UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
ORFor the quarterly period ended March 31, 2023
OR
o☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________________ to _________________
For the transition period from ______________________ to _________________
Commission file number 001-35492
ALEXANDER & BALDWIN, INC.
(Exact name of registrant as specified in its charter)
Hawaii45-4849780
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)
822 Bishop Street
P. O. Box 3440,Honolulu,Hawaii
822 Bishop Street, Honolulu, Hawaii
96801
(Address of principal executive offices)
9680l
96813
(Zip Code)
(808) 525-6611
(Registrant’sRegistrant's telephone number, including area code)
N/A
(Former name, former address, and former
fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, without par valueALEXNew York Stock Exchange
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 o☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x☒No o☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)
Smaller reporting company o
Emerging growth companyo
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐No x☒
Number of shares of common stock outstanding as of September 30, 2017:     49,176,369
March 31, 2023: 72,593,773

1

ALEXANDER & BALDWIN, INC.
FORM 10-Q
For the Quarterly Period Ended March 31, 2023

TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1.
1
Condensed Consolidated Balance Sheets - As of March 31, 2023 and December 31, 2022
1
Condensed Consolidated Statements of Operations - Three Months Ended March 31, 2023 and 2022
2
Condensed Consolidated Statements of Comprehensive Income (Loss) - Three Months Ended March 31, 2023 and 2022
3
Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2023 and 2022
4
6
7
Item 2.
23
Item 3.
36
Item 4.
36
PART II. OTHER INFORMATION
Item 1.
37
Item 1A.
37
Item 2.
37
Item 4.
37
Item 6.
38
39


1



PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

ALEXANDER & BALDWIN, INC.
Condensed Consolidated Statements of OperationsCONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts) (Unaudited)
amounts in millions; unaudited)
 Quarter Ended September 30, Nine Months Ended September 30,
  
 2017 2016 2017 2016
Operating Revenue:       
Commercial Real Estate$33.9
 $32.7
 $101.4
 $102.0
Land Operations22.6
 18.1
 45.7
 29.6
Materials & Construction55.0
 52.1
 155.7
 144.7
Total operating revenue111.5
 102.9
 302.8
 276.3
Operating Costs and Expenses:       
Cost of Commercial Real Estate19.2
 19.3
 56.9
 60.1
Cost of Land Operations11.7
 6.9
 29.1
 17.6
Cost of Materials & Construction44.3
 41.0
 125.1
 114.9
Selling, general and administrative20.1
 14.7
 51.0
 42.6
REIT evaluation/conversion costs4.4
 1.9
 11.4
 3.8
Total operating costs and expenses99.7
 83.8
 273.5
 239.0
Operating Income11.8
 19.1
 29.3
 37.3
Other Income and (Expenses):       
Income related to joint ventures4.3
 0.1
 7.5
 3.5
Gain on the sale of improved property—
 0.1
 3.0
 8.1
Reductions in solar investments, net(0.4) (0.2) (2.6) (9.7)
Interest and other income, net1.5
 0.5
 3.7
 1.6
Interest expense(6.1) (6.4) (18.5) (20.1)
Total other income and (expenses)(0.7) (5.9) (6.9) (16.6)
Income from Continuing Operations Before Income Taxes11.1
 13.2
 22.4
 20.7
Income tax expense(3.7) (1.0) (6.4) (1.6)
Income from Continuing Operations7.4
 12.2
 16.0
 19.1
Income (loss) from discontinued operations, net of income taxes(0.8) (13.6) 2.4
 (28.1)
Net Income (Loss)6.6
 (1.4) 18.4
 (9.0)
Income attributable to noncontrolling interest(0.5) (0.5) (1.7) (1.1)
Net Income (Loss) Attributable to A&B Shareholders$6.1
 $(1.9) $16.7
 $(10.1)
        
Basic Earnings (Loss) Per Share of Common Stock: 
     
Continuing operations available to A&B shareholders$0.15

$0.25
 $0.32
 $0.39
Discontinued operations available to A&B shareholders(0.02)
(0.28) 0.04
 (0.58)
Net income (loss) available to A&B shareholders$0.13

$(0.03) $0.36
 $(0.19)
Diluted Earnings (Loss) Per Share of Common Stock: 
     
Continuing operations available to A&B shareholders$0.15

$0.24
 $0.31
 $0.38
Discontinued operations available to A&B shareholders(0.02)
(0.27) 0.05
 (0.57)
Net income (loss) available to A&B shareholders$0.13

$(0.03) $0.36
 $(0.19)




    
Weighted-Average Number of Shares Outstanding: 
     
Basic49.2

49.0
 49.1
 49.0
Diluted49.6

49.4
 49.6
 49.4
        
Amounts Available to A&B Shareholders (See Note 4):       
Continuing operations available to A&B shareholders, net of income taxes$7.4
 $12.1
 $15.5
 $18.9
Discontinued operations available to A&B shareholders, net of income taxes(0.8) (13.6) 2.4
 (28.1)
Net income (loss) available to A&B shareholders$6.6
 $(1.5) $17.9
 $(9.2)
        
Cash dividends per share$0.07
 $0.06
 $0.21
 $0.18
March 31,December 31,
20232022
ASSETS
Real estate investments
Real estate property$1,600.7 $1,598.9 
Accumulated depreciation(209.3)(202.3)
Real estate property, net1,391.4 1,396.6 
Real estate developments59.9 59.9 
Investments in real estate joint ventures and partnerships7.4 7.5 
Real estate intangible assets, net41.8 43.6 
Real estate investments, net1,500.5 1,507.6 
Cash and cash equivalents10.7 33.3 
Restricted cash1.0 1.0 
Accounts receivable, net of allowances (credit losses and doubtful accounts) of $2.4 million and $2.5 million as of March 31, 2023, and December 31, 2022, respectively4.2 6.1 
Other property, net2.3 2.5 
Operating lease right-of-use assets3.0 5.4 
Goodwill8.7 8.7 
Other receivables, net of allowances of $3.6 million and $2.7 million as of March 31, 2023, and December 31, 2022, respectively8.0 6.9 
Prepaid expenses and other assets92.6 89.0 
Assets held for sale125.1 126.8 
Total assets$1,756.1 $1,787.3 
LIABILITIES AND EQUITY
Liabilities:
Notes payable and other debt$479.2 $472.2 
Accounts payable4.9 4.5 
Operating lease liabilities2.9 4.9 
Accrued pension and post-retirement benefits10.1 10.1 
Deferred revenue71.9 68.8 
Accrued and other liabilities81.7 102.1 
Liabilities associated with assets held for sale77.8 81.0 
Total liabilities728.5 743.6 
Commitments and Contingencies (Note 7)
Redeemable Noncontrolling Interest7.6 8.0 
Equity:
Common stock - no par value; authorized, 150.0 million shares; outstanding, 72.6 million and 72.5 million shares at March 31, 2023 and December 31, 2022, respectively1,807.6 1,808.4 
Accumulated other comprehensive income (loss)(2.2)1.8 
Distributions in excess of accumulated earnings(785.4)(774.5)
Total A&B shareholders' equity1,020.0 1,035.7 
Total liabilities and equity$1,756.1 $1,787.3 
See Notes to Condensed Consolidated Financial Statements.

1



ALEXANDER & BALDWIN, INC.
Condensed Consolidated Statements of Comprehensive Income (Loss)CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions) (Unaudited)amounts in millions, except per share data; unaudited)

Three Months Ended March 31,
20232022
Operating Revenue:
Commercial Real Estate$47.9 $46.3 
Land Operations2.5 12.9 
Total operating revenue50.4 59.2 
Operating Costs and Expenses: 
Cost of Commercial Real Estate25.0 24.0 
Cost of Land Operations3.6 9.2 
Selling, general and administrative8.7 8.8 
Total operating costs and expenses37.3 42.0 
Gain (loss) on disposal of non-core assets, net1.1 — 
Operating Income (Loss)14.2 17.2 
Other Income and (Expenses):
Income (loss) related to joint ventures0.4 1.4 
Pension termination— (3.2)
Interest and other income (expense), net (Note 2)(0.1)(0.1)
Interest expense(5.0)(5.7)
Income (Loss) from Continuing Operations9.5 9.6 
Income (loss) from discontinued operations, net of income taxes(4.2)1.4 
Net Income (Loss)5.3 11.0 
Loss (income) attributable to discontinued noncontrolling interest$— $(0.5)
Net Income (Loss) Attributable to A&B Shareholders$5.3 $10.5 
Earnings (Loss) Per Share Available to A&B Shareholders:
Basic Earnings (Loss) Per Share of Common Stock: 
Continuing operations available to A&B shareholders$0.13 $0.13 
Discontinued operations available to A&B shareholders(0.06)0.01 
Net income (loss) available to A&B shareholders$0.07 $0.14 
Diluted Earnings (Loss) Per Share of Common Stock:
Continuing operations available to A&B shareholders$0.13 $0.13 
Discontinued operations available to A&B shareholders(0.06)0.01 
Net income (loss) available to A&B shareholders$0.07 $0.14 
Weighted-Average Number of Shares Outstanding:
Basic72.572.6 
Diluted72.672.8 
Amounts Available to A&B Common Shareholders (Note 14):
Continuing operations available to A&B common shareholders$9.5 $9.6 
Discontinued operations available to A&B common shareholders(4.2)0.9 
Net income (loss) available to A&B common shareholders$5.3 $10.5 
 Quarter Ended September 30, Nine Months Ended September 30,
  
 2017 2016 2017 2016
Net Income (Loss)$6.6
 $(1.4) $18.4
 $(9.0)
Other Comprehensive Income:       
Unrealized interest rate hedging (loss)(0.2) —
 (0.8) (2.8)
Reclassification adjustment for interest expense included in net income (loss)0.1
 0.2
 0.4
 0.2
Defined benefit pension plans:       
Amortization of prior service credit included in net periodic pension cost(0.2) (0.3) (0.7) (0.8)
Amortization of net loss included in net periodic pension cost1.0
 1.9
 3.3
 5.6
Settlement loss1.4
 —
 1.4
 —
Income taxes related to other comprehensive income(0.8) (0.8) (1.4) (0.7)
Other comprehensive income, net of tax1.3
 1.0
 2.2
 1.5
Comprehensive Income (Loss)7.9
 (0.4) 20.6
 (7.5)
Comprehensive income attributable to noncontrolling interest(0.5) (0.5) (1.7) (1.1)
Comprehensive Income (Loss) Attributable to A&B Shareholders$7.4
 $(0.9) $18.9
 $(8.6)

See Notes to Condensed Consolidated Financial Statements.

2



ALEXANDER & BALDWIN, INC.
Condensed Consolidated Balance SheetsCONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions) (Unaudited)amounts in millions; unaudited)
 September 30,
2017		 December 31, 2016
ASSETS   
Current Assets:   
Cash and cash equivalents$13.3
 $2.2
Accounts receivable, net34.2
 32.1
Contracts retention12.4
 13.1
Costs and estimated earnings in excess of billings on uncompleted contracts20.7
 16.4
Inventories30.1
 43.3
Real estate held for sale63.8
 1.0
Income tax receivable25.9
 10.6
Prepaid expenses and other assets39.4
 19.6
Total current assets239.8
 138.3
Investments in Affiliates402.0
 390.8
Real Estate Developments151.7
 179.5
Property – Net1,212.4
 1,231.6
Intangible Assets – Net48.7
 53.8
Goodwill102.3
 102.3
Other Assets51.4
 60.0
Total assets$2,208.3
 $2,156.3
    
LIABILITIES AND EQUITY   
Current Liabilities:   
Notes payable and current portion of long-term debt$41.6
 $42.4
Accounts payable36.0
 35.2
Billings in excess of costs and estimated earnings on uncompleted contracts2.6
 3.5
Accrued interest3.8
 6.3
Deferred revenue2.7
 17.6
Indemnity holdback related to Grace acquisition9.3
 9.3
HC&S cessation-related liabilities5.0
 19.1
Accrued and other liabilities28.6
 31.7
Total current liabilities129.6
 165.1
Long-term Liabilities:   
Long-term debt584.2
 472.7
Deferred income taxes202.5
 182.0
Accrued pension and post-retirement benefits16.7
 64.8
Other non-current liabilities41.4
 47.7
Total long-term liabilities844.8
 767.2
Total liabilities974.4
 932.3
Commitments and Contingencies
 
Redeemable Noncontrolling Interest10.8
 10.8
Equity:   
Common stock - no par value; authorized, 150 million shares; outstanding, 49.2 million and 49.0 million shares at September 30, 2017 and December 31, 2016, respectively1,160.5
 1,157.3
Accumulated other comprehensive loss(41.0) (43.2)
Retained earnings99.4
 95.2
Total A&B shareholders' equity1,218.9
 1,209.3
Noncontrolling interest4.2
 3.9
Total equity1,223.1
 1,213.2
Total liabilities and equity$2,208.3
 $2,156.3
Three Months Ended March 31,
 20232022
Net Income (Loss)$5.3 $11.0 
Other Comprehensive Income (Loss), net of tax:
Cash flow hedges:
Unrealized interest rate hedging gain (loss)(3.7)3.4 
Impact of reclassification adjustment to interest expense included in Net Income (Loss)(0.3)0.4 
Employee benefit plans:
Amortization of net loss included in net periodic benefit cost— 0.9 
Pension termination— 3.2 
Other comprehensive income (loss), net of tax(4.0)7.9 
Comprehensive Income (Loss)1.3 18.9 
Comprehensive (income) loss attributable to discontinued noncontrolling interest— (0.5)
Comprehensive Income (Loss) Attributable to A&B Shareholders$1.3 $18.4 
See Notes to Condensed Consolidated Financial Statements.

3



ALEXANDER & BALDWIN, INC.
Condensed Consolidated Statements of Cash FlowsCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions) (Unaudited)amounts in millions; unaudited)
Three Months Ended March 31,
 20232022
Cash Flows from Operating Activities:
Net income (loss)$5.3 $11.0 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operations:
Loss (income) from discontinued operations4.2 (1.4)
Depreciation and amortization9.2 9.9 
Loss (gain) from disposals and asset transactions, net(1.1)— 
Share-based compensation expense1.6 1.5 
Equity in (income) loss from affiliates, net of operating cash distributions(0.4)0.1 
Pension termination— 3.2 
Changes in operating assets and liabilities:
Trade and other receivables(1.4)(0.8)
Prepaid expenses, income tax receivable and other assets(1.2)(5.7)
Development/other property inventory(0.1)3.1 
Accrued pension and post-retirement benefits— 0.8 
Accounts payable0.2 0.3 
Accrued and other liabilities(3.6)(4.8)
Operating cash flows from continuing operations12.7 17.2 
Operating cash flows from discontinued operations(7.2)(9.9)
Net cash provided by (used in) operations5.5 7.3 
Cash Flows from Investing Activities:  
Capital expenditures for property, plant and equipment(3.0)(2.2)
Proceeds from disposal of assets1.6 — 
Payments for purchases of investments in affiliates and other investments(0.1)(0.1)
Investing cash flows from continuing operations(1.5)(2.3)
Investing cash flows from discontinued operations2.2 (1.6)
Net cash provided by (used in) investing activities0.7 (3.9)
Cash Flows from Financing Activities:  
Payments of notes payable and other debt and deferred financing costs(18.0)(10.2)
Borrowings (payments) on line-of-credit agreement, net25.0 — 
Cash dividends paid(32.0)(27.0)
Repurchases of common stock and other payments(2.4)(2.2)
Financing cash flows from continuing operations(27.4)(39.4)
Financing cash flows from discontinued operations(0.4)(0.3)
Net cash provided by (used in) financing activities(27.8)(39.7)
Cash, Cash Equivalents, Restricted Cash, and Cash included in Assets Held for Sale  
Net increase (decrease) in cash, cash equivalents, restricted cash, and cash included in assets held for sale(21.6)(36.3)
Balance, beginning of period34.4 71.0 
Balance, end of period$12.8 $34.7 
4

 Nine Months Ended
 September 30,
 2017 2016
Cash Flows from Operating Activities:
 

Net income (loss)$18.4
 $(9.0)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operations:   
Depreciation and amortization31.4
 83.5
Deferred income taxes19.1
 (18.6)
Gains on asset transactions, net of asset write-downs(22.2) (7.6)
Share-based compensation expense3.4
 3.1
Investments in affiliates, net of distributions3.2
 0.2
Changes in operating assets and liabilities:   
Trade, contracts retention, and other receivables1.0
 (0.3)
Costs and estimated earnings in excess of billings on uncompleted contracts - net(5.2) (0.2)
Inventories13.2
 8.6
Prepaid expenses, income tax receivable and other assets(19.8) 4.8
Accrued pension and post-retirement benefits(48.0) 3.6
Accounts payable and contracts retention(3.0) (4.3)
Accrued and other liabilities(38.2) (7.5)
Real estate inventory sales (real estate developments held for sale)16.5
 2.8
Expenditures for real estate inventory (real estate developments held for sale)(15.0) (10.7)
Net cash provided by (used in) operations(45.2) 48.4
Cash Flows from Investing Activities:   
Capital expenditures for property, plant and equipment(33.7) (105.3)
Capital expenditures related to 1031 commercial property transactions—
 (6.2)
Proceeds from disposal of property and other assets9.8
 11.4
Proceeds from disposals related to 1031 commercial property transactions6.9
 59.3
Payments for purchases of investments in affiliates and other investments(31.5) (36.0)
Proceeds from investments in affiliates and other investments3.9
 6.0
Change in restricted cash associated with 1031 transactions6.6
 16.2
Net cash used in investing activities(38.0) (54.6)
Cash Flows from Financing Activities:   
Proceeds from issuance of long-term debt145.5
 222.0
Payments of long-term debt and deferred financing costs(46.4) (191.1)
Borrowings (payments) on line-of-credit agreement, net9.8

(11.8)
Distribution to noncontrolling interests(0.2) (0.5)
Dividends paid(10.3) (8.8)
Proceeds from issuance (repurchase) of capital stock and other, net(4.1) 0.9
Net cash provided by financing activities94.3
 10.7
Cash and Cash Equivalents:   
Net increase in cash and cash equivalents11.1
 4.5
  Balance, beginning of period2.2
 1.3
  Balance, end of period$13.3
 $5.8
    
Other Cash Flow Information:   
Interest paid, net of capitalized interest$(15.1) $(22.1)
Income taxes paid$(4.0) $—
Noncash Investing and Financing Activities:   
Uncollected proceeds from disposal of equipment$1.9
 $—
Capital expenditures included in accounts payable and accrued expenses$3.2
 $7.7
Three Months Ended March 31,
20232022
Other Cash Flow Information:
Interest paid, net of capitalized interest$(4.9)$(4.9)
Income tax (payments)/refunds, net$0.2 $— 
Noncash Investing and Financing Activities from continuing operations:
Increase (decrease) in capital expenditures included in accounts payable and accrued and other liabilities$0.3 $— 
Dividends declared but unpaid at end of period$0.6 $— 
Increase (decrease) in escrow and other receivables from subsidiary and asset disposals$0.3 $— 
Noncash Investing and Financing Activities from discontinued operations:
Increase (decrease) in capital expenditures included in liabilities associated with assets held for sale$0.2 $0.1 
Distribution to noncontrolling interests included in liabilities associated with assets held for sale$0.3 $— 
Reconciliation of cash, cash equivalents, restricted cash, and cash included in assets held for sale:
Beginning of the period:
Cash and cash equivalents$33.3 $65.4 
Restricted cash1.0 1.0 
Cash included in assets held for sale0.1 4.6 
Cash, cash equivalents, restricted cash, and cash included in assets held for sale$34.4 $71.0 
End of the period:
Cash and cash equivalents$10.7 $32.6 
Restricted cash1.0 1.0 
Cash included in assets held for sale1.1 1.1 
Cash, cash equivalents, restricted cash, and cash included in assets held for sale$12.8 $34.7 
See Notes to Condensed Consolidated Financial Statements.

5
4



ALEXANDER & BALDWIN, INC.
Condensed Consolidated Statements of EquityCONDENSED CONSOLIDATED STATEMENTS OF EQUITY AND
REDEEMABLE NONCONTROLLING INTEREST
For the nine months endedSeptember 30, 2017Three Months Ended March 31, 2023 and 20162022
(In millions) (Unaudited)amounts in millions, except per share data; unaudited)
 Total Equity  
     Accumulated      Redeem-
  CommonOther      able
  StockCompre-  Non-   Non-
    StatedhensiveRetained Controlling   Controlling
  Shares Value Loss Earnings interest Total interest
Balance, January 1, 2016 48.9
 $1,151.7
 $(45.3) $117.2
 $3.5
 $1,227.1
 $11.6
Net income (loss) 

 

 

 (10.1) 0.2
 (9.9) 0.9
Other comprehensive income, net of tax 

 

 1.5
 

 
 1.5
 

Dividends paid on common stock ($0.18 per share) 

 

 

 (8.8) 
 (8.8) 

Distributions to noncontrolling interest 

 

 

 

 
 —
 (0.1)
Adjustments to redemption value of redeemable noncontrolling interest 

 

 

 0.8
 
 0.8
 (0.8)
Share-based compensation 

 3.1
 

 

 
 3.1
 

Shares issued or repurchased, net 0.1
 1.4
 

 (0.4) 
 1.0
 

Balance, September 30, 2016 49.0
 $1,156.2
 $(43.8) $98.7
 $3.7
 $1,214.8
 $11.6
 Total Equity  
     Accumulated      Redeem-
  CommonOther      able
  StockCompre-  Non-   Non-
    StatedhensiveRetained Controlling   Controlling
  Shares Value Loss Earnings interest Total interest
Balance, January 1, 2017 49.0
 $1,157.3
 $(43.2) $95.2
 $3.9
 $1,213.2
 $10.8
Net income 

 

 

 16.7
 0.5
 17.2
 1.2
Other comprehensive income, net of tax 

 

 2.2
 

 
 2.2
 

Dividends paid on common stock ($0.21 per share) 

 

 

 (10.3) 
 (10.3) 

Distributions to noncontrolling interest 

 

 

 

 (0.2) (0.2) 

Adjustments to redemption value of redeemable noncontrolling interest 

 

 

 1.2
 

 1.2
 (1.2)
Share-based compensation 

 3.4
 

 

 

 3.4
 

Shares issued or repurchased, net 0.2
 (0.2) 

 (3.4) 
 (3.6) 

Balance, September 30, 2017 49.2
 $1,160.5
 $(41.0) $99.4
 $4.2
 $1,223.1
 $10.8
Total Equity
Common StockAccumulated
 Other
 Comprehensive Income (Loss)		(Distribution
in Excess of Accumulated Earnings)
Earnings Surplus		TotalRedeemable
Non-
Controlling
Interest
SharesStated Value
Balance, January 1, 202272.5 $1,810.5 $(80.7)$(663.2)$1,066.6 $6.9 
Net income (loss)— — — 10.5 10.5 0.5 
Other comprehensive income (loss), net of tax— — 7.9 — 7.9 — 
Dividend on common stock ($0.19 per share)— — — (13.9)(13.9)— 
Share-based compensation— 1.5 — — 1.5 — 
Shares issued (repurchased), net0.2 (2.4)— 0.2 (2.2)— 
Balance, March 31, 202272.7 $1,809.6 $(72.8)$(666.4)$1,070.4 $7.4 
Total Equity
Common StockAccumulated
 Other
 Comprehensive Income (Loss)		(Distribution
in Excess of Accumulated Earnings)
Earnings Surplus		TotalRedeemable
Non-
Controlling
Interest
SharesStated Value
Balance, January 1, 202372.5 $1,808.4 $1.8 $(774.5)$1,035.7 $8.0 
Net income (loss)— — — 5.3 5.3 — 
Other comprehensive income (loss), net of tax— — (4.0)— (4.0)— 
Dividend on common stock ($0.22 per share)— — — (16.2)(16.2)— 
Distributions to noncontrolling interest— — — — — (0.4)
Share-based compensation— 1.6 — — 1.6 — 
Shares issued (repurchased), net0.1 (2.4)— — (2.4)— 
Balance, March 31, 202372.6 $1,807.6 $(2.2)$(785.4)$1,020.0 $7.6 
See Notes to Condensed Consolidated Financial Statements.

