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Achieves 2.8% increase in Same-Store NOI and 4.0% increase in Core FFO per diluted share over the prior year quarter
HONOLULU, Nov. 3, 2022 /PRNewswire/ -- Alexander & Baldwin, Inc. (NYSE: ALEX) ("A&B" or "Company"), a Hawai'i-based company focused on owning and operating high-quality commercial real estate in Hawai'i, today announced financial results for the third quarter of 2022.
Chris Benjamin, A&B president & chief executive officer stated: "Our commercial real estate ("CRE") business posted outstanding results in the third quarter, continuing to build on the momentum experienced since early last year. Total leased occupancy remained strong at 94.6% at quarter-end as Hawai'i's economy continued to strengthen, supported by robust tourism."
"With our business simplification process nearly complete, and the Grace Pacific marketing process well underway, we are excited to shift our focus to growth. We believe our deep market relationships and a balance sheet with significant dry powder position us to uncover and capitalize on development and acquisition opportunities. We continue to pursue investments that meet our quality and return targets, and that are complementary to our geographically-focused portfolio as we seek to grow our platform and drive value for our shareholders into 2023 and beyond."
Financial Results for Q3 2022
Commercial Real Estate (CRE) Highlights for Q3 2022
CRE Redevelopment
Land Operations
Materials & Construction (M&C)
Balance Sheet, Market Value, Adjusted EBITDA and Liquidity
Dividend
2022 Full-Year Guidance
2022 Guidance | |||
Revised | Prior | Initial | |
Core FFO per diluted share | $1.07 to $1.11 | $1.05 to $1.11 | $0.94 to $1.00 |
CRE Same-Store NOI | 4.5% to 6.5% | 4% to 6% | 0% to 2% |
CRE Same-Store NOI, excluding | 4% to 6% | 3.5% to 5.5% | 2% to 4% |
ABOUT ALEXANDER & BALDWIN
Alexander & Baldwin, Inc. (NYSE: ALEX) (A&B) is the only publicly-traded real estate investment trust to focus exclusively on Hawai'i commercial real estate and is the state's largest owner of grocery-anchored, neighborhood shopping centers. A&B owns, operates and manages approximately 3.9 million square feet of commercial space in Hawai'i, including 22 retail centers, 12 industrial assets and four office properties, as well as 141 acres of ground leases. A&B is expanding and strengthening its Hawai'i CRE portfolio and achieving its strategic focus on commercial real estate by monetizing its remaining non-core assets. Over its 152-year history, A&B has evolved with the state's economy and played a leadership role in the development of the agricultural, transportation, tourism, construction, residential and commercial real estate industries. Learn more about A&B at www.alexanderbaldwin.com.
Contact:
Brett A. Brown
(808) 525-8475
investorrelations@abhi.com
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES SEGMENT DATA & OTHER FINANCIAL INFORMATION (amounts in millions, except per share data; unaudited) | ||||||||
Three Months Ended | Nine Months Ended | |||||||
2022 | 2021 | 2022 | 2021 | |||||
Operating Revenue: | ||||||||
Commercial Real Estate | $ 46.2 | $ 44.0 | $ 138.1 | $ 127.2 | ||||
Land Operations | 2.9 | 5.4 | 20.9 | 38.5 | ||||
Materials & Construction | 48.1 | 34.9 | 124.5 | 88.9 | ||||
Total operating revenue | 97.2 | 84.3 | 283.5 | 254.6 | ||||
Operating Profit (Loss): | ||||||||
Commercial Real Estate | 20.3 | 19.0 | 60.3 | 53.0 | ||||
Land Operations | (2.2) | 1.7 | (10.0) | 22.3 | ||||
Materials & Construction | 1.8 | (0.3) | 4.4 | (6.2) | ||||
Total operating profit (loss) | 19.9 | 20.4 | 54.7 | 69.1 | ||||
Gain (loss) on disposal of commercial real estate properties, net | — | — | — | 0.2 | ||||
Interest expense | (5.5) | (6.5) | (16.8) | (20.2) | ||||
Corporate and other expense | (7.6) | (6.8) | (33.7) | (18.9) | ||||
Income (Loss) from Continuing Operations Before Income Taxes | 6.8 | 7.1 | 4.2 | 30.2 | ||||
Income tax benefit (expense) | — | — | 18.1 | (0.1) | ||||
