MIST FIRE EXTINGUISHING
TEST MEMO
9. STATUS #460 C21 BILGE WATER SEPARATOR
TEST MEMO
10. STATUS #460 C32 GA\PA SYSTEM
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Exhibit 1B
MAUNALEI - SAILING REQUIREMENTS
USCG WORKLIST ITEMS
7 JULY 2006
1. Relocate lower level E/R hose reel closer to hydrant.
2. Provide G/A alarm and siren in #5 hold.
3. Install a red light/lens on SSDG room for the G/A alarm.
4. Provide adequate protective covering on the back of the main electrical
switch board.
5. Provide the following documents; Stability letter, ISM manuals, COFR,
COD, life raft certificates, loading manual, SOPEP, VRP.
6. Demonstrate proper operation of Emergency lighting in all cargo
holds. Correct discrepancies as indicated on inspection record DTD 26
Jun 1006.
GL WORKLIST ITEMS -
7 JULY 2006
1. Water Mist System to complete and re-test outstanding items.
2. Outstanding certificates for Equipment to supply.
3. Inclining Experiment to undertake and Stability Booklet to compile and
have approved by GL.
4. Steam Lines and Flanges to complete insulation.
5. Completion of all outstanding Blue Marks to be undertaken.
6. Completion of all outstanding inspections, (especially electrical
cabling).
7. LT FW Pumps overheating and overloading, (140/142 Amp; 68C) to rectify.
8. ME LO Pump E-Motor Temp at 70C to advise or rectify.
9. SW P/Ps vibration to cure
10. LT P/Ps vibration to cure.
11. Boiler Gauge Glasses visibility from control stand to enhance.
12. Provide approved inclining results
13. Stbd Emergency exit hatch facing wrong way, to be refitted.
14. Drains condenser continuous water hammer to be cured.
15. Cabling installation to be completed, (properly secured, seperated,
laid).
16. Bridge wing consoles, gyro repeaters and aerials vibrations to cure.
17. Vibration and noise issues exceeding acceptable limits as per GL
Consultants report to rectify.
Exhibit 1C
MAUNALEI - SECOND PRIORITY SAILING ITEMS
No. DESCRIPTION --- ----------- 19 Cable splice FR 120 20 Cable splice FR 80 24 Cable temp sensor TK 8 no loop. 35 Cable Splices over LO purifiers 41 CH 4 No separtion of control & power cables 42 Armored cables feeding LTFW not grounded. 48 Loose Cables Purifier area. 55 Intrinsicly safe cables - traced in blue. 61 Install rudder post locking device properly. 65 Ballast Tks 1.06&1.07 burn marks in tk-coat 66 Lashing Rod for Monorail Crane 69 Missing PA/GA Horns in CH 5 77 Handrail on P&S platforms @ FR 211 78 SW Overboard Valve From LT Coolers 81 Cargo Hold 2 Cable Separation 82 Main Swbd Loose and Uninsulated Cable 83 Fuel Pipe Heat Trace System 84 Ungrounded Cable Shields Cargo Hold 2 86 Cables too close to heat trace lines. 90 Bridge Batteries 91 Bridge Battery Bank Wiring 94 230V Transformer Cables 97 Main LO Pump Cable - Deck Penetration 99 Electrical Cable Termination 104 Identify and Repair Exposed Cable 105 Properly Splice Cable 112 Remove Excessive Cable 128 Complete Insulation No. 4 Cargo Hold 139 Install Missing Handrail No. 1 Cargo Hold 146 Install missing handrails and caps No 2 CH 150 Install Missing Elec Receptacle 151 Install Missing Elec Receptacle 152 Install Missing Elec Receptacle 153 Install Missing Elec Receptacle 154 Install Missing Elec Receptacle 155 Install Missing Elec Receptacle 156 Install Missing Elec Receptacle 158 Install Missing Elec Receptacle 167 Bow Thruster Cable Chafing 168 Fan E33 Control Circuit Wiring 172 Escape Trunk PT100 Cable Installation 173 Escape Trunk Wiring Support 174 Electric Cable Termination 176 Replace borken hatch indicator switch 178 Replace damaged monorail crane cable 182 Cable Termination 5th deck E room 183 Cable Termination 5th deck E room 184 Cable Termination under Main Swbd 191 Securing of UPS Unit 193 Steering Gear Control Panel Wiring 196 MCT packing under main switchboard 214 Repair Navtex receiver 216 Install missing vessel name boards 218 Repair Gyro Failure Alarm 220 Steam Dump Condenser 221 Repair No. 1 and 2 LT Cooling Pumps 222 