Statements
5
6



Alexander & Baldwin, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)(unaudited)
1.DESCRIPTION OF BUSINESS
Business Overview
1.    Background and Basis of Presentation
Description of Business:Alexander & Baldwin, Inc. ("A&B" or the "Company") is a fully integrated real estate investment trust ("REIT") headquartered in Honolulu, Hawai‘i, whose history in Hawai‘i dates back to 1870. Over time, the Company has evolved from a 571-acre sugar plantation on Maui to become one of Hawai‘i's premier commercial real estate companies and the owner of the largest grocery-anchored, neighborhood shopping center portfolio in the state. The Company operates threein two segments: Commercial Real Estate (formerly Leasing);("CRE") and Land Operations (formerly Real Estate Development and Sales and Agribusiness); and Materials & Construction.
On July 10, 2017,Operations. As of March 31, 2023, the Company’s board of directors unanimously approved a plan for the Company to be subject to tax as aCompany's commercial real estate investment trust (a “REIT”) for U.S. federal income tax purposes commencing with the Company’s taxable year ending December 31, 2017 (the “REIT Election”).
Although the Company began operatingportfolio resides entirely in compliance with the requirements for qualificationHawai‘i and taxationconsists of 22 retail centers, 12 industrial assets and four office properties, representing a total of 3.9 million square feet of gross leasable area ("GLA"), as a REIT (the “REIT requirements”) for the taxable year ending December 31, 2017, the Company intendswell as 142.0 acres of land under ground leases. Throughout this quarterly report on Form 10-Q, references to complete a merger that will facilitate the Company’s ongoing compliance with the REIT requirements by ensuring that certain standard REIT ownership limitations"we," "our," "us" and transfer restrictions apply"our Company" refer to the Company’s capital stock.
Pursuant to the merger agreement entered into on July 10, 2017 among the Company, Alexander & Baldwin, REIT Holdings, Inc., a Hawaii corporation and a direct, wholly owned subsidiarytogether with its consolidated subsidiaries.
Basis of the Company (“A&B REIT Holdings”), and A&B REIT Merger Corporation, a Hawaii corporation and a direct, wholly owned subsidiary of A&B REIT Holdings (“Merger Sub”), Merger Sub will be merged with and into the Company, with the Company continuing as the surviving corporation. As a result of the merger, A&B REIT Holdings will replace the Company as the Hawaii-based, publicly held corporation through which the Company’s operations are now conducted, and promptly following the merger A&B REIT Holdings will be renamed “Alexander & Baldwin, Inc.”
During the third quarter of 2017, A&B REIT Holdings filed a registration statement on Form S-4 with the Securities and Exchange Commission (“SEC”), which included a preliminary proxy statement/prospectus that provides information regarding the REIT Election, the proposed merger and the special meeting at which the Company’s shareholders were given the opportunity to vote on the holding company merger proposal. The special meeting was held on October 27, 2017, during which A&B shareholders approved the holding company merger proposal pursuant to the registration statement.

Business Segments
Commercial Real Estate: The Commercial Real Estate segment owns, operates and manages retail, office and industrial properties in Hawaii and on the mainland. The Commercial Real Estate segment also leases urban land in Hawaii to third-party lessees.
Land Operations: Primary activities of the Land Operations segment include planning, zoning, financing, constructing, purchasing, managing, selling, and investing in real property; renewable energy; and diversified agribusiness activities. The Land Operations segment also provides general trucking services, equipment maintenance and repair services, and generates and sells electricity to the extent not used elsewhere in the Company's operations. In December 2016, the Company's sugar plantation on Maui, Hawaiian Commercial & Sugar Company ("HC&S") completed its final harvest and ceased operations (the "Cessation"). See Note 14, "Cessation of Sugar Operations" for further discussion regarding the Cessation and the related costs associated with such exit and disposal activities.
Materials & Construction: The Materials & Construction segment, which primarily includes the results of Grace Pacific ("Grace"), performs asphalt paving as prime contractor and subcontractor; imports and sells liquid asphalt; mines, processes and sells rock and sand aggregate; produces and sells asphaltic concrete and ready-mix concrete; provides and sells various construction- and traffic-control-related products; and manufactures and sells precast concrete products.

6


2.BASIS OF PRESENTATION
Presentation: The interim condensed consolidated financial statements are unaudited. Because of the nature of the Company’sCompany's operations, the results for interim periods are not necessarily indicative of results to be expected for the year. While these condensed consolidated financial 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 accounting principles generally accepted in the United States of America ("GAAP") for complete financial statements. Therefore, the interim condensed consolidated financial statements should be read in conjunction with the consolidated balance sheets as of December 31, 20162022 and 2015,2021, and the related consolidated statements of operations, comprehensive income (loss), cash flows, and equity and cash flowsredeemable noncontrolling interest for each of the three years in the period ended December 31, 20162022, 2021, and 2020, respectively, and the notes thereto included in the Company’sCompany's Annual Report filed on Form 10-K for the year ended December 31, 20162022 ("20162022 Form 10-K"), and other subsequent filings with the U.S. Securities and Exchange Commission.Commission ("SEC").
Reclassifications:Prior yearto December 31, 2022, the Company operated and reported on three segments: Commercial Real Estate; Land Operations; and Materials & Construction ("M&C"). During the fourth quarter of 2022, the Company's wholly-owned subsidiary, Grace Pacific LLC ("Grace Pacific") and Company-owned quarry land on Maui ("Maui Quarries") (collectively, the "Grace Disposal Group"), which made up the majority of activity in the Company’s former M&C segment, met the criteria for classification as held for sale and discontinued operations. Accordingly, the assets and liabilities associated with the Grace Disposal Group are classified as held for sale in the condensed consolidated balance sheets, its financial statement amountsresults are reclassifiedclassified as necessary to conform to the current year presentation, including presentation of results of discontinued operations in the condensed consolidated statements of operations and reportable operating segments. There was no impact on net income, retained earnings or cash flows asfor all periods presented, and the Company’s former Materials and Construction ("M&C") segment has been eliminated. As a result of this strategic shift, the reclassifications. Seechief operating decision maker began reviewing all investments in unconsolidated affiliates together within the Land Operations segment. This change resulted in a reorganization to present the income (loss) related to one joint venture, which historically was included in the results of the former M&C segment, to now be included in the results of the Land Operations segment. All comparable information for the historical periods has been retrospectively adjusted to reflect the impact of these changes. Refer to Note 17 "Discontinued Operations"– Held for Sale and Note 18 "Segment Results" inDiscontinued Operations for additional information regarding the accompanyingGrace Disposal Group, including the assets held for sale, liabilities associated with held for sale and income (loss) from discontinued operations. Unless otherwise noted, disclosures within the remaining notes to these condensed consolidated financial statements for additional information.relate solely to the Company's continuing operations.
Rounding: Amounts in the condensed consolidated financial statements and notes are rounded to the nearest tenth of a million. Accordingly, a recalculation of some per-share amounts and percentages, if based on the reported data, may be slightly different.result in differences.
New
2.    Significant Accounting Pronouncements:Policies
The Company's significant accounting policies are described in Note 2 to the consolidated financial statements included in Item 8 of the Company's 2022 Form 10-K. There have not been any changes to the Company's significant accounting policies as described in the Company's 2022 Form 10-K.
7

Recently issued accounting pronouncements
In May 2014, Financial Accounting Standards Board (FASB)March 2020, the FASB issued Accounting Standards Update (ASU)("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606)2020-04, Reference Rate Reform, (“ASU 2014-09”) which provides guidance for revenue recognition. ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts forestablishing ASC Topic 848, and amended the transfer of non-financial assets. ASU 2014-09 will supersede the revenue recognition requirements in FASB Accounting Standards Codification Topic 605, Revenue Recognition, and most industry-specific guidance. Under ASU 2014-09, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 provides a five-step analysis of transactions to determine when and how revenue is recognized including (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract(s), (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract(s), and (v) recognize revenue when, or as, the entity satisfies a performance obligation. In addition, ASU 2014-09 requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
In August 2015, the FASB issuedstandard thereafter through ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, deferring the effective date of this standard. As a result, ASU 2014-09 and related amendments will be effective for the Company for its fiscal year beginning January 1, 2018, including interim periods within that fiscal year. Early adoption is permitted, but not before August 1, 2017, the original effective date of ASU 2014-09.
In March, April, May, and December 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal Versus Agent Consideration (Reporting Revenue Gross Versus Net), ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,2021-01 and ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements2022-06 (collectively, "ASC 848"). ASC 848 provides optional practical expedients and Practical Expedients,exceptions related to the impacts of reference rate reform that affect certain debt, leases, derivatives and ASU No. 2016-20, Technical Correctionsother contracts if certain criteria are met. The amendments apply only to contracts and Improvementshedging relationships that reference LIBOR or another reference rate expected to Topic 606, Revenue from Contracts with Customers, respectively (collectively, the “Amendments”). The Amendments servebe discontinued due to clarify certain aspects ofreference rate reform. These amendments are effective immediately and have the same effective date as ASU 2014-09.
may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2024. The Company is completing its evaluationplans to adopt ASU 2020-04 during the second quarter of 2023 after modifying certain debt to update the impact of adopting ASU 2014-09 andreference rate from LIBOR to the related Amendments (collectively, “Topic 606”) on its consolidated financial statements and disclosures, internal controls and accounting policies. Topic 606 permits two methods of adoption: retrospectively to each prior reporting period presented, or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the “Modified Retrospective Method”)Secured Overnight Financing Rate (SOFR). The Company will adopt Topic 606 on January 1, 2018 and intends to apply the Modified Retrospective Method of transition. The Company expects to provide expanded disclosures regarding our revenues from contracts with customers. The Company will continue to monitor and assess the impact of changesthe guidance and may apply other elections as applicable going forward.
Interest and other income (expense), net
Interest and other income (expense),net for the three months ended March 31, 2023 and 2022, included the following (in millions):
Three Months Ended March 31,
20232022
Interest income$0.1 $0.1 
Pension and post-retirement benefit (expense)(0.2)(0.2)
Interest and other income (expense), net$(0.1)$(0.1)

3.    Investments in Affiliates
The Company's investments in affiliates principally consist of equity investments in limited liability companies in which the Company has the ability to Topic 606exercise significant influence over the operating and interpretationsfinancial policies of these investments. Accordingly, the Company accounts for its investments using the equity method of accounting.
Operating results presented in the Company's condensed consolidated financial statements include the Company's proportionate share of net income (loss) from its equity method investments. Summarized financial information of entities accounted for by the equity method on a combined basis for the three months ended March 31, 2023 and 2022, is as they become available.follows (in millions):

Three Months Ended March 31,
20232022
Revenues$37.9 $29.4 
Operating costs and expenses34.4 28.5 
Gross Profit (Loss)$3.5 $0.9 
Income (Loss) from Continuing Operations1
$(1.3)$(2.9)
Net Income (Loss)1
$(1.3)$2.3 
1 Includes earnings from equity method investments held by the investee.
During the three months ended March 31, 2023 and 2022, Income (loss) related to joint ventures was $0.4 million and $1.4 million, respectively, and return on investment operating cash distributions was zero and $1.5 million, respectively.
4.    Fair Value Measurements
Recurring Fair Value Measurements
The following tables present the fair value of those assets and (liabilities) measured on a recurring basis as of March 31, 2023 and 2022, (in millions):


7
8



Fair Value Measurements at
March 31, 2023
Condensed Consolidated Balance Sheet LocationTotalQuoted Prices in Active Markets (Level 1)Significant Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)
Assets
Derivative financial instruments - interest rate swapsPrepaid expenses and other assets$4.4 $— $4.4 $— 
Liabilities
Derivative financial instruments - interest rate swapsAccrued and other liabilities$(5.7)$— $(5.7)$— 
In February 2016,
Fair Value Measurements at
December 31, 2022
Condensed Consolidated Balance Sheet LocationTotalQuoted Prices in Active Markets (Level 1)Significant Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)
Assets
Derivative financial instruments - interest rate swapsPrepaid expenses and other assets$5.5 $— $5.5 $— 
Liabilities
Derivative financial instruments - interest rate swapsAccrued and other liabilities$(2.8)$— $(2.8)$— 
Derivative Financial Instruments: The Company records its interest rate swaps at fair value. The fair values of the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"). ASU 2016-02 requiresCompany's interest rate swaps are classified as Level 2 measurements in the identification of arrangementsfair value hierarchy and are based on the estimated amounts that should be accountedthe Company would receive or pay to terminate the contracts at the reporting date and are determined using interest rate pricing models and interest rate related observable inputs (refer to Note 6 – Derivative Instruments for as leases by lessees. In general, lease arrangements exceeding a twelve month term must now be recognized asfair value information regarding the Company's derivative instruments).
Non-Recurring Fair Value
Certain financial and nonfinancial assets and liabilities are measured at fair value on the balance sheeta nonrecurring basis and are subject to fair value adjustments in certain circumstances, such as when there is evidence of the lessee. Under ASU 2016-02, a right-of-use assetimpairment. The Company’s process for identifying and lease obligation will be recorded for all leases, whether operating or financing, while the income statement will reflect lease expense for operating leases and amortization/interest expense for financing leases. The balance sheet amount recorded for existing leases at the date of adoption of ASU 2016-02 must be calculated using the applicable incremental borrowing rate at the date of adoption. In addition, ASU 2016-02 requires the use of the modified retrospective method, which will require adjustmentrecording impairment is discussed in Note 2 to all comparative periods presented in the consolidated financial statements. ASU 2016-02statements included in Item 8 of the Company's 2022 Form 10-K.
The following table presents the fair value hierarchy and quantitative information about the significant unobservable inputs used to determine the fair value of long-lived assets held and used and assets held for sale, net for which a nonrecurring fair value adjustment was recorded (in millions):
9

Fair Value Measurements atQuantitative Information about
December 31, 2022Level 3 Fair Value Measurements
TotalQuoted Prices in Active Markets (Level 1)Significant Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)		Total Gains (Losses)Valuation Technique/ Unobservable InputsWeighted Average Discount Rate
Assets held for sale, net1,2
$50.0 $— $— $50.0 $(89.8)Indicative bidsN/A
Long-lived assets3
— — — — (5.0)Discounted cash flows/16%
Market comparablesN/A
Total$50.0 $— $— $50.0 $(94.8)
1 Assets or liabilities are presented in Assets held for sale or Liabilities associated with assets held for sale, respectively, in the Condensed Consolidated Balance Sheets. Impairment loss is presented in Income (loss) from discontinued operations, net of income taxes in the Condensed Consolidated Statements of Operations.
2 Assets held for sale of $126.8 million, net of liabilities associated with assets held for sale of $81.0 million, and excluding estimated selling costs of $4.2 million.
3 Included in Real estate property in the Condensed Consolidated Balance Sheets. Impairment loss is presented in Cost of Land Operations in the Condensed Consolidated Statements of Operations.
Assets Held for Sale, net: As a result of the Grace Disposal Group's classification as held for sale as of December 31, 2022, the Company measured the disposal group at its fair value less costs to sell and recorded an impairment charge of $89.8 million for the year ended December 31, 2022. During the three months ended March 31, 2023, the Company recorded no additional impairment charges related to assets and liabilities held for sale. The fair value of the Grace Disposal Group is effective for financial statements issued for fiscal years beginning afterclassified as a Level 3 measurement in the fair value hierarchy because it is determined using significant unobservable inputs such as management assumptions about expected sales proceeds from third parties.
Impairment of Long-lived Assets Held and Used and Finite-Lived Intangible Assets: During the year ended December 15, 2018.31, 2022, the Company recognized an impairment charge of $5.0 million related to parcels of conservation and agriculture zoned land on Oahu. During the three months ended March 31, 2023, the Company did not recognize any impairments of long-lived assets held and used or finite-lived intangible assets. The Company is currently assessingclassifies these fair value measurements as Level 3 in the impact that adopting this new accounting standard will have on its consolidated financial statements and footnote disclosures.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230) ("ASU 2016-15"). ASU 2016-15 is an update that addresses eight specificfair value hierarchy because they involve significant unobservable inputs such as cash flow issues with the objective of reducing the existing diversity in practice ofprojections, discount rates, and management assumptions.
Financial Assets and Liabilities not Measured at Fair Value
Financial assets and liabilities that are not measured at fair value on our condensed consolidated balance sheets include cash receipts and cash payments presentation and classification in the statement of cash flows. ASU 2016-15 is effective for financial statements issued for fiscal years beginning after December 15, 2017. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements and footnote disclosures.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash ("ASU 2016-18"). ASU 2016-18 will require entities to show the changes on the total cash, cash equivalents, restricted cash, accounts and notes receivable, net and notes payable and other debt. The fair value of the Company's cash and cash equivalents, restricted cash, equivalentsaccounts receivable, net and short-term borrowings approximate their carrying values due to the short-term nature of the instruments, which is classified as Level 1 measurement in the statement of cash flows. As a result, entities will no longer present transfers between these items on the statement of cash flows. fair value hierarchy.

The guidance will be applied retrospectively and is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of adopting this new accounting standard on the Company’s consolidated financial statements and footnote disclosures.
In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business ("ASU 2017-01"). ASU 2017-01 provides guidance regarding the definition of a business with the objective of providing guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those years. ASU 2017-01 should be applied prospectively and early adoption is permitted. The new guidance will result in many real estate transactions being classified as an asset acquisition and transaction costs being capitalized. The Company elected to early adopt FASB ASU No. 2017-01 in the second quarter of fiscal year 2017. The adoption of this standard did not have a material impact on the Company’s financial position or results of operation.

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 removes Step 2fair value of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds fair value, not to exceedCompany's notes receivable approximated the carrying amount of goodwill. ASU 2017-04$1.9 million as of March 31, 2023 and December 31, 2022. The fair value of these notes is effective for fiscal years or interim periods beginning after December 15, 2019. ASU 2017-04 should be applied prospectivelyestimated using a discounted cash flow analysis in which the Company uses unobservable inputs such as market interest rates determined by the loan-to-value and early adoption is permitted. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements and footnote disclosures.

In March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost ("ASU 2017-07"). ASU 2017-07 provides that entities will present the service cost component of net periodic benefit cost in the same income statement line item(s) as other employee compensation costs arising from services rendered during the period. Only the service cost component will be eligible formarket capitalization in assets. In addition, entities will present the other components of net periodic benefit cost separately from the line item(s) that includes the service cost and outside of any subtotal of operating income, if one is presented. These components will not be eligible for capitalization in assets. ASU 2017-07 is effective for fiscal years or interim periods beginning after December 15, 2017 and early adoption is permitted. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements and footnote disclosures.

In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718), Scope of Modification Accounting (“ASU 2017-09”). ASU 2017-09 clarifies when changesrates related to the terms or conditions ofunderlying collateral at which management believes similar loans would be made, and is classified as a shared-based payment award must be accounted for as modifications. Entities will apply the modification accounting guidance if the value, vesting conditions or classification of the award changes. ASU 2017-09 is effective for financial statements issued for fiscal years beginning after December 15, 2017 and early adoption is permitted. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements and footnote disclosures.

8



In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.”This ASU eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire changeLevel 3 measurement in the fair value hierarchy.
At March 31, 2023, the carrying amount of the Company's notes payable and other debt was $479.2 million and the corresponding fair value was $461.4 million. At December 31, 2022, the carrying amount of the Company's notes payable and other debt was $472.2 million and the corresponding fair value was $449.2 million. The fair value of debt is calculated by discounting the future cash flows of the debt at rates based on instruments with similar risk, terms and maturities as compared to the Company's existing debt arrangements, and is classified as a hedging instrument to be presentedLevel 3 measurement in the same incomefair value hierarchy.

10

5.    Notes Payable and Other Debt
As of March 31, 2023 and December 31, 2022, notes payable and other debt consisted of the following (dollars in millions):

Interest Rate (%)Maturity DatePrincipal Outstanding
March 31, 2023December 31, 2022
Secured:
Laulani Village3.93%2024$58.8 $59.0 
Pearl Highlands4.15%202476.7 77.3 
Photovoltaic Financing(1)20272.5 2.6 
Manoa Marketplace(2)202954.0 54.5 
Subtotal$192.0 $193.4 
Unsecured:
Series A Note5.53%2024$14.2 $14.2 
Series J Note4.66%202510.0 10.0 
Series B Note5.55%202627.0 36.0 
Series C Note5.56%202611.0 11.0 
Series F Note4.35%202613.6 15.2 
Series H Note4.04%202650.0 50.0 
Series K Note4.81%202734.5 34.5 
Series G Note3.88%202722.1 28.1 
Series L Note4.89%202818.0 18.0 
Series I Note4.16%202825.0 25.0 
Term Loan 54.30%202925.0 25.0 
Subtotal$250.4 $267.0 
Revolving Credit Facilities:
A&B Revolver(3)202537.0 12.0 
Total debt (contractual)$479.4 $472.4 
Unamortized debt issuance costs(0.2)(0.2)
Total debt (carrying value)$479.2 $472.2 
(1) Financing lease has an interest rate of 4.14%.
(2) Loan has a stated interest rate of LIBOR plus 1.35%, but is swapped through maturity to a 3.14% fixed rate.
(3) Loan has a stated interest rate of LIBOR plus 1.05% based on a pricing grid. $50.0 million was swapped through June 2022 to a 2.40% fixed rate.
On March 5, 2021, the Financial Conduct Authority announced a timeline for the phase-out of the London Interbank Offered Rate ("LIBOR"). The Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency subsequently issued a joint statement linesaying that banks should stop entering into new contracts with LIBOR as soon as possible but at least by December 31, 2021. As of January 1, 2022, LIBOR can only be used for legacy LIBOR obligations entered into prior to December 31, 2021. In addition, the hedged item. This ASUpublication of US dollar LIBOR is effective for fiscal years beginningexpected to cease after December 15, 2018,June 30, 2023. The Secured Overnight Financing Rate ("SOFR") and interim periods within those fiscal years. Early application is permitted. Bloomberg Short Term Bank Yield Index ("BSBY") have been identified as replacements to LIBOR, with the former being recommended by the Federal Reserve-formed Alternative Reference Rates Committee.
On April 28, 2023, the Company entered into the First Amendment to the Third Amended and Restated Credit Agreement ("A&B Revolver") with Bank of America N.A., as administrative agent, First Hawaiian Bank, KeyBank National Association, Wells Fargo Bank, National Association, and other lenders party thereto, which transitioned the interest rate from LIBOR to a benchmark based on SOFR. All other terms of the agreement remain substantially unchanged.

