Fourth Quarter & Full Year 2013 Operating & Financial Results February 20, 2014
DISCLOSURE Statements in this presentation that are not historical facts are forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement. Factors that could cause actual results to differ materially from those contemplated in the statements include, without limitation, those described in our 2012 Annual Report on Form 10-K and in our other subsequent filings with the SEC. These forward looking statements are not guarantees of future performance. We do not undertake any obligation to update our forward-looking statements. 2
CALL AGENDA Opening remarks... Stan Kuriyama Real Estate & Agribusiness update....chris Benjamin Natural Materials & Construction update.....george Morvis Financial matters. Paul Ito Closing remarks..... Stan Kuriyama Questions & answers 3
FOURTH QUARTER EARNINGS Dollars in Millions, Except Per Share Amounts 30 20 22.5* Net Income 10 8.7 0 4Q13 4Q12 Diluted Earnings Per Share * Includes $0.1M of Grace acquisition-related expenses in 4Q13. 4Q13 0.46 4Q12 0.20 4
FOURTH QUARTER SEGMENT PERFORMANCE Development & Sales posts $37M increase in operating profit - 24-acre sale on Maui - 8 Kahala Avenue property sales - 7 Mainland commercial property sales Leasing continues upward trend - Operating profit up 5% - NOI up 17%* Kahala Avenue Ocean View * See appendix for a statement on management s use of non-gaap financial measures and a required reconciliation. Pearl Highlands Center 5
FOURTH QUARTER SEGMENT PERFORMANCE Natural Materials & Construction - Adjusted operating profit of $6M* - Adjusted EBITDA of $8M* Agribusiness - Operating profit $5M lower - Inventory valuation adjustments due to lower sugar prices Grace Pacific Paving * Grace s fourth quarter 2013 operating profit and EBITDA were $2.9M and $6.8M, respectively. See appendix for a statement on management s use of non-gaap measures and required reconciliations. 6 Sugar Plantation
FULL YEAR EARNINGS Dollars in Millions, Except Per Share Amounts 50 40 30 39.8* Adjusted Net Income 32.3* 20 10 36.9** 20.5** 0 2013 2012 Diluted Earnings Per Share Adjusted* GAAP 2013 0.88 0.82 2012 0.75 0.48 * Adjusted to exclude Grace acquisition-related expenses (2013) and separation-related expenses (2012). See appendix for a statement on management s use of non-gaap financial measures and required reconciliations. ** GAAP 7
FOURTH QUARTER HIGHLIGHTS Acquisition of Grace Pacific closed on October 1 Initiated a modest quarterly dividend of $0.04 Closed on 24-acre parcel for the development of Maui s first Target-anchored center - Proceeds reinvested in income-producing properties $373M KR Portfolio acquisition closed on December 20 - Sold 6 Mainland properties for $266M to fund acquisition Sale of Maui Mall announced - Closed in January - Proceeds reinvested in KR portfolio 8
KAHALA AVENUE PROPERTIES Acquired 27 properties in September for $98M 10 lots sold for $53M (9 closed, 1 in escrow) Acquired 3 properties (2 large oceanfront) in December for $30M 9
HAWAII ECONOMY CONTINUES TO PERFORM WELL 2013 Record year for the tourism industry December unemployment remains low at 4.5% Bankruptcies declined by 18% Private construction permits up 3% - Residential permits up 22% Kukui ula Plantation House Sources: Hawaii Dept. of Business, Economic Development & Tourism; Hospitality Advisors; Hawaii Department of Labor and Industrial Relations; U.S. Bankruptcy Court District of Hawaii Data provided for informational purposes only; no endorsement of forecast implied. 10