Repair Leak on No 1 HFO Separator 226 Replace seals on No. 1&2 Boiler Feed Pump 228 Scavenge Air Drain Tank Releif Valve Piping 229 Replace HVAC Gages 230 Main Engine Exhaust Leak 231 Boiler Exhaust Piping Vibration 232 Ballast System TLE's Tks 1.04&1.05 239 SW Coolers Inlet Thermometers 241 HT Cooling Pipe Support 248 DG Booster Pump Change Over Controls 250 Main SW Strainers 252 Main Engine Turning Gear Motor 254 Main Engine Cyl No.6 Ex. Valve Drain valve 256 Evap Fill Valve to Double Bottom 257 Main Engine CW Vent Piping Support 259 Diesel Gen No.1&2 Turbo outlet Thermometer 263 Main Engine Exhaust Line Supports 290 Steering Gear Flat Handrail 291 Steering Gear Flat Chafing 294 CO2 Piping Hanger 297 Fire Main Hanger 310 Main Deck Penetration 311 Exterior Main Deck Penetration 313 Exterior Main Deck Penetration 314 Exterior Main Deck Penetration 324 Exterior Main Deck Missing Locking Clips 327 Exterior Main Deck Hatch Cover Dogs 331 Exterior Main Deck Leak 353 Diesel Generator Control Cable Support 355 Rescue Boat Heater Indicator Lamp 360 Heeling Pump Junction Box 361 Bridge Control Console Chafing 362 Bridge Radio/GMDSS Console Chafing 377 Deck Containment and Funnel 381 Tank and Bilge Well Cleaning 382 Main & Emergency Fire Pump Controls 385 Securing of Cables on Open Decks 393 SLOPS Disposal 60 tons 398 Remove FO Manhole Cover Handles #4Cargo 399 Install Missing Handrail No. 4 Cargo Hold 400 Replace missing/broken term guardsDBC4 403 Presentation of Machinery Spart Parts for Ver 404 Cable Separation DB2 Platform Deck 405 Cable Separation DB2 Platform Deck 406 Repair Power On Light in Reefer Panel DBC4 408 Flying Bridge floodlight conduit support port 411 Bridge Control & GMDSS frame gounding 412 House Heads drains & vents/Sewage smell 413 Replace missing/broken term guardsDBC3 414 Properly Terminate cables in 5th deck Eroom 417 Cable Separation from heat source Fr 20 port 419 Cable Separation from heat source Fr 20 port 420 Correct Cable Chafing FR 18 Stbd Side 421 Properly Terninate cable in fire control room 425 Weekly Item List Feb16-2 Valve Niche Exh. 426 Weekly Item List Feb 16-8 Tank 1,05 Clean 428 Weekly Item List Mar30-5 Automation Wiring 431 Weekly Item List Apr13-7 Sun Awning 432 Weekly Item List Apr 27-7 Splice As builts 435 Weekly Item List May18-3 LO Pump Elec. 436 Correct Wiring Jumper on Circuit X15 in DB1 437 Correct Wiring for oil residue pump in DB1 438 Locate splice at FR 170 stbd side in J Box 439 Correct Chafing at FR81 stbd void in ovrhd 440 Properly pack MCT in room 513 442 Correct Chafing on foremast aft of breakwater 443 Properly terminate cables in EngRmEscape 444 Install explosion proof plug in Paint Locker 445 Weekly Item List May25-2 Purifier sensors 451 Fill Open Chicklet in lower ER 454 Fair warped 2nd deck of ER 455 Repair leaking flange FR 10 stbd 456 Repair leaking flange on top of cyl LO tank 457 Connect RTD FR22 stbd 461 Weld pipe hanger above Gen #4 464 Weld pipe hanger above Gen #2 465 Grind Weld seams on Gen flat trollies 466 Install missing pipe hanger above Gen #2 469 Refit lifting beam above inbd air compressor 470 Complete missing structural weld 472 Weld dosing unit at platform deck 474 Provide access or reach rod to sewage valve 476 Provide safe access to steam manifold valves 477 Degrease and clean purifier area 478 Replace cracked brass water valve HFO pur. 479 Clear blocked drain near MDO purifier 481 Clear blocked deck drain near air compressor 484 Install missing step in void FR 11 485 Reweld three CO2 hangers FR 14 stbd 487 Secure tachometer mount on main engine 489 Weld hanger to tank top in shaft alley 490 Weld hanger in shaft alley 492 Weld hanger in shaft alley 493 Add hanger to tubing in shft alley 494 Clear blocked drain near dirty oil pump 499 Repair leaking pneumatic valve 500 Weld 3 tubing hangers ER bilge 502 Repair leaking FO fitting ER bilge 503 Weld pipe hanger in ER bilge 504 Install hanger cap in ER bilge 505 Weld out pump