6.    Derivative Instruments
The Company is currently evaluatingexposed to interest rate risk related to its variable-rate interest debt. The Company balances its cost of debt and exposure to interest rates primarily through its mix of fixed-rate and variable-rate debt. From time to time, the impactCompany may use interest rate swaps to manage its exposure to interest rate risk.
11

Cash Flow Hedges of this ASU.Interest Rate Risk

The Company has three interest rate swap agreements designated as cash flow hedges, whose key terms are as follows (dollars in millions):

3.COMMITMENTS AND CONTINGENCIES
Commitments, Guarantees
EffectiveMaturityFixed InterestNotional Amount atAsset (Liability) Fair Value at
DateDateRateMarch 31, 2023March 31, 2023December 31, 2022
Interest Rate Swap Agreements
4/7/20168/1/20293.14%$54.0 $4.4 $5.5 
Forward Interest Rate Swap Agreements
5/1/202412/9/20314.88%$57.0 $(2.6)$(1.3)
12/9/202412/9/20314.83%$73.0 $(3.1)$(1.5)

The asset related to the interest rate swap as of March 31, 2023 and Contingencies:December 31, 2022, is presented within Prepaid expenses and other assets in the condensed consolidated balance sheets. The liability related to the forward interest rate swaps as of March 31, 2023 and December 31, 2022, is presented within Accrued and other liabilities in the condensed consolidated balance sheets. The changes in fair value of the cash flow hedges are recorded in Accumulated other comprehensive income (loss) and subsequently reclassified into interest expense as interest is incurred on the related variable-rate debt.
The following table represents the pre-tax effect of the derivative instruments in the Company's condensed consolidated statements of comprehensive income (loss) during the three months ended March 31, 2023 and 2022, (in millions):

Three Months Ended March 31,
20232022
Derivatives in Designated Cash Flow Hedging Relationships:
Amount of gain (loss) recognized in OCI on derivatives$(3.7)$3.4 
Impact of reclassification adjustment to interest expense included in Net Income (Loss)$(0.3)$0.4 

As of March 31, 2023, the Company expects to reclassify $1.4 million of net gains (losses) on derivative instruments from accumulated other comprehensive income to earnings during the next 12 months.
7.    Commitments and Contingencies
Commitments and other financial arrangements
The Company has various financial commitments and other arrangements including standby letters of credit and bonds that are not recorded as liabilities on the Company's condensed consolidated balance sheet excluding lease commitments that are disclosed in Note 9 of the Company’s 2016 Form 10-K, included the following (in millions) as of September 30, 2017:March 31, 2023:
Standby letters of credit(a)
$11.8
Bonds(b)
$409.7
(a) Consists of standby•Standby letters of credit issued by the Company’sCompany's lenders under the Company’sCompany's revolving credit facilities, and relate primarily to the Company’s real estate activities. In the event thefacility totaled $1.1 million as of March 31, 2023. These letters of credit areprimarily relate to the Company's workers' compensation plans and if drawn upon, the Company would be obligated to reimburse the issuer of the letter of credit. None of the letters of credit have been drawn upon to date.issuer.
(b) Represents bonds•Bonds related to construction andthe Company's real estate activities in Hawaii. Approximately$387.1totaled $18.6 million is related to construction bonds issued by third party sureties (bid, performanceas of March 31, 2023, and payment bonds) and the remainder is related torepresent commercial bonds issued by third party sureties (permit, subdivision, license and notary bonds). In the event the bonds areIf drawn upon, the Company would be obligated to reimburse the surety that issued the bond. Nonebond for the amount of the bond, reduced for the work completed to date.
•Bonds related to Grace Pacific totaled $328.4 million as of March 31, 2023, and represent the face value of construction bonds has beenissued by third party sureties (bid, performance and payment bonds). If drawn upon, to date.
Indemnity Agreements: For certain real estate joint ventures, the Company maywould be obligated underto reimburse the surety that issued the bond for the amount of the bond, reduced for the work completed to date. As of March 31, 2023, the Company's maximum remaining exposure, in the event of defaults on all existing contractual construction obligations, was approximately $130.3 million.
The Company also provides certain bond indemnities and guarantees of indebtedness for unconsolidated affiliates accounted for as equity method investments related to complete constructionGrace Pacific.
•Bond indemnities are provided for the benefit of the real estate development if the joint venture does not perform. These indemnities are designed to protect thethird-party surety in exchange for the issuance of suretyconstruction bonds that cover joint venture construction activities,(bid, performance and payment bonds). Under such as project amenities, roads, utilities, and other infrastructure, at its joint ventures. Under thebond indemnities, the Company and itsthe joint venture partners agree to
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indemnify the surety bond issuer from all losses and expenses arising from the failure of the joint venture to complete the specified bonded construction. The maximum potentialconstruction; the Company may be obligated to reimburse the surety that issued the bond for the amount of aggregate future payments is a function of the amount covered by outstanding bonds atbond, reduced for the time of default bywork completed to date if the joint venture reduceddoes not perform.
•Guarantees of indebtedness may be provided by the amountCompany for the benefit of work completedfinancial institutions providing credit to date. unconsolidated equity method investees. As of March 31, 2023, the Company had no such arrangements with third party lenders related to its unconsolidated equity method investees and no amounts outstanding.
The recorded amounts of the indemnity liabilitiesbond indemnities and guarantee of indebtedness were not material individually or in the aggregate.
The Company is a guarantor of indebtedness for certain of its unconsolidated joint ventures' borrowings with third party lenders, relating to the repayment of construction loans and performance of construction for the underlying project. As of September 30, 2017, the Company's limited guarantees on indebtedness related to five of its unconsolidated joint ventures totaled $6.1 million. The Company has not incurred any significant historical losses related to guarantees on its joint venture indebtedness.
Other than the obligationsthose described above, and those described in the Company's 2016 Form 10-K, obligations of the Company’s non-consolidatedCompany's joint ventures do not have recourse to the Company, and the Company’sCompany's "at-risk" amounts are limited to its investment.
Legal Proceedingsproceedings and Other Contingencies: A&B ownsother contingencies
Prior to the sale of approximately 41,000 acres of agricultural land on Maui to Mahi Pono Holdings, LLC ("Mahi Pono") in December 2018, the Company, through East Maui Irrigation Company, LLC ("EMI"), also owned approximately 16,000 acres of watershed lands in East Maui. A&B alsoMaui and held four water licenses to anotherapproximately 30,000 acres owned by the State of HawaiiHawai‘i in East Maui. The sale to Mahi Pono included the sale of a 50% interest in EMI (which closed February 1, 2019), and provided for the Company and Mahi Pono, through EMI, to jointly continue the existing process to secure a long-term lease from the State for delivery of irrigation water to Mahi Pono for use in Central Maui.
The last of these water license agreements expired in 1986, and all four agreements were then extended as revocable permits that were renewed annually. In 2001, a request was made to the State Board of Land and Natural Resources (the "BLNR") to replace these revocable permits with a long-term water lease. Pending the conclusioncompletion by the BLNR of thisa contested case hearing it ordered to be held on the request for the long-term lease, the BLNR has kept the existing permits on a holdover basis. Three parties (Healoha Carmichael; Lezley Jacintho; and Na Moku Aupuni O Ko‘olau Hui) filed a lawsuit on April 10, 2015, (the "4/10/15"Initial Lawsuit") alleging that the BLNR has been renewing the revocable permits annually rather than keeping them in holdover status. The lawsuit askschallenged the BLNR’s decision to continue the revocable permits for calendar year 2015 and asked the court to void the revocable permits and to declare that the renewals were illegally issued without preparation of an environmental assessment ("EA"). In December 2015, the BLNR decided to reaffirm its prior decisions to keep the permits in holdover status. This decision by the BLNR is beingwas challenged by the three parties. In January 2016, the court ruled in the 4/10/15Initial Lawsuit that the renewals were not subject to the EA requirement, but that the BLNR lacked legal authority to keep the revocable permits in holdover status beyond one year.year (the "Initial Ruling"). The court has allowedInitial Ruling was appealed to the parties to make an immediate appealIntermediate Court of this ruling. Appeals ("ICA") of the State of Hawai‘i.
In May 2016, while the Hawaiiappeal of the Initial Ruling was pending, the Hawai‘i State Legislature passed House Bill 2501, which specified that the BLNR has the legal authority to issue holdover revocable permits for the disposition of water rights for a period not to

9


exceed three years. The governor signed this bill into law as Act 126 in June 2016. Pursuant to Act 126, the first annual authorization of the existing holdover permits was sought and granted by the BLNR in December 2016.2016, November 2017 and November 2018 for calendar years 2017, 2018, and 2019. No extension of Act 126 was approved by the Hawai‘i State Legislature in 2019.
In addition, on May 24, 2001, petitions were filed by a third party, requestingJune 2019, the ICA vacated the Initial Ruling, effectively reversing the determination that the Commission on Water Resource ManagementBLNR lacked authority to keep the revocable permits in holdover status beyond one year (the "ICA Ruling"). The ICA remanded the case back to the trial court to determine whether the holdover status of the permits was both (a) "temporary" and (b) in the best interest of the State, as required by statute. The plaintiffs filed a motion with the ICA for reconsideration of Hawaii ("Water Commission") establish interim instream flow standards ("IIFS")its decision, which was denied on July 5, 2019. On September 30, 2019, the plaintiffs filed a request with the Supreme Court of Hawai‘i to review and reverse the ICA Ruling. On November 25, 2019, the Supreme Court of Hawai‘i granted the plaintiffs' request to review the ICA Ruling and, on May 5, 2020, oral argument was held.
On October 11, 2019, the BLNR took up the renewal of all the existing water revocable permits in 27the state, acting under the ICA Ruling, and approved the continuation of the four East Maui streamswater revocable permits for another one-year period through December 31, 2020. On November 13, 2020, the BLNR approved another renewal of such permits through December 31, 2021.
On March 2, 2022, the Supreme Court of Hawai’i vacated the ICA’s ruling relating to the BLNR's decision to continue the revocable permits for the calendar year 2015, holding that feedHawaii Revised Statutes Chapter 343 (the Hawaii Environmental Policy Act) did apply to the Company's irrigation system.permits. The Water Commission initially tookcourt remanded the matter back to the Circuit Court to determine if any exceptions would apply and, if not, how HRS Chapter 343 should be applied in light of the steps taken by A&B/EMI toward the long-term water lease. The Supreme Court of Hawai’i also determined that the BLNR had the statutory authority to continue the permits
13

for more than one year, but required BLNR to make findings of fact and conclusions of law determining that the action would serve the best interests of the State. A&B/EMI will continue to defend against the plaintiffs’ claims on remand.
In a separate matter, on December 7, 2018, a contested case request filed by the Sierra Club (contesting the BLNR's November 2018 approval of the 2019 revocable permits) was denied by the BLNR. On January 7, 2019, the Sierra Club filed a lawsuit in the circuit court of the first circuit in Hawai‘i against BLNR, A&B and EMI, seeking to invalidate the 2019 and 2020 holdovers of the revocable permits for, among other things, failure to perform an EA. The lawsuit also sought to enjoin A&B/EMI from diverting more than 25 million gallons a day until a permit or lease is properly issued by the BLNR, and for the imposition of certain conditions on the petitionsrevocable permits by the BLNR. The count seeking to invalidate the revocable permits based on the failure to perform an EA was dismissed by the court, based on the ICA Ruling in 2008the Initial Lawsuit. The Sierra Club’s lawsuit was amended to include a challenge to the BLNR’s renewal of the revocable permits for calendar year 2020. After a full trial on the merits held beginning in August of 2020, the court ruled, on April 6, 2021, against the Sierra Club on its lawsuit challenging the 2019 and 2010, but2020 revocable permits. On February 17, 2022, the petitioners requestedSierra Club filed its notice of appeal challenging the decision on the August 2020 trial. The court separately considered a lawsuit filed by the Sierra Club appealing the BLNR’s decision to deny it a contested case hearing on the 2021 revocable permits, which were granted by the BLNR on or about November 13, 2020. In that case, on May 28, 2021, the court issued an interim decision that the Sierra Club’s due process rights were violated, ordered the BLNR to challengehold a contested case hearing on the Water Commission's decisions2021 permits, and that the permits would be vacated. On July 30, 2021, the court modified its ruling to say that the permits would not be invalidated, but left in place pending the outcome of the contested case hearing. The contested case hearing was held by the BLNR in December 2021 to address the continuation of the revocable permits for both calendar years 2021 and 2022 and BLNR issued a decision on certain petitions. The Water Commission deniedJune 30, 2022. On December 27, 2021, while BLNR’s decision in the contested case hearing request, butwas pending, the petitioners successfully appealedcourt further modified its ruling to allow the denialpermits to remain in place until the earlier of May 1, 2022, the date on which the BLNR renders a substantive decision on the continuation of the permits for calendar year 2022, or further order of the court. On April 26, 2022, the court orally granted an extension of the May 1, 2022 deadline to the Hawaii Intermediate Courtearlier of Appeals,June 15, 2022, or the date on which the BLNR renders a substantive decision on the continuation of the permits for calendar year 2022, or as may be further ordered by the Water Commissioncourt. On June 1, 2022, the court granted an extension of the June 15, 2022 deadline to grant the request. The Commission then authorizedearlier of July 15, 2022 or the appointmentdate on which the BLNR renders a substantive decision on the continuation of a hearings officerthe permits for calendar year 2022 or as may be further ordered by the court. On June 30, 2022, the BLNR issued its final decision on the contested case hearing on the permits for calendar years 2021 and expanded2022, approving the scopecontinuation of the permits through the end of calendar year 2022. The Sierra Club filed a notice of appeal of that decision to the Circuit Court of the First Circuit in Hawai‘i and on March 31, 2023, the Circuit Court entered its Order on Appeal dismissing the Sierra Club's appeal as moot. The Company and the BLNR also appealed the court’s determination that the Sierra Club was entitled to a contested case hearing on the 2021 revocable permits.
On November 10, 2022, the BLNR voted to encompass all 27 petitionscontinue the revocable permits for amendmentcalendar year 2023 and, at that same meeting, denied the Sierra Club’s oral request for a contested case hearing. The Sierra Club subsequently submitted a written request to the BLNR for a contested case hearing on the continuation of the IIFSrevocable permits, which the BLNR denied on December 9, 2022. On November 29, 2022, the Sierra Club filed an appeal of BLNR’s decisions to deny its oral request for East Maui streams in 23 hydrologic units. The evidentiary phase of the hearing before the Commission-appointed hearings officer was completed on April 2, 2015. On January 15, 2016, the Commission-appointed hearings officer issued his recommended decision on the petitions. The recommended decision would restore water to streams in 11 of the 23 hydrologic units. In March 2016, the hearings officer ordered a reopening of the contested case proceedings in lighthearing and to continue the revocable permits for 2023 and on December 15, 2022, the Sierra Club amended its appeal to also challenge the BLNR’s denial of its written request for a contested case hearing. The BLNR’s decision to continue the Company’s January 2016 announcement to cease sugar operations at HC&S bypermits through the end of calendar year 2023 will stand unless overturned on appeal or the yearSierra Club obtains a preliminary injunction to prevent the decision from remaining in place.
In connection with A&B’s obligation to continue the existing process to secure a long-term water lease from the State, A&B and EMI will defend against the remaining claims made by the Sierra Club.
In addition to transition to a new diversified agricultural model on the former sugar lands. In April 2016,litigation described above, the Company announced its commitment to fully and permanently restore the priority taro streams identified by the petitioners. Re-opened evidentiary hearings occurred in the first quarter of 2017 and a decision is pending. In August 2017, the hearings officer in the reopened evidentiary hearing issued his proposed decision. The Commission heard arguments on the proposed decision in October 2017.
HC&S also used water from four streams in Central Maui ("Na Wai Eha") to irrigate its agricultural lands in Central Maui.  Beginning in 2004, the Water Commission began proceedings to establish IIFS for the Na Wai Eha streams. Before the IIFS proceedings were concluded, the Water Commission designated Na Wai Eha as a surface water management area, meaning that all uses of water from these streams required water use permits issued by the Water Commission. Following contested case proceedings, the Water Commission established IIFS in 2010, but that decision was appealed, and the Hawaii Supreme Court remanded the case to the Water Commission for further proceedings. The parties to the IIFS contested case settled the case in 2014. Thereafter, proceedings for the issuance of water use permits commenced with over 100 applicants, including HC&S, vying for permits. While the water use permit proceedings were ongoing, A&B announced the cessation of sugar cane cultivation at the end of 2016.  This announcement triggered a re-opening and reconsideration of the 2014 IIFS decision. Reconsideration of the IIFS is taking place simultaneously with consideration of the applications for water use permits.
If the Company is not permitted to use sufficient quantities of stream waters, it would have a material adverse effect on the Company’s pursuit of a diversified agribusiness model in subsequent years and the value of the Company’s agricultural lands.
A&B is a party to, or may be contingently liable in connection with, other legal actions arising in the normal conduct of its businesses,businesses. While the outcomes of which,such litigation and claims cannot be predicted with certainty, in the opinion of management after consultation with counsel, the reasonably possible losses would not have a material effect on A&B’s condensedthe Company's consolidated financial statements as a whole.

Further note that certain of the Company's properties and assets may become the subject of other types of claims and assessments at various times (e.g., environmental matters based on normal operations of such assets). Depending on the facts and circumstances surrounding such potential claims and assessments, the Company records an accrual if it is deemed probable that a liability has been incurred and the amount of loss can be reasonably estimated/valued as of the date of the financial statements.
10
14



4.EARNINGS PER SHARE ("EPS")
The following table provides a reconciliation of income from continuing operations to income from continuing operations available to A&B shareholders (in millions):
 Quarter Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
Income from continuing operations$7.4
 $12.2
 $16.0
 $19.1
Less: Income attributable to noncontrolling interest(0.5) (0.5) (1.7) (1.1)
Income from continuing operations attributable to A&B shareholders, net of income taxes6.9
 11.7
 14.3
 18.0
Undistributed earnings allocated to redeemable noncontrolling interest0.5
 0.4
 1.2
 0.9
Income from continuing operations available to A&B shareholders, net of income taxes7.4
 12.1
 15.5
 18.9
Income (loss) from discontinued operations available to A&B shareholders, net of income taxes(0.8) (13.6) 2.4
 (28.1)
Net income (loss) available to A&B shareholders$6.6
 $(1.5) $17.9
 $(9.2)
8.    Revenue and Contract Balances
The numberCompany generates revenue through its Commercial Real Estate and Land Operations segments. Through its Commercial Real Estate segment, the Company owns and operates a portfolio of shares usedcommercial real estate properties and generates income (i.e., revenue) as a lessor through leases of such assets. Refer to compute basicNote 9 – Leases - The Company as a Lessor for further discussion of lessor income recognition. The Land Operations segment generates revenue from contracts with customers. The Company further disaggregates revenue from contracts with customers by revenue type when appropriate if the Company believes disaggregation best depicts how the nature, amount, timing, and diluted earnings per share isuncertainty of the Company's revenue and cash flows are affected by economic factors. Revenue by type for the three months ended March 31, 2023 and 2022, was as follows (in millions):
Three Months Ended March 31,
20232022
Revenues:
Commercial Real Estate$47.9 $46.3 
Land Operations:
Development sales revenue— 6.3 
Unimproved/other property sales revenue0.9 1.8 
Other operating revenue1.6 4.8 
Land Operations2.5 12.9 
Total revenues$50.4 $59.2 
 Quarter Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
Denominator for basic EPS – weighted-average shares outstanding49.2
 49.0
 49.1
 49.0
Effect of dilutive securities: 
  
    
Non-participating stock options and restricted stock unit awards0.4
 0.4
 0.5
 0.4
Denominator for diluted EPS – weighted-average shares outstanding49.6
 49.4
 49.6
 49.4
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers (in millions):
March 31, 2023December 31, 2022
Accounts receivable$6.6 $8.6 
Allowances (credit losses and doubtful accounts)(2.4)(2.5)
Accounts receivable, net of allowance for credit losses and allowance for doubtful accounts$4.2 $6.1 
Variable consideration1
$62.0 $62.0 
Prepaid rent7.4 4.4 
Other deferred revenue2.5 2.4 
Deferred revenue$71.9 $68.8 
1 Variable consideration deferred as of the end of the periods related to amounts received in the sale of agricultural land on Maui in 2018 that, under revenue recognition guidance, could not be included in the transaction price.
Basic earnings per share is computed by dividing net earnings allocated to common shares byFor the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net earnings allocated to common shares by the weighted-average number of common shares outstanding adjusted by the number of additional shares, if any, that would have been outstanding had the potentially dilutive common shares been issued. Potentially dilutive shares of common stock include non-qualified stock options and restricted stock units.
There were no anti-dilutive securities outstanding during the quarter and ninethree months ended September 30, 2017. DuringMarch 31, 2023, the quarter and nine months ended September 30, 2016, anti-dilutive securities totaled 0.4 million shares.
5.FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of receivables and short-term borrowings approximate their carrying values dueCompany did not recognize any revenue related to the short-term natureCompany's variable consideration and other deferred revenue reported as of the instruments. The Company’s cash and cash equivalents, consisting principally of cash on deposit, may from time to time include short-term money market funds. The fair values of these money market funds, based on market prices (Level 2), approximate their carrying values due to their short-maturities. The carrying amount and fair value of the Company’s long-term debt at September 30, 2017 was $625.8 million and $642.0 million, respectively, and $515.1 million and $529.3 million at December 31, 2016, respectively.2022.


15

9.    Leases - The fair valueCompany as a Lessor
The Company leases real estate property to tenants under operating leases. Such activity is primarily composed of long-term debt is calculated by discounting the future cash flowsoperating leases within its CRE segment.
The historical cost of, the debt at rates basedand accumulated depreciation on, instruments with similar risk, terms and maturitiesleased property as compared to the Company’s existing debt arrangements (Level 2).