HAWAII ECONOMY CONTINUES TO PERFORM WELL Oahu real estate continues strong recovery - Median prices returning to peak levels Homes - $685,000 Condos - $330,000 Low levels of available inventory - Sales volumes up, but remain well below peak levels Homes 30% below peak Condos 39% below peak Commercial markets vacancies drop - Industrial 2.7% - Retail 4.2% - Office 12.2% Waihonua Sources: Title Guaranty; Honolulu Board of Realtors; Colliers International (Hawaii) Data provided for informational purposes only; no endorsement of forecast implied. 11
DEVELOPMENT & SALES
URBAN HONOLULU HIGH-RISE WAIHONUA Completely sold out under binding contracts Estimated construction completion in early 2015 THE COLLECTION 497 units in urban Honolulu 56% of 400-unit high-rise presold under binding contracts Timing of construction dependent on pre-sales & completing the regulatory approval process 13
KUKUI ULA 3 custom lots sold in 4Q at an average price of $1.4M ($70 psf) 2013 closings - 8 custom home lots at average price of $1.2M ($70 psf) - 2 cottages at average price of $2.8M or $1,600 psf of enclosed living space ($1,200 psf living area) 14
KUKUI ULA Expanding products to appeal to a broader market base (prices ranging from $1.2M to $8M) The Bungalows: Detached condominium homes Average enclosed living area: 800 sf to 1,900 sf Pricing: $1.2M to $3M ($1,500 to $1,700 psf) 15
KUKUI ULA THE VILLAS Phase I: 13 high-end, oceanview single family homes Developed in partnership with East West Partners Positive market reception 4 binding contracts secured in January at an average price of $4.5M ($1,700 psf enclosed living area) 16
RESORT RESIDENTIAL KA MILO (HAWAII ISLAND) 13 units closed in 2013 at average price of $1.1M KAI MALU (MAUI) 7 units closed in 2013 at an average price of $1.3M 3 units available for sale 17
WAILEA Seeking regulatory approval for 70-unit condominium project Advancing additional projects & evaluating opportunities to sell parcels 18
MAUI BUSINESS PARK 24-acre parcel sold in 4Q13 Expect Target to drive sales at project over the long run 19
LEASING
LEASING NOI trends upwards - Up 17% to $18.2M in 4Q* - Up 9% to $68.8M in 2013* - Increase related to acquisition of Hawaii assets $565M invested in Hawaii commercial assets - 85% funded with 1031 proceeds, 60% by Mainland 75% of NOI to come from Hawaii assets Expect NOI growth in 2014 to be between 8% to 12% Waianae Mall * See appendix for a statement on management s use of non-gaap financial measures and a required reconciliation. Napili Plaza 21
KR PORTFOLIO 22
KR PORTFOLIO 386,000 sf of prime retail & industrial space in downtown Kailua Additional 51 acres ground leased to third parties & improved with 760,000 sf of commercial space Includes 70% of all the commercialzoned land in Kailua 23
AGRIBUSINESS Operating loss of $3.6M in 4Q due to low sugar prices Expect headwinds in 2014 - Operating loss in the range of $6M to $9M Forward priced 21% of 2014 crop Have until July to price the next shipment of sugar 24
NATURAL MATERIALS & CONSTRUCTION
NATURAL MATERIALS & CONSTRUCTION 4Q performance - Adjusted operating profit of $5.7M* - Adjusted EBITDA of $7.7M* Full year 2014 purchase price allocation (PPA) adjustments impacts - $4.6M non-cash impact to operating profit - $0.6M non-cash impact to EBITDA - PPA impacts to EBITDA expected to end in December 2014 * Grace s fourth quarter 2013 operating profit and EBITDA were $2.9M and $6.8M, respectively. See appendix for a statement on management s use of non-gaap measures and required reconciliations. 26
NATURAL MATERIALS & CONSTRUCTION 115,000 tons paved in 4Q13-21,000 tons delayed into 2014 - Quarry equipment failure has been repaired & placed into service Weather impacting 1Q14 - Greater than planned rain out days - Backlog of $226M at 1/31/14 up 10% from 10/1/13 Paving Operations Hot Mix Operations 27