Income (Loss) from Continuing Operations | 6.8 | 7.1 | 22.3 | 30.1 | ||||
Income (loss) from discontinued operations | — | (0.6) | (0.1) | (0.7) | ||||
Net Income (Loss) | 6.8 | 6.5 | 22.2 | 29.4 | ||||
Loss (income) attributable to noncontrolling interest | (0.4) | (0.1) | (1.2) | (0.3) | ||||
Net Income (Loss) Attributable to A&B Shareholders | $ 6.4 | $ 6.4 | $ 21.0 | $ 29.1 | ||||
Basic Earnings (Loss) Per Share of Common Stock: | ||||||||
Continuing operations available to A&B shareholders | $ 0.09 | $ 0.10 | $ 0.29 | $ 0.41 | ||||
Discontinued operations available to A&B shareholders | — | (0.01) | — | (0.01) | ||||
Net income (loss) available to A&B shareholders | $ 0.09 | $ 0.09 | $ 0.29 | $ 0.40 | ||||
Diluted Earnings (Loss) Per Share of Common Stock: | ||||||||
Continuing operations available to A&B shareholders | $ 0.09 | $ 0.10 | $ 0.29 | $ 0.41 | ||||
Discontinued operations available to A&B shareholders | — | (0.01) | — | (0.01) | ||||
Net income (loss) available to A&B shareholders | $ 0.09 | $ 0.09 | $ 0.29 | $ 0.40 | ||||
Weighted-Average Number of Shares Outstanding: | ||||||||
Basic | 72.7 | 72.5 | 72.7 | 72.5 | ||||
Diluted | 72.8 | 72.7 | 72.8 | 72.6 | ||||
Amounts Available to A&B Common Shareholders: | ||||||||
Continuing operations available to A&B common shareholders | $ 6.3 | $ 6.9 | $ 20.9 | $ 29.7 | ||||
Discontinued operations available to A&B common shareholders | — | (0.6) | (0.1) | (0.7) | ||||
Net income (loss) available to A&B common shareholders | $ 6.3 | $ 6.3 | $ 20.8 | $ 29.0 | ||||
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (amounts in millions; unaudited) | ||||
September 30, | December 31, | |||
2022 | 2021 | |||
ASSETS | ||||
Real estate investments | ||||
Real estate property | $ 1,598.3 | $ 1,588.2 | ||
Accumulated depreciation | (197.6) | (180.5) | ||
Real estate property, net | 1,400.7 | 1,407.7 | ||
Real estate developments | 64.8 | 65.0 | ||
Investments in real estate joint ventures and partnerships | 8.2 | 8.8 | ||
Real estate intangible assets, net | 45.4 | 51.6 | ||
Real estate investments, net | 1,519.1 | 1,533.1 | ||
Cash and cash equivalents | 7.3 | 70.0 | ||
Restricted cash | 0.2 | 1.0 | ||
Accounts receivable and retention, net | 35.9 | 28.9 | ||
Inventories | 30.1 | 20.3 | ||
Other property, net | 69.6 | 83.5 | ||
Operating lease right-of-use assets | 37.0 | 20.1 | ||
Goodwill | 8.7 | 8.7 | ||
Other receivables | 6.1 | 11.6 | ||
Prepaid expenses and other assets | 133.9 | 102.6 | ||
Total assets | $ 1,847.9 | $ 1,879.8 | ||
LIABILITIES AND EQUITY | ||||
Liabilities: | ||||
Notes payable and other debt | $ 469.7 | $ 532.7 | ||
Accounts payable | 18.5 | 9.9 | ||
Operating lease liabilities | 36.8 | 19.4 | ||
Accrued pension and post-retirement benefits | 10.4 | 56.3 | ||
Deferred revenue | 71.3 | 68.5 | ||
Accrued and other liabilities | 105.9 | 119.5 | ||
Redeemable Noncontrolling Interest | 8.1 | 6.9 | ||
Equity | 1,127.2 | 1,066.6 | ||
Total liabilities and equity | $ 1,847.9 | $ 1,879.8 | ||
ALEXANDER & BALDWIN, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED CASH FLOWS (amounts in millions; unaudited) | ||||
Nine Months Ended September 30, | ||||
2022 | 2021 | |||
Cash Flows from Operating Activities: | ||||
Net income (loss) | $ 22.2 | $ 29.4 | ||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operations: | ||||
Depreciation and amortization | 33.1 | 37.7 | ||
Income tax benefit related to pension termination and other, net | (18.3) | — | ||
Loss (gain) from disposals and asset transactions, net | (54.0) | (0.4) | ||
Share-based compensation expense | 4.6 | 4.4 | ||
Equity in (income) loss from affiliates, net of operating cash distributions | (1.1) | (10.1) | ||
Pension termination | 76.9 | — | ||
Changes in operating assets and liabilities: | ||||
Trade, contracts retention, and other contract receivables | (8.7) | 9.5 | ||
Inventories | (9.8) | (3.8) | ||
Prepaid expenses, income tax receivable and other assets | (13.1) | 0.3 | ||
Development/other property inventory | 9.5 | 0.4 | ||