11


6.INVENTORIES
Materials & Construction segment inventory, including materials and supplies, are stated at the lower of cost (principally average cost, first-in, first-out basis) or market value. Sugar inventories are stated at the lower of cost (first-in, first-out basis) or market value.
Inventories at September 30, 2017March 31, 2023, and December 31, 20162022, were as follows (in millions):
March 31, 2023December 31, 2022
Leased property - real estate$1,573.5 $1,572.0 
Less: accumulated depreciation(208.9)(201.8)
Property under operating leases - net$1,364.6 $1,370.2 
Total rental income (i.e., revenue) under these operating leases during the three months ended March 31, 2023 and 2022, relating to lease payments and variable lease payments were as follows (in millions):
Three Months Ended March 31,
20232022
Lease payments$33.1 $32.2 
Variable lease payments15.6 14.9 
Revenues deemed uncollectible, net(0.7)0.3 
Total rental income$48.0 $47.4 
Contractual future lease payments to be received on non-cancelable operating leases as of March 31, 2023, were as follows (in millions):
March 31, 2023
2023$94.3 
2024116.9 
2025100.1 
202686.8 
202775.7 
202863.4 
Thereafter497.5 
Total future lease payments to be received$1,034.7 
10.    Leases - The Company as a Lessee
There have been no material changes from the Company's leasing activities as a lessee described in Note 13 to the consolidated financial statements included in Item 8 of the Company's 2022 Form 10-K. The following table provides information about the Company's operating lease costs recognized during the three months ended March 31, 2023 and 2022, (in millions):
Three Months Ended March 31,
20232022
Operating lease cost$0.6 $0.6 

16
 September 30, 2017 December 31, 2016
Sugar inventories$—
 $17.5
Asphalt10.1
 7.4
Processed rock, Portland cement, and sand13.3
 12.6
Work in progress3.1
 3.0
Construction-related retail merchandise2.0
 1.7
Parts, materials and supplies inventories1.6
 1.1
Total$30.1
 $43.3


11.    Share-based Payment Awards
7.SHARE-BASED PAYMENT AWARDS
The time-based2022 Incentive Compensation Plan ("2022 Plan") allows for the granting of stock options, stock appreciation rights, stock awards, restricted stock units, vest ratably over 3 yearsdividend equivalent rights, and other awards. The shares of common stock authorized to be issued under the performance share units cliff vest over 3 years, provided2022 Plan are to be drawn from the shares of the Company's authorized but unissued common stock or from shares of its common stock that the total shareholder returnCompany acquired, including shares purchased on the open market or private transactions.
During the three months ended March 31, 2023, the Company granted approximately 310,200 of the Company’s common stock over the relevant period meets or exceeds pre-defined levels of relative total shareholder returns of the Standard & Poor’s MidCap 400 Index and the Dow Jones U.S. Real Estate Index.

The following table summarizes the Company's stock option activity during 2017 (in thousands, except weighted average exercise price and weighted average contractual life):
 2012 Plan Weighted-
Average
Exercise
Price		 Weighted-
Average
Contractual
Life		 Aggregate
Intrinsic
Value
Outstanding, January 1, 2017903.5
 $17.78
    
Exercised(230.9) $16.45
    
Outstanding, September 30, 2017672.6
 $18.24
 3.0 years $18,947
Vested or expected to vest672.6
 $18.24
 3.0 years $18,947
Exercisable, September 30, 2017672.6
 $18.24
 3.0 years $18,947
The following table summarizes 2017 non-vested restricted stock unit activity (in thousands, except weighted-average grant-dateawards with a weighted average grant date fair value amounts):
 2012 Plan
Restricted
Stock Units
Weighted-
Average
Grant-date
Fair Value
Outstanding, January 1, 2017293.5
 $33.81
Granted139.1
 $37.41
Vested(96.3) $37.20
Canceled(17.4) $35.03
Outstanding, September 30, 2017318.9
 $34.29

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of $22.36. During the three months ended March 31, 2022, the Company granted approximately 266,300 of restricted stock unit awards with a weighted average grant date fair value of $25.99.
The fair value of the Company’sCompany's time-based awards is determined using the Company's stock price on the date of grant. The fair value of the Company's market-based awards is estimated using the Company's stock price on the date of grant and the probability of vesting using a Monte Carlo simulation with the following weighted-average assumptions:
2023 Grants2022 Grants
Volatility of A&B common stock49.1%47.7%
Average volatility of peer companies48.2%49.5%
Risk-free interest rate3.8%1.4%
 2017 Grants 2016 Grants
Volatility of A&B common stock24.1% 26.3%
Average volatility of peer companies25.6% 27.7%
Risk-free interest rate1.6% 1.1%
The Company recognizes compensation cost net of actual forfeitures of time-based or market-based awards. A summary of compensation cost related to share-based payments is as follows (in millions):
Three Months Ended March 31,
20232022
Share-based expense:
Time-based and market-based restricted stock units$1.6 $1.5 

12.    Employee Benefit Plans
 Quarter Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
Share-based expense:       
Time-based and market-based restricted stock units$1.2
 $1.0
 $3.4
 $3.1
Total recognized tax benefit(0.5) (0.5) (1.3) (1.1)
Share-based expense (net of tax)$0.7
 $0.5
 $2.1
 $2.0
8.RELATED PARTY TRANSACTIONS
Construction ContractsDuring 2022, the Company completed the termination of its funded single-employer defined benefit pension plans that covered certain non-bargaining unit employees and Material Sales.bargaining unit employees of the Company and transferred the life insurance benefits for retirees as of June 30, 2022, to an insurance company. The Company enteredcontinues to maintain its plans that provide retiree health care and the remaining life insurance benefits to certain salaried and hourly employees.
Components of the net periodic benefit cost for the Company's pension and post-retirement plans for the three months ended March 31, 2023 and 2022, are shown below (in millions):
Three Months Ended March 31,
20232022
Service cost$— $0.7 
Interest cost0.1 0.5 
Expected return on plan assets— (1.2)
Amortization of net loss— 0.9 
Pension termination— 3.2 
Net periodic benefit cost$0.1 $4.1 

13.    Income Taxes
The Company has been organized and operates in a manner that enables it to qualify, and believes it will continue to qualify, as a REIT for federal income tax purposes. The Company’s effective tax rate for the three months ended March 31, 2023, approximated the effective tax rate for the same period in 2022.
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As of March 31, 2023, tax years 2019 and later are open to audit by the tax authorities. The Company believes the result of any potential audits will not have a material adverse effect on its results of operations, financial condition, or liquidity.
14.    Earnings Per Share ("EPS")
Basic earnings per common share excludes dilution and is calculated by dividing net earnings allocated to common shares by the weighted-average number of common shares outstanding for the period. Diluted earnings per common share is calculated by dividing net earnings allocated to common shares by the weighted-average number of common shares outstanding for the period, as adjusted for the potential dilutive effect of non-participating share-based awards as well as adjusted by the number of additional shares, if any, that would have been outstanding had the potentially dilutive common shares been issued.
The following table provides a reconciliation of income (loss) from continuing operations to net income (loss) from continuing operations available to A&B common shareholders and net income (loss) available to A&B common shareholders (in millions):
Three Months Ended March 31,
20232022
Income (loss) from continuing operations$9.5 $9.6 
Distributions and allocations to participating securities— — 
Income (loss) from continuing operations available to A&B shareholders9.5 9.6 
Income (loss) from discontinued operations(4.2)1.4 
Exclude: Loss (income) attributable to discontinued noncontrolling interest— (0.5)
Net income (loss) available to A&B common shareholders$5.3 $10.5 
The number of shares used to compute basic and diluted earnings per share is as follows (in millions):

Three Months Ended March 31,
20232022
Denominator for basic EPS - weighted average shares outstanding72.5 72.6 
Effect of dilutive securities:
Restricted stock unit awards0.1 0.2 
Denominator for diluted EPS - weighted average shares outstanding72.6 72.8 

The number of anti-dilutive securities, excluded from the calculation of diluted earnings per common share, consisted of the following (in millions):
Three Months Ended March 31,
20232022
Number of anti-dilutive securities— 0.1 

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15.    Accumulated Other Comprehensive Income (Loss)
For the three months ended March 31, 2023, other comprehensive income (loss) principally includes unrealized interest rate hedging gains and losses and associated reclassification adjustments to interest expense. The components of Accumulated other comprehensive loss, net of taxes, were as follows as of March 31, 2023 and December 31, 2022, (in millions):
March 31, 2023December 31, 2022
Employee benefit plans:
Post-retirement plans$(0.3)$(0.3)
Total employee benefit plans(0.3)(0.3)
Interest rate swap(1.9)2.1 
Accumulated other comprehensive income (loss)$(2.2)$1.8 
The changes in Accumulated other comprehensive income (loss) by component for the three months ended March 31, 2023, were as follows (in millions, net of taxes):
Employee Benefit PlansInterest Rate SwapTotal
Balance, January 1, 2023$(0.3)$2.1 $1.8 
Other comprehensive income (loss) before reclassifications, net of taxes of $0— (3.7)(3.7)
Amounts reclassified from accumulated other comprehensive income (loss)1
— (0.3)(0.3)
Other comprehensive income (loss), net of taxes— (4.0)(4.0)
Balance, March 31, 2023$(0.3)$(1.9)$(2.2)
1 Amounts reclassified from Accumulated other comprehensive income related to interest rate swap settlements are presented as an adjustment to Interest expense in the Condensed Consolidated Statements of Operations. Amounts reclassified from Accumulated other comprehensive income related to employee benefit plan items are presented as part of Interest and other income (expense), net in the Condensed Consolidated Statements of Operations.

19

16.    Segment Results
Operating segments are components of an enterprise that engage in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the chief operating decision maker (its Chief Executive Officer) to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. The Company operates and reports on two segments: Commercial Real Estate and Land Operations.
Reportable segment information for the three months ended March 31, 2023 and 2022, is summarized below (in millions):
Three Months Ended March 31,
20232022
Operating Revenue:
Commercial Real Estate$47.9 $46.3 
Land Operations2.5 12.9 
Total operating revenue50.4 59.2 
Operating Profit (Loss): 
Commercial Real Estate1
20.9 20.7 
Land Operations2,3
(0.1)1.7 
Total operating profit (loss)2
20.8 22.4 
Interest expense(5.0)(5.7)
Corporate and other expense4
(6.3)(7.1)
Income (Loss) from Continuing Operations Before Income Taxes$9.5 $9.6 
1 Commercial Real Estate segment operating profit (loss) includes intersegment operating revenue, primarily from the Land Operations segment that is eliminated in consolidation.
2 In December 2022, the Grace Disposal Group met the classification as held for sale and discontinued operations, and the Company changed the composition of its reportable segments based on how the chief operating decision maker assesses the performance of the Company's continuing operations. This caused reported amounts (i.e., operating profit and segment operating profit) in the historical period to be reclassified from the former M&C segment to the Land Operations segment or discontinued operations. All comparable information for the historical periods has been retrospectively adjusted to reflect the impact of these changes, resulting in changes to Land Operations Operating Profit (Loss) and Total operating profit (loss) of $1.8 million and $(1.3) million, respectively, for the three months ended March 31, 2022.
3 For the three months ended March 31, 2022, Land Operations segment operating profit (loss) includes equity in earnings (losses) from the Company's various joint ventures of $1.4 million, and pension termination charges of $2.3 million related to the 2022 termination of the defined benefit plans. For the three months ended March 31, 2023, Land Operations segment operating profit (loss) includes $0.4 million of equity in earnings (losses) from the Company's various joint ventures, as well as a gain on sale of non-core assets, net, of $1.1 million, related to the sale of the Company's legacy trucking business.
4 Corporate and other expense includes pension termination charges of $0.9 million for the three months ended March 31, 2022, related to the 2022 termination of the defined benefit plans.
17.    Held for Sale and Discontinued Operations
Assets and liabilities associated with the Grace Disposal Group are presented in the Condensed Consolidated Balance Sheets as Assets held for sale and Liabilities associated with assets held for sale, respectively, and the results of operations are presented as discontinued operations in the Condensed Consolidated Statements of Operations and Cash Flows. While the ultimate outcome of the plan to dispose of the Grace Disposal Group is neither certain nor guaranteed, the Company intends to conduct the respective businesses in the ordinary course in substantially the same manner in which it previously has been conducted until a sale occurs.
The following table summarizes income (loss) from discontinued operationsincluded in the Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022, (in millions):

20

Three Months Ended March 31,
20232022
Revenue$36.8 $39.2 
Cost of sales1
(37.4)(34.3)
Selling, general and administrative(3.6)(3.7)
Operating income (loss) from discontinued operations1
(4.2)1.2 
Income (loss) related to joint ventures(0.1)0.1 
Interest and other income (expense), net0.3 0.1 
Interest expense(0.2)— 
Income (loss) from discontinued operations before income taxes1
(4.2)1.4 
Income tax benefit (expense) attributable to discontinued operations— — 
Income (loss) from discontinued operations1
(4.2)1.4 
Loss (income) attributable to discontinued noncontrolling interest— (0.5)
Income (loss) from discontinued operations attributable to A&B Shareholders1
$(4.2)$0.9 
1Includes $0.1 million and zero in costs associated with the resolution of liabilities from the Company’s former sugar operations for the three months ended March 31, 2023 and 2022, respectively.

The assets and liabilities held for sale included in the Condensed Consolidated Balance Sheets as of March 31, 2023 and 2022, were as follows (in millions):

March 31, 2023December 31, 2022
Cash and cash equivalents$1.1 $0.1 
Accounts receivable and retention, net of allowance for credit losses and allowance for doubtful accounts of $0.4 million and $0.4 million as of March 31, 2023 and December 31, 2022, respectively30.5 30.8 
Inventories40.1 45.0 
Other property, net67.9 67.4 
Operating lease right-of-use assets30.7 31.3 
Prepaid expenses and other assets44.6 42.0 
Less: Impairment recognized on classification as held for sale(89.8)(89.8)
Total Assets held for sale$125.1 $126.8 
Notes payable and other debt$13.7 $14.1 
Accounts payable11.5 10.2 
Operating lease liabilities30.7 31.3 
Accrued and other liabilities21.9 25.4 
Total Liabilities associated with assets held for sale$77.8 $81.0 
During the three months ended March 31, 2023, the Company recorded no additional impairment charges related to assets and liabilities held for sale.
Related Party Transactions within Discontinued Operations and Held for Sale: The Company enters into contracts in the ordinary course of business, as a supplier, with affiliatesaffiliate entities that require accounting under the equity method due to the Company's financial interests in such entities and also with affiliate parties that are members in entities in which the Company also is a member. Revenuesmember and holds a controlling financial interest. Related to the periods during which such relationships existed, revenues earned from transactions with such affiliates totaled approximately $5.5were $3.9 million and $1.8$2.1 million for the quartersthree months ended September 30, 2017March 31, 2023 and 2016,2022, respectively. Revenues earnedExpenses recognized from transactions with such affiliates totaled approximately $15.4 million and $6.0were $1.4 million for the ninethree months ended September 30, 2017March 31, 2023 and 2016, respectively.2022. Receivables from these affiliates were $4.0$4.6 million and $2.1$6.9 million at September 30, 2017as of March 31, 2023 and December 31, 2016,2022, respectively. Amounts due to these affiliates were $0.5$0.7 million and $0.2$0.4 million at September 30, 2017as of March 31, 2023 and December 31, 2016,2022, respectively.
Commercial Real Estate. The Company entered into contracts in
21

18.    Subsequent Events

On April 25, 2023, the ordinary courseCompany's Board of Directors declared a cash dividend of $0.22 per share on outstanding common stock, payable on July 5, 2023, to shareholders of record as of the close of business on June 16, 2023.

On May 3, 2023, the Company completed the acquisition of an industrial property on Oahu for approximately $9.5 million. A portion of the transaction was structured to qualify as a lessor of property, with unconsolidated affiliates in which the Company has an interest, as well as with certain entities that are owned by a directorreverse like-kind exchange under Section 1031 of the Company. Revenues earned from these transactions were $1.4 million and $4.0 million for the quarter and nine months ended September 30, 2017, respectively, and immaterial for the quarter and nine months ended September 30, 2016. Receivables from these affiliates were immaterial as of September 30, 2017 and December 31, 2016.
During the quarters ended September 30, 2017 and 2016, the Company recorded developer fee revenues of approximately $0.5 million and $0.2 million related to management and administrative services provided to certain unconsolidated investments in affiliates. Developer fee revenues recorded for the nine months ended September 30, 2017 and 2016 were $2.1 million and $0.7 million, respectively. Receivables from these affiliates were immaterial as of September 30, 2017 and December 31, 2016.

13


9.EMPLOYEE BENEFIT PLANS
Internal Revenue Code. The components of net periodic benefit cost recorded for the quarters ended September 30, 2017 and 2016 were as follows (in millions):
 Pension Benefits Post-retirement Benefits
 2017 2016 2017 2016
Service cost$0.7
 $0.8
 $—
 $—
Interest cost2.0
 2.2
 0.1
 0.2
Expected return on plan assets(2.3) (2.5) —
 —
Amortization of net loss included in net periodic pension cost1.0
 1.9
 (0.1) —
Amortization of prior service credit included in net periodic pension cost(0.2) (0.3) —
 —
Curtailment gain—
 (0.2) —
 —
Settlement loss1.4
 —
 —
 —
Net periodic benefit cost$2.6
 $1.9
 $—
 $0.2
The components of net periodic benefit cost recorded for the nine months ended September 30, 2017 and 2016 were as follows (in millions):
 Pension Benefits Post-retirement Benefits
 2017 2016 2017 2016
Service cost$2.2
 $2.4
 $0.1
 $0.1
Interest cost6.2
 6.7
 0.3
 0.4
Expected return on plan assets(7.1) (7.5) —
 —
Amortization of net loss included in net periodic pension cost3.3
 5.5
 —
 0.1
Amortization of prior service credit included in net periodic pension cost(0.7) (0.8) —
 —
Curtailment gain(0.3) (0.7) —
 —
Settlement loss1.4
 —
 —
 —
Net periodic benefit cost$5.0
 $5.6
 $0.4
 $0.6
10.ACQUISITIONS
Manoa Marketplace Acquisition. The Company applies the provisions of FASB ASC Topic No. 805, Business Combinations, ("ASC 805") to acquisitions that constitute a business, as defined. Under ASC 805, assets acquired and liabilities assumed are recorded at fair value. The excess of the purchase price over the net fair value of assets acquired and liabilities assumed is recorded as goodwill. The fair values of assets acquired and liabilities assumed are determined through the market, income or cost approaches, and the valuation approach is generally based on the specific characteristics of the asset or liability. Under the market approach, value is estimated using information from transactions in which other participants in the market have paid for reasonably similar assets that have been sold within a reasonable period from the valuation date. Adjustments are made to compensate for differences between reasonably similar assets and the item being valued. Under the income approach, the future cash flows expected to be received over the life of the asset, taking into account a variety of factors, such as long-term growth rates and the amount and timing of cash flows, are discounted to present value using a rate of return that accounts for the time value of money and investment risk factors. Under the cost approach, the Company estimates the cost to replace the asset with a new asset taking into consideration a variety of factors such as age, physical condition, functional obsolescence and economic obsolescence. The fair value of liabilities assumed is calculated as the net present value of estimated payments using prevailing market interest rates for liabilities with similar credit risk and terms.
On January 29, 2016, the Company consummated the purchase of the leasehold and leased fee interests in Manoa Marketplace, a multi-tenant neighborhood shopping center in Honolulu for $82.4 million through a 1031 transaction.

14


The allocation of purchase price to assets acquired and liabilities assumed is as follows (in millions):
Assets acquired: 
Land$40.5
Building36.8
In-place leases7.0
Favorable leases1.3
Total assets acquired85.6
  
Total liabilities assumed3.2
  
Net assets acquired$82.4
The finite-lived intangible assets related to in-place leases and favorable leases are amortized over their respective lease terms. As of the acquisition date, the weighted-average remaining lives of the in-place leases and favorable leases were approximately 5 and 3 years, respectively.
In connection with the Manoa Marketplace transaction, the Company incurred approximately $1.1 million of acquisition-related expenses during the nine months ended September 30, 2016. The costs are included in selling, general and administrative costs in the accompanying condensed consolidated statements of operations and are reported in the Commercial Real Estate segment for segment reporting purposes.
11.ACCUMULATED OTHER COMPREHENSIVE LOSS
The changes in accumulated other comprehensive loss by component for the nine months ended September 30, 2017 were as follows (in millions, net of tax):
 Employee Benefit Plans Interest Rate Swap Total
Beginning balance, January 1, 2017$(45.0) $1.8
 $(43.2)
Unrealized interest rate hedging loss, net of taxes of $0.3—
 (0.5) (0.5)
Amounts reclassified from accumulated other comprehensive loss, net of taxes of $1.5 and $0.2 for employee benefit plans and interest rate swap, respectively2.5
 0.2
 2.7
Ending balance, September 30, 2017$(42.5) $1.5
 $(41.0)
The reclassifications of other comprehensive income components out of accumulated other comprehensive loss for the quarters and nine months ended September 30, 2017 and 2016 were as follows (in millions):
  Quarter Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
Reclassification adjustment for interest expense included in net income (loss) $0.1
 $0.2
 $0.4
 $0.2
Amortization of defined benefit pension items reclassified to net periodic pension cost:   —
   —
Prior service credit (0.2) (0.3) (0.7) (0.8)
Net loss 1.0
 1.9
 3.3
 5.6
Settlement loss 1.4
 —
 1.4
 —
Total reclassifications before income tax 2.3
 1.8
 4.4
 5.0
Income taxes related to reclassifications of other comprehensive income (0.9) (0.8) (1.7) (1.9)
Total reclassifications of other comprehensive income components, net of tax $1.4
 $1.0
 $2.7
 $3.1

