UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20192020
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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.)
P. O. Box 3440,Honolulu,Hawaii96801
(Address of principal executive offices)(Zip Code)
(808) (808) 525-6611
(Registrant'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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐
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.
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Number of shares of common stock outstanding as of September 30, 2019: 72,258,124
2020: 72,354,347

1


ALEXANDER & BALDWIN, INC.
FORM 10-Q
For the Quarterly Period Ended September 30, 20192020

TABLE OF CONTENTS

Page
PART I. FINANCIAL INFORMATION
Item 1.
1
Condensed Consolidated Balance Sheets - As of September 30, 20192020 and December 31, 20182019
1
Condensed Consolidated Statements of Operations - Three and Nine Months Ended September 30, 20192020 and 20182019
2
Condensed Consolidated Statements of Comprehensive Income (Loss) - Three and Nine Months Ended September 30, 20192020 and 20182019
3
Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 20192020 and 20182019
4
Condensed Consolidated Statements of Equity - Three and Nine Months Ended September 30, 20192020 and 20182019
6
8
Item 2.
2527
Item 3.
3948
Item 4.
3948
PART II. OTHER INFORMATION
Item 1.
4049
Item 1A.
49
Item 2.
4050
Item 4.
4050
Item 5.6.
4051
Item 6.
4152
Signature
42





PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALEXANDER & BALDWIN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions) (Unaudited)amounts in millions; unaudited)
September 30,December 31,
September 30,
2019		 December 31, 201820202019
ASSETS   ASSETS
Real estate investments   Real estate investments
Real estate property$1,531.4
 $1,293.7
Real estate property$1,544.1 $1,540.2 
Accumulated depreciation(124.3) (107.2)Accumulated depreciation(148.0)(127.5)
Real estate property, net1,407.1
 1,186.5
Real estate property, net1,396.1 1,412.7 
Real estate developments93.8
 155.2
Real estate developments77.3 79.1 
Investments in real estate joint ventures and partnerships135.4
 141.0
Investments in real estate joint ventures and partnerships132.4 133.4 
Real estate intangible assets, net78.7
 59.8
Real estate intangible assets, net64.9 74.9 
Real estate investments, net1,715.0
 1,542.5
Real estate investments, net1,670.7 1,700.1 
Cash and cash equivalents7.2
 11.4
Cash and cash equivalents117.1 15.2 
Restricted cash0.2
 223.5
Restricted cash0.2 0.2 
Accounts receivable and retention, net67.8
 61.2
Accounts receivable and retention, net of allowance for credit losses and allowance for doubtful accounts of $4.1 million and $0.6 million as of September 30, 2020 and December 31, 2019, respectivelyAccounts receivable and retention, net of allowance for credit losses and allowance for doubtful accounts of $4.1 million and $0.6 million as of September 30, 2020 and December 31, 2019, respectively52.7 51.6 
Inventories23.9
 26.5
Inventories19.3 20.7 
Other property, net131.4
 135.5
Other property, net111.2 124.4 
Operating lease right-of-use assets22.7
 —
Operating lease right-of-use assets19.5 21.8 
Goodwill15.4
 65.1
Goodwill10.5 15.4 
Other receivables28.7
 56.8
Prepaid expenses and other assets109.4
 102.7
Other receivables, net of allowance for credit losses and allowance for doubtful accounts of $4.5 million and $1.6 million as of September 30, 2020 and December 31, 2019, respectivelyOther receivables, net of allowance for credit losses and allowance for doubtful accounts of $4.5 million and $1.6 million as of September 30, 2020 and December 31, 2019, respectively15.8 27.8 
Prepaid expenses and other assets, net of allowance for credit losses and allowance for doubtful accounts of $0.1 million and $0 million as of September 30, 2020 and December 31, 2019, respectivelyPrepaid expenses and other assets, net of allowance for credit losses and allowance for doubtful accounts of $0.1 million and $0 million as of September 30, 2020 and December 31, 2019, respectively97.9 107.1 
Total assets$2,121.7
 $2,225.2
Total assets$2,114.9 $2,084.3 
   
LIABILITIES AND EQUITY   LIABILITIES AND EQUITY
Liabilities:   Liabilities:
Notes payable and other debt$732.4
 $778.1
Notes payable and other debt$763.6 $704.6 
Accounts payable15.0
 34.2
Accounts payable10.4 17.8 
Operating lease liabilities23.0
 —
Operating lease liabilities19.7 21.6 
Accrued pension and post-retirement benefits31.4
 29.4
Accrued pension and post-retirement benefits26.9 26.8 
Indemnity holdbacks7.5
 16.3
Indemnity holdbacks7.5 7.5 
Deferred revenue68.4
 63.2
Deferred revenue68.0 67.6 
Accrued and other liabilities107.7
 87.8
Accrued and other liabilities102.2 103.4 
Total liabilities985.4
 1,009.0
Total liabilities998.3 949.3 
Commitments and Contingencies

 

Commitments and Contingencies (Note 10)Commitments and Contingencies (Note 10)
Redeemable Noncontrolling Interest7.9
 7.9
Redeemable Noncontrolling Interest6.4 6.3 
Equity:   Equity:
Common stock - no par value; authorized, 150 million shares; outstanding, 72.3 million and 72.0 million shares at September 30, 2019 and December 31, 2018, respectively1,797.4
 1,793.4
Common stock - no par value; authorized, 150 million shares; outstanding, 72.4 million shares at September 30, 2020 and December 31, 2019, respectivelyCommon stock - no par value; authorized, 150 million shares; outstanding, 72.4 million shares at September 30, 2020 and December 31, 2019, respectively1,804.5 1,800.1 
Accumulated other comprehensive income (loss)(55.0) (51.9)Accumulated other comprehensive income (loss)(53.9)(48.8)
Distributions in excess of accumulated earnings(617.6) (538.9)Distributions in excess of accumulated earnings(640.4)(626.2)
Total A&B shareholders' equity1,124.8
 1,202.6
Total A&B shareholders' equity1,110.2 1,125.1 
Noncontrolling interest3.6
 5.7
Noncontrolling interest0 3.6 
Total equity1,128.4
 1,208.3
Total equity1,110.2 1,128.7 
Total liabilities and equity$2,121.7
 $2,225.2
Total liabilities and equity$2,114.9 $2,084.3 
See Notes to Condensed Consolidated Financial Statements.

1

ALEXANDER & BALDWIN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Inamounts in millions, except per share amounts) (Unaudited)data; unaudited)
  Three Months Ended September 30, Nine Months Ended September 30,
  2019 2018 2019 2018
Operating Revenue:        
Commercial Real Estate $42.7
 $35.9
 $118.6

$104.9
Land Operations 8.5
 24.0
 82.4

72.6
Materials & Construction 37.9
 59.5
 126.6

167.3
Total operating revenue 89.1
 119.4
 327.6

344.8
Operating Costs and Expenses:     


Cost of Commercial Real Estate 23.8
 19.2
 64.3

57.0
Cost of Land Operations 5.9
 17.4
 68.5

67.0
Cost of Materials & Construction 42.0
 50.5
 127.2

143.5
Selling, general and administrative 13.3
 14.6
 45.1

44.7
Goodwill impairment 49.7
 —
 49.7
 —
Total operating costs and expenses 134.7
 101.7
 354.8
 312.2
Gain (loss) on the sale of commercial real estate properties —
 —
 —
 49.8
Operating Income (Loss) (45.6) 17.7
 (27.2) 82.4
Income (loss) related to joint ventures 2.4
 4.5
 6.1

6.3
Interest and other income (expense), net (Note 2) 0.6
 3.7
 2.8

2.1
Interest expense (8.2) (9.1) (25.4)
(26.4)
Income (Loss) from Continuing Operations Before Income Taxes (50.8) 16.8
 (43.7)
64.4
Income tax benefit (expense) —
 (1.0) 1.1

1.8
Income (Loss) from Continuing Operations (50.8) 15.8
 (42.6)
66.2
Income (loss) from discontinued operations, net of income taxes (0.1) (0.2) (0.8)
(0.2)
Net Income (Loss) (50.9) 15.6
 (43.4)
66.0
Loss (income) attributable to noncontrolling interest 1.1
 (0.8) 1.8

(1.4)
Net Income (Loss) Attributable to A&B Shareholders $(49.8) $14.8
 $(41.6)
$64.6
      


Basic Earnings (Loss) Per Share of Common Stock:     


Continuing operations available to A&B shareholders $(0.69) $0.21
 $(0.57)
$0.92
Discontinued operations available to A&B shareholders —
 —
 (0.01)
—
Net income (loss) available to A&B shareholders $(0.69) $0.21
 $(0.58)
$0.92
Diluted Earnings (Loss) Per Share of Common Stock:     


Continuing operations available to A&B shareholders $(0.69) $0.20
 $(0.57)
$0.89
Discontinued operations available to A&B shareholders —
 —
 (0.01)
—
Net income (loss) available to A&B shareholders $(0.69) $0.20
 $(0.58)
$0.89
      


Weighted-Average Number of Shares Outstanding:     


Basic 72.3
 72.0
 72.2

70.2
Diluted 72.3
 72.4
 72.2

72.4
      




Amounts Available to A&B Shareholders (Note 4):     




Continuing operations available to A&B shareholders $(49.7) $15.0
 $(40.8)
$64.8
Discontinued operations available to A&B shareholders (0.1) (0.2) (0.8)
(0.2)
Net income (loss) available to A&B shareholders $(49.8) $14.8
 $(41.6)
$64.6
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Operating Revenue:
Commercial Real Estate$35.7 $42.7 $113.1 $118.6 
Land Operations7.7 8.5 29.0 82.4 
Materials & Construction34.4 37.9 90.4 126.6 
Total operating revenue77.8 89.1 232.5 327.6 
Operating Costs and Expenses: 
Cost of Commercial Real Estate23.5 23.8 71.8 64.3 
Cost of Land Operations12.9 5.9 23.8 68.5 
Cost of Materials & Construction30.2 42.0 83.4 127.2 
Selling, general and administrative11.7 13.3 34.5 45.1 
Impairment of assets related to Materials & Construction0 49.7 5.6 49.7 
Total operating costs and expenses78.3 134.7 219.1 354.8 
Gain (loss) on disposal of commercial real estate properties, net0 0 0.5 0 
Gain (loss) on disposal of non-core assets, net9.0 0 9.0 0 
Total gain (loss) on disposal of assets, net9.0 0 9.5 0 
Operating Income (Loss)8.5 (45.6)22.9 (27.2)
Other Income and (Expenses):
Income (loss) related to joint ventures2.2 2.4 5.3 6.1 
Interest and other income (expense), net (Note 2)(0.4)0.6 (0.6)2.8 
Interest expense(7.1)(8.2)(22.7)(25.4)
Income (Loss) from Continuing Operations Before Income Taxes3.2 (50.8)4.9 (43.7)
Income tax benefit (expense)0 0 0 1.1 
Income (Loss) from Continuing Operations3.2 (50.8)4.9 (42.6)
Income (loss) from discontinued operations, net of income taxes0.0 (0.1)(0.8)(0.8)
Net Income (Loss)3.2 (50.9)4.1 (43.4)
Loss (income) attributable to noncontrolling interest(0.2)1.1 0.4 1.8 
Net Income (Loss) Attributable to A&B Shareholders$3.0 $(49.8)$4.5 $(41.6)
Earnings (Loss) Per Share Available to A&B Shareholders:
Basic Earnings (Loss) Per Share of Common Stock: 
Continuing operations available to A&B shareholders$0.04 $(0.69)$0.07 $(0.57)
Discontinued operations available to A&B shareholders0 0 (0.01)(0.01)
Net income (loss) available to A&B shareholders$0.04 $(0.69)$0.06 $(0.58)
Diluted Earnings (Loss) Per Share of Common Stock:
Continuing operations available to A&B shareholders$0.04 $(0.69)$0.07 $(0.57)
Discontinued operations available to A&B shareholders0 0 (0.01)(0.01)
Net income (loss) available to A&B shareholders$0.04 $(0.69)$0.06 $(0.58)
Weighted-Average Number of Shares Outstanding:
Basic72.472.3 72.372.2 
Diluted72.472.3 72.472.2 
Amounts Available to A&B Common Shareholders (Note 17):
Continuing operations available to A&B common shareholders$3.0 $(49.7)$5.3 $(40.8)
Discontinued operations available to A&B common shareholders0 (0.1)(0.8)(0.8)
Net income (loss) available to A&B common shareholders$3.0 $(49.8)$4.5 $(41.6)
See Notes to Condensed Consolidated Financial Statements.

2

ALEXANDER & BALDWIN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions) (Unaudited)amounts in millions; unaudited)
 Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,
 2019 2018 2019 2018 2020201920202019
Net Income (Loss) $(50.9) $15.6
 $(43.4) $66.0
Net Income (Loss)$3.2 $(50.9)$4.1 $(43.4)
Other Comprehensive Income (Loss), net of tax:        Other Comprehensive Income (Loss), net of tax:
Cash flow hedges:Cash flow hedges:
Unrealized interest rate hedging gain (loss) (2.0) 0.6
 (5.5) 3.0
Unrealized interest rate hedging gain (loss)(0.1)(2.0)(7.7)(5.5)
Impact of reclassification adjustment to interest expense included in Net Income (Loss) 0.2
 —
 (0.1) —
Impact of reclassification adjustment to interest expense included in Net Income (Loss)0.5 0.2 0.6 (0.1)
Defined benefit pension plans:        
Amortization of net loss included in net periodic pension cost 0.9
 1.1
 2.9
 3.3
Amortization of prior service credit included in net periodic pension cost (0.1) (0.2) (0.4) (0.5)
Curtailment (gain)/loss —
 —
 —
 (0.4)
Defined benefit plans:Defined benefit plans:
Amortization of net loss included in net periodic benefit costAmortization of net loss included in net periodic benefit cost0.8 0.9 2.0 2.9 
Amortization of prior service credit included in net periodic benefit costAmortization of prior service credit included in net periodic benefit cost0 (0.1)0 (0.4)
Income taxes related to other comprehensive income (loss) —
 (0.4) —
 (1.4)Income taxes related to other comprehensive income (loss)0 0 0 0 
Other comprehensive income (loss), net of tax (1.0) 1.1
 (3.1) 4.0
Other comprehensive income (loss), net of tax1.2 (1.0)(5.1)(3.1)
Comprehensive Income (Loss) (51.9) 16.7
 (46.5) 70.0
Comprehensive Income (Loss)4.4 (51.9)(1.0)(46.5)
Comprehensive (income) loss attributable to noncontrolling interest 1.1
 (0.8) 1.8
 (1.4)
Comprehensive income (loss) attributable to noncontrolling interestComprehensive income (loss) attributable to noncontrolling interest(0.2)1.1 0.4 1.8 
Comprehensive Income (Loss) Attributable to A&B Shareholders $(50.8) $15.9
 $(44.7) $68.6
Comprehensive Income (Loss) Attributable to A&B Shareholders$4.2 $(50.8)$(0.6)$(44.7)
See Notes to Condensed Consolidated Financial Statements.

3

ALEXANDER & BALDWIN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions) (Unaudited)amounts in millions; unaudited)
Nine Months Ended September 30,
 20202019
Cash Flows from Operating Activities:
Net income (loss)$4.1 $(43.4)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operations:
Depreciation and amortization40.5 36.6 
Loss (gain) from disposals and asset transactions, net(9.5)(2.6)
Impairment of assets5.6 49.7 
Share-based compensation expense4.4 4.1 
Equity in (income) loss from affiliates, net of operating cash distributions(5.0)(3.5)
Changes in operating assets and liabilities:
Trade, contracts retention, and other contract receivables(2.1)(6.9)
Inventories1.2 2.6 
Prepaid expenses, income tax receivable and other assets7.9 25.8 
Development/other property inventory1.4 40.7 
Accrued pension and post-retirement benefits2.0 4.6 
Accounts payable(5.2)(10.3)
Accrued and other liabilities(8.1)6.6 
Net cash provided by (used in) operations37.2 104.0 
Cash Flows from Investing Activities:  
Capital expenditures for acquisitions0 (218.4)
Capital expenditures for property, plant and equipment(17.7)(31.8)
Proceeds from disposal of assets27.1 3.0 
Payments for purchases of investments in affiliates and other investments0 (3.3)
Distributions of capital from investments in affiliates and other investments11.1 12.2 
Net cash provided by (used in) investing activities20.5 (238.3)
Cash Flows from Financing Activities:  
Proceeds from issuance of notes payable and other debt173.0 111.8 
Payments of notes payable and other debt and deferred financing costs(105.3)(155.3)
Borrowings (payments) on line-of-credit agreement, net(8.7)(5.1)
Distribution to noncontrolling interests0 (0.3)
Cash dividends paid(13.8)(36.2)
Proceeds from issuance (repurchase) of capital stock and other, net(1.0)(1.0)
Payment of deferred acquisition holdback0 (7.1)
Net cash provided by (used in) financing activities44.2 (93.2)
Cash, Cash Equivalents and Restricted Cash  
Net increase (decrease) in cash, cash equivalents and restricted cash101.9 (227.5)
Balance, beginning of period15.4 234.9 
Balance, end of period$117.3 $7.4 

4

 Nine Months Ended September 30,
 2019 2018
Cash Flows from Operating Activities:   
Net income (loss)$(43.4) $66.0
Adjustments to reconcile net income (loss) to net cash provided by (used in) operations:
 
Depreciation and amortization36.6
 31.6
Deferred income taxes—
 (2.4)
Loss (gain) on asset transactions, net(2.6) (62.1)
Goodwill impairment49.7
 —
Share-based compensation expense4.1
 4.0
(Income) loss from affiliates, net of distributions of income(3.5) 2.0
Changes in operating assets and liabilities:   
Trade, contracts retention, and other contract receivables(6.9) (4.9)
Inventories2.6
 (0.3)
Prepaid expenses, income tax receivable and other assets25.8
 (4.1)
Accrued pension and post-retirement benefits4.6
 2.5
Accounts payable(10.3) (8.3)
Accrued and other liabilities6.6
 (7.3)
Real estate development for sale proceeds48.5
 41.0
Expenditures for real estate development for sale(7.8) (20.0)
Net cash provided by (used in) operations104.0
 37.7
    
Cash Flows from Investing Activities:   
Capital expenditures for acquisitions(218.4) (201.6)
Capital expenditures for property, plant and equipment(31.8) (40.0)
Proceeds from disposal of property, investments and other assets3.0
 169.3
Payments for purchases of investments in affiliates and other investments(3.3) (21.3)
Distributions of capital from investments in affiliates and other investments12.2
 32.8
Net cash provided by (used in) investing activities(238.3) (60.8)
    
Cash Flows from Financing Activities:   
Proceeds from issuance of long-term debt111.8
 533.5
Payments of long-term debt and deferred financing costs(155.3) (433.6)
Borrowings (payments) on line-of-credit agreement, net(5.1) (14.2)
Distribution to noncontrolling interests(0.3) (0.2)
Cash dividends paid(36.2) (156.6)
Proceeds from issuance (repurchase) of common stock and other, net(1.0) (1.3)
Payment of deferred acquisition holdback(7.1) —
Net cash provided by (used in) financing activities(93.2) (72.4)
    
Cash, Cash Equivalents and Restricted Cash:   
Net increase (decrease) in cash, cash equivalents, and restricted cash(227.5) (95.5)
Balance, beginning of period234.9
 103.2
Balance, end of period$7.4
 $7.7


Other Cash Flow Information:   Other Cash Flow Information:
Interest paid, net of capitalized interest$(25.2) $(26.1)Interest paid, net of capitalized interest$(15.1)$(25.2)
Income tax (payments)/refunds, net$25.8
 $1.9
Income tax (payments)/refunds, net$0.5 $25.8 
   
Noncash Investing and Financing Activities:   Noncash Investing and Financing Activities:
Capital expenditures included in accounts payable and accrued expenses$2.6
 $2.0
Fair value of loan assumed in connection with acquisition$—
 $61.0
Issuance of shares for stock dividend$—
 $626.4
Capital expenditures included in accounts payable and accrued and other liabilitiesCapital expenditures included in accounts payable and accrued and other liabilities2.5 2.6 
Right-of-use ("ROU") assets and corresponding lease liability recorded upon ASC 842 adoption$31.0
 $—
Right-of-use ("ROU") assets and corresponding lease liability recorded upon ASC 842 adoption0 31.0 
Lease liabilities arising from obtaining ROU assets$1.7
 $—
Finance lease liabilities arising from obtaining ROU assetsFinance lease liabilities arising from obtaining ROU assets0.4 1.7 
   
Reconciliation of cash, cash equivalents and restricted cash:   Reconciliation of cash, cash equivalents and restricted cash:
Beginning of the period   
Beginning of the period:Beginning of the period:
Cash and cash equivalents$11.4
 $68.9
Cash and cash equivalents$15.2 $11.4 
Restricted cash223.5
 34.3
Restricted cash0.2 223.5 
Cash, cash equivalents and restricted cash$234.9
 $103.2
Cash, cash equivalents and restricted cash$15.4 $234.9 
   
End of the period   
End of the period:End of the period:
Cash and cash equivalents$7.2
 $7.5
Cash and cash equivalents$117.1 $7.2 
Restricted cash0.2
 0.2
Restricted cash0.2 0.2 
Cash, cash equivalents and restricted cash$7.4
 $7.7
Cash, cash equivalents and restricted cash$117.3 $7.4 
See Notes to Condensed Consolidated Financial Statements.