Accrued pension and post-retirement benefits | (31.3) | (4.0) | ||
Accounts payable | 5.7 | 2.9 | ||
Accrued and other liabilities | (6.7) | 0.9 | ||
Net cash provided by (used in) operations | 9.0 | 67.2 | ||
Cash Flows from Investing Activities: | ||||
Capital expenditures for property, plant and equipment | (15.7) | (26.1) | ||
Proceeds from disposal of assets | 73.1 | 0.6 | ||
Payments for purchases of investments in affiliates and other investments | (1.5) | (0.8) | ||
Distributions of capital and other receipts from investments in affiliates and other investments | 0.1 | 40.2 | ||
Net cash provided by (used in) investing activities | 56.0 | 13.9 | ||
Cash Flows from Financing Activities: | ||||
Proceeds from issuance of notes payable and other debt | 13.5 | 128.0 | ||
Payments of notes payable and other debt and deferred financing costs | (29.3) | (192.2) | ||
Borrowings (payments) on line-of-credit agreement, net | (50.0) | — | ||
Cash dividends paid | (57.7) | (46.5) | ||
Repurchases of common stock and other payments | (5.0) | (1.1) | ||
Net cash provided by (used in) financing activities | (128.5) | (111.8) | ||
Cash, Cash Equivalents and Restricted Cash | ||||
Net increase (decrease) in cash, cash equivalents and restricted cash | (63.5) | (30.7) | ||
Balance, beginning of period | 71.0 | 57.4 | ||
Balance, end of period | $ 7.5 | $ 26.7 |
USE OF NON-GAAP FINANCIAL MEASURES
The Company uses non-GAAP measures when evaluating operating performance because management believes that they provide additional insight into the Company's and segments' core operating results, and/or the underlying business trends affecting performance on a consistent and comparable basis from period to period. These measures generally are provided to investors as an additional means of evaluating the performance of ongoing core operations. The non-GAAP financial information presented herein should be considered supplemental to, and not as a substitute for or superior to, financial measures calculated in accordance with GAAP.
NOI is a non-GAAP measure used internally in evaluating the unlevered performance of the Company's Commercial Real Estate portfolio. The Company believes NOI provides useful information to investors regarding the Company's financial condition and results of operations because it reflects only the contract-based income and cash-based expense items that are incurred at the property level. When compared across periods, NOI can be used to determine trends in earnings of the Company's properties as this measure is not affected by non-contract-based revenue (e.g., straight-line lease adjustments required under GAAP); by non-cash expense recognition items (e.g., the impact of depreciation and amortization expense or impairments); or by other expenses or gains or losses that do not directly relate to the Company's ownership and operations of the properties (e.g., indirect selling, general, administrative and other expenses, as well as lease termination income). The Company believes the exclusion of these items from operating profit (loss) is useful because the resulting measure captures the contract-based revenue that is realizable (i.e., assuming collectability is deemed probable) and the direct property-related expenses paid or payable in cash that are incurred in operating the Company's Commercial Real Estate portfolio, as well as trends in occupancy rates, rental rates and operating costs. NOI should not be viewed as a substitute for, or superior to, financial measures calculated in accordance with GAAP.
The Company reports NOI and Occupancy on a Same-Store basis, which includes the results of properties that were owned and operated for the entirety of the prior calendar year and current reporting period, year-to-date. The Company believes that reporting on a Same-Store basis provides investors with additional information regarding the operating performance of comparable assets separate from other factors (such as the effect of developments, redevelopments, acquisitions or dispositions).