15


12.INCOME TAXES
The Company's effective tax rate was higher for the nine months ended September 30, 2017 compared to the same period in 2016 primarily due to the 2016 recognition of non-refundable federal tax credits related to the Company’s investment in two photovoltaic facilities, discussed below.
In 2016, the Company invested $15.4 million in Waihonu Equity Holdings, LLC ("Waihonu"), an entity that operates two photovoltaic facilities with a combined capacity of 6.5 megawatts in Mililani, Oahu. The Company accounts for its investment in Waihonu under the equity method. The investment return from the Company's investment in Waihonu is principally composed of non-refundable federal and refundable state tax credits. The federal tax credits are accounted for using the flow through method, which reduces the provision for income taxes in the year that the federal tax credits first become available. During 2016, the Company recognized income tax benefits of approximately $8.7 million related to the non-refundable tax credits, $2.9 million related to the refundable state tax credits in Income Tax Receivable, as well as a corresponding reduction to the carrying amount of its investment in Waihonu, recorded in Investments in Affiliates in the accompanying condensed consolidated balance sheets.
For the quarter and nine months ended September 30, 2017, the Company recorded reductions to the carrying value of its Waihonu and KIUC Renewable Solutions Two ("KRS II") investments of $0.4 million and $2.6 million, respectively, in Reduction in Solar Investments, net in the accompanying condensed consolidated statements of operations. For the quarter and nine months ended September 30, 2016, the Company recorded reductions to the carrying value of its Waihonu and KRS II investments of $0.2 million and $9.7 million, respectively, in Reduction in Solar Investments, net in the accompanying condensed consolidated statements of operations.
The Company recognizes accrued interest on income taxes in income tax expense. As of September 30, 2017, accrued interest was not material. As of September 30, 2017, the Company has not identified any material unrecognized tax positions.
13.NOTES PAYABLE AND LONG-TERM DEBT
Revolving Credit Facility Amendment: On September 15, 2017, the Company entered into a Second Amended and Restated Credit Agreement ("A&B Revolver") with Bank of America N.A., as administrative agent, First Hawaiian Bank, and other lenders party thereto, which amended and restatedcompleted its existing $350 million committed revolving credit facility ("Revolving Credit Facility"). The A&B Revolver increased the total revolving commitments to $450 million, extended the term of the Revolving Credit Facility to September 15, 2022, amended certain covenants (see below), and reduced the interest rates and fees charged under the Revolving Credit Facility. All other terms of the Revolving Credit Facility remain substantially unchanged.
Private Shelf Facility Amendment: On September 15, 2017, the Company entered into an amendment ("Pru Amendment") of its Second Amended and Restated Note Purchase and Private Shelf Agreement, dated as of December 10, 2015, with Prudential Investment Management, Inc. and certain affiliates (individually and collectively with “Prudential”), which amended certain covenants (see below). Additionally, the Pru Amendment included a provision for a contingent incremental interest rate increase of 20 basis points on all outstanding notes unless, following the Company's planned earnings and profits purge, the maximum ratio of debt to total adjusted asset value is equal to or less than 0.35 to 1.00 with respect to any fiscal quarter ending on or before September 30, 2018. The contingent interest rate adjustment, if triggered, will continue until such time that the Company's ratio of debt to total adjusted asset value declines to 0.35 to 1.00 or below. If the contingent interest rate adjustment is not triggered on September 30, 2018, or if triggered, but subsequently the Company's ratio of debt to total adjusted asset value declines to 0.35 to 1.00 or below, the contingent interest rate adjustment shall have no further force or effect.
Changes to Revolver Amendment and Pru Amendment Covenants: The principal amendments under the A&B Revolver and the Pru Amendment are as follows:
An increase in the maximum ratio of debt to total adjusted asset value from 0.50:1.0 to 0.60:1.0.
An increase in the aggregate maximum amount of priority debt at any time from 20 percent to 25 percent.
Allows the Company to consummate the holding company merger to adopt certain governance changes and facilitate the Company's ongoing compliance with REIT requirements.
Sets the minimum shareholders' equity amount to be $850.6 million plus 75 percent of the net proceeds received from equity issuances, less non-recurring costs related to the REIT conversion, among other additions and subtractions.
Allows for the payment of minimum dividends required to maintain REIT status and other dividends in any amount so long as no event of default shall then exist or would exist after giving effect to such dividends.

initial purchase price allocations.
16
22




New Unsecured Term Debt - Rate Locks: On October 10, 2017, the Company entered into a rate lock commitment to draw $50 million under its Second Amended and Restated Note Purchase and Private Shelf Agreement, as amended, with Prudential (“Prudential Shelf Facility”). Under the commitment, the Company will draw $50 million on November 21, 2017 and will use the proceeds for general corporate purposes. The note bears interest at 4.04 percent and matures on November 21, 2026. Interest only is paid semi-annually and the principal balance is due at maturity.
On October 30, 2017, the Company entered into a second rate lock commitment to draw $25 million under its Prudential Shelf Facility. Under the commitment, the Company will draw $25 million on December 8, 2017 and will use the proceeds for general corporate purposes. The note bears interest at 4.16 percent and matures on December 8, 2028. Interest only is paid semi-annually and the principal balance is due at maturity.

At September 30, 2017 and December 31, 2016, notes payable and long-term debt consisted of the following (in millions):
 2017 2016
Revolving credit facilities:   
Wells Fargo GLP Revolver, matures in 2018 (a)—
 —
A&B Revolver, matures in 2022 ($283.0 million available) (b)155.2
 14.9
Term loans:   
6.38%, payable through 2017, secured by Midstate Hayes—
 8.2
1.85%, payable through 2017, unsecured0.5
 2.5
2.00%, payable through 2018, unsecured0.3
 0.8
3.31%, payable through 2018, unsecured1.5
 2.8
5.19%, payable through 2019, unsecured5.1
 6.5
LIBOR plus 2.00%, payable through 2019 (c)

9.4
 9.4
6.90%, payable through 2020, unsecured48.8
 65.0
LIBOR plus 1.00%, payable through 2021, secured by asphalt terminal (d)5.1
 6.1
3.15%, payable through 2021, second mortgage secured by Kailua Town Center III4.9
 —
LIBOR plus 1.50%, payable through 2021, secured by Kailua Town Center III (e)10.9
 11.2
5.53%, payable through 2024, unsecured28.5
 28.5
3.90%, payable through 2024, unsecured65.9
 68.1
4.15%, payable through 2024, secured by Pearl Highlands Center87.5
 88.8
5.55%, payable through 2026, unsecured46.0
 46.0
5.56%, payable through 2026, unsecured25.0
 25.0
4.35%, payable through 2026, unsecured22.0
 22.0
3.88%, payable through 2027, unsecured50.0
 50.0
LIBOR plus 1.35%, payable through 2029, secured by Manoa Marketplace (f)60.0
 60.0
Total debt (contractual)626.6
 515.8
Unamortized debt premium (discount)0.4
 0.5
Unamortized debt issuance costs(1.2) (1.2)
Total debt (carrying value)625.8
 515.1
Less current portion(41.6) (42.4)
Long-term debt$584.2
 $472.7
(a) Loan has a stated interest rate of LIBOR plus 1.50%.
(b) Loan has a stated interest rate of LIBOR plus 1.65%, based on pricing grid.
(c) Loan is secured by a letter of credit.
(d) Loan has a stated interest rate of LIBOR plus 1.00%, but is swapped through maturity to a 5.98% fixed rate.
(e) Loan has a stated interest rate of LIBOR plus 1.50%, but is swapped through maturity to a 5.95% fixed rate.
(f) Loan has a stated interest rate of LIBOR plus 1.35%, but is swapped through maturity to a 3.14% fixed rate.

17


14.CESSATION OF SUGAR OPERATIONS
A summary of the pre-tax costs and remaining costs associated with the Cessation is as follows (in millions):
  Nine Months Ended September 30, 2017 
Cumulative
Amount
Recognized
as of September 30, 2017
 
Remaining
to be
Recognized
 Total
Employee severance benefits and related costs $0.3
 $22.1
 $—
 $22.1
Asset write-offs and accelerated depreciation —
 71.3
 —
 71.3
Property removal, restoration and other exit-related costs 2.1
 9.2
 1.2
 10.4
Total Cessation-related costs $2.4
 $102.6
 $1.2
 $103.8
A rollforward of the Cessation-related liabilities during the nine months ended September 30, 2017 is as follows (in millions):

 Employee Severance Benefits and Related Costs 
Other Exit Costs1
 Total
Balance at December 31, 2016 $13.7
 $5.4
 $19.1
Expense 0.3
 2.1
 2.4
Cash payments (14.0) (2.5) (16.5)
Balance at September 30, 2017 $—
 $5.0
 $5.0
1Includes asset retirement obligations.
The Cessation-related liabilities were included in the accompanying condensed consolidated balance sheets as follows (in millions):
  Classification on Balance Sheet September 30, 2017 December 31, 2016
Employee severance benefits and related costs HC&S cessation-related liabilities $—
 $13.7
Other exit costs HC&S cessation-related liabilities 5.0
 5.4
Total Cessation-related liabilities   $5.0
 $19.1

18


15.INVESTMENTS IN AFFILIATES
The Company's investments in affiliates consist principally of equity investments in limited liability companies in which the Company has the ability to exercise significant influence over the operating and financial policies of these investments. Accordingly, the Company accounts for its investments using the equity method of accounting.
Operating results include the Company's proportionate share of net income from its equity method investments. A summary of combined financial information related to the Company's equity method investments for the quarters and nine months ended September 30, 2017 and 2016 is as follows (in millions):
 Quarter Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Revenues$52.4
 $46.4
 $136.6
 $142.5
Gross Profit$8.5
 $7.5
 $23.2
 $24.5
Income from Continuing Operations*$4.0
 $(0.2) $10.6
 $8.7
Net Income (Loss)*$3.8
 $(0.5) $10.2
 $8.1
* Includes earnings from equity method investments held by the investee.  
16.DERIVATIVE INSTRUMENTS
The Company is exposed to interest rate risk related to its floating rate interest debt. The Company balances its cost of debt and exposure to interest rates primarily through its mix of fixed and floating rate debt. From time to time, the Company may use interest rate swaps to manage its exposure to interest rate risk.
Cash Flow Hedges of Interest Rate Risk
During 2016, the Company entered into an interest rate swap agreement with a notional amount of $60.0 million which was designated as a cash flow hedge. The Company structured the interest rate swap agreement to hedge the variability of future interest payments due to changes in interest rates with regards to the Company's long-term debt. A summary of the key terms related to the Company's outstanding cash flow hedge as of September 30, 2017 is as follows (dollars in millions):
    Notional Amount at Fair Value atClassification on
Effective DateMaturity DateInterest Rate September 30, 2017 September 30, 2017 December 31, 2016Balance Sheet
4/7/20168/1/20293.14% $60.0
 $2.4
 $2.8
Other assets
The Company assessed the effectiveness of the cash flow hedge at inception and will continue to do so on an ongoing basis. The effective portion of the changes in fair value of the cash flow hedge is recorded in accumulated other comprehensive loss and subsequently reclassified into interest expense as interest is incurred on the related-variable rate debt. When ineffectiveness exists, the ineffective portion of changes in fair value of the cash flow hedge is recognized in earnings in the period affected.
Non-designated Hedges
As of September 30, 2017, the Company has two interest rate swaps that have not been designated as cash flow hedges whose key terms are as follows (dollars in millions):
    Notional Amount at Fair Value atClassification on
Effective DateMaturity DateInterest Rate September 30, 2017 September 30, 2017 December 31, 2016Balance Sheet
1/1/20149/1/20215.95% $10.9
 $(1.1) $(1.3)Other non-current liabilities
6/18/20083/1/20215.98% $5.1
 $(0.3) $(0.5)Other non-current liabilities
Total   $16.0
 $(1.4) $(1.8) 

19


The following table represents the pre-tax effect of the derivative instruments in the Company's condensed consolidated statement of comprehensive income (loss) (in millions):
  Quarter Ended September 30, Nine Months Ended September 30,
Derivatives in Designated Cash Flow Hedging Relationships: 2017 2016 2017 2016
Amount of (gain) loss recognized in OCI on derivatives (effective portion) $0.2
 $—
 $0.8
 $2.8
Amounts of (gain) loss reclassified from accumulated OCI into earnings under "interest expense" (ineffective portion and amount excluded from effectiveness testing) $(0.1) $(0.2) $(0.4) $(0.2)
The Company records gains or losses related to interest rate swaps that have not been designated as cash flow hedges in interest expense in its condensed consolidated statements of operations, and the amounts were immaterial during each of the quarters ended September 30, 2017 and 2016.
The Company measures all of its interest rate swaps at fair value. The fair values of the Company's interest rate swaps (Level 2) are based on the estimated amounts that the Company would receive or pay to terminate the contracts at the reporting date and are determined using interest rate pricing models and interest rate related observable inputs.
17.DISCONTINUED OPERATIONS
In December 2016, HC&S completed its final harvest and the Company ceased its sugar operations.
The historical results of operations have been presented as discontinued operations in the condensed consolidated financial statements and prior periods have been recast.
The revenue, operating loss, gain (loss) on asset dispositions, income tax (expense) benefit and after-tax effects of these transactions for the quarters and nine months ended September 30, 2017 and 2016 were as follows (in millions):
 Quarter Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Sugar operations revenue (Land Operations)$0.4
 $35.7
 $22.9
 $73.7
        
Operating loss before income taxes$(1.1) $(17.1) $(2.2) $(51.2)
Gain (loss) on asset dispositions, net(0.2) —
 6.0
 —
Income (loss) from discontinued operations before income taxes(1.3) (17.1) 3.8
 (51.2)
Income tax (expense) benefit0.5
 3.5
 (1.4) 23.1
Income (loss) from discontinued operations$(0.8) $(13.6) $2.4
 $(28.1)
        
Basic earnings (loss) per share$(0.02) $(0.28) $0.04
 $(0.58)
Diluted earnings (loss) per share$(0.02) $(0.27) $0.05
 $(0.57)
There was no depreciation and amortization related to discontinued operations for the quarter and nine months ended September 30, 2017. Depreciation and amortization related to discontinued operations was $12.6 million and $47.3 million for the quarter and nine months ended September 30, 2016, respectively.

20


18.SEGMENT RESULTS
Segment results were as follows (in millions):

Quarter Ended September 30, Nine Months Ended September 30,

2017 2016 2017 2016
Revenue:       
Commercial Real Estate$33.9
 $32.7
 $101.4
 $102.0
Land Operations22.6
 18.1
 45.7
 29.6
Materials & Construction55.0
 52.1
 155.7
 144.7
Total revenue111.5
 102.9
 302.8
 276.3
Operating Profit (Loss):       
Commercial Real Estate1
13.6
 13.5
 41.3
 41.3
Land Operations2
10.4
 7.8
 9.7
 (7.3)
Materials & Construction6.5
 5.6
 18.8
 18.5
Total operating profit30.5
 26.9
 69.8
 52.5
Interest expense(6.1) (6.4) (18.5) (20.1)
Gain on the sale of improved property—
 0.1
 3.0
 8.1
General corporate expenses(8.9) (5.5) (20.5) (16.0)
REIT evaluation/conversion costs3
(4.4) (1.9) (11.4) (3.8)
Income From Continuing Operations Before Income Taxes11.1
 13.2
 22.4
 20.7
Income tax expense(3.7) (1.0) (6.4) (1.6)
Income From Continuing Operations7.4
 12.2
 16.0
 19.1
Income (loss) from discontinued operations, net of income tax(0.8) (13.6) 2.4
 (28.1)
Net Income (Loss)6.6
 (1.4) 18.4
 (9.0)
Income attributable to noncontrolling interest(0.5) (0.5) (1.7) (1.1)
Net Income (Loss) Attributable to A&B Shareholders$6.1
 $(1.9) $16.7
 $(10.1)
1 Commercial Real Estate operating profit includes intersegment operating revenue, primarily from our Materials & Construction segment, and is eliminated in our consolidated results of operations.
2 For the quarter and nine months ended September 30, 2017, Land Operations segment operating profit includes non-cash reductions of $0.4 million and $2.6 million, respectively, related to the Company's solar tax equity investments. For the quarter and nine months ended September 30, 2016, Land Operations segment operating profit included non-cash reductions of $0.2 million and $9.7 million, respectively. The non-cash reductions are recorded in Reductions in solar investment, net on the condensed consolidated statement of operations.
3
Costs related to the Company's in-depth evaluation of and conversion to a REIT.

21


ITEM 2. MANAGEMENT’SMANAGEMENT'S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following analysis of the condensed consolidated financial condition and results of operations of Alexander & Baldwin, Inc. ("A&B" or the "Company") 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 and the Company’sCompany's Annual Report on Form 10-K for the year ended December 31, 20162022, ("2022 Form 10-K") filed with the U.S. Securities and Exchange Commission ("SEC").

FORWARD-LOOKING STATEMENTS
Throughout this quarterly report on Form 10-Q, references to "we," "our," "us" and "our Company" refer to Alexander & Baldwin, Inc. ("A&B" or the "Company"), from time to time, may make or may have made certaintogether with its consolidated subsidiaries.
Forward-Looking Statements
Statements in this Form 10-Q that are not historical facts are forward-looking statements whether orally or in writing, such as forecasts and projectionswithin the meaning 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, SEC filings, such as the Forms 10-K, 10-Q and 8-K, the Annual Report to Shareholders, press releases made by the Company, the Company’s 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. New risk factors emerge from time to time and it is not possible for the Company to predict all such risk factors, nor can it assess the impact of all such risk factors on the Company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Accordingly, forward-looking statements cannot be relied upon as a guarantee of future results1995 and involve a number of risks and uncertainties that could cause actual results to differ materially from those projectedcontemplated 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. 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, the evaluation of alternatives by the Company related to its non-core assets and business, and the risk factors discussed in the statements, including the Company’s 2016 Annual Report onCompany's most recent Form 10-K, Form 10-Q and other filings with the SEC. The Company isinformation in this Form 10-Q should be evaluated in light of these important risk factors. We do not required, and undertakes noundertake any obligation to revise or update the Company's forward-looking statements or any factors that may affect actual results, whether as a result of new information, future events, or circumstances occurring after the date of this report.statements.
INTRODUCTIONIntroduction and Objective
Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is a supplement to the accompanying condensed consolidated financial statements and provides additional material information about A&B’sthe Company's business, recent developments and financial condition,condition; its results of operations at a consolidated and segment level; its liquidity and capital resources including an evaluation of the amounts and certainty of cash flows results offrom operations and from outside sources; and how certain accounting principles, policies and estimates affect A&B’sits financial statements. MD&A is organized as follows:
•Business Overview: This section provides a general description of A&B’sthe Company's business, as well as recent developments that A&Bmanagement believes are important in understanding its results of operations and financial condition or in understanding anticipated future trends.
Critical Accounting Estimates: This section identifies and summarizes those accounting policies that significantly impact A&B’s reported results of operations and financial condition and require significant judgment or estimates on the part of management in their application.
•ConsolidatedResults of Operations: This section provides an analysis of A&B’sthe Company's consolidated results of operations for the quarters and ninethree months ended September 30, 2017 and 2016.
March 31, 2023, as compared to the corresponding period of the preceding fiscal year.
•Analysis of Operating Revenue and Profit by Segment: This section provides an analysis of A&B’sthe Company's results of operations by business segment.
segment for the three months ended March 31, 2023, as compared to the corresponding period of the preceding fiscal year.
Liquidity and Capital Resources:•Use of Non-GAAP Financial Measures: This section provides a discussion of A&B’sthe Company's non-GAAP financial measures included in this report and presents quantitative reconciliations between the non-GAAP financial measures and the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP. It also describes why the Company believes that presentation of the non-GAAP financial measure provides useful information to investors regarding the Company's financial condition and an analysisresults of A&B’s cash flowsoperations and, to the extent material, describes additional purposes for which the nine months ended September 30, 2017Company uses the non-GAAP financial measures.
•Liquidity and 2016, as well asCapital Resources: This section provides a discussion of A&B’sany material changes in the Company's liquidity, financial condition and cash flows, including a discussion of any material changes in the Company's ability to fund its future commitments and ongoing operating activities in the short-term (i.e., over the next twelve months from the most recent fiscal period end) and in the long-term (i.e., beyond the next twelve months) through internal and external sources of capital.capital, as compared to the end of preceding fiscal year ended December 31, 2022. It includes an evaluation of the amounts and certainty of cash flows from operations and from outside sources.
23

Quantitative and Qualitative Disclosures about Market Risk:•Other Matters: This section discusses how A&B monitorsidentifies and manages exposuresummarizes other matters to potential gains and losses associated withbe discussed in Item 2 of this report including any changes in interest rates.
the significant judgments or critical accounting estimates on the part of management in preparing the Company's consolidated financial statements that may materially impact the Company's reported results of operations and financial condition from the end of the preceding fiscal year ended December 31, 2022, the potential impact of recently issued accounting pronouncements and other miscellaneous matters as needed.
Rounding:Amounts in the MD&A are rounded to the nearest tenth of a million. Accordingly, a recalculation of totals and percentages, if based on the reported data, and may be slightly different.

22
Business Overview

Reportable segments

BUSINESS OVERVIEW
A&B, whose history dates back to 1870, is headquartered in Honolulu andThe Company operates through three reportable segments: Commercial Real Estate; Land Operations; and Materials & Construction. The Company's three reportable segments reflect an internal reorganization of the operations and reporting structure that the Company completed in the fourth quarter of 2016 to facilitate operational efficiencies and enhance the execution of the Company’s businesses. Prior to October 1, 2016, the Company operated under four reportabletwo segments: Commercial Real Estate and Land Operations. A description of each of the Company's reporting segments is as follows:
•Commercial Real Estate Development("CRE") - This segment functions as a vertically integrated real estate investment company with core competencies in investments and Sales, Materials & Construction,acquisitions (i.e., identifying opportunities and Agribusiness. acquiring properties); construction and development (i.e., designing and ground-up development of new properties or repositioning and redevelopment of existing properties); and in-house leasing and property management (i.e., executing new and renegotiating renewal lease arrangements, managing its properties' day-to-day operations and maintaining positive tenant relationships). The Company's preferred asset classes include improved properties in retail and industrial spaces and also urban ground leases. Its focus within improved retail properties, in particular, is on grocery-anchored neighborhood shopping centers that meet the daily needs of Hawai‘i communities. Through its core competencies and with its experience and relationships in Hawai‘i, the Company seeks to create special places that enhance the lives of Hawai‘i residents and to provide venues and opportunities that enable its tenants to thrive. Income from this segment is principally generated by owning, operating and leasing real estate assets.
•Land Operations - This segment includes the Company's legacy landholdings, assets, and liabilities that are subject to the Company's simplification and monetization effort. Financial results from this segment are principally derived from real estate development and land sales, joint ventures, and other legacy business activities.
Simplification strategy
As a resultREIT focused on Hawai‘i commercial real estate, the Company has pursued the monetization and disposition of the segment reorganization, the Company’s former Real Estate Developmentlegacy, non-core assets and Saleslandholdings in order to simplify its business and Agribusiness segments have been combined into the new Land Operations reportable segment. Additionally, the following items were realignedallocate its capital resources to commercial real estate.
In December 2022, in connection with the segment changes: (1) agricultural leasesevaluation of strategic alternatives to monetize and dispose of Grace Pacific and the Maui Quarries (collectively, the “Grace Disposal Group”), the Company's Board of Directors authorized Management to complete a sale of the Grace Disposal Group. In conjunction with the Board's authorization, the Company concluded that previously were includedthe Grace Disposal Group met the criteria for classification as held for sale and discontinued operations as of December 31, 2022. The assets and liabilities associated with the Grace Disposal Group are classified as held for sale in the Commercial Real Estatecondensed consolidated balance sheets, and its financial results are classified as discontinued operations in the condensed consolidated statements of operations and cash flows for all periods presented and the Company’s former Materials and Construction ("M&C") segment were reclassified tohas been eliminated. In conjunction with the elimination of the M&C segment, the Company's equity interest in an unconsolidated materials company was incorporated with the Land Operations segment, (2)reportable segment.
The outcome of the sale of the Grace Disposal Group is not certain, industrial leasesas any transaction would be dependent upon various external factors beyond the Company's control, including, among others, market conditions, industry trends, interest of third parties, and the availability of financing to potential buyer(s) on reasonable terms. Further, there can be no assurance that previously were includedany potential transaction will result in the former Agribusiness segment were reclassifiedCompany being able to recover the Commercial Real Estate segment, (3) salescarrying value of commercial properties that previously were included in the former Real Estate DevelopmentGrace Disposal Group.