5

ALEXANDER & BALDWIN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
For the Nine Months Ended September 30, 20192020 and 20182019
(In millions) (Unaudited)amounts in millions, except per share data; unaudited)
 Total Equity  
 Common Stock Accumulated
Other
Compre-
hensive Income (Loss)		 (Distribution
in Excess
of Accumulated Earnings)		 Non-Controlling
Interest		 Total Redeem-
able
Non-
Controlling
Interest
 
 Shares Stated Value 
Balance, January 1, 2018 49.3
 $1,161.7
 $(42.3) $(473.0) $4.7
 $651.1
 $8.0
Net income (loss) —
 —
 —
 64.6
 0.8
 65.4
 0.6
Impact of adoption of ASU 2014-09 —
 —
 —
 (1.4) —
 (1.4) —
Other comprehensive income (loss), net of tax —
 —
 4.0
 —
 —
 4.0
 —
Stock dividend ($11.65 per share) 22.6
 626.4
 —
 —
 —
 626.4
 —
Distributions to noncontrolling interest —
 —
 —
 —
 (0.2) (0.2) —
Adjustments to redemption value of redeemable noncontrolling interest —
 —
 —
 0.6
 —
 0.6
 (0.6)
Share-based compensation —
 4.0
 —
 —
 —
 4.0
 —
Shares issued or repurchased, net 0.1
 —
 —
 (1.3) —
 (1.3) —
Balance, September 30, 2018 72.0
 $1,792.1
 $(38.3) $(410.5) $5.3
 $1,348.6
 $8.0
              
 Total Equity  Total Equity
 Common Stock Accumulated
Other
Compre-
hensive Income (Loss)		 (Distribution
in Excess
of Accumulated Earnings)		 Non-Controlling
Interest		 Total Redeem-
able
Non-
Controlling
Interest		Common StockAccumulated
Other
Compre-
hensive Income (Loss)		(Distribution
in Excess
of Accumulated Earnings)
Earnings Surplus		Non-Controlling
Interest		TotalRedeem-
able
Non-
Controlling
Interest
 
 Shares Stated Value SharesStated Value
Balance, January 1, 2019 72.0
 $1,793.4
 $(51.9) $(538.9) $5.7
 $1,208.3
 $7.9
Balance, January 1, 201972.0 $1,793.4 $(51.9)$(538.9)$5.7 $1,208.3 $7.9 
Net income (loss) —
 —
 —
 (41.6) (1.8) (43.4) —
Net income (loss)— — — (41.6)(1.8)(43.4)0 
Other comprehensive income (loss), net of tax —
 —
 (3.1) —
 —
 (3.1) —
Other comprehensive income (loss), net of tax— — (3.1)— — (3.1)— 
Dividend on common stock ($0.50 per share) —
 —
 —
 (36.2) —
 (36.2) —
Dividend on common stock ($0.50 per share)— — — (36.2)— (36.2)— 
Distributions to noncontrolling interest —
 —
 —
 —
 (0.3) (0.3) —
Distributions to noncontrolling interest— — — — (0.3)(0.3)— 
Share-based compensation —
 4.1
 —
 —
 —
 4.1
 —
Share-based compensation— 4.1 — — — 4.1 — 
Shares issued or repurchased, net 0.3
 (0.1) —
 (0.9) —
 (1.0) —
Shares issued or repurchased, net0.3 (0.1)— (0.9)— (1.0)— 
Balance, September 30, 2019 72.3
 $1,797.4
 $(55.0) $(617.6) $3.6
 $1,128.4
 $7.9
Balance, September 30, 201972.3 $1,797.4 $(55.0)$(617.6)$3.6 $1,128.4 $7.9 
Total Equity
Common StockAccumulated
Other
Compre-
hensive Income (Loss)		(Distribution
in Excess
of Accumulated Earnings)
Earnings Surplus		Non-Controlling
Interest		TotalRedeem-
able
Non-
Controlling
Interest
SharesStated Value
Balance, January 1, 2020Balance, January 1, 202072.3 $1,800.1 $(48.8)$(626.2)$3.6 $1,128.7 $6.3 
Cumulative impact of adoption of ASC 326Cumulative impact of adoption of ASC 326— — — (4.0)(0.1)(4.1)— 
Net income (loss)Net income (loss)— — — 4.5 (0.5)4.0 0.1 
Other comprehensive income (loss), net of taxOther comprehensive income (loss), net of tax— — (5.1)— — (5.1)— 
Dividend on common stock ($0.19 per share)Dividend on common stock ($0.19 per share)— — — (13.8)— (13.8)— 
Disposal of M&C subsidiaryDisposal of M&C subsidiary— — — — (3.0)(3.0)— 
Share-based compensationShare-based compensation— 4.4 — — — 4.4 — 
Shares issued or repurchased, netShares issued or repurchased, net0.1 — — (0.9)— (0.9)— 
Balance, September 30, 2020Balance, September 30, 202072.4 $1,804.5 $(53.9)$(640.4)$0 $1,110.2 $6.4 
See Notes to Condensed Consolidated Financial Statements.Statements


6


ALEXANDER & BALDWIN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
For the Three Months Ended September 30, 20192020 and 20182019
(In millions) (Unaudited)amounts in millions, except per share data; unaudited)
 Total Equity  
 Common Stock Accumulated
Other
Compre-
hensive Income (Loss)		 (Distribution
in Excess
of Accumulated Earnings)		 Non-Controlling
Interest		 Total Redeem-
able
Non-
Controlling
Interest
 
 Shares Stated Value 
Balance, July 1, 2018 72.0
 $1,790.8
 $(39.4) $(426.0) $5.0
 $1,330.4
 $8.0
Net income (loss) —
 —
 —
 14.8
 0.3
 15.1
 0.5
Other comprehensive income (loss), net of tax —
 —
 1.1
 —
 —
 1.1
 —
Adjustments to redemption value of redeemable noncontrolling interest —
 —
 —
 0.5
 —
 0.5
 (0.5)
Share-based compensation —
 1.3
 —
 —
 —
 1.3
 —
Shares issued or repurchased, net —
 —
 —
 0.2
 —
 0.2
 —
Balance, September 30, 2018 72.0
 $1,792.1
 $(38.3) $(410.5) $5.3
 $1,348.6
 $8.0
              
 Total Equity  Total Equity
 Common Stock Accumulated
Other
Compre-
hensive Income (Loss)		 (Distribution
in Excess
of Accumulated Earnings)		 Non-Controlling
Interest		 Total Redeem-
able
Non-
Controlling
Interest		Common StockAccumulated
Other
Compre-
hensive Income (Loss)		(Distribution
in Excess
of Accumulated Earnings)
Earnings Surplus		Non-Controlling
Interest		TotalRedeem-
able
Non-
Controlling
Interest
 
 Shares Stated Value SharesStated Value
Balance, July 1, 2019 72.2
 $1,795.9
 $(54.0) $(554.0) $4.7
 $1,192.6
 $7.9
Balance, July 1, 201972.2 $1,795.9 $(54.0)$(554.0)$4.7 $1,192.6 $7.9 
Net income (loss) —
 —
 —
 (49.8) (1.1) (50.9) —
Net income (loss)— — — (49.8)(1.1)(50.9)0 
Other comprehensive income (loss), net of tax —
 —
 (1.0) —
 —
 (1.0) —
Other comprehensive income (loss), net of tax— — (1.0)— — (1.0)— 
Dividend on common stock ($0.19 per share) —
 —
 —
 (13.8) —
 (13.8) —
Dividend on common stock ($0.19 per share)— — — (13.8)— (13.8)— 
Share-based compensation —
 1.4
 —
 —
 —
 1.4
 —
Share-based compensation— 1.4 — — — 1.4 — 
Shares issued or repurchased, net 0.1
 0.1
 —
 —
 —
 0.1
 —
Shares issued or repurchased, net0.1 0.1 — 0 — 0.1 — 
Balance, September 30, 2019 72.3
 $1,797.4
 $(55.0) $(617.6) $3.6
 $1,128.4
 $7.9
Balance, September 30, 201972.3 $1,797.4 $(55.0)$(617.6)$3.6 $1,128.4 $7.9 
Total Equity
Common StockAccumulated
Other
Compre-
hensive Income (Loss)		(Distribution
in Excess
of Accumulated Earnings)
Earnings Surplus		Non-Controlling
Interest		TotalRedeem-
able
Non-
Controlling
Interest
SharesStated Value
Balance, July 1, 2020Balance, July 1, 202072.3 $1,803.1 $(55.1)$(643.4)$0 $1,104.6 $6.2 
Net income (loss)Net income (loss)— — — 3.0 — 3.0 0.2 
Other comprehensive income (loss), net of taxOther comprehensive income (loss), net of tax— — 1.2 — — 1.2 — 
Share-based compensationShare-based compensation— 1.4 — — — 1.4 — 
Shares issued or repurchased, netShares issued or repurchased, net0.1 0 — 0 — 0 — 
Balance, September 30, 2020Balance, September 30, 202072.4 $1,804.5 $(53.9)$(640.4)$0 $1,110.2 $6.4 
See Notes to Condensed Consolidated Financial Statements.Statements



7

Alexander & Baldwin, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)(unaudited)
1.DESCRIPTION OF BUSINESS
1.    BACKGROUND AND BASIS OF PRESENTATION
Description of Business:Alexander & Baldwin, Inc. ("A&B" or the "Company") is a real estate investment trust ("REIT") headquartered in Honolulu, Hawai‘i. The Company operates in 3 segments: Commercial Real Estate ("CRE"); Land Operations; and Materials & Construction ("M&C").  As of September 30, 2019,2020, the Company's CRE improvedCompany owns a portfolio of commercial real estate consistedimproved properties in Hawai‘i consisting of NaN22 retail centers, 10 industrial assets and 4 office properties, in Hawai‘i, representing a total of 3.9 million square feet of gross leasable area. The Companyarea; it also owns a portfolio of ground leases in Hawai‘i that comprised 154representing 153.7 acres as of September 30, 2019.2020. Throughout this quarterly report on Form 10-Q, references to "we," "our," "us" and "our Company" refer to Alexander & Baldwin, Inc., together with its consolidated subsidiaries.
2.BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The interim condensed consolidated financial statements are unaudited. Because of the nature of the Company'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, 20182019 and 2017,2018, and the related consolidated statements of operations, comprehensive income (loss), equity and cash flows for each of the three years in the period ended December 31, 2019, 2018 2017 and 2016,2017, respectively, and the notes thereto included in the Company's Annual Report filed on Form 10-K for the year ended December 31, 20182019 ("20182019 Form 10-K"), and other subsequent filings with the U.S. Securities and Exchange Commission ("SEC").
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 result in differences.
Significant Accounting Policies:Reclassifications: Certain amounts presented in the prior year have been reclassified to conform to the current year presentation. Refer to Note 2 to the condensed consolidated financial statements for such reclassifications made in conjunction with the adoption of recent accounting pronouncements. Further, a reclassification was made to the condensed consolidated statements of cash flows to present, on a net basis, amounts previously presented separately within cash flows from operating activities (i.e., to present activity related to proceeds and expenditures of real estate development/other property for sale – normal operating activity in the Company's Land Operations segment – on a net basis similar to the presentation of changes in other inventories held by the Company). This change does not affect previously reported cash flows from operating activities in the condensed consolidated statements of cash flows.
2.    SUMMARY OF SIGNIFICANT ACCOUNTING 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 20182019 Form 10-K. Changes to significant accounting policies are included herein.
Reclassifications
Unclassified Balance Sheet: During the first quarter of 2019, the Company changed the presentation of its balance sheet to be unclassified in order to be comparable with other REIT peers. The change was applied to all periods presented retrospectively.
Gain on Sale of Properties: In November 2018, the SEC finalized the Disclosure Update Simplification Project, which eliminated Rule 3-15(a)(1) reporting of Gain or Loss on Sale of Properties by REITs. To conform with Accounting Standards Codification ("ASC") 360 and the SEC rule change, the Company has classified the gain on dispositions of real estate assets in operating income in the Company's condensed consolidated statements of operations. The Company reclassified the prior period to conform to the current year presentation. This change resulted in an increase of $49.8 million in operating income during the nine months ended September 30, 2018.
Recently adopted accounting pronouncements
In February 2016,April 2020, the Financial Accounting Standards Board ("FASB") staff issued Accounting Standards Update ("ASU") No. 2016-02, Leases(Topic 842) ("ASU 2016-02"). The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 and should be implemented using a modified retrospective approach, withquestion-and-answer document focusing on lease concessions related to the option to apply the guidance at the effective date or the beginningeffects of the earliest comparative period. The Company adopted the guidance on January 1, 2019 and elected to use the effective date as the date of initial application. Consequently, financial information was not updatedcoronavirus pandemic ("COVID-19") and the disclosures required under the new standard are not provided for dates and periods before January 1, 2019. Additionally, the Company elected the "package of practical expedients," which permits the Company to not reassess prior conclusions about lease identification, lease classification and initial direct costs.
The new guidance did not have a material impact on the accounting treatment of the Company's triple-net tenant leases, which are the primary source of our CRE revenues. However, starting in the current year there were certain changes to the guidance under ASC 842 which will have an impact on future operating results, including initial direct costs associated with the execution


application of lease agreements such as legal fees and certain transaction costs will no longer be capitalizable and instead are expensed in the period incurred.
The Company recorded right-of-use ("ROU"accounting guidance related to modifications (the "Lease Modification Q&A") assets and corresponding lease liabilities of approximately $31.0 million on. See Note 12 to the condensed consolidated balance sheetfinancial statements for certain leases in which it is the lessee. The adoption of ASC 842 had no impactfurther discussion on the Company's lease expense.
In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities. The guidance is effective for fiscal years, and interim periods within those fiscal years,impact of applicable rent relief provided beginning after December 15, 2018. The Company adopted the guidance on January 1, 2019. The guidance amends the hedge accounting model in ASC 815 to enable entities to better portray the economics of their risk management activities in the financial statements and enhancequarter ended June 30, 2020 under the transparency and understandability of hedge results. The amendments expand an entity's ability to hedge nonfinancial and financial risk components and reduce complexity in fair value hedges of interest rate risk. This ASU eliminates the requirement to separately measure and report hedge ineffectiveness and requires the earnings effect of the hedging instrument to be presented in the same income statement line as the hedged item. The adoption of this standard did not have an impact on the Company's financial position or results of operations.
In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company adopted the guidance on January 1, 2019. The guidance expands the scope of ASC 718 to include share-based payment transactions with the exception of specific guidance related to the attribution of compensation cost. The guidance also clarifies that any share-based payment awards granted in conjunction with selling goods or services to customers should be evaluated under ASC 606. The adoption of this standard did not have an impact on the Company's financial position or results of operations.Lease Modification Q&A.
Recently issuedadopted accounting pronouncements
In June 2016, the FASB issued ASUAccounting Standards Update ("ASU") No. 2016-13, Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost.cost and available for sale debt securities, and amended the guidance thereafter. The guidance replacesin ASU 2016-13 and related amendments was codified into Accounting Standards Codification Topic 326, Financial Instruments - Credit Losses ("ASC 326"). ASC 326 amended prior guidance on the existing incurred lossimpairment of financial instruments by adding an impairment model based on expected losses rather than incurred losses that would be recognized through an allowance for credit losses. Amendments included in ASC 326 further clarified that operating lease receivables are not within the scope of ASC 326 and are to remain governed by lease guidance.
8