CONDENSED BALANCE SHEET DOLLARS IN MILLIONS Assets 12/31/13 12/31/12 Current assets 171 63 Investments in affiliates 341 320 Real estate developments 249 144 Property, net 1,274 839 Other assets 250 71 Total 2,285 1,437 Liabilities & Shareholders Equity 12/31/13 12/31/12 Current liabilities, excl. current portion of LTD 112 55 Long-term debt 711 235 Deferred income taxes 189 153 Accrued pension and post-retirement benefits 37 59 Other long-term liabilities 61 21 Shareholders equity 1,175 914 Total 2,285 1,437 Available borrowing capacity 12/31/13 $246M Debt to debt + equity 38% Debt to total assets 31% 28
CAPITAL EXPENDITURES DOLLARS IN MILLIONS 2014 2013 2013 Forecast* Actual Plan Growth capital Ongoing development capital, joint ventures and other investments 100 201 111 Leasing 50 565 60 Natural materials & construction 5 304 - Total growth capital 155 1,070 171 Maintenance capital Leasing 13 10 12 Natural materials & construction 5 - - Agribusiness 12 11 17 Total maintenance capital 30 21 29 Gross capital expenditures 185 1,091 200 1031 exchange proceeds (50) (390) (60) Debt assumed - (165) - Stock issuance - (196) - Deferred purchase price for Grace - (24) - Net capital expenditures 135 316 140 * Excludes KR portfolio-related exchanges. 29
CLOSING REMARKS Invested over $1B in high-quality Hawaii investments Position A&B as the best vehicle to invest in Hawaii s future Focused on integration and returns from investments Kailua Town Center Paving Operations 30
CLOSING REMARKS Continue core strategies - Build development pipeline - Seek new investments in Hawaii real estate & complementary businesses - Migrate Mainland commercial portfolio to Hawaii - Identify less volatile future for Agribusiness Strong financial position for pursuing future growth opportunities Committed to creating shareholder value 31 The Ridge at Wailea Pearl Highlands Center
Fourth Quarter & Full Year 2013 Operating & Financial Results February 20, 2014
USE OF NON-GAAP FINANCIAL MEASURES Alexander & Baldwin, Inc. reports net income and diluted earnings per share in accordance with GAAP and on a non-gaap basis. Reconciliations of the Company s GAAP to non-gaap financial measures for the year ended December 31, 2013 and 2012 are presented on the next slide. The Company uses these non-gaap financial measures when evaluating operating performance because management believes that the exclusion from net income of one-time advisory, legal, equity conversion and other expenses that were incurred to acquire Grace Pacific Corporation and to effect the separation of the Company from Matson, Inc., provides insight into the Company s core operating results, future cash flow generation, and the underlying business trends affecting performance on a consistent and comparable basis from period to period. A&B provides this information to investors as an additional means of evaluating 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. 33
RECONCILIATION OF GAAP TO NON-GAAP MEASURES DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS (UNAUDITED) Year Ended December 31, 2013 2012 Net income 36.9 20.5 Professional service and other expenses incurred to acquire Grace Pacific LLC 4.6 -- Professional service and other expenses incurred to effect separation -- 5.7 Charge to convert pre-separation stock options to A&B-only shares -- 1.1 Write-down of non-strategic Mainland development project carrying values -- 9.8 Income tax effect of adjusting items (1.7) (4.8) Adjusted net income 39.8 32.3 Diluted earnings per share, net income 0.82 0.48 Professional service and other expenses incurred to acquire Grace Pacific LLC 0.10 -- Professional service and other expenses incurred to effect separation -- 0.13 Charge to convert pre-separation stock options to A&B-only shares -- 0.03 Write-down of non-strategic Mainland development project carrying values -- 0.23 Income tax effect of adjusting items (0.04) (0.12) Diluted earnings per share, adjusted net income 0.88 0.75 34 34