24

Consolidated Results of Operations
The following analysis of the consolidated financial condition and Sales segment were reclassified to the Commercial Real Estate segment, and (4) the Company's solar energy investments that previously were presented as Corporate investments were reclassified to Land Operations. The financial information for all prior periods has been recast to correspond to these segment changes.
On July 10, 2017, the Company’s boardresults of directors unanimously approved a plan for the Company to be subject to tax as a real estate investment trust (a “REIT”) for U.S. federal income tax purposes commencing with the Company’s taxable year ending December 31, 2017 (the “REIT Election”).
Although the Company began operating in compliance with the requirements for qualification and taxation as a REIT (the “REIT requirements”) for the taxable year ending December 31, 2017, the Company intends to complete a merger that will facilitate the Company’s ongoing compliance with the REIT requirements by ensuring that certain standard REIT ownership limitations and transfer restrictions apply to the Company’s capital stock.
Pursuant to the merger agreement entered into on July 10, 2017 among the Company, Alexander & Baldwin REIT Holdings, Inc., a Hawaii corporation and a direct, wholly owned subsidiaryoperations of the Company (“A&B REIT Holdings”), and A&B REIT Merger Corporation, a Hawaii corporation and a direct, wholly owned subsidiary of A&B REIT Holdings (“Merger Sub”), Merger Sub willits subsidiaries should be merged with and into the Company,read in conjunction with the Company continuing as the surviving corporation. As a result of the merger, A&B REIT Holdings will replace the Company as the Hawaii-based, publicly held corporation through which the Company’s operations are now conducted,condensed consolidated financial statements and promptly following the merger A&B REIT Holdings will be renamed “Alexander & Baldwin, Inc.”related notes thereto.
During the thirdFinancial results - First quarter of 2017, A&B REIT Holdings filed a registration statement on Form S-42023 compared with the Securities and Exchange Commission (“SEC”), which included a preliminary proxy statement/prospectus that provides information regarding the REIT Election, the proposed merger and the special meeting at which the Company’s shareholders were given the opportunity to vote on the holding company merger proposal. The special meeting was held on October 27, 2017, during which A&B shareholders approved the holding company merger proposal pursuant to the registration statement.2022
Commercial Real Estate
(amounts in millions, except percentage data and per share data; unaudited)Three Months Ended March 31,2023 vs 2022
20232022$%
Operating revenue$50.4 $59.2 $(8.8)(14.9)%
Cost of operations(28.6)(33.2)4.6 (13.9)%
Selling, general and administrative(8.7)(8.8)0.1 (1.1)%
Gain (loss) on disposal of non-core assets, net1.1 — 1.1 NM
Operating income (loss)14.2 17.2 (3.0)(17.4)%
Income (loss) related to joint ventures0.4 1.4 (1.0)(71.4)%
Pension termination— (3.2)3.2 (100.0)%
Interest and other income (expense), net(0.1)(0.1)— — %
Interest expense(5.0)(5.7)0.7 (12.3)%
Income (loss) from continuing operations9.5 9.6 (0.1)(1.0)%
Discontinued operations (net of income taxes)(4.2)1.4 (5.6)(400.0)%
Net income (loss)5.3 11.0 (5.7)(51.8)%
(Income) loss attributable to discontinued noncontrolling interest— (0.5)0.5 (100.0)%
Net income (loss) attributable to A&B$5.3 $10.5 $(5.2)(49.5)%
Basic Earnings (Loss) Per Share of Common Stock:
Basic earnings (loss) per share - continuing operations$0.13 $0.13 $— — %
Basic earnings (loss) per share - discontinued operations(0.06)0.01 (0.07)(700.0)%
$0.07 $0.14 $(0.07)(50.0)%
Diluted Earnings (Loss) Per Share of Common Stock:
Diluted earnings (loss) per share - continuing operations$0.13 $0.13 $— — %
Diluted earnings (loss) per share - discontinued operations(0.06)0.01 (0.07)(700.0)%
$0.07 $0.14 $(0.07)(50.0)%
Continuing operations available to A&B common shareholders$9.5 $9.6 $(0.1)(1.0)%
Discontinued operations available to A&B common shareholders(4.2)0.9 (5.1)(566.7)%
Net income (loss) available to A&B common shareholders$5.3 $10.5 $(5.2)(49.5)%
Funds From Operations ("FFO")1
$18.6 $18.8 $(0.2)(1.1)%
Core FFO1
$21.2 $20.8 $0.4 1.9 %
FFO per diluted share$0.26 $0.26 $— — %
Core FFO per diluted share$0.29 $0.29 $— — %
Weighted average diluted shares outstanding (FFO/Core FFO)2
72.6 72.8 
1 For definitions of capitalized terms and a discussion of management's use of a non-GAAP financial measure and the required reconciliation of non-GAAP measures to GAAP measures, refer to page 30.
2 May differ from figure used in the consolidated statements of operations based on differing dilutive effects for net income (loss) versus FFO/Core FFO.
The Commercial Real Estate segment owns, operates and manages retail, industrial, and office propertiescauses of material changes in Hawaii and on the mainland. The Commercial Real Estate segment also leases urban land in Hawaii to third-party lessees.
Land Operations
The Land Operations segment actively manages the Company's land and real estate-related assets and deploys these assets to their highest and best use. Primary activitiescondensed consolidated statements of the Land Operations segment include planning, zoning, financing, constructing, purchasing, managing, selling, and investing in real property; renewable energy; and diversified agribusiness activities. As a result of the previously mentioned segment realignment, the Company has reclassified the HC&S sugar operations, which completed its final harvest and ceased operations in December 2016, to the Land Operations segment and also presented the operations as discontinued operations for all periods.
Materials & Construction
The Materials & Construction segment performs asphalt paving as prime contractor and subcontractor; imports and sells liquid asphalt; mines, processes and sells basalt aggregate; produces and sells asphaltic and ready-mix concrete; provides and sells various construction- and traffic-control-related products and manufactures and sells precast concrete products.

23


CONSOLIDATED RESULTS OF OPERATIONS
Consolidated – Third quarter of 2017 compared with 2016
 Quarter Ended September 30,
(dollars in millions, except per-share amounts)2017 2016 $ Change Change
Operating revenue$111.5
 $102.9
 8.6
 8.4%
Operating costs and expenses99.7
 83.8
 15.9
 19.0%
Operating income11.8
 19.1
 (7.3) (38.2)%
Other expense, net(0.7) (5.9) 5.2
 (88.1)%
Income tax expense(3.7) (1.0) (2.7) 270.0%
Income from continuing operations7.4
 12.2
 (4.8) (39.3)%
Discontinued operations (net of income taxes)(0.8) (13.6) 12.8
 (94.1)%
Net income (loss)6.6
 (1.4) 8.0
 NM
Income attributable to noncontrolling interest(0.5) (0.5) —
 —%
Net income (loss) attributable to A&B$6.1
 $(1.9) 8.0
 NM
     
  
Basic earnings per share - continuing operations$0.15
 $0.25
 (0.10) (40.0)%
Basic earnings (loss) per share - discontinued operations(0.02) (0.28) 0.26
 (92.9)%
Net income (loss) available to A&B shareholders$0.13
 $(0.03) 0.16
 NM
        
Diluted earnings per share - continuing operations$0.15
 $0.24
 (0.09) (37.5)%
Diluted earnings (loss) per share - discontinued operations(0.02) (0.27) 0.25
 (92.6)%
Net income (loss) available to A&B shareholders$0.13
 $(0.03) 0.16
 NM
The Company's consolidated operating revenue increased $8.6 million, or 8.4%, to $111.5 million for the third quarter of 2017three months ended March 31, 2023, as compared to the third quarter of 2016, reflecting an increase in revenue for Land Operations of $4.5 million, and an increase in Materials & Construction revenue of $2.9 million.
Consolidated operating costs and expenses for the third quarter of 2017 increased $15.9 million, or 19.0%, to $99.7 million compared to the third quarter of 2016. The reasons for the operating cost and expense changesthree months ended March 31, 2022, are described below by business segment,or in the Analysis of Operating Revenue and Profit by Segment. Segment sections below.
25

Operating costsrevenue during the first quarter ended March 31, 2023, decreased 14.9%, or $8.8 million, to $50.4 million, due primarily to lower revenues from the Land Operations operating segment, including revenue related to development and expenses forunimproved property sales and legacy business activities that were sold in the thirdsecond quarter of 2017 also included $4.42022.
Cost of operations during the first quarter ended March 31, 2023, decreased 13.9%, or $4.6 million, related to $28.6 million, due primarily to lower costs incurred by the Company's evaluationLand Operations operating segment from lower development and conversion to a REIT.
The Company's other expenses, net were $0.7 millionunimproved property sales and disposal of legacy business activities in the thirdsecond quarter of 2017 compared to $5.92022.
Gain (loss) on disposal of non-core assets, net during the first quarter ended March 31, 2023, of $1.1 million in the third quarter of 2016. The change in other income (expense) was primarily due to higher incomethe sale of the Company's ownership interest in a legacy trucking and storage business on Maui.
Income (loss) related to joint ventures decreased $1.0 million, or 71.4%, from the first quarter ended March 31, 2022 to March 31, 2023, due primarily to lower earnings from the Company's equity method investments, partially offset byunconsolidated investment in a higher non-cash reduction to solar investments, net inmaterials company.
Pension termination loss of $3.2 million during the third quarter of 2017 as compared to the third quarter of 2016.
The Company recorded an income tax expense of $3.7 million on pre-tax income of $11.1 million for the third quarter of 2017, and an income tax expense of $1.0 million on pre-tax income of $13.2 million for the third quarter of 2016. The Company's effective tax rate was higher for thefirst quarter ended September 30, 2017, compared to the same period in 2016, primarily due to the 2016 recognition of non-refundable federal tax creditsMarch 31, 2022, resulted from a partial settlement charge related to certain benefit payments made from the Company’s investmentmaster trust as a result of the Defined Benefit Plans termination process in two photovoltaic facilities.2022.

Loss from discontinued operations (net of income taxes) during the first quarter ended March 31, 2023, increased 4x, or $5.6 million, to $4.2 million due primarily to low paving volumes as a result of project delays and inclement weather during the period.

24
26



Consolidated – First nine months of 2017 compared with 2016
 Nine Months Ended September 30,
(dollars in millions, except per-share amounts)2017 2016 $ Change Change
Operating revenue$302.8
 $276.3
 26.5
 9.6%
Operating costs and expenses273.5
 239.0
 34.5
 14.4%
    Operating income29.3
 37.3
 (8.0) (21.4)%
Other expense, net(6.9) (16.6) 9.7
 (58.4)%
Income tax expense(6.4) (1.6) (4.8) 300.0%
     Income from continuing operations16.0
 19.1
 (3.1) (16.2)%
Discontinued operations (net of income taxes)2.4
 (28.1) 30.5
 NM
     Net income (loss)18.4
 (9.0) 27.4
 NM
Income attributable to noncontrolling interest(1.7) (1.1) (0.6) 54.5%
     Net income (loss) attributable to A&B$16.7
 $(10.1) 26.8
 NM
        
Basic earnings per share - continuing operations$0.32
 $0.39
 (0.07) (17.9)%
Basic earnings (loss) per share - discontinued operations0.04
 (0.58) 0.62
 NM
     Net income (loss) available to A&B shareholders$0.36
 $(0.19) 0.55
 NM
        
Diluted earnings per share - continuing operations$0.31
 $0.38
 (0.07) (18.4)%
Diluted earnings (loss) per share - discontinued operations0.05
 (0.57) 0.62
 NM
     Net income (loss) available to A&B shareholders$0.36
 $(0.19) 0.55
 NM

The Company's consolidated operating revenue increased $26.5 million, or 9.6%, to $302.8 million for the first nine months of 2017 as compared to the first nine months of 2016, reflecting an increase in revenue for Land Operations of $16.1 million, and an increase in revenue for Materials & Construction of $11.0 million.
Consolidated operating costs and expenses for the first nine months of 2017 increased $34.5 million, or 14.4%, to $273.5 million compared to the first nine months of 2016. The reasons for the operating cost and expense changes are described below, by business segment, in the Analysis of Operating Revenue and Profit by Segment.Segment
The following analysis should be read in conjunction with the condensed consolidated financial statements and related notes thereto.
Commercial Real Estate
Financial results - First quarter of 2023 compared with 2022
Results of operations for the first quarter ended March 31, 2023 and 2022, were as follows:
(amounts in millions, except percentage data and acres; unaudited)Three Months Ended March 31,2023 vs 2022
20232022$
%1
Commercial Real Estate operating revenue$47.9 $46.3 $1.6 3.5 %
Commercial Real Estate operating costs and expenses(25.0)(24.0)(1.0)4.2 %
Selling, general and administrative(2.0)(1.6)(0.4)25.0 %
Commercial Real Estate operating profit (loss)$20.9 $20.7 $0.2 1.0 %
Net Operating Income ("NOI")2
$30.4 $29.8 $0.6 2.2 %
Same-Store Net Operating Income ("Same-Store NOI")2
$30.4 $29.7 $0.7 2.2 %
Gross leasable area ("GLA") in square feet ("SF") for improved properties at end of period3.9 3.9 — — %
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.
2 For a discussion of management's use of non-GAAP financial measures and the required reconciliation of non-GAAP measures to GAAP measures, refer to page 30.
Commercial Real Estate operating revenue increased 3.5% or $1.6 million, to $47.9 million for the first quarter ended March 31, 2023, as compared to the first quarter ended March 31, 2022. Operating profit increased 1.0%, or $0.2 million, to $20.9 million for the first quarter ended March 31, 2023, as compared to the first quarter ended March 31, 2022. The increase in operating revenue and operating profit from the prior year was due primarily to higher base rents. Operating costs and expenses for the first nine months of 2017 also included $11.4quarter ended March 31, 2023, increased 4.2%, or $1.0 million, related to the Company's evaluation of a REIT conversion.
The Company's other expenses, net, were $6.9 million in the first nine months of 2017 compared to $16.6 million in the first nine months of 2016. The change in other income (expense) was primarily due to a lower reduction in solar investments, net, partially offset by lower gains on sales of improved property.
The Company recorded an income tax expense of $6.4 million on pre-tax income of $22.4$25.0 million for the first nine months of 2017, and an income tax expense of $1.6 million on pre-tax income of $20.7 million for the first nine months of 2016. The Company's effective tax rate was higher for the first nine monthsquarter ended September 30, 2017March 31, 2023, as compared to the same period in 2016first quarter ended March 31, 2022, due primarily to the 2016 recognition of non-refundable federal tax credits related to the Company’s investment in two photovoltaic facilities.higher property operating costs.


25


ANALYSIS OF OPERATING REVENUE AND PROFIT BY SEGMENT
Commercial Real Estate – Thirdportfolio additions and dispositions
There were no acquisitions or dispositions of CRE improved properties or ground lease interests in land during the three months ended March 31, 2023.
Leasing activity
During the first quarter ended March 31, 2023, the Company signed 14 new leases and 35 renewal leases for its improved properties across its retail, industrial, and office asset classes, covering 139,300 square feet of 2017 comparedGLA. The 14 new leases consist of 22,900 square feet with 2016an average annual base rent of $36.41 per-square-foot. Of the 14 new leases, six leases with a total GLA of 10,300 square feet were considered comparable (i.e., renewals, for the same units, or new leases executed for units that have been vacated in the previous 12 months for comparable space and comparable lease terms) and, for these six leases, resulted in an 1.7% average base rent increase over comparable expiring leases. The 35 renewal leases consist of 116,400 square feet with an average annual base rent of $29.53 per square foot. Of the 35 renewal leases, 26 leases with a total GLA of 65,900 square feet were considered comparable and resulted in an 8.4% average base rent increase over comparable expiring leases.
Leasing activity summarized by asset class for the three months ended March 31, 2023, were as follows:
27

 Quarter Ended September 30,
(dollars in millions)2017 2016 Change
Commercial Real Estate segment operating revenue$33.9
 $32.7
 3.7%
Commercial Real Estate segment operating costs and expenses(19.2) (19.3) (0.5)%
Selling, general and administrative(1.9) (0.4) 375.0%
Intersegment operating revenue2
0.8
 0.6
 33.3%
Other income (expense), net—
 (0.1) (100.0)%
Commercial Real Estate operating profit$13.6
 $13.5
 0.7%
Operating profit margin40.1% 41.3%
 
Cash Net Operating Income ("Cash NOI")1
    
   Hawaii$18.5
 $17.6
 5.2%
   Mainland2.7
 2.6
 2.4%
Total$21.2
 $20.2
 4.8%
Same-Store Cash Net Operating Income ("Same-Store Cash NOI")1
     
   Hawaii$16.7
 $16.1
 3.5%
   Mainland2.7
 2.5
 7.2%
Total$19.4
 $18.7
 4.0%
Gross Leasable Area ("GLA") (million sq. ft.) - Improved, end of period     
Hawaii3.0
 2.9
  
Mainland1.8
 1.8
  
Total improved4.8
 4.7
  
Hawaii ground leases (acres)117
 115
  
Three Months Ended March 31, 2023
LeasesGLA (SF)ABR/SF
Rent Spread1
Retail3081,987$39.626.0%
Industrial1752,463$16.0510.2%
Office24,852$37.143.0%
1 Rent spread is calculated for comparable leases, a subset of the total population of leases for the period presented (described above).
1Refer
Occupancy
The Company reports three types of occupancy: "Leased Occupancy," "Physical Occupancy," and "Economic Occupancy."
The Leased Occupancy percentage calculates the square footage leased (i.e., the space has been committed to page by a lessee under a signed lease agreement) as a percentage of total available improved property square footage as of the end of the period reported.
The Physical Occupancy percentage calculates the square footage leased and commenced (i.e., measured when the lessee has physical access to the space) as a percentage of total available improved property space at the end of the period reported.
The Economic Occupancy percentage calculates the square footage under leases for which the lessee is contractually obligated to make lease-related payments (i.e., subsequent to the rent commencement date) to total available improved property square footage as of the end of the period reported.
The Company's improved portfolio occupancy metrics as of March 31, 2023 and 2022, were as follows:
As ofAs ofBasis Point Change
March 31, 2023March 31, 2022
Leased Occupancy93.9%94.5%(60)
Physical Occupancy93.3%94.1%(80)
Economic Occupancy92.4%92.0%40

28

For further context, the Company's Leased Occupancy and Economic Occupancy metrics for its improved portfolio summarized by asset class – and the corresponding occupancy metrics for a discussioncategory of management's use of a non-GAAP financial measure and the required reconciliation of non-GAAP measures to GAAP measures.
2Intersegment operating revenue for Commercial Real Estate is primarily from our Materials & Construction segment, and is eliminated in our consolidated results of operations.
Commercial Real Estate revenue for the third quarter of 2017 and 2016 was $33.9 million and $32.7 million, respectively. The increase was primarily attributable to the increases in Hawaii same-store rents. "Same-store" refers to properties that were owned and operated for the entirety of the prior calendar year. The same-store pool excludes properties under development or redevelopmentyear and also excludes properties acquired or sold during the comparable reporting periods, including stabilized properties. New developments and redevelopments are moved into the same-store pool upon one full calendar year of stabilized operation, which is typically upon attainment of market occupancy.
Operating profit and cash net operating incomecurrent period, to date ("Cash NOI") for the third quarter of 2017 increased by 0.7% and 4.8%, respectively, compared to the third quarter of 2016. The period-over-period increase in operating profit was primarily due to performance of the Hawaii properties, including higher Hawaii same-store rents, offset by an increase in general and administrative expenses. The higher general and administrative expenses reflect the Company’s strategic shift to focus on the growth of the commercial real estate portfolio through acquisition, development and redevelopment, which resulted in the alignment of certain personnel and related costs to the Commercial Real Estate segment,Same-Store" as well as costs incurred related to transitioning existing third-party property management and leasing functions internally. The period-over-period increase in Cash NOI was primarily due to performance of the Hawaii portfolio, including higher Hawaii same-store rents. Same-Store Cash NOI for the third quarter of 2017 increased by 4.0% compared to the third quarter of 2016, primarily due to an increase in same-store rents.
Tenant improvement costs were $2.5 million and $0.6 million for the quarter ended September 30, 2017 and 2016, respectively. Leasing commissions were $1.0 million and $0.6 million for the quarter ended September 30, 2017 and 2016, respectively.

26


The Company's commercial portfolio's occupancy percentage summarized by geographic location and property typemore fully described below) – as of September 30, 2017 wasMarch 31, 2023 and 2022, were as follows:
Leased Occupancy
As ofAs ofBasis Point Change
March 31, 2023March 31, 2022
Retail93.6%93.1%50
Industrial95.2%98.0%(280)
Office87.1%87.7%(60)
Total Leased Occupancy93.9%94.5%(60)
Economic Occupancy
As ofAs ofBasis Point Change
March 31, 2023March 31, 2022
Retail91.7%89.7%200
Industrial94.6%97.3%(270)
Office86.5%85.9%60
Total Economic Occupancy92.4%92.0%40
Same-Store Leased Occupancy
As ofAs ofBasis Point Change
March 31, 2023March 31, 2022
Retail93.6%93.1%50
Industrial95.1%98.0%(290)
Office87.1%87.7%(60)
Total Same-Store Leased Occupancy93.9%94.5%(60)
Same-Store Economic Occupancy
As ofAs ofBasis Point Change
March 31, 2023March 31, 2022
Retail91.7%89.7%200
Industrial94.5%97.3%(280)
Office86.5%85.9%60
Total Same-Store Economic Occupancy92.4%92.0%40
Land Operations
Percent occupancyHawaiiMainlandTotal
Retail92.5%96.0%92.9%
Industrial94.2%99.2%97.0%
Office91.9%87.5%88.8%
Total93.0%95.9%94.1%
Trends, events and uncertainties
The Company's commercial portfolio's quarter end same-store occupancy as of September 30, 2017 was 94.1% as compared to 91.3% as of September 30, 2016.
The table below identifies sales and acquisitions between December 31, 2016 and September 30, 2017:
Dispositions Acquisitions
Date Property Leasable sq. ft. Date Property Leasable sq. ft.
1/17 The Maui Clinic Building 16,600
 6/17 Honokohau Industrial 73,200
  Total dispositions 16,600
   Total improved acquisitions 73,200
The table below identifies sales and acquisitions between December 31, 2015 and December 31, 2016:
Dispositions Acquisitions
Date Property Leasable sq. ft. Date Property Leasable sq. ft.
6/16 Ninigret Office Park 185,500
 12/16 2927 East Manoa Road (Ground Lease) N/A
6/16 Gateway Oaks 59,700
 1/16 Manoa Marketplace 139,300
6/16 Prospect Park 163,300
      
  Total dispositions 408,500
   Total improved acquisitions 139,300

Commercial Real Estate – First nine months of 2017 compared with 2016
 Nine Months Ended September 30,
(dollars in millions)2017 2016 Change
Commercial Real Estate segment operating revenue$101.4
 $102.0
 (0.6)%
Commercial Real Estate segment operating costs and expenses(56.9) (60.1) (5.3)%
Selling, general and administrative(5.1) (2.3) 121.7%
Intersegment operating revenue2
2.1
 1.9
 10.5%
Other income (expense), net(0.2) (0.2) —%
Commercial Real Estate operating profit$41.3
 $41.3
 —%
Operating profit margin40.7% 40.5%  
Net Operating Income ("Cash NOI")1
     
   Hawaii$55.5
 $52.5
 5.8%
   Mainland8.3
 10.5
 (21.6)%
Total$63.8
 $63.0
 1.2%
Same-Store Net Operating Income ("Same-Store Cash NOI")1
     
   Hawaii$50.7
 $48.6
 4.3%
   Mainland8.2
 7.9
 4.5%
Total$58.9
 $56.5
 4.3%
1Refer to page 28 for a discussion of management's use of a non-GAAP financial measure and the required reconciliation of non-GAAP measures to GAAP measures.
2Intersegment operating revenue for Commercial Real Estate is primarily from our Materials & Construction segment, and is eliminated in our consolidated results of operations.