The Company completed its adoption of the provisions of ASU 2016-13, as amended, with an expected loss methodology,effective date of January 1, 2020, using a modified retrospective approach for its financial assets in the scope of ASC 326, which willconsisted of in-scope financial assets held at amortized cost (presented as part of the Company's accounts and retention receivables, other receivables and other contract assets). As a result in more timely recognition of the guidance, the Company is required to estimate and record non-cash credit losses. This ASU is effectivelosses related to these financial assets and expand its credit quality disclosures. Results for annual reporting periods and interim periods within those years, beginning after December 15, 2019. The FASB has subsequently issued other related ASUs, which amend ASU 2016-13January 1, 2020 are presented under ASC 326 while prior period amounts continue to provide clarification and additionalbe reported in accordance with previously applicable guidance. The Company is currently assessingrecorded a net increase of $4.0 million to Distributions in excess of accumulated earnings as of January 1, 2020, with a corresponding increase to previously recorded valuation accounts for its financial assets held at amortized cost for the cumulative effect of adopting ASC 326. The new standard did not have a material impact that adopting this new accounting standard will haveto any of the Company's other financial assets or instruments presented on its condensed consolidated financial statementsbalance sheet.
The following table illustrates the impact of the Company's adoption of ASC 326 (in millions):
January 1, 2020
As Reported under ASC 326Prior to ASC 326 AdoptionImpact of ASC 326 Adoption
Assets:
Allowance for credit losses on Accounts receivable and retention$1.6 $0.3 $1.3 
Allowance for credit losses on Other receivables4.2 1.6 2.6 
Allowance for credit losses on costs and estimated earnings in excess of billings on uncompleted contracts1
0.1 0 0.1 
Total$5.9 $1.9 $4.0 
1 Included in Prepaid expenses and footnote disclosures.other assets in the condensed consolidated balance sheets.
In August 2018, the FASB issued ASU 2018-13, Changes to the Disclosure Requirements for Fair Value MeasurementMeasurement.. The guidance amends and removes several disclosure requirements, including the valuation processes for Level 3 fair value measurements. This ASU also modifies some disclosure requirements and requires additional disclosures for changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements and requires the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This ASU is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. The Company is currently assessingadoption of this standard did not have a material impact on the impact that adopting this new standard will have on itsCompany's condensed consolidated financial statements and footnote disclosures.
In August 2018, the FASB issued ASU 2018-14, Changes to the Disclosure Requirements for Defined Benefit Plans. The guidance clarifies current disclosures and removes several disclosure requirements including accumulated other comprehensive income expected to be recognized over the next fiscal year and amount and timing of plan assets expected to be returned to the employer. This ASU also requires additional disclosures as well as explanations for significant gains and losses related to changes in the benefit plan obligation. This ASU is effective for fiscal years beginning after December 15, 2020. The Company is currently assessing the impact that adopting this new standard will have on its condensed consolidated financial statements andor footnote disclosures.
In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other: Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. The guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Accordingly, the amendments require an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. The amendments also require the entity (customer) to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement, which includes reasonably certain renewals. The adoption of this standard did not have a material impact on the Company's financial position or results of operations.
Reclassifications in conjunction with recently adopted accounting pronouncements
In conjunction with its adoption of ASC 326 with an effective date of January 1, 2020, the Company made certain reclassifications in its presentation of the condensed consolidated balance sheets for amounts related to contract receivables and financing receivables; such reclassifications were not material to the condensed consolidated financial statements. One such reclassification was to present interest receivables in the same line as the related financing receivables (affecting Accounts receivable, net and Other receivables). Another was to aggregate Accounts receivable, net and Contracts retention into a single line item in the accompanying condensed consolidated balance sheets (refer to Note 11 where such balances will continue to be presented separately). Further, certain amounts historically related to the allowance for doubtful accounts were reclassified under current presentation (e.g., certain amounts are now presented under the allowance for credit losses calculated under ASC 326 as described in Note 5 to the condensed consolidated financial statements).
9

Recently issued accounting pronouncements
In August 2018, the FASB issued ASU 2018-14, Changes to the Disclosure Requirements for Defined Benefit Plans. The guidance clarifies current disclosures and removes several disclosure requirements including accumulated other comprehensive income expected to be recognized over the next fiscal year and amount and timing of plan assets expected to be returned to the employer. This ASU also requires additional disclosures as well as explanations for significant gains and losses related to changes in the benefit plan obligation. This ASU is effective for fiscal years beginning after December 15, 2019 and the amendments can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption.2020. The Company is


currently assessing the impact that adopting this new standard will have on its condensed consolidated financial statements and footnote disclosures.
Leases
Lessee:In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform. The new guidance provides practical expedients and exceptions for reference rate reform related activities that impact debt, leases, derivatives and other contracts if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company determines if an arrangement is a leasecurrently assessing its contracts and the optional expedients provided by the new standard.
Allowance for credit losses
The Company estimates its allowance for credit losses for financial assets within the scope of ASC 326 at inception by considering whether that arrangement conveysportfolio levels which include the rightCRE segment, the Land Operations segment and individual components of the M&C segment (e.g., "GPC," "GPRS," further described in Note 1 to use an identified asset for a period of time in exchange for consideration. Operating leases arethe consolidated financial statements included in operating lease ROUItem 8 of the Company's 2019 Form 10-K). Within these portfolio levels, the Company develops expected credit loss estimates by security type (which may include financing receivables or contract assets recognized in contracts with customers) by factoring historical loss information; information on both current conditions and operating lease liabilitiesreasonable and supportable forecasts of future conditions that may not be reflected in historical loss information; and other relevant credit quality information for the respective securities. As part of this process, the Company analyzes relevant information on a collective (pool) basis for securities with similar risk characteristics or separately on an individual basis when a financial asset does not share risk characteristics with other financial assets.
The portfolios of financial assets within the scope of ASC 326 relating to the CRE and Land Operations segments include financing receivables (i.e., notes receivable), which are primarily composed of historical development and other land-related transactions. The assets in these portfolios are analyzed on an individual basis, in which the Company considers certain, available information specific to the counterparties to the transactions (e.g., liquidity and solvency of the counterparties) and environmental factors that are relevant in the Company's condensed consolidated balance sheets.
ROUassessment of the expected collectability of the future cash flows for these assets represent(e.g., changes and expected changes in the Company's right to use an underlying asset forgeneral economic environment in which the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROUcounterparty operates). For these assets, and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, the Company uses its incremental borrowing rate based ona discounted cash flow method to calculate the information available at commencement date in determiningallowance for credit losses using the present value of lease payments. The Company uses the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.asset's effective interest rate.
The Company has also elected, for all classesportfolios relating to the M&C segment represent discrete business components and are composed of underlyingcontract assets to not recognize lease liabilities and lease assets for leases with a term of 12 months or less.
Lessor: The Company reviews its contracts to determine if they qualify as a lease. A contract is determined to be a lease when the right to substantially all of the economic benefits and to direct the use of an identified asset is transferred to a customer over a defined period of time for consideration. During this review, the Company evaluates among other items, asset specification, substitution rights, purchase options, operating rights and control over the asset during the contract period.
The Company has lease agreements with lease and non-lease components, which are generally accounted for separately under ASC 606, Revenue from Contracts with Customers. The Company has elected to not separate non-lease components from lease components for all classes of underlying assets where the component follows the same timing and pattern as the lease component. Non-lease components included in rental revenue primarily consist of tenant reimbursements for common area maintenance and other services paid for by the lessor and utilized by the lessee.
Rental revenue is primarily derived from operating leases and, therefore, is generally recognized on a straight-line basis over the term of the lease. Fixed contractual payments from the Company's leases are recognized on a straight-line basis over the terms of the respective leases. Straight-line rental revenue commences when the customer assumes control of the leased premises. Accrued straight-line rents receivable represents the amount by which straight-line rental revenue exceeds rents currently billed in accordancecontracts with lease agreements. Certain of the Company's lease agreements include terms for contingent rental revenue (e.g. percentage rents based on tenant sales volume) and tenant reimbursed property taxes, which are both accounted for as variable payments.
Certain of the Company's leases include termination and/or extension options. Termination options allow the customer to terminate the lease prior to the end of the lease term under specific circumstances.customers. The Company's extension options generally require a re-negotiation with the customer at market rates. Initial direct costs, primarily commissions, related to the leasing of properties are capitalized on the balance sheet and amortized over the lease term. All other costs to negotiate or arrange a lease are expensed as incurred.
Accounts receivable related to leases are regularly evaluated for collectability, considering factors including, but not limited to, the credit quality of the customer, historical trends of the customer, and changes in customer payment terms. Upon determination that the collectability of a customer receivable is not probable, the Company will record an allowance for such receivable and a corresponding reduction to revenue previously recognized. Subsequent revenue is recorded on a cash basis until collectability on related billings becomes probable.
Changes in estimates on construction contracts
Revenue on the Company's long-term construction contracts are recognized using the percentage of completion, cost-to-cost, input method. Due to thediffering nature of the work requiredproducts and services provided by these components drive differences in historical and expected credit loss patterns and, as such, the Company tracks historical loss information at this portfolio level as part of information it uses to be performed, estimating total revenue and cost at completiondevelop its estimate of expected credit losses. Further, as the Company believes its contract is complex, subject to many variables and requires significant judgment. Such estimates of contract revenue and cost are dependentassets have different default risk expectations based on a number of factors that may change during a contract performance period, resultingcustomer/project type, in changes to estimated contract profitability. These factors include, but are not limitedaddition to the completenesshistorical loss information at the portfolio level, the Company also pools the respective portfolio's contract receivables by these different categories to make adjustments to its historical loss experience. Other information the Company analyzes and accuracyuses in its development of its allowance for credit losses include known customer information and environmental factors surrounding the original bid;customers' current and future ability to pay (i.e., changes and expected changes in the timing of scheduled work; change orders; unusual weather conditions; changes in costs of labor and/or materials; changes in productivity


expectations; and the expected, or actual, resolution terms for claims. Management evaluates changes in estimates on a contract by contract basis and uses the cumulative catch-up method to account for the changes in the periodgeneral economic environment in which they are determined.the customers operate).
10

Interest and other income (expense), net
Interest and other income (expense), net for the three and nine months ended September 30, 2020 and 2019 was primarily composed of interest income of $2.9 million. Interest and other income (expense), net forincluded the following (in millions):
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Interest income$0.2 $0.9 $1.0 $2.9 
Pension and postretirement benefit (expense)(0.6)(1.1)(1.9)(3.4)
Gain (loss) on sale of joint venture interest0 0 0 2.6 
Other income (expense), net0 0.8 0.3 0.7 
Interest and other income (expense), net$(0.4)$0.6 $(0.6)$2.8 

3.    REAL ESTATE ASSET ACQUISITIONS
The Company did not execute any real estate asset acquisitions during the nine months ended September 30, 2018 was primarily composed of a $4.2 million net gain on2020. During the sale of the Company's joint venture interest in the Ka Milo real estate development-for-sale project. For the nine monthsyear ended September 30, 2019 and 2018, other expense was primarily composed of pension and postretirement benefit expense of $3.4 million and $2.2 million, respectively.
Discontinued operations
In December 2016, the Company completed its final sugar harvest and ceased its sugar operations. Costs related to the cessation of sugar operations are presented as discontinued operations in the condensed consolidated statements of operations. Liabilities related to the cessation of sugar operations are presented within Accrued and other liabilities in the condensed consolidated balance sheets. For the nine months ended September 30,31, 2019, the Company recorded a loss from discontinued operations of $0.8 million primarily related to an increase in cessation related accruals and a reserve for bad debt against outstanding receivables deemed uncollectible in the first quarter of 2019.
3.COMMITMENTS AND CONTINGENCIES
Commitments, Guarantees and Contingencies: Commitments and financial arrangements not recorded on the Company's condensed consolidated balance sheet included standby letters of credit and bonds. As of September 30, 2019, standby letters of credit issued by the Company's lenders under the Company's revolving credit facilities totaled $1.7 million. These letters of credit primarily relate to the Company'sacquired 5 commercial real estate activities, and if drawn upon the Company would be obligated to reimburse the issuer.
As of September 30, 2019, bonds related to the Company's construction and real estate activities totaled $440.8assets for $218.4 million. Approximately $421.7 million represents the face value of construction bonds issued by third party sureties (bid, performance and payment bonds), and the remainder is related to commercial bonds issued by third party sureties (permit, subdivision, license and notary bonds). In the event the bonds are drawn upon, the Company would be obligated to reimburse the surety that issued the bond for the amount of the bond, reduced for the work completed to date. As of September 30, 2019, the Company's estimated remaining exposure, assuming defaults on all existing contractual construction obligations, was approximately $79.8 million.
Indemnity Agreements: For certain real estate joint ventures, the Company may be obligated under bond indemnities to complete construction of the real estate development if the joint venture does not perform. These indemnities are designed to protect the surety in exchange for the issuance of surety bonds that cover joint venture construction activities, such as project amenities, roads, utilities, and other infrastructure, at its joint ventures. Under the indemnities, the Company and its joint venture partners agree to 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 potential amount of aggregate future payments is a function of the amount covered by outstanding bonds at the time of default by the joint venture, reduced by the amount of work completed to date. The recorded amounts of the indemnity liabilities were not material individually or in the aggregate.
The Company is a guarantorallocation of indebtedness for certain of its unconsolidated joint ventures' borrowings with third party lenders, relatingpurchase price to the repayment of construction loansassets acquired and performance of construction for the underlying project. As of September 30, 2019, the Company's limited guarantees on indebtedness related to 1 of its unconsolidated joint ventures totaled $3.1 million.
Other than obligations described above and those described in the Company's 2018 Form 10-K, obligations of the Company's joint ventures do not have recourse to the Company, and the Company's "at-risk" amounts are limited to its investment.
Legal Proceedings and Other 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, A&B, through East Maui Irrigation Company, LLC ("EMI"), also owned approximately 16,000 acres of watershed lands in East Maui and also held 4 water licenses to approximately 30,000 acres owned by the State of Hawai‘i in East Maui. The sale to Mahi Pono includes the sale of a 50% interest in EMI (which closed February 1, 2019), and provides for A&B and Mahi Pono, through EMI, to jointly continue the existing process to secure long-term leases 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 4 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 completion by the BLNR of a 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. NaN parties filed a lawsuit on April 10, 2015 (the "4/10/15 Lawsuit") alleging that the BLNR has been renewing the revocable permits annually rather than keeping them in holdover status. The lawsuit 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 was challenged by the 3 parties. In January 2016, the court ruled in the 4/10/15 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. The decision was appealed to the Intermediate Court of Appeals ("ICA") of the State of Hawai‘i.
In May 2016, while the appeal of the 4/10/15 Lawsuit 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 exceed three years. The governor signed this bill into law as Act 126 in June 2016. Pursuant to Act 126, the annual authorization of the existing holdover permits was sought and granted by the BLNR in December 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 June 2019, the ICA vacated the lower court’s ruling in the 4/10/15 Lawsuit that the BLNR lacked authority to keep the revocable permits in holdover status beyond one year and remanded the case 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 have filed a motion with the ICA for reconsideration of its decision, which was denied on July 5, 2019. On September 30, 2019, Plaintiffs filed a request with the Supreme Court of Hawai‘i to review and reverse the ICA’s ruling. On October 11, 2019, the BLNR took up the renewal of all the existing water revocable permits in the state, acting under the ICA's ruling, and approved the continuation of the 4 East Maui water revocable permits for another one-year period through December 31, 2020.
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, 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 extension of the revocable permits for, among other things, failure to perform an EA. The count alleging failure to perform an EA was recently ordered to be dismissed based on the ICA ruling in the 4/10/15 Lawsuit. The lawsuit also seeks to enjoin the diversion by EMI of more than 25 million gallons a day pending the imposition by BLNR of conditions that Sierra Club alleges should be imposed on the revocable permits. In connection with A&B’s obligation to continue the existing process to secure long-term water leases from the State, A&B and EMI will defend against the claims made by the Sierra Club.
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, the outcomes of which, in the opinion of management after consultation with counsel, would not have a material effect on A&B's consolidated financial statements as a whole.
4.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 income (loss) from continuing operations available to A&B shareholders and net income (loss) available to A&B shareholders (in millions):
 Three Months Ended September 30, Nine Months Ended September 30,
  
 2019
2018 2019 2018
Income (loss) from Continuing Operations$(50.8) $15.8
 $(42.6) $66.2
Less: (Income) loss attributable to noncontrolling interest1.1
 (0.8) 1.8
 (1.4)
Income (loss) from continuing operations attributable to A&B shareholders(49.7) 15.0
 (40.8) 64.8
Income (loss) from discontinued operations available to A&B shareholders, net of income taxes(0.1) (0.2) (0.8) (0.2)
Net income (loss) available to A&B shareholders$(49.8) $14.8
 $(41.6) $64.6
The number of shares used to compute basic and diluted earnings per shareliabilities assumed is as follows (in millions):
Fair value of assets acquired and liabilities assumed
Assets acquired:
Land$106.9 
Property and improvements91.3 
In-place leases23.2 
Favorable leases4.3 
Total assets acquired$225.7 
Liabilities assumed:
Unfavorable leases$7.3 
Total liabilities assumed7.3 
Net assets acquired$218.4 
 Three Months Ended September 30, Nine Months Ended September 30,
  
 2019 2018 2019 2018
Denominator for basic EPS - weighted average shares outstanding72.3
 72.0
 72.2
 70.2
Effect of dilutive securities:       
Non-participating stock options and restricted stock unit awards—
 0.4
 —
 0.4
Special Distribution—
 —
 —
 1.8
Denominator for diluted EPS - weighted average shares outstanding72.3
 72.4
 72.2
 72.4
As of the acquisition date, the weighted-average amortization periods of the in-place and favorable leases were approximately 8.2 years and 4.7 years, respectively. The weighted-average amortization period of the unfavorable leases was approximately 18.6 years.
4.    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 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 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
11

There were 0.4 million shares of anti-dilutive securities outstanding duringaccounted for by the equity method on a combined basis for the three and nine months ended September 30, 2019. There were 0.1 million shares of anti-dilutive securities outstanding during2020 and 2019 is as follows (in millions):
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Revenues$43.3 $44.7 $133.6 $143.1 
Operating costs and expenses36.9 35.6 110.9 127.6 
Gross Profit (Loss)$6.4 $9.1 $22.7 $15.5 
Income (Loss) from Continuing Operations1
$6.0 $5.5 $14.0 $6.6 
Net Income (Loss)1
$5.7 $5.4 $13.5 $6.4 
1 Includes earnings from equity method investments held by the investee.

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5.    ALLOWANCE FOR CREDIT LOSSES
The following table presents the threeactivity in the allowance for credit losses related to the Company's financing receivables and contract assets for the nine months ended September 30, 2018.2020 (in millions):
CRELand OperationsM&C
Financing ReceivablesFinancing ReceivablesContract AssetsTotal
Allowance for credit losses:
Balance as of January 1, 2020 (prior to adoption of ASC 326)$0 $1.6 $0.3 $1.9 
Impact of adoption of ASC 3260.4 2.3 1.3 4.0 
Provision for expected credit losses0 0.3 0 0.3 
Balance as of March 31, 20200.4 4.2 1.6 6.2 
Provision for expected credit losses0 (0.3)(0.1)(0.4)
Disposal of subsidiary0 0 (0.1)(0.1)
Balance as of June 30, 20200.4 3.9 1.4 5.7 
Provision for expected credit losses0 0.2 (0.1)0.1 
Ending allowance balance as of September 30, 2020$0.4 $4.1 $1.3 $5.8 
5.FAIR VALUE OF FINANCIAL INSTRUMENTS
The credit quality of the Company's financing receivables is monitored each reporting period on an individual asset basis using specific information on the counterparties in these transactions. The following represents qualitative and quantitative information on each financing receivable within the applicable portfolios.
The CRE portfolio of financing receivables consists of 1 asset that originated in 2019 and had an amortized cost basis of $0.4 million as of both the adoption date of January 1, 2020 and September 30, 2020. Based on individual credit quality indicators of the counterparty as of the adoption date and September 30, 2020, the most likely outcome of expected cash flows for the asset in a range of possible outcomes (i.e., the single best estimate) was zero and, as a result, the Company recorded a full allowance for credit losses for the financing receivable on adoption of ASC 326 as of January 1, 2020 and as of September 30, 2020.
The Land Operations financing receivables consist of 3 assets. The first originated in 2008 and had an amortized cost basis of $1.6 million as of both the adoption date of January 1, 2020 and September 30, 2020. Based on individual credit quality indicators of the counterparty as of the adoption date and September 30, 2020, the most likely outcome of expected cash flows for the asset in a range of possible outcomes (i.e., the single best estimate) was zero and, as a result, the Company recorded a full allowance for credit losses for the financing receivable on adoption of ASC 326 as of January 1, 2020 and as of September 30, 2020. The second financing receivable within Land Operations was generated in 2016 and had an amortized cost basis of $13.5 million and $11.6 million as of the adoption date of January 1, 2020 and September 30, 2020, respectively. The third financing receivable within Land Operations was generated in 2017 and had an amortized cost basis of $2.6 million as of both the adoption date of January 1, 2020 and September 30, 2020. The second and third financing receivables were evaluated based on the credit quality indicators of the respective counterparties (as well as reasonable and supportable forecasts of future conditions that are relevant to determining the expected collectability of the receivable) as of the adoption date and September 30, 2020 and the estimated allowance for credit losses was calculated using a discounted cash flow approach.
The Company's contract assets represent trade receivables that are due in one year or less that result from revenue transactions from contracts with customers or other related balances that do not meet the definition of financing receivables.
For allowance for credit losses estimated using the discounted cash flow approach, changes in present value attributable to the passage of time are reported as an adjustment to credit loss expense. As a result, the provision for expected credit losses in any given period may be impacted by changes in expected credit losses on future payments or current period collections for receivables on which allowances were recorded in previous periods, both of which may be further impacted or offset by changes in present value attributable to the passage of time.
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6.    INVENTORIES
Inventories are stated at the lower of cost (principally first-in, first-out basis) or net realizable value. Inventories as of September 30, 2020 and December 31, 2019 were as follows (in millions):
September 30,December 31,
20202019
Asphalt$5.7 $8.0 
Processed rock and sand6.9 6.6 
Work in progress3.4 2.9 
Retail merchandise2.3 2.0 
Parts, materials and supplies inventories1.0 1.2 
Total$19.3 $20.7 

7.    FAIR VALUE MEASUREMENTS
The fair value of the Company's cash and cash equivalents, accounts receivable and notes receivable with remaining terms less than 12 months approximate their carrying values due to the short-term nature of the instruments. The fair value of the Company's notes receivable with remaining terms greater than 12 months is estimated 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 market capitalization rates related to the underlying collateral at which management believes similar loans would be made and classified as Level 3 in the fair value hierarchy. The fair value of these notes approximates the carrying amount of $15.7$11.7 million at September 30, 2019.2020. The fair value and carrying value of these notes was $16.3$16.1 million at December 31, 2018.2019 (see Note 2, "Summary of Significant Accounting Policies," for reclassifications related to these notes in conjunction with the adoption of ASC 326).
The carrying amount and fair value of the Company's debt at September 30, 20192020 was $732.4$763.6 million and $753.8$758.9 million, respectively, and $778.1$704.6 million and $758.0$727.3 million at December 31, 2018,2019, respectively. 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 (Level 2).
The Company carries its interest rate swaps at fair value. See Note 159, "Derivative Instruments," for fair value information regarding the Company's derivative instruments.