USE OF NON-GAAP FINANCIAL MEASURES The Company presents NOI, which is a non-gaap measure derived from real estate revenues (determined in accordance with GAAP, less straight-line rental adjustments) minus property operating expenses (determined in accordance with GAAP). NOI does not have any standardized meaning prescribed by GAAP, and therefore, may differ from definitions of NOI used by other companies. NOI should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of the Company s financial performance, or as an alternative to cash flow from operating activities as a measure of the Company s liquidity. NOI is commonly used as a measure of operating performance because it is an indicator of the return on property investment, and provides a method of comparing property performance over time. NOI excludes general and administrative expenses, straightline rental adjustments, interest income, interest expense, depreciation and amortization, and gains on sales of interests in real estate. The Company believes that the Real Estate Leasing segment s operating profit after discontinued operations is the most directly comparable GAAP measurement to NOI. A required reconciliation of Real Estate Leasing operating profit to Real Estate Leasing segment NOI is on the following slide. 35
RECONCILIATION OF GAAP TO NON-GAAP MEASURES DOLLARS IN MILLIONS Real estate leasing segment operating profit before discontinued operations Three Months Ended December 31, Full Year Ended December 31, 2013 2012 2013 2012 10.7 10.2 43.4 41.6 Less amounts reported in discontinued operations (2.8) (4.2) (14.6) (17.1) Real estate leasing segment operating profit after subtracting discontinued operations Adjustments: 7.9 6.0 28.8 24.5 Depreciation and amortization 7.0 5.6 24.8 22.2 Straight-line lease adjustments (0.7) (0.9) (2.9) (3.6) General and administrative expenses 1.2 0.6 3.5 2.9 Discontinued operations 2.8 4.2 14.6 17.1 Real estate leasing segment NOI 18.2 15.5 68.8 63.1 36 36
USE OF NON-GAAP FINANCIAL MEASURES The Company presents adjusted operating profit and adjusted EBITDA for Grace, which is a non-gaap measure. The Company uses this non-gaap financial measure when evaluating operating performance for Grace because management believes that adjusted operating profit and adjusted EBITDA provide insight into Grace s core operating results, future cash flow generation, and the underlying business trends affecting performance on a consistent and comparable basis from period to period. A&B provides this information to investors as an additional means of evaluating Grace s 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. A required reconciliation of Grace s operating profit to adjusted operating profit and operating profit to adjusted EBITDA is on the following slide. 37
RECONCILIATION OF GAAP TO NON-GAAP MEASURES DOLLARS IN MILLIONS Three Months Ended, December 31, 2013 Grace operating profit 2.9 Impact of purchase price allocation adjustments 2.8 Grace adjusted operating profit 5.7 Grace operating profit 2.9 Depreciation & amortization expense 4.4 Impact of purchase price allocation adjustments on cost of goods sold 0.9 Income attributable to non-controlling interest (0.5) Grace adjusted EBITDA 7.7 38
KEY HAWAII ECONOMIC INDICATORS Indicator (% Change YOY, except unemployment rate) Real Gross Domestic Product 2010 2011 2012 2013 2014F 2015F 2016F DBEDT DBEDT DBEDT DBEDT UHERO DBEDT UHERO DBEDT UHERO DBEDT 1.4 2.1 1.6 2.4* 4.3 2.8 4.0 2.5 3.3 2.3 Visitor Arrivals 7.7 4.0 10.0 3.0 3.2 2.7 2.3 2.3 1.1 2.1 Real Personal Income 0.9 2.0 1.3 2.3* 3.5 3.3 2.9 2.7 2.3 2.4 Unemployment Rate 6.9 6.5 5.8 4.5** 4.0 4.2 3.7 4.0 3.5 3.8 * Forecast ** December 2013 Sources: University of Hawaii Economic Research Organization (UHERO), State Forecast Update October 25, 2013 http://www.uhero.hawaii.edu/; Hawaii Department of Business, Economic Development & Tourism (DBEDT), Outlook for the Economy 4Q2013 http://hawaii.gov/dbedt. Data provided for informational purposes only; no endorsement implied. 39