Reconciliations of Commercial Real Estate operating profit (loss) to Commercial Real Estate NOI and Same-Store NOI are as follows:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
(amounts in millions; unaudited) | 2022 | 2021 | Change1 | 2022 | 2021 | Change1 | ||||||
Commercial Real Estate Operating Profit | $ 20.3 | $ 19.0 | $ 1.3 | $ 60.3 | $ 53.0 | $ 7.3 | ||||||
Plus: Depreciation and amortization | 9.0 | 9.2 | (0.2) | 27.4 | 28.2 | (0.8) | ||||||
Less: Straight-line lease adjustments | (1.2) | (1.1) | (0.1) | (3.7) | (2.9) | (0.8) | ||||||
Less: Favorable/(unfavorable) lease amortization | (0.2) | (0.1) | (0.1) | (0.8) | (0.5) | (0.3) | ||||||
Less: Termination income | (0.1) | (0.1) | — | (0.1) | (0.1) | — | ||||||
Plus: Other (income)/expense, net | (0.6) | (0.4) | (0.2) | 0.3 | (0.6) | 0.9 | ||||||
Plus: Selling, general, administrative and other | 1.8 | 1.6 | 0.2 | 5.2 | 4.8 | 0.4 | ||||||
Commercial Real Estate NOI | 29.0 | 28.1 | 0.9 | 88.6 | 81.9 | 6.7 | ||||||
Less: NOI from acquisitions, dispositions, and | (0.1) | — | (0.1) | (0.4) | (0.1) | (0.3) | ||||||
Commercial Real Estate Same-Store NOI | $ 28.9 | $ 28.1 | $ 0.8 | $ 88.2 | $ 81.8 | $ 6.4 | ||||||
1 Amounts in this table are rounded to the nearest tenth of a million, but percentages were calculated based on thousands. Accordingly, a recalculation of some percentages, if based on the reported data, may be slightly different. |
FFO is presented by the Company as a widely used non-GAAP measure of operating performance for real estate companies. The Company believes that, subject to the following limitations, FFO provides a supplemental measure to net income (calculated in accordance with GAAP) for comparing its performance and operations to those of other REITs. FFO does not represent an alternative to net income calculated in accordance with GAAP. In addition, FFO does not represent cash generated from operating activities in accordance with GAAP, nor does it represent cash available to pay distributions and should not be considered as an alternative to cash flow from operating activities, determined in accordance with GAAP, as a measure of the Company's liquidity. The Company presents different forms of FFO:
The Company presents both non-GAAP measures and reconciles each to the most directly-comparable GAAP measure as well as reconciling FFO to Core FFO. The Company's FFO and Core FFO may not be comparable to FFO non-GAAP measures reported by other REITs. These other REITs may not define the term in accordance with the current Nareit definition or may interpret the current Nareit definition differently.
Reconciliations of net income (loss) available to A&B common shareholders to FFO and Core FFO are as follows:
Three Months Ended | Nine Months Ended | |||||||
(amounts in millions; unaudited) | 2022 | 2021 | 2022 | 2021 | ||||
Net income (loss) available to A&B common shareholders | $ 6.3 | $ 6.3 | $ 20.8 | $ 29.0 | ||||
Depreciation and amortization of commercial real estate properties | 9.0 | 9.2 | 27.4 | 28.2 | ||||
Gain on the disposal of commercial real estate properties, net | — | — | — | (0.2) | ||||
FFO | $ 15.3 | $ 15.5 | $ 48.2 | $ 57.0 | ||||
Exclude items not related to core business: | ||||||||
Land Operations Operating (Profit) Loss | 2.2 | (1.7) | 10.0 | (22.3) | ||||
Materials & Construction Operating (Profit) Loss | (1.8) | 0.3 | (4.4) | 6.2 | ||||
Loss from discontinued operations | — | 0.6 | 0.1 | 0.7 | ||||
Income (loss) attributable to noncontrolling interest | 0.4 | 0.1 | 1.2 | 0.3 | ||||
Income tax expense (benefit) | — | — | (18.1) | 0.1 | ||||
Non-core business interest expense | 2.8 | 3.1 | 8.3 | 9.9 | ||||
Pension termination - CRE and Corporate | — | — | 14.7 | — | ||||
Core FFO | $ 18.9 | $ 17.9 | $ 60.0 | $ 51.9 |
Reconciliations of Core FFO starting from Commercial Real Estate operating profit (loss) are as follows:
Three Months Ended | Nine Months Ended | |||||||
(amounts in millions; unaudited) | 2022 | 2021 | 2022 | 2021 | ||||
Commercial Real Estate Operating Profit (Loss) | $ 20.3 | $ 19.0 | $ 60.3 | $ 53.0 | ||||
Depreciation and amortization of commercial real estate properties | 9.0 | 9.2 | 27.4 | 28.2 | ||||
Corporate and other expense | (7.6) | (6.8) | (33.7) | (18.9) | ||||
Pension termination - CRE and Corporate | — | — | 14.7 | — | ||||
Distributions to participating securities | (0.1) | — | (0.2) | — | ||||
Core business interest expense | (2.7) | (3.5) | (8.5) | (10.4) | ||||
Core FFO | $ 18.9 | $ 17.9 | $ 60.0 | $ 51.9 |
The Company may report various forms of Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), on a consolidated basis or a segment basis (e.g., "Consolidated EBITDA" or "Materials & Construction EBITDA"), as non-GAAP measures used by the Company in evaluating the Company's and segments' operating performance on a consistent and comparable basis from period to period. The Company provides this information to investors as an additional means of evaluating the performance of the Company's and segments' ongoing operations.