14

6.INVENTORIES
Inventories are stated at the lower of cost (principally first-in, first-out basis) or net realizable value. Inventories as of8.    NOTES PAYABLE AND OTHER DEBT
At September 30, 20192020 and December 31, 2018 were as follows (in millions):
 September 30, 2019 December 31, 2018
Asphalt$9.7
 $9.4
Processed rock and sand7.5
 9.5
Work in progress3.2
 4.0
Retail merchandise2.1
 2.0
Parts, materials and supplies inventories1.4
 1.6
Total$23.9
 $26.5

7.SHARE-BASED PAYMENT AWARDS
The 2012 Incentive Compensation Plan ("2012 Plan") allows for the granting of stock options, restricted stock units and common stock. The shares of common stock authorized to be issued under the 2012 Plan may be drawn from the shares of the Company's authorized but unissued common stock or from shares of its common stock that the Company acquires, including shares purchased on the open market or private transactions.
The following table summarizes the Company's stock option activity for the nine months ended September 30, 2019, (in thousands, except weighted-average exercise price and weighted-average contractual life):
 2012 Plan
Stock Options		 Weighted-
Average
Exercise Price		 Weighted-
Average
Contractual Life		 Aggregate
Intrinsic
Value
Outstanding, January 1, 2019580.1 $12.91
 
 

Exercised(225.8) $11.29
 
 

Canceled(2.0) $13.11
    
Outstanding, September 30, 2019352.3 $13.95
 1.8 years $3,756
Vested or expected to vest352.3 $13.95
 1.8 years $3,756
Exercisable, September 30, 2019352.3 $13.95
 1.8 years $3,756

The following table summarizes non-vested restricted stock unit activity for the nine months ended September 30, 2019 (in thousands, except weighted-average grant-date fair value amounts):
 2012 Plan
Restricted
Stock Units		 Weighted-
Average
Grant-date
Fair Value
Outstanding, January 1, 2019421.3
 $25.91
Granted264.0
 $20.05
Vested(149.5) $23.72
Canceled(78.8) $22.07
Outstanding, September 30, 2019457.0
 $23.90

The time-based restricted stock units granted to employees vest ratably over a period of three years. The time-based restricted stock units granted to non-employee directors prior to 2018 vest ratably over a period of three years, and commencing in 2018, the time-based restricted stock units granted to non-employee directors vest over one year. The market-based performance share units cliff vest over three years, provided that the total shareholder return of the Company's common stock over the relevant period meets or exceeds pre-defined levels of total shareholder returns relative to indices, as defined.


The fair value of the Company'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:
 2019 Grants 2018 Grants
Volatility of A&B common stock23.8% 22.7%
Average volatility of peer companies23.8% 21.6%
Risk-free interest rate1.8% 2.3%

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 September 30, Nine Months Ended September 30,
   
  2019 2018 2019 2018
Share-based expense: 
 
    
Time-based and market-based restricted stock units $1.4
 $1.3
 $4.1
 $4.0
Total recognized tax benefit —
 (0.1) —
 (0.4)
Share-based expense (net of tax) $1.4
 $1.2
 $4.1
 $3.6


8.RELATED PARTY TRANSACTIONS
Construction Contracts and Material Sales. The Company entered into contracts in the ordinary course of business, as a supplier, with affiliates that are members in entities in which the Company also is a member. Revenues earned from transactions with affiliates were $2.8 million and $4.5 million for the three months ended September 30, 2019 and 2018, respectively. Revenues earned from transactions with affiliates were $9.6 million and $10.8 million for the nine months ended September 30, 2019 and 2018, respectively. Receivables from these affiliates were $1.5 million and $2.2 million as of September 30, 2019 and December 31, 2018, respectively. Amounts due to these affiliates were $0.7 million and $0.6 million as of September 30, 2019 and December 31, 2018.
Commercial Real Estate. The Company entered into contracts in the ordinary course of business, as a lessor of property, with certain affiliates that are partially owned by a former director of the Company. There was 0 recorded revenue earned from transactions with affiliates for the three months ended September 30, 2019. For the three months ended September 30, 2018, revenues earned from transactions with affiliates were $1.2 million. Revenues earned from transactions with affiliates were $1.3 million and $3.5 million for the nine months ended September 30, 2019 and 2018, respectively. There were 0 receivables from these affiliates as of September 30, 2019 and less than $0.1 million as of December 31, 2018.
Land Operations. During the three months ended September 30, 2019 and 2018, the Company recognized $1.1 million and less than $0.1 million, respectively, related to revenue for services provided to certain unconsolidated investments in affiliates and interest earned on notes receivables from related parties. Service revenues and interest recorded during the nine months ended September 30, 2019 and 2018 were $1.7 million and $0.1 million, respectively. Receivables from these affiliates were less than $0.1 million as of September 30, 2019 and December 31, 2018.
During the year ended December 31, 2017, the Company extended a five-year construction loan secured by a mortgage on real property to one of its joint ventures. Receivables from this affiliate were $13.1 million and $13.5 million as of September 30, 2019 and December 31, 2018, respectively.


9.EMPLOYEE BENEFIT PLANS
Components of the net periodic benefit cost for the Company's pension and post-retirement plans for the three and nine months ended September 30, 2019 and 2018 are shown below (in millions):
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
Service cost$0.7
 $0.5
 $1.8
 $1.6
Interest cost2.1
 2.0
 6.3
 6.0
Expected return on plan assets(1.8) (2.1) (5.4) (6.2)
Amortization of net loss0.9
 1.1
 2.9
 3.3
Amortization of prior service credit(0.1) (0.2) (0.4) (0.5)
Curtailment (gain)/loss—
 —
 —
 (0.4)
Net periodic benefit cost$1.8
 $1.3
 $5.2
 $3.8

10.REAL ESTATE ASSET ACQUISITIONS
During the nine months ended September 30, 2019, the Company acquired 5 commercial real estate assets for $218.4 million.
The allocation of purchase price to assets acquired and liabilities assumed is as follows (in millions):
Fair value of assets acquired and liabilities assumed
Assets acquired: 
Land$106.9
Property and improvements91.3
In-place leases23.2
Favorable leases4.3
Total assets acquired$225.7
  
Liabilities assumed: 
Unfavorable leases$7.3
Total liabilities assumed7.3
Net assets acquired$218.4

As of the acquisition date, the weighted-average amortization periods of the in-place and favorable leases were approximately 8.2 years and 4.7 years, respectively. The weighted-average amortization period of the unfavorable leases was approximately 18.6 years.


11.ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The changes in accumulated other comprehensive income (loss) by component for the nine months ended September 30, 2019 were as follows (in millions):
 Employee
Benefit Plans		 Interest Rate Swap Total
Balance, January 1, 2019$(55.2) $3.3
 $(51.9)
Other comprehensive income (loss) before reclassifications, net of taxes of $0 for interest rate swap—
 (5.5) (5.5)
Amounts reclassified from accumulated other comprehensive income (loss), net of taxes of $0 for employee benefit plans2.5
 —
 2.5
Amounts reclassified from accumulated other comprehensive income (loss), net of taxes of $0 for interest rate swap—
 (0.1) (0.1)
Balance, September 30, 2019$(52.7) $(2.3) $(55.0)

The details of the changes in accumulated other comprehensive income (loss), including reclassifications out of accumulated other comprehensive income (loss), by component for the three and nine months ended September 30, 2019 and 2018, respectively, were as follows (in millions):
         
  Three Months Ended September 30, Nine Months Ended September 30,
  2019 2018 2019 2018
Unrealized interest rate hedging gain (loss) $(2.0) $0.6
 $(5.5) $3.0
Impact of reclassification adjustment to interest expense included in Net Income (Loss) 0.2
 —
 (0.1) —
Amortization of defined benefit pension items reclassified to net periodic pension cost:        
Actuarial loss1
 0.9
 1.1
 2.9
 3.3
Prior service credit1
 (0.1) (0.2) (0.4) (0.5)
Curtailment (gain)/loss1
 —
 —
 —
 (0.4)
Total before income tax (1.0) 1.5
 (3.1) 5.4
Income taxes —
 (0.4) —
 (1.4)
Other comprehensive income (loss), net of tax $(1.0) $1.1
 $(3.1) $4.0
1 This accumulated other comprehensive income (loss) component is included in the computation of net periodic pension cost (see Note 9 for additional details).
12.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 and nine months ended September 30, 2019 differed from the effective tax rate for the same periods in 2018, primarily due to the full valuation allowance recorded on the net deferred tax assets at the end of 2018.


13.NOTES PAYABLE AND TOTAL DEBT
At September 30, 2019 and December 31, 2018, notes payable and total debt consisted of the following (in(dollars in millions):
Interest Rate (%)Maturity DatePrincipal Outstanding
September 30, 2020December 31, 2019
Secured:
Kailua Town Center(1)2021$9.9 $10.2 
Kailua Town Center #23.1520214.5 4.6 
Heavy Equipment Financing(2)(2)3.1 3.6 
Laulani Village3.93202461.6 62.0 
Pearl Highlands4.15202481.9 83.4 
Manoa Marketplace(3)202958.3 59.5 
Subtotal$219.3 $223.3 
Unsecured:
Series D Note6.9020200 16.2 
Bank syndicated loan(4)202350.0 50.0 
Series A Note5.53202428.4 28.5 
Series J Note4.66202510.0 10.0 
Series B Note5.55202646.0 46.0 
Series C Note5.56202622.0 23.0 
Series F Note4.35202619.7 22.0 
Series H Note4.04202650.0 50.0 
Series K Note4.81202734.5 34.5 
Series G Note3.88202735.0 35.0 
Series L Note4.89202818.0 18.0 
Series I Note4.16202825.0 25.0 
Term Loan 54.30202925.0 25.0 
Subtotal$363.6 $383.2 
Revolving Credit Facilities:
GLP Asphalt revolving credit facility(5)20200 0 
A&B Revolver(6)2022181.0 98.7 
Subtotal$181.0 $98.7 
Total Debt (contractual)763.9 705.2 
Unamortized debt premium (discount)0 (0.1)
Unamortized debt issuance costs(0.3)(0.5)
Total debt (carrying value)$763.6 $704.6 
      Principal Outstanding
Debt Interest Rate
(%)		 Maturity
Date		 September 30, 2019 December 31, 2018
Secured:        
Kailua Town Center (1) 2021 $10.3
 $10.5
Kailua Town Center #2 3.15% 2021 4.7
 4.7
Heavy equipment financing (2) 2023 2.0
 —
Laulani Village 3.93% 2024 62.0
 62.0
Pearl Highlands 4.15% 2024 84.0
 85.3
Manoa Marketplace (3) 2029 59.8
 60.0
Subtotal     $222.8
 $222.5
Unsecured:        
Term Loan 3 5.19% 2019 0.7
 2.3
Term Loan 4 (4) 2019 —
 9.4
Series D Note 6.90% 2020 16.2
 32.5
Bank syndicated loan (5) 2023 50.0
 50.0
Series A Note 5.53% 2024 28.5
 28.5
Series J Note 4.66% 2025 10.0
 10.0
Series B Note 5.55% 2026 46.0
 46.0
Series C Note 5.56% 2026 23.0
 24.0
Series F Note 4.35% 2026 22.0
 22.0
Series H Note 4.04% 2026 50.0
 50.0
Series K Note 4.81% 2027 34.5
 34.5
Series G Note 3.88% 2027 42.5
 42.5
Series L Note 4.89% 2028 18.0
 18.0
Series I Note 4.16% 2028 25.0
 25.0
Term Loan 5 4.30% 2029 25.0
 25.0
Subtotal     $391.4
 $419.7
Revolving Credit Facilities:        
GLP Asphalt revolving credit facility (6) 2020 0.5
 0.4
Revolving credit facility (7) 2022 118.4
 136.6
Subtotal     $118.9
 $137.0
Total debt (contractual)     $733.1
 $779.2
Unamortized debt premium (discount)     (0.1) (0.2)
Unamortized debt issuance costs     (0.6) (0.9)
Total debt (carrying value)     $732.4
 $778.1

(1) Loan has a stated interest rate of LIBOR plus 1.50%, but is swapped through maturity to a 5.95% fixed rate.
(2) Loans have a stated raterates ranging from 4.08% to 5.00% and stated maturity dates ranging from 2021 to 2024.
(3) Loan has a stated interest rate of LIBOR plus 1.35%, but is swapped through maturity to a 3.14% fixed rate.
(4) Loan has a stated interest rate of LIBOR plus 2.00%, and1.80% but is secured byswapped through maturity to a letter of credit.3.15% fixed rate.
(5) Loan has a stated interest rate of LIBOR plus 1.60%, based on pricing grid.1.25%.
(6) Loan has a stated interest rate of LIBOR plus 1.25%.
(7) Loan has a stated interest rate of LIBOR plus 1.65%,1.85% based on pricing grid.

The Company believes that funds generated from results of operations, available cash and cash equivalents, and available borrowings under credit facilities will be sufficient to satisfy any maturities of debt due in the next twelve months.
Interest costs are capitalized for certain development and redevelopment projects that have not yet been placed into service. Capitalization of interest commences when development activities and expenditures begin and end upon completion, which is when the asset is ready for its intended use. CapitalizedThere were 0 capitalized interest costs related to development activities were $0.8for the three months ended September 30, 2020 and $0.2 million for the nine months ended September 30, 2019.2020. There were $0.4$0.2 million and $0.8 million of capitalized interest costs for the ninethree months ended September 30, 2018.


14.    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 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 (loss) from its equity method investments. Summarized financial information of entities accounted for by the equity method on a combined basis for the three and nine months ended September 30, 2019, and 2018 is as follows (in millions):respectively.
  Three Months Ended September 30, Nine Months Ended September 30,
  2019 2018 2019 2018
Revenues $44.7
 $78.0
 $143.1
 $202.6
Operating costs and expenses 35.6
 64.8
 127.6
 172.5
Gross Profit (Loss) $9.1
 $13.2
 $15.5
 $30.1
Income (Loss) from Continuing Operations1
 $5.5
 $9.9
 $6.6
 $14.3
Net Income (Loss)1
 $5.4
 $9.8
 $6.4
 $14.0
1 Includes earnings from equity method investments held by the investee.
15

15.9.    DERIVATIVE INSTRUMENTS
The Company is exposed 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 and variable 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
As of September 30, 2019,2020, the Company has 12 interest rate swap agreementagreements designated as a cash flow hedgehedges whose key terms are as follows (dollars in millions):
EffectiveMaturityFixed Interest Notional Amount at Fair Value at
DateDateRate September 30, 2019 September 30, 2019 December 31, 2018
4/7/20168/1/20293.14% $60.0
 $(1.7) $3.9

EffectiveMaturityFixed InterestNotional Amount atAsset (Liability) Fair Value atClassification on
DateDateRateSeptember 30, 2020September 30, 2020December 31, 2019Balance Sheet
4/7/20168/1/20293.14%$58.3 $(5.8)$(0.2)Accrued and other liabilities
02/13/202002/27/20233.15%$50.0 $(1.5)N/AAccrued and other liabilities
The liability related to the interest rate swap as of September 30, 2019 is presented within Accrued and other liabilities in the condensed consolidated balance sheet. The asset related to the interest swap at December 31, 2018 was presented within Prepaid expenses and other assets. The changes in fair value of the cash flow hedge are recorded in accumulated other comprehensive income (loss) and subsequently reclassified into interest expense as interest is incurred on the related-variable rate debt. As of September 30, 2020, the Company expects to reclassify $0.8 million of net gains (losses) on derivative instruments from accumulated other comprehensive income to earnings during the next 12 months.
Non-designated Hedges
As of September 30, 2019,2020, the Company has 1 interest rate swap that has not been designated as a cash flow hedge whose key terms are as follows (dollars in millions):
EffectiveMaturityFixed Interest Notional Amount at Fair Value atClassification on
DateDateRate September 30, 2019 September 30, 2019 December 31, 2018Balance Sheet
1/1/20149/1/20215.95% $10.3
 $(0.6) $(0.5)Accrued and other liabilities



EffectiveMaturityFixed InterestNotional Amount atAsset (Liability) Fair Value atClassification on
DateDateRateSeptember 30, 2020September 30, 2020December 31, 2019Balance Sheet
1/1/20149/1/20215.95%$9.9 $(0.4)$(0.5)Accrued and other liabilities
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):
  Three Months Ended September 30, Nine Months Ended September 30,
  2019 2018 2019 2018
Derivatives in Designated Cash Flow Hedging Relationships: 
 
    
Amount of gain (loss) recognized in OCI on derivatives $(2.0) $0.6
 $(5.5) $3.0
Impact of reclassification adjustment to interest expense included in Net Income (Loss) $0.2
 $—
 $(0.1) $—

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Derivatives in Designated Cash Flow Hedging Relationships:
Amount of gain (loss) recognized in OCI on derivatives$(0.1)$(2.0)$(7.7)$(5.5)
Impact of reclassification adjustment to interest expense included in Net Income (Loss)$0.5 $0.2 $0.6 $(0.1)
The Company records gains or losses related to interest rate swaps that have not been designated as cash flow hedges in Interest and other income in its condensed consolidated statements of operations, andoperations. The Company recognized a gain of $0.1 million in the nine months ended September 30, 2020. There were 0 amounts were immaterial duringrecognized in the three and nine months ended September 30, 2019 and 2018.related to changes in fair value.
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.
16
16.    SEGMENT RESULTS