and catwalk foundation ER 506 Provide access to valve on feed water fill pump 507 Weld cap on kick pipe ER bilge 510 Provide lint trap main laundry 512 Properly mount fire detector fwd of boiler 513 Replace missing watch duty reset button 516 Install missing handrail safety chain FR 211 517 Install missing handrail Cargo Hold No. 4 518 Weld Out Cable Tray Support in 1st dk eroom 519 Weld Out handrails near treatment rm 2nd dk 521 Replace and Demostrate Valve Niche Elec. 522 Repair Fire Fighting Pump off lights in console 523 Secure Microprocessor & UPS - Ship' office 524 Replace Temporary Choker on Compass 525 Properly terminate cable under DG4 alternator 526 Install hanger on boiler HFO return line 527 Install cable to PT100sensor for Tank 5.01 BLUE MARK INSPECTION DB 3629 FIRE DETECTION SYSTEM BLUE MARK INSPECTION DB 3665 QUICK CLOSING VALVE\FIRE DAMPERS |
Exhibit 1D
MAUNALEI - ADDITIONAL WORK ITEMS
Item
No. Description
---- -----------
1 Remove existing shelving, install foundations and Lista Cabinets
2 Prefabricate and install foundations, and install Lista cabinets
3 Prefabricate and install foundations, and install Lista cabinets
4 Wire in additional ME sensor points to monitoring system
5 Install 28 cylinder exhaust temperature sensors and rails, wire into
monitoring system
6 Install Kyma shaft horsepower meter
7 Marinfloc OWS piping requirements & wiring
8 Install PMI system on ME
9 Modify piping to connect into MDO system
10 Install sink and drinking fountain
11 Modify 28 lashing bar brackets Main deck
12 Furnish and install turnbuckle bins in bson store
13 Paint hatch cover sockets
14 Install accordion door between officer/duty mess
15 Hand rails on aft end of stack exhaust deck
16 2 Pilot ladder stowage boxes on main deck
17 Matson gangway platforms Port & Stbd
18 Cascade air bottle system
19 Remove/relocate deck ladders
20 Install lashing bar bins in-between hatches
21 Install 3 keyless entry security locks
22 Mounting bracket for Billy Pugh on house blkhd
23 Security bars on coaming openings
24 Lista cabinet foundations
25 Piping for livestock feed water
26 Install safety wire for port and stbd gangway
27 Upper Foremast safety cage on ladder
28 Door installation to "Suez Talley office"
29 Land line for cargo operations
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CERTIFICATION
I, W. Allen Doane, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Alexander & Baldwin, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
By /s/ W. Allen Doane
-----------------------------------
W. Allen Doane, Chairman and
Chief Executive Officer
Date: July 28, 2006
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CERTIFICATION
I, Christopher J. Benjamin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Alexander & Baldwin, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
By /s/ Christopher J. Benjamin
-------------------------------------
Christopher J. Benjamin, Senior Vice President,
Chief Financial Officer and Treasurer
Date: July 28, 2006
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Certification of Chief Executive Officer and
Chief Financial Officer Pursuant to
18 U.S.C. Section 1350, As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of Alexander & Baldwin, Inc. (the "Company") for the quarterly period ended June 30, 2006, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), W. Allen Doane, as Chairman and Chief Executive Officer of the Company, and Christopher J. Benjamin, as Senior Vice President, Chief Financial Officer and Treasurer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to their knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ W. Allen Doane ----------------------------------- Name: W. Allen Doane Title: Chairman and Chief Executive Officer Date: July 28, 2006 /s/ Christopher J. Benjamin ----------------------------------- Name: Christopher J. Benjamin Title: Senior Vice President, Chief Financial Officer and Treasurer Date: July 28, 2006 |