Alexander & Baldwin(ALEX) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Presents unaudited condensed consolidated financial statements and management's analysis for the quarter ended March 31, 2022 Financial Statements The unaudited condensed consolidated financial statements for Q1 2022 show a 21.2% revenue increase and a slight rise in net income, with decreased operating cash flow Condensed Consolidated Balance Sheets The balance sheet shows a slight decrease in total assets and liabilities, primarily due to reduced cash and debt Condensed Consolidated Balance Sheets (in millions) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $1,854.6 | $1,879.8 | | Real estate investments, net | $1,523.2 | $1,533.1 | | Cash and cash equivalents | $33.7 | $70.0 | | Total Liabilities | $776.8 | $806.3 | | Notes payable and other debt | $522.2 | $532.7 | | Total Equity | $1,070.4 | $1,066.6 | - Total assets decreased by $25.2 million, primarily driven by a $36.3 million decrease in cash and cash equivalents. Total liabilities decreased by $29.5 million, mainly due to a reduction in notes payable and other debt[8][9] Condensed Consolidated Statements of Operations Operating revenue increased 21.2% year-over-year, leading to higher operating income and net income, while diluted EPS remained flat Q1 2022 vs Q1 2021 Statement of Operations (in millions, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Total operating revenue | $98.2 | $81.0 | | Operating Income | $18.4 | $13.9 | | Net Income Attributable to A&B Shareholders | $10.5 | $9.9 | | Diluted EPS | $0.14 | $0.14 | - Total operating revenue increased by 21.2% year-over-year, driven by growth in the Commercial Real Estate and Materials & Construction segments. Despite higher revenue, Diluted EPS remained flat at $0.14 per share[12] Condensed Consolidated Statements of Cash Flows Net cash from operations significantly decreased, with financing activities primarily involving dividend payments and debt repayments Q1 2022 vs Q1 2021 Cash Flows (in millions) | Cash Flow Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $7.3 | $20.6 | | Net cash provided by (used in) investing activities | $(3.9) | $10.4 | | Net cash used in financing activities | $(39.7) | $(56.2) | | Net decrease in cash | $(36.3) | $(25.2) | - Net cash from operations saw a significant decrease to $7.3 million from $20.6 million in the prior year. Financing activities primarily consisted of $27.0 million in cash dividend payments and $10.5 million in debt repayments[17] Notes to Condensed Consolidated Financial Statements Provides details on segment operations, debt structure, ongoing legal proceedings, and pension plan termination impacts - The company operates in three segments: Commercial Real Estate (CRE), Land Operations, and Materials & Construction (M&C). As of March 31, 2022, the CRE portfolio included 3.9 million square feet of gross leasable area across 37 properties in Hawai'i[27] - Total debt (carrying value) was $522.2 million as of March 31, 2022, a decrease from $532.7 million at year-end 2021. The company uses interest rate swaps to manage exposure on its variable-rate debt[42][43][45] - The company is involved in ongoing legal proceedings concerning water rights for its former agricultural lands in East Maui, with recent court rulings requiring further review and hearings[56][61][62] - On February 23, 2021, the Board approved the termination of the company's Defined Benefit Pension Plans. A partial settlement charge of $3.2 million was recorded in Q1 2022, with expected additional cash contributions of $34 million to $48 million in 2022 to fully fund the plans[80][81][82] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses strong Q1 performance driven by CRE and M&C segments, ongoing simplification strategy, and pension plan termination Business Overview Outlines the company's three operating segments and its strategic focus on monetizing non-commercial real estate assets - The company operates three segments: Commercial Real Estate (CRE), Land Operations, and Materials & Construction (M&C)[106] - The CRE segment focuses on grocery-anchored neighborhood shopping centers and industrial spaces in Hawai'i[106] - The company is pursuing a simplification strategy, which includes monetizing non-commercial real estate assets, particularly the Materials & Construction business[108][109] Consolidated Results of Operations Details the consolidated financial performance, highlighting revenue growth and the impact of pension settlement