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Commercial Real Estate revenue for the first nine months of 2017 was 0.6% lower than the first nine months of 2016, primarily due to the timing of sales and acquisitions during 2016, partially offset by an increase in Hawaii same-store rents.
Operating profit for the first nine months of 2017 was consistent with the same period last year, while Cash NOI increased by 1.2%. Operating profit did not change period-over-period, which reflected an increase in operating profit related to same-store properties as described above, offset by an increase in general and administrative expenses. The general and administrative expenses reflect the Company’s strategic shift to focus on the growth of the commercial real estate portfolio through acquisition, development and redevelopment, which resulted in the alignment of certain personnel and related costs to the Commercial Real Estate segment, as well as costs incurred related to transitioning existing third-party property management and leasing functions internally. The period-over-period increase in Cash NOI was primarily due to increases in same-store rents, partially offset by the impact of acquisitions and dispositions between the reported periods. Same-Store Cash NOI for the first nine months of 2017 increased by 4.3% compared to the first nine months of 2016.  The period over period increase in Same-Store Cash NOI was primarily due to an increase in same-store rents throughout the Hawaii and Mainland portfolios.
Tenant improvement costs were $4.0 million and $3.0 million for the nine months ended September 30, 2017 and 2016, respectively. Leasing commissions were $4.6 million and $2.1 million for the nine months ended September 30, 2017 and 2016, respectively.
Use of Non-GAAP Financial Measures
Cash net operating income ("Cash NOI") is presented for the Commercial Real Estate segment, and is calculated by adjusting segment operating profit for depreciation and amortization, straight-line lease adjustments, and general, administration and other expenses. Other real estate companies may use different methodologies for calculating Cash NOI, and accordingly, the Company's presentation of Cash NOI may not be comparable to other real estate companies.

Cash NOI is a non-GAAP measure used by the Company in evaluating the CRE segment’s operating performance as it is an indicator of the return on property investment, and provides a method of comparing performance of operations, on an unlevered basis, over time. Cash NOI should be not be viewed as a substitute for, or superior to, financial measures calculated in accordance with GAAP. In connection with the Company's decision to convert to a REIT in 2017, the Company has revised its definition of NOI to adjust Operating Profit for termination income, lease incentive amortization, and favorable/unfavorable lease amortization. We refer to amounts reported in this MD&A under our new definition as "Cash NOI" to distinguish from the amounts previously reported under our prior definition. While there is no standard industry definition of NOI, the Company believes its revised definition is more closely aligned with current practices of other REITs.

A reconciliation of Commercial Real Estate segment operating profit to Commercial Real Estate segment Cash NOI is as follows:
  Quarter Ended September 30, Nine Months Ended September 30,
(dollars in millions) 2017 2016 Change 2017 2016 Change
Commercial Real Estate Operating Profit $13.6
 $13.5
 
 $41.3
 $41.3
 
Adjustments:     
      
Depreciation and amortization 6.6
 7.0
 
 19.7
 21.7
 
Straight-line lease adjustments (0.3) (0.4) 
 (1.3) (1.6) 
Lease incentive amortization —
 —
 
 —
 0.1
 
Favorable/(unfavorable) lease amortization (0.6) (0.9) 
 (2.2) (2.6) 
Termination income —
 —
 
 —
 (0.1) 
Other (income)/expense, net —
 0.1
 
 0.2
 0.2
 
Selling, general, administrative and other expenses 1.9
 0.9
 
 6.1
 4.0
 
Commercial Real Estate Cash NOI 21.2
 20.2
 4.8% 63.8
 63.0
 1.2%
Acquisitions/disposition and other adjustments (1.8) (1.5) 
 (4.9) (6.5) 
Commercial Real Estate Same-Store Cash NOI $19.4
 $18.7
 4.0% $58.9
 $56.5
 4.3%



28


Land Operations – Third quarter of 2017 compared with 2016
Effect of Property Sales Mix on Operating Results: Direct year-over-year comparison of the Land Operations segment results may not provide a consistent, measurable indicator of future performance because results from period to period are significantly affected by the mix and timing of property sales. Operating results, by virtue of each project’s asset class geography and timing are inherently variable. Earnings from joint venture investments are not included in segment revenue, but are included in operating profit. The mix of real estate sales in any year or quartergiven period can be diverse and canmay include developed residential real estate, developable subdivision lots, undeveloped land andor property sold under threat of condemnation. The saleFurther, the timing of undeveloped land and vacant parcelsproperty or parcel sales can significantly affect operating results in Hawaii generally provides higher margins than does the sale of developed property, due to the low historical cost basis of the Company’s Hawaii land. Consequently, Land Operations revenue trends, cash flows from the sales of real estate, and the amount of real estate held for sale on the Company's balance sheet do not necessarily indicate future profitability trends for this segment. Additionally, the operatinga given period.
Operating profit reported in each quarterperiod for the Land Operations segment does not necessarily follow a percentage of sales trend because the cost basis of property sold can differ significantly between transactions. For example, the sale of undeveloped land and vacant parcels in Hawai‘i may result in higher margins than the sale of developed property due to the low historical cost basis of the Company's legacy landholdings.
 Quarter Ended September 30,
(dollars in millions)2017 2016
Development sales revenue$1.5
 $3.3
Unimproved/other property sales revenue15.4
 9.5
Agribusiness revenue5.6
 5.2
Other operating revenues0.1
 0.1
Total Land Operations segment revenue$22.6
 $18.1
Operating expenses(16.4) (11.2)
Earnings from joint ventures2.9
 0.6
Reductions in solar investments, net(0.4) (0.2)
Interest and other income1.7
 0.5
Total Land Operations operating profit$10.4
 $7.8
Third quarter 2017: Land Operations operating revenue and operating profit were $22.6 million and $10.4 million, respectively. Operating results forAs a result, direct year-over-year comparison of the Land Operations segment results may not provide a consistent, measurable indicator of future performance. Further, Land Operations revenue trends, cash flows from the sales of real estate, and the amounts of real estate developments for sale on the Company's condensed consolidated balance sheet do not necessarily indicate future profitability trends for this segment.
29

Financial results - First quarter of 2023 compared with 2022
Results of operations for the first quarter ended March 31, 2023 and 2022, were as follows:
Three Months Ended March 31,
(amounts in millions; unaudited)20232022
Development sales revenue$— $6.3 
Unimproved/other property sales revenue0.9 1.8 
Other operating revenue1
1.6 4.8 
Total Land Operations operating revenue2.5 12.9 
Land Operations operating costs and expenses(3.6)(9.2)
Selling, general and administrative(0.5)(1.2)
Gain (loss) on disposal of assets, net1.1 — 
Earnings (loss) from joint ventures0.4 1.4 
Pension termination— (2.3)
Interest and other income (expense), net— 0.1 
Total Land Operations operating profit (loss)$(0.1)$1.7 
1 Other operating revenue includes revenue related to trucking and licensing and leasing of non-core legacy agricultural lands during the periods ended 2023 and 2022. Other revenue also includes renewable energy during the period ended 2022.
First quarter of 2023: Land Operations revenue of $2.5 million during the first quarter ended March 31, 2023, included salesrevenue related to a 293-acre parcelthe Company's legacy business activities in Haiku, Maui, a 273-acrethe Land Operations segment (primarily trucking services and licensing and leasing of non-core legacy lands), as well as the sale of an unimproved land parcel on the island of Kauai, and a 1.5-acre parcel at Maui Business Park II, as well as earningsKauai.
Land Operations operating loss of $0.1 million during the first quarter ended March 31, 2023, was composed of the margins resulting from the Company's real estate development-related joint venturessales and investments. The segment results also included segment operating expenseslegacy business activities noted above, carrying costs of $16.4 millionlandholdings, and non-cash reductions in the carrying valuegain on disposal of the Company's tax equity solar investmentsownership interest in a legacy trucking and storage business on Maui.
First quarter of $0.4 million.
Third quarter 2016: Land Operations operating2022: Operating revenue and operating profit were $18.1of $12.9 million and $7.8 million, respectively. Operating results included salesprimarily consisted of a 267-acre parcel in Haiku, Maui, a Kahala lot, as well as earnings fromrevenue related to the Company's real estate development-related joint ventures and investments, partially offset by operating expenses of the segment and a $0.2 million non-cash reductionlegacy business activities in the carrying value of the Company’s tax equity solar investments.

29


Land Operations – First nine months of 2017 compared with 2016
 Nine Months Ended September 30,
(dollars in millions)2017 2016
Development sales revenue$6.1
 $3.3
Unimproved/other property sales revenue21.4
 10.1
Agribusiness revenue18.0
 16.0
Other operating revenues0.2
 0.2
Total Land Operations segment revenue$45.7
 $29.6
Operating expenses(40.7) (29.3)
Earnings from joint ventures3.6
 1.0
Reductions in solar investments, net(2.6) (9.7)
Interest and other income3.7
 1.1
Total Land Operations operating profit (loss)$9.7
 $(7.3)
First nine months of 2017: Land Operations operating revenue and operating profit were $45.7 million and $9.7 million, respectively. Operating results for the Land Operations segment included(primarily licensing and leasing of non-core legacy land, trucking services, and renewable energy), as well as sales related to a 293-acre parcel in Haiku, Maui, a 273-acre parcel on the island of Kauai, a 3-acre parcel in Wailea, Maui, a 6-acre parcel in Haliimaile, Maui, two lotsfive development parcels at Maui Business Park and a 0.8-acre vacant, urban parcelunimproved land parcels on Maui, as well as earnings from the Company's real estate development-related joint venturesislands of Kauai and investments. The segment results also included a $2.6 million non-cash reduction in the carrying value of the Company's Solar Investment.Maui.
First nine months of 2016: Land Operations operating revenueprofit of $1.7 million during the first quarter ended March 31, 2022, was composed of the margins resulting from the real estate sales and operating loss were $29.6 millionlegacy business activities noted above and $7.3 million, respectively. Operating results included a $9.7 million non-cash reductionequity earnings in the carrying value of the Company’s Solar Investments, segment operating expenses,Company's joint venture projects, partially offset by revenuea settlement charge of $2.3 million related to certain benefit payments made by the master trust in connection with the termination of the Defined Benefit Plans. Earnings from joint ventures of $1.4 million during the first quarter ended March 31, 2022, was primarily driven by the Company's unconsolidated investment in a materials company.
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.

FFO is presented by the Company as a widely used non-GAAP measure of operating performance for real estate companies. FFO is defined by the National Association of Real Estate Investment Trusts ("Nareit") December 2018 Financial Standards White Paper as follows: net income (loss) available to A&B common shareholders (calculated in accordance with GAAP), excluding (1) depreciation and amortization related to real estate, (2) gains and losses from the sale of certain real estate assets, (3) gains and losses from change in control, (4) impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity, and (5) income (loss) from discontinued operations that are incidental to CRE.
30

The Company believes that, subject to the following limitations, FFO provides a 267-acre parcelsupplemental measure to net income (calculated in Haiku, Maui,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 Kahala lot, nine Ka Milo units,measure of the Company’s liquidity. The Company presents different forms of FFO:
•"Core FFO" represents a non-GAAP measure relevant to the operating performance of the Company's commercial real estate business (i.e., its core business). Core FFO is calculated by adjusting CRE operating profit to exclude items noted above (i.e., depreciation and amortization related to real estate included in CRE operating profit) and to make further adjustments to include expenses not included in CRE operating profit but that are necessary to accurately reflect the operating performance of its core business (i.e., corporate expenses and interest expense attributable to this core business) or to exclude items that are non-recurring, infrequent, unusual and unrelated to the core business operating performance (i.e., not likely to recur within two years or has not occurred within the prior two years). The Company believes such adjustments facilitate the comparable measurement of the Company's core operating performance over time. The Company believes that Core FFO, which is a supplemental non-GAAP financial measure, provides an additional and useful means to assess and compare the operating performance of REITs.

•FFO represents the Nareit-defined non-GAAP measure for the operating performance of the Company as a whole. The Company's calculation refers to net income (loss) available to A&B common shareholders as its starting point in the calculation 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.
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 sale of electricity generated bydirect property-related expenses paid or payable in cash that are incurred in operating the Company's renewable energyCommercial 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.
NOI represents total Commercial Real Estate contract-based operating revenue that is realizable (i.e., assuming collectability is deemed probable) less the direct property-related operating expenses paid or payable in cash. The calculation of NOI excludes the impact of depreciation and amortization (e.g., depreciation related to capitalized costs for improved properties, other capital expenditures for building/area improvements and tenant space improvements, as well as amortization of leasing commissions); straight-line lease adjustments (including amortization of lease incentives); amortization of favorable/unfavorable lease assets/liabilities; lease termination income; interest and other income (expense), net; selling, general, administrative and other expenses (not directly associated with the property); and impairment of commercial real estate assets.

Discontinued Operations
The revenue, operating loss,Company reports NOI and after-tax effectsOccupancy on a Same-Store basis, which includes the results of discontinued operationsproperties that were owned and operated for the quarterentirety of the prior calendar year and ninecurrent reporting period, year-to-date. The Same-Store pool excludes properties under development or redevelopment and also excludes properties acquired or sold during either of the comparable reporting periods. While there is management judgment involved in classifications, new developments and redevelopments are moved into the Same-Store pool after one full calendar year of stabilized operation. Properties included in held for sale are excluded from Same-Store.
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).
31

To emphasize, the Company's methods of calculating non-GAAP measures may differ from methods employed by other companies and thus may not be comparable to such other companies.
Reconciliations of net income (loss) available to A&B common shareholders to FFO and Core FFO for the three months ended September 30, 2017 March 31, 2023and 2016 were2022, are as follows (in millions):

Three Months Ended March 31,
20232022
Net Income (Loss) available to A&B common shareholders$5.3 $10.5 
Depreciation and amortization of commercial real estate properties9.1 9.2 
(Income) loss from discontinued operations, net of income taxes4.2 (1.4)
Income (loss) attributable to discontinued noncontrolling interest— 0.5 
FFO$18.6 $18.8 
Exclude items not related to core business:
Land Operations operating (profit) loss0.1 (1.7)
Pension termination - CRE and Corporate— 0.9 
Non-core business interest expense2.5 2.8 
Core FFO$21.2 $20.8 
Reconciliations of Core FFO starting from Commercial Real Estate operating profit (loss) for the three months ended March 31, 2023 and 2022, are as follows (in millions):
Three Months Ended March 31,
20232022
Commercial Real Estate Operating Profit (Loss)$20.9 $20.7 
Depreciation and amortization of commercial real estate properties9.1 9.2 
Corporate and other expense(6.3)(7.1)
Core business interest expense(2.5)(2.9)
Pension termination - CRE and Corporate— 0.9 
Core FFO$21.2 $20.8 
Reconciliations of Commercial Real Estate operating profit to Commercial Real Estate NOI for the three months ended March 31, 2023 and 2022, are as follows (in millions):
Three Months Ended March 31,
20232022
CRE Operating Profit (Loss)$20.9 $20.7 
Plus: Depreciation and amortization9.1 9.2 
Less: Straight-line lease adjustments(1.3)(1.5)
Less: Favorable/(unfavorable) lease amortization(0.3)(0.2)
Plus: Selling, general, administrative and other expenses2.0 1.6 
NOI30.4 29.8 
Less: NOI from acquisitions, dispositions, and other adjustments— (0.1)
Same-Store NOI$30.4 $29.7 

32
 Quarter Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Sugar operations revenue (Land Operations)$0.4
 $35.7
 $22.9
 $73.7
        
Operating loss before income taxes$(1.1) $(17.1) $(2.2) $(51.2)
Gain (loss) on asset dispositions(0.2) —
 6.0
 —
Income (loss) from discontinued operations before income taxes(1.3) (17.1) 3.8
 (51.2)
Income tax (expense) benefit0.5
 3.5
 (1.4) 23.1
Income (loss) from discontinued operations$(0.8) $(13.6) $2.4
 $(28.1)
        
Basic earnings (loss) per share$(0.02) $(0.28) $0.04
 $(0.58)
Diluted earnings (loss) per share$(0.02) $(0.27) $0.05
 $(0.57)
Third quarter 2017: Loss from discontinued operations of $0.8 million during the third quarter of 2017 reflected exit related costs, as well as property removal and restoration costs. See Note 14, "Cessation of Sugar Operations" for further discussion regarding the cessation and the related costs associated with such exit and disposal activities.

30



Liquidity and Capital Resources
Third quarter 2016: Loss from discontinued operationsOverview
The Company's principal sources of $13.6 million during the third quarter of 2016 reflected sugar operations cessation costs, partially offset by results of the sugar operations. The cessation charges included accelerated depreciation, employee severance benefitsliquidity to meet its business requirements and related costs, and property removal, restoration and other exit-related costs.
First nine months of 2017: Income from discontinued operations of $2.4 million during the first nine months of 2017 reflected the gain on asset dispositions and the results of operations related to the final sugar voyage, partially offset by cessation-related costs. During the first nine months ended September 30, 2017, the Company sold mobile equipment assets, its bulk sugar transportation vessel and factory equipment, which resulted in a total gain of $6.0 million. Additionally, the Company recognized revenue and operating profit during the first nine months of 2017, primarily related to the final delivery of sugar inventory, which occurred in January 2017. The cessation charges included costs related to employee severance and benefits, as well as property removal, restoration and other exit-related costs. See Note 14, "Cessation of Sugar Operations" for further discussion regarding the cessation and the related costs associated with such exit and disposal activities.
First nine months of 2016: Loss from discontinued operations of $28.1 million during the first nine months of 2016 reflected sugar operations cessation costs, partially offset by results of the sugar operations. The cessation charges included accelerated depreciation, employee severance benefits and related costs, and property removal, restoration and other exit-related costs.

MATERIALS & CONSTRUCTION
Materials & Construction -Third quarterof 2017 compared with 2016
 Quarter Ended September 30,
(dollars in millions)2017 2016 Change
Revenue$55.0
 $52.1
 5.6%
Operating profit$6.5
 $5.6
 16.1%
Operating profit margin11.8% 10.7%  
Depreciation and amortization$3.1
 $2.9
 6.9%
Aggregate used and sold (tons in thousands)179.7
 158.1
 13.7%
Asphaltic concrete placed (tons in thousands)165.8
 126.9
 30.7%
Backlog1,2 at period end
$211.3
 $242.5
 (12.9)%
1
Backlog represents the total of (1) the amount of revenue that Grace Pacific and Maui Paving, LLC, a 50-percent-owned unconsolidated affiliate, expect to realize on contracts awarded and (2) government contracts in which Grace Pacific has been confirmed to be the lowest bidder and formal communication of the award is perfunctory ($31.8 million as of September 30, 2017). Backlog primarily consists of asphalt paving and, to a lesser extent, Grace Pacific’s consolidated revenue from its Prestress and construction-and traffic control-related products. Backlog includes estimated revenue from the remaining portion of contracts not yet completed, as well as revenue from approved change orders. The length of time that projects remain in backlog can span from a few days for a small volume of work to 36 months for large paving contracts and contracts performed in phases. Maui Paving's backlog at September 30, 2017 and 2016 was $12.9 million and $19.1 million, respectively.
2
As of September 30, 2017 and 2016, the backlog included contractual revenue with related parties of $1.0 million and $1.8 million, respectively.
Materials & Construction revenue for the third quarter of 2017 increased $2.9 million, or 5.6%, as compared to the third quarter of 2016, primarily due to higher paving and Prestress volumes and a bulk sale of imported aggregates, partially offset by lower average prices per unit sold in paving, Prestress and GLP, as well as lower sales volumes for hot mix and liquid asphalt. Revenue during the third quarter of 2017 reflected approximately 179.7 thousand tons of aggregate used and sold and 165.8 thousand tons of asphaltic concrete placed, as compared to 158.1 thousand tons of aggregate used and sold and 126.9 thousand tons of asphaltic concrete placed during 2016. Backlog at the end of September 30, 2017 was $211.3 million compared to $242.9 million as of December 31, 2016. The decrease in backlog from the fourth quarter of 2016 is primarily due to the amount of work completed and billed work during the period and the lack of major bids offered by governmental entities during the first nine months of 2017 compared to first nine months 2016. Backlog reasonably expected to be filledplans both in the current fiscal year is approximately $153.0 million.
Operating profit increased $0.9 million, or 16.1%short-term (i.e., in the third quarter of 2017, as compared tonext twelve months from March 31, 2023) and long-term (i.e., beyond the third quarter of 2016, primarily due to higher earnings from unconsolidated affiliatesnext twelve months) have generally been cash provided by operating activities; available cash and Prestress, partially offset by lower paving margins resulting from competitive pricing pressures.