Consolidated EBITDA is calculated by adjusting the Company's consolidated net income (loss) to exclude the impact of interest expense, income taxes and depreciation and amortization. Materials & Construction EBITDA is calculated by adjusting Materials & Construction operating profit (which excludes interest expense and income taxes) to add back depreciation and amortization recorded at the M&C segment.
The Company also adjusts Consolidated EBITDA or Materials & Construction EBITDA (to arrive at "Consolidated Adjusted EBITDA" or "M&C Adjusted EBITDA") for items identified as non-recurring, infrequent or unusual that are not expected to recur in the Company's core business or segment's normal operations. In addition to the aforementioned adjustments, the Company further adjusts Materials & Construction EBITDA to exclude income attributable to noncontrolling interests as presented in its consolidated statements of operations.
As illustrative examples, the Company identified non-cash long-lived asset impairments recorded in different businesses within the M&C segment as non-recurring, infrequent or unusual items that are not expected to recur in the segment's normal operations. By excluding these items from Materials & Construction EBITDA to arrive at M&C Adjusted EBITDA, the Company believes it provides meaningful supplemental information about its core operating performance and facilitates comparisons to historical operating results. Such non-GAAP measures should not be viewed as a substitute for, or superior to, financial measures calculated in accordance with GAAP.
Reconciliations of the Company's consolidated net income to Consolidated EBITDA and Consolidated Adjusted EBITDA are as follows:
TTM September 30, | ||||
(amounts in millions, unaudited) | 2022 | 2021 | ||
Net Income (Loss) | $ 28.6 | $ 30.5 | ||
Adjustments: | ||||
Depreciation and amortization | 45.8 | 50.5 | ||
Interest expense | 22.9 | 27.8 | ||
Income tax expense (benefit) | (18.2) | (0.3) | ||
Consolidated EBITDA | $ 79.1 | $ 108.5 | ||
Equity method investment impairment related to the Materials & Construction Segment | 2.9 | — | ||
Asset impairments related to the Materials & Construction Segment | 26.1 | — | ||
Pension termination | 76.9 | — | ||
Consolidated Adjusted EBITDA | $ 185.0 | $ 108.5 |
Reconciliations of Materials & Construction operating profit (loss) to Materials & Construction EBITDA and Materials & Construction Adjusted EBITDA are as follows:
Three Months Ended | Nine Months Ended | ||||||
(amounts in millions; unaudited) | 2022 | 2021 | 2022 | 2021 | |||
Materials & Construction Operating Profit (Loss) | $ 1.8 | $ (0.3) | $ 4.4 | $ (6.2) | |||
Materials & Construction depreciation and amortization | 1.3 | 2.6 | 4.3 | 8.1 | |||
Materials & Construction EBITDA | 3.1 | 2.3 | 8.7 | 1.9 | |||
Loss (income) attributable to noncontrolling interest | (0.4) | (0.1) | (1.2) | (0.3) | |||
Materials & Construction Adjusted EBITDA1 | $ 2.7 | $ 2.2 | $ 7.5 | $ 1.6 | |||
1 See above for a discussion of management's use of non-GAAP financial measures and reconciliations from GAAP to non-GAAP measures. |
FORWARD-LOOKING STATEMENTS
Statements in this release that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding possible or assumed future results of operations, business strategies, growth opportunities and competitive positions, as well as the rapidly changing challenges with, and the Company's plans and responses to, the coronavirus pandemic ("COVID-19") and related economic disruptions. Such forward-looking statements speak only as of the date the statements were made and are not guarantees of future performance. Forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from those expressed in or implied by the forward-looking statements. These factors include, but are not limited to, prevailing market conditions and other factors related to the Company's REIT status and the Company's business, risks associated with COVID-19 and its impact on the Company's businesses, results of operations, liquidity and financial condition, the evaluation of alternatives by the Company related to its materials and construction business, and the risk factors discussed in the Company's most recent Form 10-K, Form 10-Q and other filings with the Securities and Exchange Commission. The information in this release should be evaluated in light of these important risk factors. We do not undertake any obligation to update the Company's forward-looking statements.
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SOURCE Alexander & Baldwin, Inc.