charges Consolidated Financial Results Summary (in millions) | Metric | Q1 2022 | Q1 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Operating revenue | $98.2 | $81.0 | $17.2 | 21.2% | | Operating income | $18.4 | $13.9 | $4.5 | 32.4% | | Net income attributable to A&B | $10.5 | $9.9 | $0.6 | 6.1% | | Core FFO | $20.8 | $15.4 | $5.4 | 35.1% | - The 21.2% increase in operating revenue was driven by higher revenues from the CRE and M&C segments, partially offset by lower revenues from Land Operations[118] - Pension and post-retirement benefit expense increased to $3.4 million from $0.6 million, primarily due to a $3.2 million partial settlement charge related to the termination of the Defined Benefit Plans[119] Analysis of Operating Revenue and Profit by Segment Analyzes revenue and profit contributions from Commercial Real Estate, Land Operations, and Materials & Construction segments Segment Operating Profit (Loss) (in millions) | Segment | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Commercial Real Estate | $20.6 | $15.4 | | Land Operations | $(0.1) | $11.4 | | Materials & Construction | $3.2 | $(4.0) | - Commercial Real Estate operating profit increased 33.8% due to higher rents as tenant relief modifications ended and improved collections. Same-Store NOI increased 17.0% to $29.6 million[122] - Land Operations reported an operating loss of $0.1 million, a significant decrease from an $11.4 million profit in Q1 2021, reflecting the variable nature of land sales and a $2.3 million pension settlement charge[138][139] - Materials & Construction swung to a $3.2 million profit from a $4.0 million loss, driven by quarry and asphalt sales. Backlog increased 59.4% year-over-year to $202.7 million[142][143] Liquidity and Capital Resources Discusses the company's liquidity sources, available credit, significant cash requirements, and compliance with debt covenants - Principal sources of liquidity are cash from operations, cash on hand ($33.7 million at quarter-end), and borrowing capacity under credit facilities[156][162] - As of March 31, 2022, the company had $448.9 million of available capacity on its primary revolving credit facility[162] - A significant near-term cash requirement is the expected contribution of $34 million to $48 million in 2022 to settle the termination of its Defined Benefit Pension Plans[158] - The company was in compliance with all financial covenants for its debt arrangements as of March 31, 2022[173] Quantitative and Qualitative Disclosures About Market Risk Reports no material changes in market risk disclosures since the prior fiscal year-end - There have been no material changes in market risk disclosures since the year-end 2021 Form 10-K filing[179] Controls and Procedures Management concluded disclosure controls were effective, with no material changes to internal control over financial reporting - The CEO and CFO concluded that as of March 31, 2022, the company's disclosure controls and procedures were effective[180] - There were no material changes to the company's internal control over financial reporting during the first fiscal quarter[181] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, and equity security sales for the reporting period Legal Proceedings Details ongoing legal challenges concerning water rights in East Maui, including recent court rulings and pending decisions - The company is involved in legal proceedings regarding water licenses in East Maui, which were previously used for agricultural operations[56][57] - On March 2, 2022, the Supreme Court of Hawai'i vacated a prior ruling, holding that the Hawaii Environmental Policy Act applied to the water permits and remanded the case back to the Circuit Court[60][61] - A separate lawsuit filed by the Sierra Club challenging the 2019 and 2020 revocable permits is also under appeal, and a decision on the 2021 and 2022 permits is pending following a contested case hearing[62] Risk Factors Confirms no material changes to the risk factors previously disclosed in the company's latest annual report - No material changes to risk factors were reported for the period[184] Unregistered Sales of Equity Securities and Use of Proceeds Reports no unregistered equity sales and the reauthorization of a stock repurchase program with no shares bought back - No unregistered equity securities were sold during the period[185] - A $150 million stock repurchase program was reauthorized, effective through December 31, 2023. No shares were repurchased in 2022 or 2021 under the plan[185]