KEY HAWAII ECONOMIC INDICATORS YTD DECEMBER 2013, EXCEPT AS INDICATED % Change Unemployment rate (December) 4.5 (11.8) Visitors Arrivals (millions) 8.2 2.6 Expenditures (billions) $14.5 2.0 Building permits (millions) $2.6B 2.9 Oahu residential real estate resales Median home prices $650,000 4.8 Home volumes 3,312 4.6 Home months of inventory (December) 2.7 8.0 Median condo prices $332,000 4.6 Condo volumes 4,874 11.8 Condo months of inventory (December) 2.9 (3.3) Sources: Hawaii Department of Labor and Industrial Relations; Hawaii Tourism Authority, Monthly Visitor Statistics, January 30, 2014 ; DBEDT Monthly Economic Indicators, December 2013; Honolulu Board of Realtors, December 2013. Data provided for informational purposes only; no endorsement implied. 40
Visitor Arrivals (in Millions) Visitor Expenditures ($ in Billions) VISITOR ARRIVALS & EXPENDITURES 9.0 8.5 8.0 7.5 7.0 6.5 6.0 Arrivals: 2.6% Expenditures: 2.0% 20 18 16 14 12 10 8 5.5 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014F 2015F 2016F Visitor Expenditures Visitor Arrivals 6 Source: DBEDT Quarterly Statistical & Economic Report, 4th Quarter 2013 http://hawaii.gov/dbedt; Hawaii Tourism December 2013 Visitor Highlights http://www.hawaiitourismauthority.org Data provided for informational purposes only; no endorsement of forecast implied. 41
Percent HAWAII & U.S. UNEMPLOYMENT RATE 10.0 9.0 8.0 7.0 Hawaii Average Unemployment December 2013 4.5% December 2012 5.1% 6.0 5.0 4.0 3.0 2.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014F 2015F 2016F Hawaii U.S. Sources: DBEDT Quarterly Statistical & Economic Report, 4 th Quarter 2013 http://hawaii.gov/dbedt; United States Department of Labor, Unemployment Data; Federal Reserve Forecast as of December 18, 2013 Data provided for informational purposes only; no endorsement of forecast implied. 42
HAWAII REAL ESTATE OVERVIEW YTD DECEMBER 2013 RESIDENTIAL REAL ESTATE RESALES County Single Family Homes Condominiums Sales % Change Median Price % Change Sales % Change from 2012 Median Price % Change Hawaii 1,876 16 295,000 14 641 9 251,000 (3) Kauai 445 6 525,000 14 348 9 311,000 7 Maui 980 5 530,000 13 1,334 7 374,500 5 Oahu 3,312 5 650,000 5 4,874 12 332,000 5 Total 6,613 8 7,197 10 Source: Title Guaranty Sales of Existing Homes & Condominiums Report, December 2013. Data provided for informational purposes only; no endorsement implied. 43
Median Price Sales Volume HAWAII REAL ESTATE OVERVIEW - OAHU OAHU SINGLE FAMILY HOMES & CONDO RESALES (QUARTERLY DATA) 800,000 2,500 700,000 600,000 500,000 2,000 1,500 400,000 300,000 200,000 1,000 500 100,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Oahu- SFH Median Price Oahu- Condo Median Price Oahu - SFH Sales Volume Oahu- Condo Sales Volume Source: Title Guaranty Sales of Existing Homes & Condominiums report, Honolulu Board of Realtors December 2013. Data provided for informational purposes only; no endorsement implied. 0 44
HAWAII COMMERCIAL REAL ESTATE OVERVIEW 2013 Market Retail Industrial Office Trends Rental rate growth expected Rents expected to rise further due to tightened market conditions Vacancy expected to rise in the short term, rents to remain stable Oahu Commercial Market Statistics Retail Industrial Office Net absorption (sq. ft.) 72,045 375,959 119,748 Vacancy rate 4.2% 2.7% 12.2% Average asking rent per sf per month (NNN) $3.35 $0.99 $1.55 Average operating expense per sf $1.18 $0.37 $1.33 Source: Colliers International (Hawaii) Data provided for informational purposes only; no endorsement implied. 45