Alexander & Baldwin's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Alexander & Baldwin, Inc. ( ALEX)

Q4 2011 Earnings Call

February 13, 2012 5:00 pm ET


Stanley M. Kuriyama – President & Chief Executive Office

Joel M. Wine – Senior Vice President, Chief Financial Officer and Treasurer

Matthew J. Cox – President, Matson Navigation Company, Inc.

Christopher J. Benjamin – President, A&B Land Group


Sheila Mcgrath – Keefe, Bruyette & Woods, Inc.

Jack Atkins – Stephens, Inc.

Brendan Maiorana – Wells Fargo Securities, LLC

Dean Machado – LionEye Capital Management LLC



Good day, ladies and gentlemen, and welcome to Fourth Quarter and Full-Year 2011 Alexander & Baldwin Earnings Conference Call. My name is Jeremy, and I will be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session (Operator Instructions).

I would now like to turn the conference over to your host for today, Ms. Suzy Hollinger, Director of Investor Relations. Please proceed ma’am.

Suzy P. Hollinger

Thank you, Jeremy. Aloha and welcome to Alexander & Baldwin’s fourth quarter and full-year 2011 earnings call. On the call with me today are Stan Kuriyama, A&B's President and CEO; Joel Wine, A&B's CFO; Matt Cox, President of Matson Navigation Company; and Chris Benjamin, President of A&B Land Group.

Before we commence, please note that statements in this call and presentation that set forth expectations or predictions are based on facts and situations that are known to us as of today, February 13, 2012. Actual results may differ materially due to risks and uncertainties, such as those described on pages 17 through 25 of our 2010 Form 10-K and our other subsequent filings with the SEC.

Statements in this call and presentation are not guarantees of future performance. And we do not undertake any obligation to update our forward-looking statements.

Management will be referring to non-GAAP financial measures when discussing results for the quarter and year. In particular, we will be referring to non-GAAP net income, diluted earnings per share and Ocean Transportation operating profit that exclude the impact of losses from the operation and shutdown of our discontinued CLX2 service. Included in the appendix of today’s slide presentation is a reconciliation of the GAAP to non-GAAP financial measures, a statement regarding our use of these measures and additional SEC required information. Slides from this presentation are available for your download at our website

This slide provides you an agenda for our presentation, after which we will take your questions. We will start with Stan, who will comment on the year.

Stanley M. Kuriyama

Good afternoon everyone and thank you for joining our call today. 2011 was a challenging and atypical year for the company with mixed results across our various lines of business and the announcement of a major milestone in the company's history.

At Matson’s we saw volume increases in our core Hawaii trade lane due to a strong improvement in Hawaii tourism, as well as increases in Guam due to Horizon Lines exit from the trade. However, overcapacity and low rates in the Transpacific trade significantly suppressed our earnings in our China services resulting in the eventual discontinuation of CLX2.

It was a difficult year for the Transpacific carriers with nearly all companies incurring heavy losses in 2011. We remain fortunate that even under these adverse conditions the double head haul and premium service of our CLX1 string allows it to be one of the few profitable lines in the Transpacific trade.

In real estate, our commercial portfolio produced a nice double-digit year-over-year improvement in operating profit despite a still soft national economy. We made the long term strategic decision in 2011 to refocus our commercial portfolio back to Hawaii over time. Accordingly, the pace of sales from our commercial portfolio was, and will increasingly be dictated by the ability to locate acquisition opportunities in Hawaii. As a result, we saw far fewer large sales from our commercial portfolio in 2011 than in prior years.

In addition, offshore demand for Hawaii Resort Residential product remained weak, resulting in fewer development and property sales than were expected when we started the year. Importantly however, we continued to make good progress in expanding and positioning our pipeline of development projects in Hawaii for eventual market recovery.

Finally, our Agribusiness division led by HCNS had a banner year, and we expect strong performance to continue in 2012.

Joel, Matt and Chris will provide you with more detail on 2011 and our outlook for the coming year. Major news last year of course was our announcement in December to separate Alexander & Baldwin into standalone, publicly traded, land and transportation companies. We firmly believe that shareholders will benefit from the greater focus, alignment and transparency separation will bring.

As you will here from Joel, we’re on track with our regulatory filings and are currently targeting a third quarter separation date.

Turning briefly to Hawaii’s economy, tourism continues to be a real bright spot for the state. Tourism expenditures in 2011 were $12.5 billion, nearly matching the record $12.6 billion expended in 2007. When you consider that 2007 was followed by the recessionary years of 2008 and 2009, the strength and rapidity of tourism’s rebound is a real testament to the industry's resiliency. Tourism was the primary reason Hawaii’s unemployment rate averaged 6.3% in 2011 compared to the national average of 9%. More rapid economic recovery however will depend on the return of construction, which is yet to recover in any meaningful way.

This has not escaped the notice of our elected officials, and a few weeks ago the state senate proposed spending and expediting the permitting for $500 million of shovel-ready construction projects. Additional slides on the Hawaii economy are included in the appendix to this presentation.

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