Operating segment information for10.    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 three and nine months endedCompany's condensed consolidated balance sheet as of September 30, 20192020:
•Standby letters of credit issued by the Company's lenders under the Company's revolving credit facilities totaled $1.1 million as of September 30, 2020. These letters of credit primarily relate to the Company's workers' compensation plans and 2018 is summarized below (in millions):
  Three Months Ended September 30, Nine Months Ended September 30,

 2019 2018 2019 2018
Operating Revenue:        
Commercial Real Estate $42.7
 $35.9
 $118.6
 $104.9
Land Operations 8.5
 24.0
 82.4
 72.6
Materials & Construction 37.9
 59.5
 126.6
 167.3
Total operating revenue 89.1
 119.4
 327.6
 344.8
Operating Profit (Loss):        
Commercial Real Estate1
 18.0
 15.9
 50.6
 45.0
Land Operations2
 2.8
 13.1
 15.9
 9.3
Materials & Construction (57.9) 3.4
 (66.7) 7.2
Total operating profit (loss) (37.1) 32.4
 (0.2) 61.5
Gain (loss) on the sale of commercial real estate properties —
 —
 —
 49.8
Interest expense (8.2) (9.1) (25.4) (26.4)
General corporate expenses (5.5) (6.5) (18.1) (20.5)
Income (Loss) from Continuing Operations Before Income Taxes $(50.8) $16.8

$(43.7)
$64.4

construction activities; if drawn upon the Company would be obligated to reimburse the issuer.
1 •Commercial Real Estate segment operating profit (loss) includes intersegment operating revenue, primarily from the Materials & Construction segment, and is eliminated in the condensed consolidated results of operations.
2 Land Operations segment operating profit (loss) includes equity in earnings (losses) from the Company's various real estate joint ventures and non-cash reductionsBonds related to the Company's solar tax equity investments.
Segment balance sheet informationconstruction and real estate activities totaled $357.6 million as of September 30, 2020. Approximately $338.3 million represents the face value of construction bonds issued by third party sureties (bid, performance and payment bonds), and the remainder is related to commercial bonds issued by third party sureties (permit, subdivision, license and notary bonds); if drawn upon, the Company would be obligated to reimburse the surety that issued the bond for the amount of the bond, reduced for the work completed to date. As of September 30, 2020, the Company's maximum remaining exposure, in the event of defaults on all existing contractual construction obligations, was approximately $72.7 million.
The Company also provides certain bond indemnities and guarantees of indebtedness for certain of its unconsolidated affiliates that it accounts for as equity method investments (e.g., real estate joint ventures).
•Bond indemnities are provided for the benefit of the surety in exchange for the issuance of surety bonds and cover joint venture construction activities (such as project amenities, roads, utilities, and other infrastructure). Under such bond indemnities, the Company and the joint venture partners agree to 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 Company may be obligated to complete construction of the joint ventures' construction projects if the joint venture does not perform. The maximum potential amount of aggregate future payments is a function of the amount covered by outstanding bonds at the time of default by the joint venture, reduced by the amount of work completed to date.
•Guarantees of indebtedness of an unconsolidated equity method investee relate to a line of credit held by such investee with third party lenders. As of September 30, 2020, the Company's limited guarantees on indebtedness totaled $9.2 million.
The recorded amounts of the bond indemnities and guarantee of indebtedness were not material individually or in the aggregate. Other than obligations described above and those described in the Company's 2019 Form 10-K, obligations of the Company's joint ventures do not have recourse to the Company, and the Company's "at-risk" amounts are limited to its investment.
Legal proceedings and other 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 and also held 4 water licenses to approximately 30,000 acres owned by the State of Hawai‘i in East Maui. The sale to Mahi Pono includes the sale of a 50% interest in EMI (which closed February 1, 2019), and provides 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 4 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 completion by the BLNR of a 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. NaN parties filed a lawsuit on April 10, 2015 (the "Initial Lawsuit") alleging that the BLNR has been renewing the revocable permits annually rather than keeping them in holdover status. The lawsuit 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 was challenged by the 3 parties. In January 2016, the court ruled in the Initial 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 (the "Initial Ruling"). The Initial Ruling was appealed to the Intermediate Court of Appeals ("ICA") of the State of Hawai‘i.
17

In May 2016, while the appeal 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 exceed three years. The governor signed this bill into law as Act 126 in June 2016. Pursuant to Act 126, the annual authorization of the existing holdover permits was sought and granted by the BLNR in December 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 June 2019, the ICA vacated the Initial Ruling, effectively reversing the determination that the BLNR 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 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. On October 11, 2019, the BLNR took up the renewal of all the existing water revocable permits in the state, acting under the ICA Ruling, and approved the continuation of the 4 East Maui water revocable permits for another one-year period through December 31, 2020.
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, 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 extension of the revocable permits for, among other things, failure to perform an EA. The lawsuit also seeks to have the BLNR enjoin A&B/EMI from diverting more than 25 million gallons a day until a permit or lease is summarized below (in millions):properly issued by the BLNR, and for the imposition of certain conditions on the revocable permits by the BLNR. The count seeking to invalidate the revocable permits based on the failure to perform an EA has been dismissed by the court, based on the ICA Ruling in the Initial Lawsuit. 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.
  September 30, 2019 December 31, 2018
Identifiable Assets:    
Commercial Real Estate $1,539.2
 $1,530.4
Land Operations 300.9
 350.0
Materials & Construction 259.0
 297.1
Other 22.6
 47.7
Total assets $2,121.7
 $2,225.2

The Company is a party to, or may be contingently liable in connection with, other legal actions arising in the normal conduct of its businesses, the outcomes of which, in the opinion of management after consultation with counsel, would not have a material effect on the Company's condensed 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.


17.11.    REVENUE AND CONTRACT BALANCES
The Company disaggregates revenue from contracts with customers by revenue type, as the Company believes it best depicts how the nature, amount, timing and uncertainty of the Company's revenue and cash flows are affected by economic factors. Through its CRE segment, the Company owns and operates a portfolio of commercial real estate properties and generates income as a lessor through leases of such assets. See Note 12 to the consolidated financial statements for further discussion. Revenue by type for the three and nine months ended September 30, 2020 and 2019 was as follows (in millions):
  Three Months Ended September 30, Nine Months Ended September 30,
  2019 2018 2019 2018
Revenues:        
     Commercial Real Estate $42.7
 $35.9
 $118.6
 $104.9
     Land Operations:        
Development sales revenue 0.8
 9.0
 31.2
 42.8
Unimproved/other property sales revenue 1.5
 9.1
 32.4
 11.5
Other operating revenue 6.2
 5.9
 18.8
 18.3
Land Operations 8.5
 24.0
 82.4
 72.6
     Materials & Construction 37.9
 59.5
 126.6
 167.3
Total revenues $89.1
 $119.4
 $327.6
 $344.8

The
18

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Revenues:
     Commercial Real Estate$35.7 $42.7 $113.1 $118.6 
     Land Operations:
Development sales revenue2.0 0.8 7.9 31.2 
Unimproved/other property sales revenue0 1.5 3.7 32.4 
Other operating revenue5.7 6.2 17.4 18.8 
Land Operations7.7 8.5 29.0 82.4 
     Materials & Construction34.4 37.9 90.4 126.6 
Total revenues$77.8 $89.1 $232.5 $327.6 
In the context of guidance on revenue from contracts with customers and arrangements in its scope, the total amount of contract consideration allocated to either wholly unsatisfied or partially satisfied performance obligations was $86.6$106.6 million as of September 30, 2019.2020. The Company expects to recognize as revenue approximately 30%15% - 35%20% of the remaining contract consideration allocated to either wholly unsatisfied or partially satisfied performance obligations in 2019,2020, with the remaining recognized thereafter.
Timing of revenue recognition may differ from the timing of invoicing to customers. Certain construction contracts include retainage provisions that are customary in the industry (i.e., are not for financing purposes) and are included in Accounts receivable and retention, net in the condensed consolidated balance sheets.. The balances billed but not paid by customers pursuant to these provisions generally become due upon completion and acceptance of the project work or products by the owners.customers.
Costs and estimated earnings in excess of billings on uncompleted contracts represent amounts earned and reimbursable under contracts, but have a conditional right for billing and payment, such as achievement of milestones or completion of the project. When events or conditions indicate that it is probable that the amounts outstanding become unbillable, the transaction price and associated contract asset is reduced. Costs and estimated earnings in excess of billings are presented within Prepaid expenses and other assets in the condensed consolidated balance sheets.
Billings in excess of costs and estimated earnings on uncompleted contracts are billings to customers on contracts in advance of work performed, including advance payments negotiated as a contract condition. Generally, unearned project-related costs will be earned over the next twelve months. Billings in excess of costs and estimated earnings are presented within Accrued and other liabilities in the condensed consolidated balance sheets.
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers:customers (in millions):
(in millions)September 30, 2019 
January 1,
2019
Accounts receivable, net$58.2
 $49.6
Contracts retention$9.6
 $11.6
Costs and estimated earnings in excess of billings on uncompleted contracts$9.5
 $9.2
Billings in excess of costs and estimated earnings on uncompleted contracts$9.7
 $5.9
Variable consideration$62.0
 $62.0
Deferred revenue$6.4
 $1.2

September 30, 2020December 31, 2019
Accounts receivable$49.2 $43.6 
Contracts retention7.6 8.6 
Allowance for credit losses on accounts receivable and retention(4.1)(0.6)
Accounts receivable and retention, net$52.7 $51.6 
Costs and estimated earnings in excess of billings on uncompleted contracts$5.0 $10.0 
Billings in excess of costs and estimated earnings on uncompleted contracts$9.0 $7.9 
Variable consideration1
$62.0 $62.0 
Deferred revenue$6.0 $5.6 
1Variable consideration deferred as of the period end 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.
For the three months ended and nine months ended September 30, 2019,2020 the Company recognized revenue of $4.6$1.2 million and $7.2 million, respectively, related to the Company's contract liabilities reported as of January 1, 2019.2020.
18.12.    LEASES - THE COMPANY AS LESSOR
The Company as Lessee: Principal non-cancelable operating leases include land, office space, harbors and equipment leased for periods that expire through 2031. Management expects that in the normal course of business, most operating leases will be renewed or replaced by other similar leases. The Company has equipment under finance leases with periods that expire through


2023. ROU assets and lease liabilities related to these finance leases are presented within Other property, net and Notes payable and other debt, respectively, in the condensed consolidated balance sheets.
Lease expense for operating leases that provide for future escalations are accounted for on a straight-line basis. For the three and nine months ended September 30, 2019, lease expense under operating and finance leases was as follows (in millions):
  Three Months EndedNine Months Ended
  September 30, 2019
Operating lease cost $1.9
$5.2
Finance lease cost:   
Amortization of right-of-use assets 0.2
0.4
Interest on lease liabilities 0.1
0.1
Total lease cost $2.2
$5.7

Supplemental balance sheet information related to operating and finance leases as of September 30, 2019 was as follows:
Weighted-average remaining lease term (years) - operating leases9.3
Weighted-average remaining lease term (years) - finance leases2.7
Weighted-average discount rate - operating leases4.4%
Weighted-average discount rate - finance leases4.5%

Supplemental cash flow information related to operating and finance leases for the nine months ended September 30, 2019 was as follows (in millions):
  Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:  
Operating cash outflows from operating leases $4.4
Operating cash outflows from financing leases $0.1
Financing cash flows from finance leases $0.4

Future lease payments under non-cancelable operating and finance leases as of September 30, 2019 were as follows (in millions):
  September 30, 2019
  Operating Leases Finance Leases
2019 $1.3
 $0.2
2020 5.2
 0.8
2021 5.1
 0.7
2022 5.0
 0.3
2023 3.9
 0.1
2024 2.2
 —
Thereafter 8.4
 —
Total lease payments $31.1
 $2.1
Less: Interest (8.1) (0.1)
Total lease liabilities $23.0
 $2.0



Future lease payments under non-cancelable operating leases as of December 31, 2018 were as follows (in millions):
  December 31, 2018
2019 $5.5
2020 5.4
2021 5.3
2022 5.3
2023 4.5
Thereafter 13.9
  $39.9

The Company as Lessor: The Company leases land and buildings to third parties under operating leases. Such activity is primarily composed of operating leases within its CRE segment.
Beginning in the quarter ended June 30, 2020, the Company began entering into rent relief arrangements with certain of its tenants due to the disruption from COVID-19 in the form of rent deferrals or other relief modifications that resulted in
19

changes to fixed contractual lease payments for specified months. Such other relief modifications included changing the nature of payments from fixed to variable (i.e., variable based on a percentage of the tenant's sales, typically subject to a minimum "floor" amount) or, in some cases, payment forgiveness. Consistent with lease accounting guidance and recent interpretations provided by the FASB in the Lease Modification Q&A, the Company elected to treat such eligible lease concessions (i.e., such rent deferrals, fixed-to-variable modifications or payment forgiveness arrangements that do not result in a substantial increase in the rights of the lessor or obligations of the lessee) outside of the lease accounting modification framework.
For rent deferrals, consistent with an acceptable method described in the Lease Modification Q&A, the Company accounts for the event as if no changes to the lease contract were made and continues to record lease receivables and recognize income during the deferral period. For the other relief modifications mentioned above that resulted in reductions to fixed contractual lease payments, consistent with the Lease Modification Q&A, the Company reports, for periods covered by the modification, reduced rental income (i.e., revenue) equal to the agreed-upon amounts (offset by any variable lease payments).
The Company continues to assess collectability on all such amounts due under leases and only recognizes revenue to the extent such amounts are probable of collection (or payment is received). During the three and nine months ended September 30, 2020, the Company projected a higher amount of uncollectable tenant billings due to COVID-19 and, as a result, during the three and nine months ended September 30, 2020, the Company recorded reductions in revenue of $5.6 million and $12.2 million, respectively, related to aggregate charges for CRE accounts receivable and unbilled straight-line lease receivables for which the Company assessed that the tenant's future payment of amounts due under leases was not probable. Further, during the three and nine months ended September 30, 2020, the Company recorded reductions of revenue of $0.7 million and $3.4 million, respectively, related to the allowance for doubtful accounts for other impacted operating lease receivables.
As a result of COVID-19, certain tenants experiencing economic difficulties have sought and may continue to seek current and future rent relief, which may be provided in the form of additional rent deferrals or other relief modifications, among other possible agreements. The Company is evaluating each request on a case-by-case basis and will apply lease accounting guidance (including the Lease Modification Q&A) consistently to leases with similar characteristics and similar circumstances. The future impact of any potential rent concessions in the context of lease accounting guidance and the Lease Modification Q&A is dependent upon the extent of relief granted to tenants as a result of COVID-19 in future periods and the elections made by the Company at the time of entering into such agreements.
The historical cost of, and accumulated depreciation on, leased property as of September 30, 20192020 and December 31, 2018 were as follows (in millions):
  September 30, 2019 December 31, 2018
Leased property - real estate $1,501.2
 $1,263.0
Less: Accumulated depreciation (115.2) (104.4)
Property under operating leases, net $1,386.0
 $1,158.6

Total rental income under these operating leases2019 were as follows (in millions):
September 30, 2020December 31, 2019
Leased property - real estate$1,515.9 $1,511.3 
Less: Accumulated depreciation(145.6)(125.0)
Property under operating leases, net$1,370.3 $1,386.3 
  Three Months Ended Nine Months Ended
  September 30, 2019
Lease payments $54.0
 $80.4
Variable lease payments 2.5
 3.6
Total $56.5
 $84.0
Total rental income (i.e., revenue) under these operating leases during the three and nine months ended September 30, 2020 and 2019 relating to lease payments and variable lease payments were as follows (in millions):
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Lease payments$23.0 $29.8 $73.9 $82.6 
Variable lease payments13.3 13.9 41.3 37.6 
Total rental income$36.3 $43.7 $115.2 $120.2 
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FutureContractual future lease payments to be received on non-cancelable operating leases as of September 30, 20192020 were as follows (in millions):
September 30, 2020
2020$29.6 
2021113.9 
2022102.7 
202391.9 
202479.8 
202568.1 
Thereafter486.9 
Total future lease payments to be received$972.9 
  September 30, 2019
2019 $32.3
2020 115.0
2021 102.1
2022 90.0
2023 79.9
2024 68.0
Thereafter 485.6
Total lease receivables $972.9



13.    LEASES - THE COMPANY AS LESSEE
FutureThere have been no material changes from the Company's leasing activities as a lessee described in Note 9 to the consolidated financial statements included in Item 8 of the Company's 2019 Form 10-K. Operating lease payments to be received on non-cancelable operating leases as of December 31, 2018 were as follows (in millions):
  December 31, 2018
2019 $97.6
2020 96.2
2021 78.2
2022 69.3
2023 59.9
Thereafter 407.8
  $809.0

The Company's leases have remaining lease terms of 1 year to 45 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within 1 year.
19.    GOODWILL IMPAIRMENT
The Company's goodwill balance as of December 31, 2018 and September 30, 2019cost was $65.1$1.2 million and $15.4$1.9 million respectively, and is attributable tofor the M&C and CRE segments. The goodwill related to the M&C segment was assigned to 3 reporting units: GPC (primarily consisting of the Grace Pacific’s quarry, paving, and liquid asphalt operations), GPRS (primarily consisting of Grace Pacific’s roadway and maintenance solutions operations) and GPRM (primarily consisting of Grace Pacific’s prestressed and precast concrete operations).
During the quarterthree months ended September 30, 2020 and 2019, the Companyrespectively. Operating lease cost was required to perform an interim impairment test for the goodwill in each of its 3 M&C reporting units due to the continued decline in M&C sales$3.5 million and margins in 2019, which resulted from continued, adverse market conditions.
The Company's goodwill and impairment test estimated the fair value of the M&C reporting units using various methodologies, including a market approach that involves the application of market-derived multiples and an income approach that was based on a discounted cash flow analysis. The Company classified these fair value measurements as Level 3. Under the market multiple methodology, the estimate of fair value is based on market multiples of EBITDA (earnings before interest, taxes, depreciation and amortization) or revenues. The discounted cash flow approach relies on a number of assumptions, including future macroeconomic conditions, market factors specific to the reporting unit, the amount and timing of estimated future cash flows to be generated by the business over an extended period of time, and a discount rate that considers the risks related to the amount and timing of the cash flows, among others. The weighted average discount rate used in the discounted cash flow approach of the valuation was 12.7%.
Changes in the carrying amount of goodwill allocated to the Company's reportable segments$5.2 million for the nine months ended September 30, 2020 and 2019, consistedrespectively. Finance lease cost was $0.4 million and $0.3 million for the three months ended September 30, 2020 and 2019, respectively. Finance lease cost was $1.0 million and $0.5 million for the nine months ended September 30, 2020 and 2019, respectively.
14.    SHARE-BASED PAYMENT AWARDS
The 2012 Incentive Compensation Plan ("2012 Plan") allows for the granting of stock options, restricted stock units and common stock. The shares of common stock authorized to be issued under the 2012 Plan may be drawn from the shares of the Company's authorized but unissued common stock or from shares of its common stock that the Company acquires, including shares purchased on the open market or private transactions. During the nine months ended September 30, 2020, the Company granted approximately 279,400 restricted stock unit awards with a weighted average grant date fair value of $22.26 under the 2012 Plan. During the nine months ended September 30, 2019, the Company granted approximately 264,000 restricted stock units with a weighted average grant date fair value of $20.05 under the 2012 Plan.
The fair value of the Company'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:
2020 Grants2019 Grants
Volatility of A&B common stock22.6 %23.6 %
Average volatility of peer companies23.2 %24.3 %
Risk-free interest rate1.3 %2.6 %
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 September 30,Nine Months Ended September 30,
2020201920202019
Share-based expense:
Time-based and market-based restricted stock units$1.4 $1.4 $4.4 $4.1 
 Materials & Construction Commercial Real Estate Total
Balance, January 1, 2019$56.4
 $8.7
 $65.1
Goodwill Impairment(49.7) —
 (49.7)
Balance, September 30, 2019$6.7
 $8.7
 $15.4

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15.    EMPLOYEE BENEFIT PLANS
Components of the net periodic benefit cost for the Company's pension and post-retirement plans for the three and nine months ended September 30, 2020 and 2019 are shown below (in millions):
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Service cost$0.2 $0.7 $0.6 $1.8 
Interest cost1.7 2.1 5.2 6.3 
Expected return on plan assets(1.7)(1.8)(5.1)(5.4)
Amortization of net loss0.8 0.9 2.0 2.9 
Amortization of prior service credit0 (0.1)0 (0.4)
Net periodic benefit cost$1.0 $1.8 $2.7 $5.2 
The Company has made 0 contributions to its defined benefit pension plans during the nine months ended September 30, 2020 and does 0t expect to make any such contributions in the current fiscal year.
16.    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 nine months ended September 30, 2020 differed from the effective tax rate for the same period in 2019, primarily due to the benefit from interest income receivable on IRS tax refunds in 2019.