31


Materials & Construction -First nine months of 2017compared with 2016
 Nine Months Ended September 30,
(dollars in millions)2017 2016 Change
Revenue$155.7
 $144.7
 7.6%
Operating profit$18.8
 $18.5
 1.6%
Operating profit margin12.1% 12.8%  
Depreciation and amortization$9.2
 $8.8
 4.5%
Aggregate used and sold (tons in thousands)526.3
 500.8
 5.1%
Asphaltic concrete placed (tons in thousands)442.9
 331.7
 33.5%
Materials & Construction revenue for the first nine months of 2017 increase $11.0 million, or 7.6%, as compared to the first nine months of 2016, primarily due to higher pavingcash equivalents; and Prestress volumes, a bulk sale of imported aggregates and higher levels of construction-related services, partially offset by lower average prices per unit sold in paving, Prestress product and liquid asphalt, as well as lower sales volumes for hot mix and liquid asphalt. Revenue during the first nine months of 2017 reflected approximately 526.3 thousand tons of aggregate used and sold and 442.9 thousand tons of asphaltic concrete placed, as compared to 500.8 thousand tons of aggregate used and sold and 331.7 thousand tons of asphaltic concrete placed during 2016.
Operating profit increased $0.3 million, or 1.6%, in the first nine months of 2017, as compared to the first nine months of 2016, primarily due to higher volumes in paving and Prestress products, an improved mix of Roadway higher margin work, lower unit inventory costs for liquid asphalt, and lower hot mix asphalt production cost per ton partially offset by paving work completed that were bid at lower margins due to competitive pricing pressures and lower volumes of hot mix asphalt and third party aggregate sales.borrowing capacity under its credit facility. The Company expects the competitive pricing and market conditions that have impacted the segment financial performance to persist.

LIQUIDITY AND CAPITAL RESOURCES
Overview: A&B'sCompany's primary liquidity needs have historically been to support working capitalfor its business requirements and fundplans have generally been supporting its known contractual obligations and also funding capital expenditures (including recent commercial real estate acquisitions and real estate developments. A&B’s principal sourcesdevelopments); shareholder distributions; and working capital needs.
The Company's ability to retain outstanding borrowings and utilize remaining amounts available under its revolving credit facility will depend on its continued compliance with the applicable financial covenants and other terms of liquiditythe Company's notes payable and other debt arrangements. The Company was in compliance with its financial covenants for all outstanding balances as of March 31, 2023, and intends to operate in compliance with these covenants or seek to obtain waivers or modifications to these financial covenants to enable the Company to maintain compliance in the future. However, due to various uncertainties and factors outside of Management's control, the Company may be unable to continue to maintain compliance with certain of its financial covenants. Failure to maintain compliance with its financial covenants or obtain waivers or agree to modifications with its lenders would have beena material adverse impact on the Company's financial condition.
As of March 31, 2023, the Company had $442.2 million of fixed rate debt (after the effects of interest rate swaps) and $37.0 million of variable-rate debt with weighted average interest rates of 4.2% and 5.9%, respectively. Other than in default, the Company does not have an obligation, nor the option in some cases, to prepay its fixed-rate debt prior to maturity and, as a result, interest rate fluctuations and the resulting changes in fair value would have little impact on the Company’s financial condition or results of operations unless the Company was required to refinance such debt.
Based on its current outlook, the Company believes that funds generated from cash flows provided by operating activities,activities; available cash and cash equivalent balances,balances; and borrowing capacity under its various credit facilities.facility will be sufficient to meet the needs of the Company's business requirements and plans both in the short-term (i.e., the next twelve months from March 31, 2023) and long-term (i.e., beyond the next twelve months).
Known contractual obligations
A&B’s operating income description of material contractual commitments is generated by its subsidiaries. Therecontained in the Notes to Consolidated Financial Statements included in Part II, Item 8 of the 2022 Form 10-K, and relates to the Company's Notes payable and other debt, Operating lease liabilities, and Accrued pension and post-retirement benefits. In addition, a description of other material cash requirements, including capital expenditures, is provided in Management's Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7 of the 2022 Form 10-K, and includes contractual interest payments for Notes payable and other debt as well as amounts to be spent on contractual non-cancellable purchase obligations (that specifies all significant terms, including fixed or minimum quantities to be purchased, pricing structure and approximate timing of the transaction that are not recorded as liabilities in the consolidated balance sheet).
As of March 31, 2023, there were no material restrictions onchanges in the abilityCompany's known contractual obligations from the end of A&B’s wholly owned subsidiariesthe preceding fiscal year ended December 31, 2022. Refer to pay dividends or makeNote 5 – Notes Payable and Other Debt, Note 10 – Leases - The Company as a Lessee and Note 12 – Employee Benefit Plans in this report for further discussion.
Further, a description of other distributionscommitments, contingencies and off-balance sheet arrangements is contained in the Notes to A&B. A&B regularly evaluates investment opportunities, including development projects, commercial real estate acquisitions, joint venture investments, share repurchases, business acquisitionsConsolidated Financial Statements included in Part II, Item 8 of the 2022 Form 10-K. As of March 31, 2023, there have been no material changes in the Company's other commitments, contingencies and other strategic transactionsoff-balance sheet arrangements from the end of the preceding fiscal year ended December 31, 2022. Refer to increase shareholder value. A&B cannot predict whether or when it may make investments or what impact any such transactions could have on A&B’s resultsNote 7 – Commitments and Contingencies in this report for further discussion.
Sources of operations, cash flows or financial condition. A&B’sliquidity
As noted above, one of the Company's principal sources of liquidity has been operating cash flows from continuing operations. For the three months ended March 31, 2023, operating cash flows from continuing operations borrowing availability and overall liquidity are subject to certain risks and uncertainties, including those described inof $12.7 million was primarily driven by cash generated by the section entitled "Risk Factors"Commercial Real Estate segment (the Company's core business). The Company's operating cash flows from continuing operations for the three months ended March 31, 2023, represents a decrease of the Company’s 2016 Annual Report on Form 10-K.
Cash Flows: Cash flows used in operating activities totaled $45.2$4.5 million from $17.2 million for the ninethree months ended September 30, 2017March 31, 2022, due primarily to lower cash proceeds from unimproved land and development sales in 2023 as compared to cash flows provided2022. Cash proceeds from unimproved/other property and development
33

sales decreased by operating activities of $48.4$7.0 million from $7.8 million for the ninethree months ended September 30, 2016. The decrease inMarch 31, 2022, to $0.8 million for the three months ended March 31, 2023. Total cash flows in future periods may be subject to variation from operating activities is primarily attributed to cash outlays for working capital purposes, including a discretionary pension contribution and employee severance payments relatedthe Land Operations segment due to the cessationvarying activity in completing sales on remaining non-core assets as part of HC&S sugar operations.the Company's continued execution on its simplification strategy and development property sales.
The Company's other primary sources of liquidity include its cash on-hand of $10.7 million as of March 31, 2023, and the Company's revolving credit and term facilities, which provide liquidity and flexibility on a short-term (i.e., the next twelve months from March 31, 2023), as well as long-term basis. With respect to the $500.0 million A&B Revolver available for general A&B purposes, as of March 31, 2023, the Company had $37.0 million of borrowings outstanding, $1.1 million letters of credit issued against, and $461.9 million of available capacity. This credit facility has a term through August 29, 2025, plus two six-month optional extensions.
On August 13, 2021, the Company entered into an at-the-market equity distribution agreement, or ATM Agreement, pursuant to which it may sell common stock up to an aggregate sales price of $150.0 million. Sales of common stock, if any, made pursuant to the ATM Agreement may be sold in negotiated transactions or transactions that are deemed to be “at the market” offerings, as defined in Rule 415 of the Securities Act of 1933, as amended. Actual sales will depend on a variety of factors including market conditions, the trading price of the Company's common stock, capital needs, and the Company's determination of the appropriate sources of funding to meet such needs. As of March 31, 2023, the Company has not sold any shares under the at-the-market offering program, nor has any obligation to sell shares under the at-the-market offering program.
Other uses (or sources) of liquidity
The Company may use (or, in some periods, generate) cash through various investing activities or financing activities. Cash flows used in investing activities totaled $38.0for continuing operations was $1.5 million duringfor the first ninethree months of 2017,ended March 31, 2023, as compared to $54.6$2.3 million duringfor the first ninethree months of 2016. The period-to-period change in cash flowsended March 31, 2022. Cash used in investing activities for continuing operations during the three months ended March 31, 2023, was primarily due todriven by $3.0 million in capital expenditures partially offset by cash outlaysproceeds from the sale of $82.4 million relatedthe Company's legacy trucking and storage business in the Land Operations segment. Cash used in investing activities for continuing operations during the three months ended March 31, 2022, was primarily driven by capital expenditures.
As it relates to the CRE segment (i.e., its core business), the Company differentiates capital expenditures as follows (based on management's perspective on discretionary versus non-discretionary areas of spending for its CRE business):
•Growth Capital Expenditures: Property acquisition, of Manoa Marketplacedevelopment and redevelopment activity to generate income and cash flow growth.

•Maintenance Capital Expenditures: Activity necessary to maintain building value, the current income stream and position in the first quarter of 2016.market.

32



Capital expenditures for the third quarter of 2017 and 2016 was $10.3 million and $5.5 million, respectively. Capital expendituresrespective periods for the first nine months of 2017 totaled $33.7 million as compared to $105.3 million for the first nine months of 2016. Net cash flows used in investing activities for capital expendituresall segments were as follows:
Three Months Ended March 31,
(dollars in millions; unaudited)20232022Change
CRE property acquisitions, development and redevelopment$1.3 $1.1 18.2%
Building/area improvements (Maintenance Capital Expenditures)1.1 0.5 120.0%
Tenant space improvements (Maintenance Capital Expenditures)0.6 0.2 200.0%
Land Operations and Corporate— 0.4 (100.0)%
Total capital expenditures1
$3.0 $2.2 36.4%
 Quarter Ended September 30,
(dollars in millions)2017 2016 Change
Commercial real estate property acquisitions/improvements$5.6
 $1.6
 250.0%
Tenant improvements2.5
 0.6
 316.7%
Quarrying and paving1.1
 1.7
 (35.3)%
Agribusiness and other1.1
 1.6
 (31.3)%
Total capital expenditures1
$10.3
 $5.5
 87.3%
      
 Nine Months Ended September 30,
(dollars in millions)2017 2016 Change
Commercial real estate property acquisitions/improvements$22.0
 $88.1
 (75.0)%
Tenant improvements4.0
 3.0
 33.3%
Quarrying and paving5.1
 7.1
 (28.2)%
Agribusiness and other2.6
 7.1
 (63.4)%
Total capital expenditures1
$33.7
 $105.3
 (68.0)%
1 Excludes capital expenditures for real estate developments to be held and sold as real estate development inventory, which are classified in the condensed consolidated statement of cash flows as operating activities and are excluded from the tabletables above.
Cash flows provided byused in financing activities for continuing operations was $27.4 million for the three months ended March 31, 2023, as compared to $39.4 million for the three months ended March 31, 2022. During the three months ended March 31, 2023, the Company's net cash outlays related to financing activities were $94.3due primarily to cash dividend payments totaling $32.0 million for the first nine monthsand repayments of 2017, as compared to $10.7secured and unsecured notes payable and other debt of $18.0 million. These outlays were partially offset by net borrowings of $25.0 million during the first nine months of 2016. The change from the prior year was primarily due to higher repayment amounts made on the Company's long termrevolving credit facilities. During the three months ended March 31, 2022, the Company's net cash outlays related to financing activities were due primarily to its net repayments of notes payable and other debt offsettingand deferred financing costs and line-of-credit agreement of $10.2 million, as well as cash dividend payments totaling $27.0 million.
34

The Company's Board of Directors authorized the higher amounts borrowedCompany to repurchase up to $150.0 million of its common stock between February 25, 2020 and December 31, 2023. As of March 31, 2023, the Company had repurchased 277,010 shares on the open market for an aggregate purchase price, including commissions of $4.6 million, with $145.4 million remaining available under the Company's revolving senior credit facilitystock repurchase program. The shares were retired upon repurchase. The Company did not repurchase any shares during the nine monthsquarter ended September 30, 2016.March 31, 2023.
Other capital resource matters
The Company believes that funds generated from resultsfrequently utilizes §1031 and §1033 of operations, available cash and cash equivalents, and available borrowings under credit facilities will be sufficient to finance the Company’s business requirements for the next fiscal year, including working capital, capital expenditures, and potential acquisitions and stock repurchases. There can be no assurance, however, that the Company will continue to generate cash flows at or above current levels or that it will be able to maintain its ability to borrow under its available credit facilities.
Other Sources of Liquidity: Additional sources of liquidity for the Company consisted of cash and cash equivalents, trade and income tax receivables, contracts retention, and inventories, that totaled $114.3 million at September 30, 2017, an increase of $13.9 million from December 31, 2016. This net increase is primarily due to an increase in cash and cash equivalents of $11.1 million, income tax receivables of $15.3 million, partially offset by a decrease in sugar inventories of $17.5 million as a result of the cessation of the sugar operations.
The Company also has revolving credit and term facilities that provide additional sources of liquidity for working capital requirements or investment opportunities on a short-term as well as longer-term basis. On September 15, 2017, the Company entered into a Second Amended and Restated Credit Agreement ("A&B Revolver") with Bank of America N.A., as administrative agent, First Hawaiian Bank, and other lenders party thereto, which amended and restated its existing $350 million committed revolving credit facility ("Revolving Credit Facility"). The A&B Revolver increased the total revolving commitments to $450 million, extended the term of the Revolving Credit Facility to September 15, 2022, amended certain covenants, and reduced the interest rates and fees charged under the Revolving Credit Facility. All other terms of the Revolving Credit Facility remain substantially unchanged.
Total debt as of September 30, 2017 was $625.8 million compared to $515.1 million as of December 31, 2016. The increase in debt of 21.5% during the first nine months of 2017 was primarily attributed to net borrowings of $108.9 million, inclusive of net draws on the A&B Revolver of $140.3 million and a new second mortgage of $5.0 million related to Kailua Town Center, offset by amortization and other repayments of the Company's term loans. As of September 30, 2017, available capacity under the unsecured, committed credit facility totaled $283.0 million.

33


Balance Sheet: The Company has a working capital surplus of $110.2 million as of September 30, 2017, which is an increase of $137.0 million, from a $26.8 million deficit as of December 31, 2016. The change in the working capital surplus is primarily due to an increase in prepaid and other assets, cash, real estate held for sale, and income tax receivables.
At September 30, 2017, the Company believes it was in compliance with all of its covenants under its credit facilities. While there can be no assurance that the Company will remain in compliance with its covenants, the Company expects that it will remain in compliance.

34


Tax-Deferred Real Estate Exchanges:
Sales & Purchases- During the third quarter of 2017, the Company had no sales that qualified for tax-deferral treatment under Internal Revenue Code Section 1031.  Duringof 1986, as amended (the "Code"), to obtain tax-deferral treatment when qualifying real estate assets are sold or become subject to involuntary conversion and the second quarter of 2017,resulting proceeds are reinvested in replacement properties within the Company utilized $10.1 millionrequired time period. Proceeds from potential tax-deferred sales to acquire Honokohau Industrial Park under a reverse 1031 exchange transaction. During the first quarter of 2016, the Company acquired both the leasehold and leased fee interests of Manoa Marketplace, a retail center on Oahu for $82.4 million. The proceeds from the sales§1031 of the three Mainland properties that were completed during the second quarter of 2016 were applied to the Manoa Marketplace acquisition under a reverse 1031 transaction that qualifies for tax-deferral treatment under Internal Revenue Code 1031.
Proceeds from 1031 tax-deferred sales are held in escrow (and presented as part of Restricted cash on the consolidated balance sheets) pending future reinvestment or are returned to the Company for general use to purchase new real estate assets.if eligibility for tax-deferral treatment based on the required time period lapses. The proceeds from 1033 condemnationsinvoluntary conversions under §1033 of the Code are held by the Company until the funds are redeployed. As
During the three months ended March 31, 2023, the Company did not complete any transactions that would give rise to cash proceeds from sales or involuntary conversion activity that qualified under §1031 or §1033 of September 30, 2017,the Code. Further, during the three months ended March 31, 2023, there were approximately $3.6 millionno acquisitions utilizing eligible/available proceeds from tax-deferred sales or condemnationsinvoluntary conversions.
As of March 31, 2023, $0.8 million funds from tax-deferred sales were available for use and had not been reinvested under §1031 of the Code. Also as of March 31, 2023, the Company held $3.1 million from tax-deferred involuntary conversions that had not yet been reinvested.
Commitments, Contingencies and Off-balance Sheet Arrangements: A description of other commitments, contingencies, and off-balance sheet arrangements at September 30, 2017, and herein incorporated by reference, is included in Note 3 to the condensed consolidated financial statements of Item 1 in this Form 10-Q.
OTHER MATTERS
Significant Accounting Policies:  The Company’s significant accounting policies are described in Note 2 to the consolidated financial statements included in Item 8reinvested under §1033 of the Company’s 2016 Form 10-K.Code.
Trends, events and uncertainties
General economic conditions and consumer spending patterns can negatively impact our operating results. Unfavorable local, regional, national, or global economic developments or uncertainties, including market volatility, supply chain and labor constraints, inflationary pressures, travel restrictions, war, natural disasters or effects of climate change, or a prolonged economic downturn could adversely affect our business. During the quarter ended March 31, 2023, the Federal Reserve continued its campaign to lower inflation by raising the federal funds rate from 0.25% to 4.75%. The impact of the rapid increase in the federal funds rate from 0.25% at January 1, 2022, has resulted in a tightening of credit and contributed to volatility in the banking, technology, and housing industries. The ultimate extent of the impact that these trends and events will have on the Company's business, financial condition, results of operations and liquidity and capital resources will largely depend on future developments, including the resulting impact on economic growth/recession, the impact on travel and tourism behavior and the impact on consumer confidence and discretionary and non-discretionary spending, all of which are highly uncertain and cannot be reasonably predicted.

Other Matters
Critical Accounting Estimates:accounting estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, upon which the Management’sManagement's Discussion and Analysis is based, requires that management exercise judgment when making estimates and assumptions about future events that may 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 critical accounting estimates. These differences could be material. The most significant accounting estimates inherent in the preparation of A&B’sthe Company's financial statements were described inManagement’sManagement's Discussion and Analysis of Financial Condition and Results of Operations contained in the Company’s 2016Company's 2022 Form 10-K.

New accounting pronouncements 

Refer to Notes to Consolidated Financial Statements, included in Part 1, Item 1 of this report, for a full description of the impact of recently issued accounting standards, which is incorporated herein by reference, including the expected dates of adoption and estimated effects on the Company's results of operations and financial condition.
35



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information concerning market risk is incorporated herein by reference to Item 7A of the Company’sCompany's Form 10-K for the fiscal year ended December 31, 2016.2022. There hashave been no material changechanges in the quantitative and qualitative disclosures about market risk since December 31, 2016.2022.

ITEM 4. CONTROLS AND PROCEDURES
(a)Disclosure Controls and Procedures
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")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 March 31, 2023, the end of such period, the Company'sCompany’s disclosure controls and procedures arewere effective.
(b)    Changes in Internal Control Over Financial Reporting
There have not been noany changes in the Company's internal controlscontrol over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the Company's fiscal first 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.

36



PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information set forth under the "Legal Proceedings and Other Contingencies" section in Note 37 of Notes to Condensed Consolidated Financial Statements, included in Part I, Item 1 of this report, is incorporated herein by reference.

ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors previously disclosed in Item 1A. "Risk Factors" in the Company's most recent annual report on Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer PurchasesThere were no equity securities sold by the Company during the period covered by this report that were not registered under the Securities Act.
In February 2020, the Company's Board of Equity SecuritiesDirectors authorized the Company to repurchase up to $150.0 million of its common stock beginning on February 25, 2020, and ending on December 31, 2021. In October 2021, the Company's Board of Directors reauthorized the Company to repurchase up to $150.0 million of its common stock beginning on January 1, 2022, and ending on December 31, 2023.
There were no purchases or repurchases of equity securities made by or on behalf of the Company during the quarter ended March 31, 2023, and $145.4 million remains available under the stock repurchase program as of March 31, 2023.
 
 
 
 
Period
 
 
 
Total number of
shares purchased1
 
 
 
Average price
paid per share
Total number of
shares purchased as
part of publicly
announced plans
or programs
Maximum number
of shares that
may yet be purchased
under the plans
or programs
July 1-31, 201760$42.19——
August 1-31, 201716,954$43.53——
September 1-30, 20173,025$43.68——
1
Represents shares accepted in satisfaction of tax withholding obligations arising upon option exercises.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulations S-K (17 CFR 229.104) is included in Exhibit 95 to this periodic report on Form 10-Q.

ITEM 5. OTHER INFORMATION
37
None.

ITEM 6. EXHIBITS
EXHIBIT INDEX
10.     Material Contracts
10.a.(v)    First Amendment to Third Amended and Restated Credit Agreement by and among Alexander & Baldwin, Inc., Alexander & Baldwin Investments, LLC, A&B II, LLC, Grace Pacific LLC, Bank of America N.A., First Hawaiian Bank, KeyBank National Association, Wells Fargo Bank, National Association, and other lenders party thereto dated April 28, 2023..
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.
95    Mine Safety Disclosure.
101    The following information from Alexander & Baldwin, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022; (ii) Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022; (iii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2023 and 2022; (iv) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022; (v) Condensed Consolidated Statements of Equity and Redeemable Noncontrolling Interest for the three months ended March 31, 2023 and 2022; and (vi) Notes to Condensed Consolidated Financial Statements.
104    Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
38

SIGNATURES
31.1Certification of Chief Executive Officer, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2Certification of Chief Financial Officer, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32Certification 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.
101The following information from Alexander & Baldwin, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations for the nine months ended September 30, 2017 and September 30, 2016, (ii) Condensed Consolidated Statement of Comprehensive Income (Loss) for the three and nine months ended September 30, 2017 and September 30, 2016, (iii) Condensed Consolidated Balance Sheets at September 30, 2017 and December 31, 2016, (iv) Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2017 and September 30, 2016, (v) Condensed Consolidated Statements of Equity for the nine months ended September 30, 2017 and September 30, 2016, and (vi) the Notes to the Condensed Consolidated Financial Statements.
95Mine Safety Disclosure

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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.
ALEXANDER & BALDWIN, INC.
(Registrant)
Date:November 8, 2017/s/ James E. Mead
James E. Mead
Chief Financial Officer
Date:November 8, 2017/s/ Paul K. Ito
Paul K. Ito
Senior Vice President, Finance and Treasurer


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EXHIBIT INDEX
31.1
Certification of Chief Executive Officer, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of
May 5, 2023By: /s/ Clayton K.Y. Chun
Clayton K.Y. Chun
Executive Vice President, Chief Financial Officer as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.and Treasurer
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.
101May 5, 2023
The following information from Alexander & Baldwin, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and September 30, 2016, (ii) Condensed Consolidated Statement of Comprehensive Income (Loss) for the three and nine months ended September 30, 2017 and September 30, 2016, (iii) Condensed Consolidated Balance Sheets at September 30, 2017 and December 31, 2016, (iv) Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2017 and September 30, 2016, (v) Condensed Consolidated Statements of Equity for the nine months ended September 30, 2017 and September 30, 2016 and (vi) the Notes to the Condensed Consolidated Financial Statements.
By: /s/ Anthony J. Tommasino
Anthony J. Tommasino
95
Mine Safety Disclosure
Vice President and Controller


39