As of September 30, 2020, tax years 2016 and later are open to audit by the tax authorities.As of September 30, 2020, the Company has 1 open tax examination of the 2016 Hawaii state income tax return of a joint venture investment.The Company believes that the result of this audit will not have a material adverse effect on its results of operations, financial condition or liquidity.
17.    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.
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The following table provides a reconciliation of income (loss) from continuing operations to 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 September 30,Nine Months Ended September 30,
2020201920202019
Income (loss) from continuing operations$3.2 $(50.8)$4.9 $(42.6)
Exclude: (Income) loss attributable to noncontrolling interest(0.2)1.1 0.4 1.8 
Income (loss) from continuing operations attributable to A&B shareholders3.0 (49.7)5.3 (40.8)
Distributions and allocations to participating securities0 0 0 0 
Income (loss) from continuing operations available to A&B common shareholders3.0 (49.7)5.3 (40.8)
Income (loss) from discontinued operations available to A&B common shareholders0 (0.1)(0.8)(0.8)
Net income (loss) available to A&B common shareholders$3.0 $(49.8)$4.5 $(41.6)
The number of shares used to compute basic and diluted earnings per share is as follows (in millions):
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Denominator for basic EPS - weighted average shares outstanding72.4 72.3 72.3 72.2 
Effect of dilutive securities:
Stock options and restricted stock unit awards0 0 0.1 0 
Denominator for diluted EPS - weighted average shares outstanding72.4 72.3 72.4 72.2 
There were 0.5 million and 0.4 million shares of anti-dilutive securities outstanding during the three and nine months ended September 30, 2020, respectively. There were 0.4 million shares of anti-dilutive securities outstanding during the three and nine months ended September 30, 2019.
18.    ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The components of accumulated other comprehensive income (loss), net of taxes, were as follows as of September 30, 2020 and December 31, 2019 (in millions):
September 30, 2020December 31, 2019
Unrealized components of benefit plans:
Pension plans$(45.5)$(47.4)
Post-retirement plans0.2 0.2 
Non-qualified benefit plans(0.7)(0.8)
Total employee benefit plans(46.0)(48.0)
Interest rate swap(7.9)(0.8)
Accumulated other comprehensive income (loss)$(53.9)$(48.8)
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The changes in accumulated other comprehensive income (loss) by component for the nine months ended September 30, 2020 were as follows (in millions):
Employee Benefit PlansInterest Rate SwapTotal
Balance, January 1, 2020$(48.0)$(0.8)$(48.8)
Other comprehensive income (loss) before reclassifications0 (7.7)(7.7)
Amounts reclassified from accumulated other comprehensive income (loss)1
2.0 0.6 2.6 
Taxes on other comprehensive income (loss)0 0 0 
Other comprehensive income (loss), net of taxes2.0 (7.1)(5.1)
Balance, September 30, 2020$(46.0)$(7.9)$(53.9)
1 Amounts reclassified from accumulated other comprehensive income related to interest 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.    RELATED PARTY TRANSACTIONS
Construction Contracts and Material Sales. The Company entered into contracts in the ordinary course of business, as a supplier, with affiliates that are members in entities in which the Company also is a member. Related to the periods during which the relationship existed, revenues earned from transactions with affiliates were $3.8 million and $2.8 million for the three months ended September 30, 2020 and 2019, respectively, and $5.8 million and $9.6 million for the nine months ended September 30, 2020 and 2019, respectively. Expenses recognized from transactions with affiliates were $0.2 million and less than $0.1 million for the three months ended September 30, 2020 and 2019, respectively, and $1.1 million and less than $0.1 million for the nine months ended September 30, 2020 and 2019, respectively. Receivables from these affiliates were $1.1 million and $0.2 million as of September 30, 2020 and December 31, 2019, respectively. Amounts due to these affiliates were $1.0 million and $1.2 million as of September 30, 2020 and December 31, 2019.
Commercial Real Estate. The Company entered into contracts in the ordinary course of business, as a lessor of property, with certain affiliates that were partially owned by a former director of the Company, as lessee. Revenue from transactions with these affiliates (confined to periods during which the former director was actively serving the Company) was approximately $1.3 million during the nine months ended September 30, 2019 and NaN in the nine months ended September 30, 2020.
Land Operations. During the three months ended and nine months ended September 30, 2020 and 2019, the Company recognized $0.3 million and $1.1 million, respectively, and $1.4 million and $1.7 million, respectively, related to revenue for services provided to certain unconsolidated investments in affiliates and interest earned on notes receivable from related parties. Receivables from service arrangements with these affiliates were less than $0.1 million as of September 30, 2020 and December 31, 2019. Notes receivable from related parties were held at carrying values of $9.8 million and $13.1 million as of September 30, 2020 and December 31, 2019, respectively, related to a construction loan secured by a mortgage on real property with one of the Company's joint ventures.
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20.    SEGMENT RESULTS
Operating segment information for the three and nine months ended September 30, 2020 and 2019 is summarized below (in millions):
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Operating Revenue:
Commercial Real Estate$35.7 $42.7 $113.1 $118.6 
Land Operations7.7 8.5 29.0 82.4 
Materials & Construction34.4 37.9 90.4 126.6 
Total operating revenue77.8 89.1 232.5 327.6 
Operating Profit (Loss): 
Commercial Real Estate1
11.0 18.0 37.9 50.6 
Land Operations2
3.4 2.8 13.1 15.9 
Materials & Construction1.3 (57.9)(10.1)(66.7)
Total operating profit (loss)15.7 (37.1)40.9 (0.2)
Gain (loss) on disposal of commercial real estate properties, net0 0 0.5 0 
Interest expense(7.1)(8.2)(22.7)(25.4)
Corporate and other expense(5.4)(5.5)(13.8)(18.1)
Income (Loss) from Continuing Operations Before Income Taxes$3.2 $(50.8)$4.9 $(43.7)
1 Commercial Real Estate segment operating profit (loss) includes intersegment operating revenue, primarily from the Materials & Construction segment, and is eliminated in the condensed consolidated statements of operations.
2 Land Operations segment operating profit (loss) includes equity in earnings (losses) from the Company's various real estate joint ventures and non-cash reductions related to the Company's solar tax equity investments.
21.    LONG-LIVED ASSETS HELD FOR SALE OR DISPOSED OF
The following represents disclosures for long-lived assets (disposal groups) that either have been disposed of or were classified as held for sale during the periods presented.
Port Allen solar power facility asset sale
As described in Item 2 of the Company's 2019 Form 10-K, the Company, through its wholly-owned subsidiary, McBryde Resources, Inc., has produced renewable energy through hydroelectric and solar power facilities on Kauai. Energy generated from these hydroelectric and solar power facilities has been used for A&B-related operations or sold to Kauai Island Utility Cooperative. Such activities are included and reported in the Land Operations segment.
In connection with its strategy to simplify its business, during the quarter ended September 30, 2020, the Company executed a purchase and sale agreement and consummated the sale of assets related to its solar power facility in Port Allen on Kauai for purchase consideration (measured at the date of disposal) of approximately $17.1 million. As a result, the Company derecognized the carrying value of the net assets of the disposal group and recorded a gain on disposal of approximately $8.9 million which is included in Gain (loss) on disposal of non-core assets, net in the condensed consolidated statements of operations. The disposal was not considered individually significant and does not qualify for presentation and disclosure as a discontinued operation.
GP/RM Prestress, LLC ("GPRM") sale of subsidiary
As described in Note 1 to the consolidated financial statements in the Company's 2019 Form 10-K, as of December 31, 2019, the Company owned a 51% interest in GPRM, a provider of precast/prestressed concrete products and services, which the Company consolidated due to holding a controlling financial interest through its majority voting interests and reported as part of the M&C segment. Subsequent to the quarter ended March 31, 2020, GPRM met the criteria to be classified as held for sale. As a result, in the quarter ended June 30, 2020, the Company recorded a write-down of $5.6 million (based on fair value less cost to sell) related to the disposal group which was included in Impairment of assets related to Materials & Construction in the condensed consolidated statements of operations.
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On June 29, 2020, the Company consummated the sale of its 51% ownership interest in GPRM to an unrelated third-party through an LLC interest purchase agreement in exchange for cash proceeds received/to be received of approximately $5.0 million. In connection with the consummation of the disposal of GPRM, the Company recorded an entry to deconsolidate the carrying amounts of the GPRM disposal group and recognized a net loss of $0.1 million, which was included in Gain (loss) on disposal of non-core assets, net in the condensed consolidated statements of operations.
The GPRM disposal was not considered individually significant and does not qualify for presentation and disclosure as a discontinued operation. Subsequent to the disposal of GPRM, the Company's goodwill balance was $10.5 million and $15.4 million as of September 30, 2020 and December 31, 2019, respectively, of which $8.7 million relates to the Commercial Real Estate segment and the remainder relates to a separate reporting unit within the M&C segment, GP Roadway Solutions, Inc.
22.    SUBSEQUENT EVENTS
On October 22, 2019,As described in Note 6 to the consolidated financial statements in the Company's Board2019 Form 10-K, the GLP Asphalt revolving credit facility had a maturity date of Directors declared a cash dividend of $0.19 per share of outstanding common stock, payable on DecemberOctober 5, 20192020. Subsequent to shareholders of record as ofSeptember 30, 2020, the close of business on November 12, 2019.
GLP Asphalt revolving credit facility maturity was extended to January 26, 2021.

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ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following analysis of the consolidated financial condition and results of operations of Alexander & Baldwin, Inc. ("A&B" or the "Company") and its subsidiaries 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's Annual Report on Form 10-K for the year ended December 31, 20182019 ("2019 Form 10-K") filed with the U.S. Securities and Exchange Commission ("SEC").
Throughout this quarterly report on Form 10-Q, references to "we," "our," "us" and "our Company" refer to Alexander & Baldwin, Inc., together with its consolidated subsidiaries.
FORWARD-LOOKING STATEMENTS
Statements in this Form 10-Q that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve a number of risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking 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.positions, as well as the rapidly changing challenges with, and the Company's plans and responses to, the recent novel coronavirus ("COVID-19") pandemic and related economic disruptions. Such forward-looking statements speak only as of the date the statements were made and are not guarantees of future performance. Forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from those expressed in or implied by the forward-looking statements. These factors include, but are not limited to, prevailing market conditions and other factors related to the Company's REIT status and the Company's business, as well asrisks associated with COVID-19 and its impact on the Company's businesses, results of operations, liquidity and financial condition, the evaluation of alternatives by the Company related to its materials and construction business and by the Company's joint venture related to the development of Kukui‘ula, generallyand the risk factors discussed in the Company's most recent Form 10-K, Form 10-Q and other filings with the SEC. The information in this Form 10-Q should be evaluated in light of these important risk factors. We do not undertake any obligation to update the Company's forward-looking statements.
INTRODUCTION
Management'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 information about A&B'sthe Company's business, recent developments, financial condition, liquidity and capital resources, cash flows, results of operations and how certain accounting principles, policies and estimates affect A&B’sthe Company’s financial statements. MD&A is organized as follows:
•
Business Overview: This section provides a general description of A&B's business, as well as recent developments that A&B believes
•Business Overview: This section provides a general description of the Company's business, as well as recent developments that we believe are important in understanding its results of operations and financial condition or in understanding anticipated future trends.
•ConsolidatedResults of Operations: This section provides an analysis of the Company's consolidated results of operations for the three and nine months ended September 30, 2020.
•Analysis of Operating Revenue and Profit by Segment: This section provides an analysis of the Company's results of operations by business segment.
•Liquidity and Capital Resources: This section provides a discussion of the Company's financial condition and an analysis of the Company’s cash flows for the nine months ended September 30, 2020 and 2019, as well as a discussion of the Company's ability to fund its future commitments and ongoing operating activities through internal and external sources of capital.
•Other Matters: This section identifies and summarizes other matters to be discussed in Item 2 of this Form 10-Q including commitments, contingencies and off-balance sheet arrangements; accounting policies that significantly impact the Company's reported results of operations and financial condition and require significant judgment or estimates on the part of management in their application; and other miscellaneous matters as needed.
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, may be slightly different.
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•
ConsolidatedResults of Operations: This section provides an analysis of A&B's consolidated results of operations for the three and nine months ended September 30, 2019.
•
Analysis of Operating Revenue and Profit by Segment: This section provides an analysis of A&B's results of operations by business segment.
•
Liquidity and Capital Resources: This section provides a discussion of A&B's financial condition and an analysis of A&B’s cash flows for the nine months ended September 30, 2019 and 2018, as well as a discussion of A&B's ability to fund its future commitments and ongoing operating activities through internal and external sources of capital.
•
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.
•
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, may be slightly different.
BUSINESS OVERVIEW
A&B, whose history dates back to 1870, is a REIT headquartered in Honolulu, Hawai'i andReportable segments
The Company operates through three reportable segments: Commercial Real Estate; Land Operations; and Materials & Construction. A description of each of the Company's reporting segments is as follows:


Commercial Real Estate
•Commercial Real Estate ("CRE"): includes functions as a vertically integrated real estate investment company with core competencies in investments and acquisitions (i.e., raising capital, identifying opportunities and acquiring properties); construction and development (i.e., designing and ground-up development of new properties or repositioning and redevelopment of existing properties); in-house leasing and property management redevelopment(i.e., executing new and development-for-hold activities. Significant assetsrenegotiating renewal lease arrangements, managing its properties' day-to-day operations and maintaining positive tenant relationships); and asset management (i.e., maintaining, upgrading and enhancing its portfolio of high-quality improved properties). The segment's preferred asset classes include improved commercial real estateproperties 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 citizens. Through its core competencies and with its experience and relationships in Hawai‘i, the Company seeks to create special places and experiences for Hawai‘i residents and attempts to provide venues and opportunities for tenants to thrive. Income from this segment is principally generated by leasingowning, operating and operatingleasing real estate assets.
•Land Operations
Land Operations: involves the monetization and management of the Company's landholdings and optimizationland-related assets, pursuant to which primary activities of A&B's landthe segment include the following: planning and related assets primarily through the following activities: developing land for sale; leasing agriculturalentitlement of real property to facilitate sales; selling undeveloped land; and renewable energy. Primary assets includeother operationally-diverse legacy business activities to employ its landholdings renewable energy assets (investments in hydroelectricat their highest and solar facilities and power purchase agreements) and development-for-sale projects and investments.best use. Financial results from this segment are principally derived from renewable energy operations,real estate development sales, land parcel sales, income/loss from real estate joint ventures, real estate development salesrenewable energy, trucking services and fees, and land parcel sales.other legacy business activities.
Materials & Construction
•Materials & Construction ("M&C"): performs operates as Hawai‘i's largest asphalt paving as prime contractor and subcontractor; importsis one of the state's largest natural materials and sells liquid asphalt; mines, processesinfrastructure construction companies. Such activities are primarily conducted through the Company's wholly-owned subsidiary, Grace Pacific LLC ("Grace Pacific"), a materials and sells basalt aggregate; produces and sells asphaltic concrete; provides and sells various construction- and traffic-control-related products and services; and manufactures and sells precast concrete products. Assets include two grade-A (prime) rock quarries, a liquid asphalt storage terminal, hot mix asphalt plants, and quarry and paving equipment. Income is generated principally by materials supply and paving construction.construction company in Hawai‘i.
Simplification strategy
As a result of its conversion to a REIT and consequent de-emphasis of non-REIT operating businesses, the Company ishas established a strategy to simplify its business, which includes ongoing efforts to accelerate the monetization of land and related assets and also includes evaluating strategic options for the eventual monetization of some or all of its Materials & Construction businesses.
While the Company continues to evaluate options for the Grace Pacific paving business, at the close of the quarter ended June 30, 2020, the Company consummated the sale of one of Grace Pacific's subsidiary operations, GP/RM Prestress, LLC ("GPRM"), a provider of precast/prestressed concrete products and services (which the Company historically consolidated through the disposal date due to holding a controlling financial interest through its majority voting interests). In connection with this sale and disposal, the Company recognized a write-down of $5.6 million (based on fair value less cost to sell) related to GPRM which was included in Impairment of assets related to Materials & Construction in the condensed consolidated statements of operations in the nine months ended September 30, 2020.
Related to the Land Operations segment, during the quarter ended September 30, 2020, the Company executed a purchase and sale agreement and consummated the sale of assets related to its solar power facility in Port Allen on Kauai for purchase consideration (measured at the date of disposal) of approximately $17.1 million. In connection with the sale, the Company recorded a gain on disposal of approximately $8.9 million which was included in Gain (loss) on disposal of non-core assets, net in the condensed consolidated statements of operations.
Moreover, related to its unconsolidated equity method investments in joint venture development projects at Kukui‘ula, the Company continues its evaluation of opportunities to monetize these investments or, in conjunction with the joint venture partners, its evaluation of a range of alternative strategies to accelerate the monetization of the land in the joint venture projects. Any potential transaction related to either the investments or the assets within the joint venture projects would be dependent upon a number of external factors that may be beyond the Company's and/or joint venture projects' control, including, among other factors, market conditions, industry trends and the interest of third parties in the Kukui‘ula development projects. Accordingly, there can be no assurance that any of the options evaluated will be pursued or completed. Further, there can be no
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assurance that the outcome of the evaluation of strategic alternatives or any potential transaction will result in the Company being able to maintain the carrying value of the Kukui‘ula joint venture development projects.
Coronavirus outbreak
In December 2019, COVID-19 was first reported in Wuhan, China, and on March 11, 2020, the World Health Organization declared COVID-19 a pandemic. The COVID-19 pandemic has adversely impacted the global economy and has contributed to significant volatility in financial markets. Considerable uncertainty surrounds COVID-19 and its effects on the population, as well as the effectiveness of any responses taken by government authorities. The pandemic resulted in a significant decline in Hawai‘i tourism and increase in business closures during the three and nine months ended September 30, 2020; it has significantly impacted the Company's business due largely to the extreme hardships facing its retail tenants. The ultimate extent of the impact that the COVID-19 pandemic 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 duration and spread of the outbreak, the severity of economic disruptions and resulting impact on economic growth/recession, the response by all levels of government in their efforts to contain the outbreak and to mitigate the economic disruptions, the impact on travel and tourism behavior and the impact on consumer confidence and spending, all of which are highly uncertain and cannot be reasonably predicted.
As of October 23, 2020, all of the Company's properties within its CRE portfolio remain open and the Company has estimated that approximately 95% of its tenants (based on total lease billings in October 2020) remain open and operating in some capacity. Further as of this date, the CRE portfolio tenants have paid approximately 81% of their third quarter billings and 75% of their October lease billings (which includes base rents and recoveries from tenants). Within this population, the Company's grocer tenants (designated as essential businesses and located within its grocery-anchored neighborhood shopping centers), have paid approximately 90% of their third quarter billings and approximately 85% of their October lease billings.
As a result of COVID-19, certain tenants experiencing economic difficulties have sought and may continue to seek current and future rent relief, which may be provided in the form of rent deferrals or other relief modifications that result in changes to fixed contractual lease payments for specific months, among other possible arrangements.
During the quarter ended June 30, 2020, rent assistance provided to certain tenants primarily consisted of rent deferrals which varied in terms of months covered and the repayment period (e.g., on a short-term basis to be repaid over the second half of 2020 or on a long-term basis to be repaid over 2021). During the quarter ended September 30, 2020, rent assistance arrangements involved additional deferrals as well as other relief modifications, including modifying the nature of rent payments from fixed to variable (i.e., variable based on a percentage of the tenant's sales, typically subject to a minimum "floor" amount) or, in some cases, payment forgiveness.
As of September 30, 2020, rent assistance arrangements offered and agreed to with tenants as a result of COVID-19 were as follows (dollars in millions):
Number of tenantsTotal impacted lease billings
Rent deferrals199$4.5 
Other relief modifications1
81$2.6 
1 Certain tenants that were provided other relief modifications may have also been subject to rent deferrals.
Additionally, during the three and nine months ended September 30, 2020, the Company projected a higher amount of uncollectable tenant billings due to COVID-19. The reductions in revenue the Company recorded as a result of such
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assessments were as follows (in millions):
Three Months Ended September 30, 2020Nine Months Ended September 30, 2020
Impact to billed accounts receivable$4.0 $8.4 
Impact to straight-line lease receivables1.6 3.8 
Total revenue reductions - tenant collectability assessments5.6 12.2 
Provision for allowance for doubtful accounts1
0.7 3.4 
Total revenue reductions$6.3 $15.6 
1 Related to other impacted operating lease receivables.
The Company’s financial results for the three and nine months ended September 30, 2020 have been significantly impacted by the COVID-19 pandemic resulting in reductions in operating profit and its non-GAAP performance measures. As such, the comparability of the Company’s results of operations for the three and nine months ended September 30, 2020 to future periods may be significantly impacted by the effects of the outbreak of the COVID-19 pandemic.
30

CONSOLIDATED RESULTS OF OPERATIONS
The following analysis of the consolidated financial condition and results of operations of Alexander & Baldwin, Inc. and its subsidiaries should be read in conjunction with the condensed consolidated financial statements and related notes thereto. Amounts in this narrative are rounded to millions,the nearest tenth of a million, but per-share calculations and percentages were calculated based on thousands. Accordingly, a recalculation of some per-share amounts and percentages, if based on the reported data, may be slightly different than the amounts includedpresented herein. The financial information included in the following table and narrative reflects the presentation of the Company's former sugar operations as discontinued operations for all periods presented.
31

Consolidated - Third quarter of 20192020 compared with 20182019
(amounts in millions, except percentage data and per share data; unaudited)Three Months Ended September 30,
20202019$ ChangeChange
Operating revenue$77.8 $89.1 $(11.3)(12.7)%
Cost of operations(66.6)(71.7)5.1 (7.1)%
Selling, general and administrative(11.7)(13.3)1.6 (12.0)%
Impairment of assets related to Materials & Construction— (49.7)49.7 NM
Gain (loss) on disposal of assets, net9.0 — 9.0 NM
Operating income (loss)8.5 (45.6)54.1 (118.6)%
Income (loss) related to joint ventures2.2 2.4 (0.2)(8.3)%
Interest and other income (expense), net(0.4)0.6 (1.0)(166.7)%
Interest expense(7.1)(8.2)1.1 (13.4)%
Income (loss) from continuing operations3.2 (50.8)54.0 (106.3)%
Discontinued operations (net of income taxes)— (0.1)0.1 (100.0)%
Net income (loss)3.2 (50.9)54.1 (106.3)%
(Income) loss attributable to noncontrolling interest(0.2)1.1 (1.3)(118.2)%
Net income (loss) attributable to A&B$3.0 $(49.8)$52.8 (106.0)%
Basic Earnings (Loss) Per Share of Common Stock:
Basic earnings (loss) per share - continuing operations$0.04 $(0.69)$0.73 (105.8)%
Basic earnings (loss) per share - discontinued operations— — — NM
Net income (loss) available to A&B shareholders$0.04 $(0.69)$0.73 (105.8)%
Diluted Earnings (Loss) Per Share of Common Stock:
Diluted earnings (loss) per share - continuing operations$0.04 $(0.69)$0.73 (105.8)%
Diluted earnings (loss) per share - discontinued operations— — — NM
Net income (loss) available to A&B shareholders$0.04 $(0.69)$0.73 (105.8)%
Continuing operations available to A&B common shareholders$3.0 $(49.7)$52.7 (106.0)%
Discontinued operations available to A&B common shareholders— (0.1)0.1 (100.0)%
Net income (loss) available to A&B common shareholders$3.0 $(49.8)$52.8 (106.0)%
Funds From Operations ("FFO")1
$12.5 $(40.0)$52.5 (131.3)%
Core FFO1
$11.6 $18.5 $(6.9)(37.3)%
FFO per diluted share$0.17 $(0.55)$0.72 (130.9)%
Core FFO per diluted share$0.16 $0.25 $(0.09)(36.0)%
Weighted average diluted shares outstanding (FFO/Core FFO)72.4 72.6 
 Three Months Ended September 30,    
(dollars in millions, except per share amounts, unaudited)2019 2018 $ Change Change
Operating revenue$89.1
 $119.4
 $(30.3) (25.4)%
Cost of operations(71.7) (87.1) 15.4
 17.7 %
Selling, general and administrative(13.3) (14.6) 1.3
 8.9 %
Goodwill impairment(49.7) —
 (49.7) — %
Operating income (loss)(45.6) 17.7
 (63.3) NM
Income (loss) related to joint ventures2.4
 4.5
 (2.1) (46.7)%
Interest and other income (expense), net0.6
 3.7
 (3.1) (83.8)%
Interest expense(8.2) (9.1) 0.9
 9.9 %
Income tax benefit (expense)—
 (1.0) 1.0
 100.0 %
Income (loss) from continuing operations(50.8) 15.8
 (66.6) NM
Discontinued operations (net of income taxes)(0.1) (0.2) 0.1
 50.0 %
Net income (loss)(50.9) 15.6
 (66.5) NM
(Income) loss attributable to noncontrolling interest1.1
 (0.8) 1.9
 NM
Net income (loss) attributable to A&B$(49.8) $14.8
 $(64.6) NM
        
Basic earnings (loss) per share - continuing operations$(0.69) $0.21
 (0.90) NM
Basic earnings (loss) per share - discontinued operations—
 —
 —
 — %
Net income (loss) available to A&B shareholders$(0.69) $0.21
 (0.90) NM
        
Diluted earnings (loss) per share - continuing operations$(0.69) $0.20
 (0.89) NM
Diluted earnings (loss) per share - discontinued operations—
 —
 —
 — %
Net income (loss) available to A&B shareholders$(0.69) $0.20
 (0.89) NM
1 Refer to page 42 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.
The causes of material changes in the condensed consolidated statements of operations for the three months ended September 30, 2020 as compared to the three months ended September 30, 2019 are described below or in the Analysis of Operating Revenue and Profit by Segment sections below.
Operating revenue for the third quarter ended September 30, 20192020 decreased 25.4%12.7%, or $30.3$11.3 million, to $89.1$77.8 million, primarily due to lower revenue from each of the Commercial Real Estate, Land Operations and Materials & Construction segments.
32

Cost of operations for the third quarter ended September 30, 2020 decreased 7.1% or $5.1 million, to $66.6 million, primarily due to decreases in costs incurred by the Materials & Construction and Commercial Real Estate segment partially offset by an increase in costs incurred by the Land Operations segment.
Selling, general and administrative for the third quarter ended September 30, 2020 decreased 12.0%, or $1.6 million, to $11.7 million, primarily due to lower corporate overhead costs, as well as lower costs incurred in each of the Commercial Real Estate, Land Operations and Materials & Construction segments. Such cost reductions were due primarily to lower personnel-related costs.
Impairment of assets related to Materials & Construction of $49.7 million for the third quarter ended September 30, 2019 was driven by a non-cash impairment to the carrying value of the Company's goodwill balance. There was no such impairment in the current quarter.
Gain (loss) on disposal of assets, net of $9.0 million for the third quarter ended September 30, 2019 was due primarily to the gain of $8.9 million resulting from the sale of the Company's solar power facility in Port Allen on Kauai.









33

Consolidated - First nine months of 2020 compared with 2019
(amounts in millions, except percentage data and per share data; unaudited)Nine Months Ended September 30,
20202019$ ChangeChange
Operating revenue$232.5 $327.6 $(95.1)(29.0)%
Cost of operations(179.0)(260.0)81.0 (31.2)%
Selling, general and administrative(34.5)(45.1)10.6 (23.5)%
Impairment of assets related to Materials & Construction(5.6)(49.7)44.1 NM
Gain (loss) on disposal of assets, net9.5 — 9.5 NM
Operating income (loss)22.9 (27.2)50.1 (184.2)%
Income (loss) related to joint ventures5.3 6.1 (0.8)(13.1)%
Interest and other income (expense), net(0.6)2.8 (3.4)(121.4)%
Interest expense(22.7)(25.4)2.7 (10.6)%
Income tax benefit (expense)— 1.1 (1.1)(100.0)%
Income (loss) from continuing operations4.9 (42.6)47.5 (111.5)%
Discontinued operations (net of income taxes)(0.8)(0.8)— — %
Net income (loss)4.1 (43.4)47.5 (109.4)%
(Income) loss attributable to noncontrolling interest0.4 1.8 (1.4)(77.8)%
Net income (loss) attributable to A&B$4.5 $(41.6)$46.1 (110.8)%
Basic Earnings (Loss) Per Share of Common Stock:
Basic earnings (loss) per share - continuing operations$0.07 $(0.57)$0.64 (112.3)%
Basic earnings (loss) per share - discontinued operations(0.01)(0.01)— — %
Net income (loss) available to A&B shareholders$0.06 $(0.58)$0.64 (110.3)%
Diluted Earnings (Loss) Per Share of Common Stock:
Diluted earnings (loss) per share - continuing operations$0.07 $(0.57)$0.64 (112.3)%
Diluted earnings (loss) per share - discontinued operations(0.01)(0.01)— — %
Net income (loss) available to A&B shareholders$0.06 $(0.58)$0.64 (110.3)%
Continuing operations available to A&B common shareholders$5.3 $(40.8)$46.1 (113.0)%
Discontinued operations available to A&B common shareholders(0.8)(0.8)— — %
Net income (loss) available to A&B common shareholders$4.5 $(41.6)$46.1 (110.8)%
Funds From Operations ("FFO")1
$34.3 $(15.3)$49.6 (324.2)%
Core FFO1
$43.0 $46.6 $(3.6)(7.7)%
FFO per diluted share$0.47 $— $(0.21)$0.68 (323.8)%
Core FFO per diluted share$0.59 $— $0.64 $(0.05)(7.8)%
Weighted average diluted shares outstanding (FFO/Core FFO)72.4 — 72.2 
1 Refer to page 42 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.
The causes of material changes in the condensed consolidated statements of operations for the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019 are described below or in the Analysis of Operating Revenue and Profit by Segment sections below.
Operating revenue for the nine months ended September 30, 2020 decreased 29.0%, or $95.1 million, to $232.5 million, primarily due to lower revenue from each of the Land Operations, and Materials & Construction segment partially offset by higher revenue from theand Commercial Real Estate segment. The reasons for business and segment-specific fluctuations in revenue are further described below in the Analysis of Operating Revenue and Profit by Segment.segments.
34

Cost of operations for the third quarternine months ended September 30, 20192020 decreased 17.7%,31.2% or $15.4$81.0 million, to $71.7$179.0 million, primarily due to decreases in costs incurred by each of the Land Operations and Materials & Construction and Land Operations segments partially offset by an increase in costs incurred by the Commercial Real Estate segment. The reasons for the cost of operations changes are described below, by business segment, in the Analysis of Operating Revenue and Profit by Segment.
Selling, general and administrative for the third quarternine months ended September 30, 20192020 decreased 8.9%23.5%, or $1.3$10.6 million, to $13.3$34.5 million, primarily due to lower corporate overhead costs, as well as lower costs incurred in the Materials & Construction segment and atCRE segments. Corporate partially offset by higheroverhead costs ofdecreased from the Commercial Real Estate segment. Corporate expenses decreasedprior period primarily due to lower management consulting expenses in the current quarter as compared to those incurred in the third quarter of 2018. The reasons for business and segment-specific fluctuations in selling, general and administrative expenses are further described below in the Analysis of Operating Revenue and Profit by Segment.personnel-related costs.


Goodwill impairment for the third quarter ended September 30, 2019 was $49.7 million dueImpairment of assets related to asset impairments incurred in the Materials & Construction segment. There were no asset impairments incurred during the third quarter ended September 30, 2018. The reasons for business and segment specific asset impairments are further described in the Analysis of Operating Revenue and Profit by Segment.
Income (loss) related to joint ventures for the third quarter ended September 30, 2019 decreased $2.1$5.6 million to $2.4 million, due primarily to lower income related to real estate development joint ventures, as compared to the third quarter ended September 30, 2018. Additional discussion of business and segment-specific fluctuations related to income (loss) related to joint ventures is further described in the Analysis of Operating Revenue and Profit by Segment.
Interest and other income (expense), net was a net income of $0.6 million in the third quarter ended September 30, 2019 compared to a net income of $3.7 million in the third quarter ended September 30, 2018. Other income for the third quarter ended September 30, 2018 included a gain of $4.2 million related to the sale of the Company's joint venture interest in the Ka Milo real estate development-for-sale.
Interest expense for the third quarter ended September 30, 2019 decreased $0.9 million, to $8.2 million, due to lower average debt levels during the period.
Discontinued operations (net of income taxes) was a net expense of $0.1 million in the third quarter ended September 30, 2019 compared to a net expense of $0.2 million in the third quarter ended September 30, 2018.
(Income) Loss attributable to noncontrolling interest during the third quarter ended September 30, 2019 was a loss of $1.1 million compared to income of $0.8 million during the third quarter ended September 30, 2018. The noncontrolling interest represents third-party noncontrolling interests in two entities consolidated within the Materials & Construction segment, and in which Grace Pacific owns a 70 percent and 51 percent share in each. The loss in the third quarter ended September 30, 2019 was primarily driven by asset impairments incurred in the Materials & Construction segment in the reporting units which involve the noncontrolling interest.


Consolidated - First nine months of 2019 compared with 2018
 Nine Months Ended September 30,    
(dollars in millions, except per share amounts, unaudited)2019 2018 $ Change Change
Operating revenue$327.6
 $344.8
 $(17.2) (5.0)%
Cost of operations(260.0) (267.5) 7.5
 2.8 %
Selling, general and administrative(45.1) (44.7) (0.4) (0.9)%
Goodwill impairment(49.7) —
 (49.7) — %
Gain (loss) on the sale of commercial real estate properties—
 49.8
 (49.8) (100.0)%
Operating income (loss)(27.2) 82.4
 (109.6) NM
Income (loss) related to joint ventures6.1
 6.3
 (0.2) (3.2)%
Interest and other income (expense), net2.8
 2.1
 0.7
 33.3 %
Interest expense(25.4) (26.4) 1.0
 3.8 %
Income tax benefit (expense)1.1
 1.8
 (0.7) (38.9)%
Income (loss) from continuing operations(42.6) 66.2
 (108.8) NM
Discontinued operations (net of income taxes)(0.8) (0.2) (0.6) 3X
Net income (loss)(43.4) 66.0
 (109.4) NM
(Income) loss attributable to noncontrolling interest1.8
 (1.4) 3.2
 NM
Net income (loss) attributable to A&B$(41.6) $64.6
 $(106.2) NM
        
Basic earnings (loss) per share - continuing operations$(0.57) $0.92
 (1.49) (162.0)%
Basic earnings (loss) per share - discontinued operations(0.01) —
 (0.01) — %
Net income (loss) available to A&B shareholders$(0.58) $0.92
 (1.50) (163.0)%
        
Diluted earnings (loss) per share - continuing operations$(0.57) $0.89
 (1.46) (164.0)%
Diluted earnings (loss) per share - discontinued operations(0.01) —
 (0.01) — %
Net income (loss) available to A&B shareholders$(0.58) $0.89
 (1.47) (165.2)%
Operating revenue for the nine months ended September 30, 2019 decreased 5.0%, or $17.2 million,2020 was related to $327.6 million, primarily due to lower revenue from the Materials & Construction segment partially offset by higher revenue from eachsale and disposal of GPRM at the close of the Commercial Real Estate and Land Operations segments. The reasons for business and segment-specific fluctuations in revenue are furtherquarter ended June 30, 2020 as described below in the Analysis of Operating Revenue and Profit by Segment.above.
CostGain (loss) on disposal of operationsassets, net of $9.0 million for the nine months ended September 30, 2019 decreased 2.8%, or $7.5 million, to $260.0 million, primarily due to a decrease in costs by the Materials & Construction segment partially offset by an increase in costs incurred by the Commercial Real Estate segment. The reasons for the cost of operations changes are described below, by business segment, in the Analysis of Operating Revenue and Profit by Segment.
Selling, general and administrative for the nine months ended September 30, 2019 increased 0.9%, or $0.4 million, to $45.1 million, primarily due to an increase in each of the Commercial Real Estate and Materials & Construction segments. The reasons for business and segment-specific fluctuations in selling, general and administrative expenses are further described below in the Analysis of Operating Revenue and Profit by Segment.
Goodwill impairment for the nine months ended September 30, 2019 was $49.7 million due to asset impairments incurred in the Materials & Construction segment. There were no asset impairments incurred during the nine months ended September 30, 2018. The reasons for business and segment specific asset impairments are further described in the Analysis of Operating Revenue and Profit by Segment.
Gain (loss) on the sale of commercial real estate properties during the nine months ended September 30, 2018 was $49.8 million due to the aggregate gain realized on the sales of six mainland properties (Concorde Commerce Center, Deer Valley Financial Center, 1800 and 1820 Preston Park, Little Cottonwood Center, Royal MacArthur Center, and Sparks Business Center) and three Hawai‘i assets (Stangenwald Building, Judd Building and land underlying a ground lease). There were no sales of commercial real estate assets during the nine months ended September 30, 2019.


Interest and other income (expense), net was a net income of $2.8 million in the nine months ended September 30, 2019 compared to a net income of $2.1 million in the nine months ended September 30, 2018. The change from the prior year was primarily due to higher interest income on the Company's notes receivable, partially offset by an increase in pension expense.
Interest expense for the nine months ended September 30, 2019 decreased $1.0 to $25.4 million, due to lower average debt levels during the period.
Income tax benefit (expense) was a benefit of $1.1 million during the nine months ended September 30, 2019 primarily due to a tax benefit related to interest income on IRS income tax refunds. Income tax benefit (expense) was a benefit of $1.8 million during the nine months ended September 30, 2018, due to a taxable loss incurred in the operations of the Company's taxable REIT subsidiary.
Discontinued operations (net of income taxes) was a net expense of $0.8 million during the nine months ended September 30, 2019 and was not significant during the nine months ended September 30, 2018.
(Income) Loss attributable to noncontrolling interest during the nine months ended September 30, 2019 was a loss of $1.8 million as compared to income of $1.4 million during the nine months ended September 30, 2018. The noncontrolling interest represents third-party noncontrolling interests in two entities consolidated within the Materials & Construction segment, and in which Grace Pacific owns a 70 percent and 51 percent share in each. The loss in the nine months ended September 30, 20192020 was primarily driven by asset impairments incurredthe consummation of the sale of assets related to the Company's solar power facility in the Materials & Construction segment in the reporting units which involve the noncontrolling interest.Port Allen on Kauai.

35

ANALYSIS OF OPERATING REVENUE AND PROFIT BY SEGMENT
Commercial Real Estate
Financial Results - Third quarter of 20192020 compared with 20182019
Operating results for the third quarter ended September 30, 2020, as compared to the third quarter ended September 30, 2019, were as follows:
 Three Months Ended September 30,    
(dollars in millions, unaudited)2019 2018 $ Change Change
Commercial Real Estate operating revenue$42.7
 $35.9
 $6.8
 18.9 %
Commercial Real Estate operating costs and expenses(23.8) (19.2) (4.6) (24.0)%
Selling, general and administrative(2.3) (1.4) (0.9) (64.3)%
Intersegment operating revenue, net1
0.7
 0.6
 0.1
 16.7 %
Other income/(expense), net0.7
 —
 0.7
 — %
Commercial Real Estate operating profit (loss)$18.0
 $15.9
 $2.1
 13.2 %
Operating profit (loss) margin42.2% 44.3%    
        
Cash Net Operating Income ("Cash NOI")2
       
   Hawai‘i$27.2
 $22.0
    
   Mainland—
 —
    
Total$27.2
 $22.0
    
        
Same-Store Cash Net Operating Income ("Same-Store Cash NOI")2
$19.3
 $18.9
    
Gross Leasable Area ("GLA") (million sq. ft.) - Improved (end of period)3.9
 3.4
    
Ground leases (acres at end of period)154
 109
    
(amounts in millions, except percentage data and acres; unaudited)Three Months Ended September 30,
20202019$ ChangeChange
Commercial Real Estate operating revenue$35.7 $42.7 $(7.0)(16.4)%
Commercial Real Estate operating costs and expenses(23.5)(23.8)0.3 (1.3)%
Selling, general and administrative(1.7)(2.3)0.6 (26.1)%
Intersegment operating revenue, net1
0.5 0.7 (0.2)(28.6)%
Interest and other income (expense), net— 0.7 (0.7)(100.0)%
Commercial Real Estate operating profit (loss)$11.0 $18.0 $(7.0)(38.9)%
Operating profit (loss) margin30.8 %42.2 %
Net Operating Income ("NOI")2
$21.6 $27.2 
Same-Store Net Operating Income ("Same-Store NOI")2
$18.7 $23.1 
Gross leasable area ("GLA") in square feet ("SF") for improved properties at end of period3.9 3.9 
Ground leases (acres at end of period)153.7 154.0 
1 Intersegment operating revenue, net for Commercial Real Estate is primarily from the Materials & Construction segment and is eliminated in the consolidated results of operations.
2 Refer to page 3342 for a discussion of management's use of a non-GAAP financial measure and the required reconciliation of non-GAAP measures to GAAP measures.
Commercial Real Estate operating revenue increased 18.9%,decreased 16.4% or $6.8$7.0 million, to $42.7$35.7 million for the third quarter ended September 30, 2019,2020, as compared to the third quarter ended September 30, 2018.2019. Operating profit increased 13.2%decreased 38.9%, or $2.1$7.0 million, to $18.0$11.0 million for the third quarter ended September 30, 2019,2020, as compared to the third quarter ended September 30, 2018.2019. The variancedecrease in operating revenue and operating profit from the prior year is primarily driven by charges recorded related to the collectability of tenant billings as a result of COVID-19, as well as the impact of other relief modifications and other adjustments provided in the period. During the three months ended September 30, 2020, the Company recorded reductions in revenue of $5.6 million related to accounts receivable and unbilled straight-line lease receivables for tenants whose future payment of amounts due primarilyunder leases was no longer considered probable; $2.6 million related to the impact of acquired properties/development/redevelopment projects commencing operationsother relief modifications (e.g., rent forgiveness) and newother adjustments provided in the period; and $0.7 million related to the allowance for doubtful accounts for other impacted operating lease receivables. Selling, general and administrative expenses decreased $0.6 million from the prior year's quarter primarily driven by lower personnel cost.
Commercial Real Estate interest and other income (expense), net from the prior year was primarily driven by miscellaneous other income recognized in settlements and release of liabilities related to tenants at Ho‘okele Shopping Center and The Shops at Kukui‘ula. There were no such amounts in the current year.

36

Financial Results - First nine months of 2020 compared with 2019
Operating results for the nine months ended September 30, 2020, as compared to the nine months ended September 30, 2019, were as follows:
Nine Months Ended September 30,
(amounts in millions, except percentage data; unaudited)20202019$ ChangeChange
Commercial Real Estate operating revenue$113.1 $118.6 $(5.5)(4.6)%
Commercial Real Estate operating costs and expenses(71.8)(64.3)(7.5)11.7 %
Selling, general and administrative(5.6)(7.8)2.2 (28.2)%
Intersegment operating revenue, net1
1.9 1.9 — — %
Interest and other income (expense), net0.3 2.2 (1.9)(86.4)%
Commercial Real Estate operating profit (loss)$37.9 $50.6 $(12.7)(25.1)%
Operating profit (loss) margin33.5 %42.7 %
Net Operating Income ("NOI")2
$72.7 $76.8 
Same-Store Net Operating Income ("Same-Store NOI")2
$62.1 $69.3 
1 Intersegment operating revenue, net for Commercial Real Estate is primarily from the Materials & Construction segment and is eliminated in the consolidated results of operations.
2 Refer to page 42 for a discussion of management's use of a non-GAAP financial measure and the required reconciliation of non-GAAP measures to GAAP measures.
Commercial Real Estate operating revenue decreased 4.6% or $5.5 million, to $113.1 million for the nine months ended September 30, 2020, as compared to the nine months ended September 30, 2019. Operating profit decreased 25.1%, or $12.7 million, to $37.9 million for the nine months ended September 30, 2020, as compared to the nine months ended September 30, 2019. The decrease in each of Commercial Real Estate operating revenue and operating profit for the nine months ended September 30, 2020 reflects revenue charges of $15.6 million related to the collectability of tenant leases,billings that the Company recorded during the nine months ended September 30, 2020 due primarily to COVID-19, as well as an increasethe impact of other relief modifications (e.g., rent forgiveness) and other adjustments provided in same-store rents.


Acquiredthe period of $2.6 million (described above). Such impacts were partially offset by the impacts of properties contributing toacquired in the first half of 2019 and redevelopment/new development projects commencing operations. Such impacts also drove the increase in operating profitcosts and expenses of 11.7% or $7.5 million to $71.8 million for the nine months ended September 30, 2020. Selling, general and administrative expenses decreased $2.2 million from the prior year primarily driven by lower personnel cost.
Commercial Real Estate interest and other income (expense), net from the prior year was primarily driven by interest income earned on §1031 exchange funds from the sale of agricultural land on Maui in 2018 (which were utilized as of the thirdend of the quarter of 2019 compared with 2018 include (i) current year retail portfolioended June 30, 2019).
Commercial Real Estate Portfolio Acquisitions and Dispositions
There were no acquisitions of Queens' Marketplace on the island of Hawai‘i in May 2019 and Waipouli Town Center on Kauai in May 2019, (ii) current year acquisitions ofCRE improved properties or ground lease interests in land during the landthree or nine months ended September 30, 2020.
During the nine months ended September 30, 2020, the Company made the following dispositions within one of its commercial real estate properties under a purchase option held and executed by the Home Depot warehouse storethen-current tenant as follows (dollars in the Iwilei submarket of Honolulu in March 2019 and land in Kapolei Business Park West commonly known as the Honolulu Authority of Rapid Transportation (HART) precast yard in April 2019, and (iii) current/prior year industrial acquisitions of three Class-A warehouse buildings in Kapolei on Oahu in April 2019/December 2018.millions):
Redevelopment/new development projects impacting current year operating profit due to the commencement of operations include Lau Hala Shops in Kailua on Oahu (commenced operations in the fourth quarter of 2018) and Ho‘okele Shopping Center on Maui (commenced operations in
Dispositions
PropertyLocationDate
(Month/Year)		Sales PriceGLA (SF)
The Collection (Suites 2 & 3)Oahu, HI2/20$6.0 6,100
Leasing Activity
During the third quarter ended September 30, 2020, the Company signed 16 new leases and 54 renewal leases, covering 174,700 square feet of 2019).GLA. The 16 new leases comprise 26,400 square feet with an average annual base rent of $21.84 per square foot. Of the signed 16 new leases, three leases with total GLA of 2,900 square feet were considered
Growth in same-store rents
37

comparable (i.e., leases executed for units that have been vacated in the third quarterprevious 12 months for comparable space and comparable lease terms) and, for these three leases, resulted in a 24.5% average base rent decrease over comparable expiring leases. The 54 renewal leases comprise 148,300 square feet with an average annual base rent of 2019 compared with 2018 was primarily driven$35.17 per square foot. Of the signed 54 renewal leases, 20 were considered comparable and resulted in a 6.8% average base rent increase over comparable expiring leases.
Leasing activity summarized by Pearl Highlands Center and Kailua Retail on Oahu resulting from higher occupancy and strong comparable leasing spreads, respectively.
The increase in operating profit from these drivers was partially offset by higher general and administrative expense related to growth in the overall segment portfolio driven, in part, by an increase in personnel-related costs in the segment operations to support such growth.
"Same-store" refers to properties that were owned and operatedproperty type for the entiretythree and nine months ended September 30, 2020 were as follows:

Three Months Ended September 30, 2020Nine Months Ended September 30, 2020
LeasesGLAABR/SF
Rent Spread1
LeasesGLAABR/SF
Rent Spread1
Retail51114,773$43.11(3.1)%102302,842$33.494.2%
Industrial1858,934$13.8612.3%44225,398$14.3011.3%
Office11,001$26.993.0%923,457$35.361.6%
1Rent spread is calculated for comparable leases, a subset of the prior calendar year. The same-store pool excludes properties under development or redevelopment, properties heldtotal population of leases for sale 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. New developments and redevelopments are generally considered stabilized upon the initial attainment of 90% occupancy.period presented (described above).
Occupancy
Occupancy represents the percentage of square footage leased and commenced to gross leasable space at the end of the period reported. The Company's commercial portfolio's occupancy – and same-store occupancy percentage summarized by property type as of September 30, 2019 and 2018 was as follows:
Occupancy     
 As of As of Percentage Point Change
 September 30, 2019 September 30, 2018 
Retail94.9% 92.7% 2.2
Industrial95.4% 90.2% 5.2
Office92.6% 91.7% 0.9
Total95.0% 91.9% 3.1
Same-Store Occupancy    
 As of As of Percentage Point Change
 September 30, 2019 September 30, 2018 
Retail94.3% 92.7% 1.6
Industrial94.2% 90.2% 4.0
Office92.6% 91.7% 0.9
Total94.2% 91.8% 2.4


GLA related to improved properties was 3.9 million square feet at September 30, 2019 and 3.5 million square feet at December 31, 2018. The fluctuation in GLA from December 31, 2018 was due primarily to the following current year asset acquisitions (excluding ground leases, which have no impact on GLA):
Acquisitions
DatePropertyGLA (SF)
5/19Queens' Marketplace135,000
5/19Waipouli Town Center56,500
4/19Kapolei Enterprise Center93,000
Total improved acquisitions284,500
Commercial Real Estate - First nine months of 2019 compared with 2018
 Nine Months Ended September 30,    
(dollars in millions, unaudited)2019 2018 $ Change Change
Commercial Real Estate operating revenue$118.6
 $104.9
 $13.7
 13.1 %
Commercial Real Estate operating costs and expenses(64.3) (57.0) 7.3
 (12.8)%
Selling, general and administrative(7.8) (4.7) (3.1) (66.0)%
Intersegment operating revenue, net1
1.9
 1.9
 —
 — %
Other income/(expense), net2.2
 (0.1) 2.3
 NM
Commercial Real Estate operating profit (loss)$50.6
 $45.0
 $5.6
 12.4 %
Operating profit (loss) margin42.7% 42.9%    
        
Cash Net Operating Income ("Cash NOI")2
       
   Hawai‘i$76.8
 $63.1
    
   Mainland—
 1.5
    
Total$76.8
 $64.6
    
        
Same-Store Cash Net Operating Income ("Same-Store Cash NOI")2
$59.2
 $56.2
    
1 Intersegment operating revenue, net for Commercial Real Estate is primarily from the Materials & Construction segment and is eliminated in the condensed consolidated results of operations.
2 Refer to page 33 for a discussioncategory of management's use of a non-GAAP financial measure and the required reconciliation of non-GAAP measures to GAAP measures.
Commercial Real Estate operating revenue increased 13.1%, or $13.7 million, to $118.6 million for the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018. Operating profit increased 12.4%, or $5.6 million, to $50.6 million for the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018. The variance in operating profit from the prior year is due primarily to the impact of acquired properties/development/redevelopment projects commencing operations and new tenant leases, as well as an increase in same-store rents.
Acquired properties contributing to the increase in operating profit in the first nine months of 2019 compared with 2018 include (i) current year retail portfolio acquisitions of Queens' Marketplace on the island of Hawai‘i in May 2019 and Waipouli Town Center on Kauai in May 2019, as well as the continued stabilization of February 2018 acquisitions of three Hawai‘i retail centers (Pu‘unene Shopping Center, Laulani Village Shopping Center, and Hokulei Village Shopping Center), (ii) current year acquisitions of ground lease interests in the land under the Home Depot warehouse store in the Iwilei submarket of Honolulu in March 2019 and land in Kapolei Business Park West commonly known as the Honolulu Authority of Rapid Transportation (HART) precast yard in April 2019, and (iii) current/prior year industrial acquisitions of three Class-A warehouse buildings in Kapolei on Oahu in April 2019/December 2018.
Redevelopment/new development projects impacting the current year operating profit due to the commencement of operations include Lau Hala Shops in Kailua on Oahu (commenced operations in the fourth quarter of 2018) and Ho‘okele Shopping Center on Maui (commenced operations in the third quarter of 2019).


Growth in same-store rents in the first nine months of 2019 compared with 2018 was primarily driven by Pearl Highlands Center and Kailua Retail on Oahu resulting from higher occupancy and strong comparable leasing spreads, respectively.
The increase in operating profit from these drivers was partially offset by higher general and administrative expense related to growth in the overall segment portfolio driven, in part, by an increase in personnel-related costs in the segment operations to support such growth.
"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 redevelopment, properties held for saleyear ("Same-Store" as more fully described below) – summarized by property type as of September 30, 2020 and also excludes properties acquired or sold2019 was as follows:
Occupancy
As ofAs ofPercentage Point Change
September 30, 2020September 30, 2019
Retail91.5%94.9%(3.4)
Industrial97.8%95.4%2.4
Office92.3%92.6%(0.3)
Total Improved Portfolio93.5%95.0%(1.5)

Same-Store Occupancy
As ofAs ofPercentage Point Change
September 30, 2020September 30, 2019
Retail94.0%95.1%(1.1)
Industrial97.6%95.0%2.6
Office92.3%92.6%(0.3)
Total Improved Portfolio95.1%95.0%0.1



38


Land Operations
Financial Results - Third quarter of 2020 compared with 2019
Three Months Ended September 30,
(amounts in millions; unaudited)20202019
Development sales revenue$2.0 $0.8 
Unimproved/other property sales revenue— 1.5 
Other operating revenue1
5.7 6.2 
Total Land Operations operating revenue7.7 8.5 
Land Operations operating costs and expenses(13.0)(5.9)
Selling, general and administrative(1.2)(1.5)
Gain (loss) on disposal of assets, net8.9 — 
Earnings (loss) from joint ventures1.3 1.9 
Interest and other income (expense), net(0.3)(0.2)
Total Land Operations operating profit (loss)$3.4 $2.8 
1 Other operating revenue includes revenue related to trucking, renewable energy and diversified agriculture.
Third quarter of 2020: Land Operations revenue during the comparable reporting periods, including stabilized properties. New developmentsquarter ended September 30, 2020 was $7.7 million and redevelopments are moved intoincluded the same-store pool upon one full calendar yearsales of stabilized operation. New developments and redevelopments are generally considered stabilized upon the initial attainment of 90% occupancy.
Use of Non-GAAP Financial Measures
The Company uses non-GAAP measures when evaluatingtwo development parcels at Maui Business Park II. Revenue also included other operating performance because management believes that they provide additional insight intorevenue related to the Company's legacy business activities in the Land Operations segment (e.g., trucking service, renewable energy and segments' corediversified agribusiness operations). Land Operations operating results, and/orcosts and expenses of $13.0 million included a charge of $6.7M related to the underlyingestimated costs of probable remediation work for reservoirs on Kauai.
Further, as noted above, during the quarter ended September 30, 2020, the Company executed a purchase and sale agreement and consummated the sale of assets related to its solar power facility in Port Allen on Kauai for purchase consideration (measured at the date of disposal) of approximately $17.1 million. In connection with the sale, the Company recorded a gain on disposal of approximately $8.9 million.
Land Operations operating profit of $3.4 million during the third quarter ended September 30, 2020 was due primarily to the impact of these aforementioned events (including margins realized for the sales activity), as well as profits generated from the operations of the segment's other legacy business trends affecting performanceactivities.
Third quarter of 2019: Land Operations revenue was $8.5 million and included the impact of sales of 0.5 acres at Maui Business Park II and a 1-acre unimproved parcel on a consistentthe island of Kauai. Revenue also included other operating revenues related to the Company's trucking service, renewable energy, and comparable basisdiversified agribusiness operations.
Land Operations operating profit of $2.8 million during the third quarter ended September 30, 2019 was composed of the margins on the Maui Business Park II development lot and Kauai unimproved property, as well as income from period to period. These measures generally are provided to investors as an additional means of evaluating the performance of ongoing core operations.
Cash Net Operating Income ("Cash NOI") is a non-GAAP measure used internally in evaluating the unlevered performanceoperations of the Company's Commercial Real Estate portfolio.trucking service and renewable energy business. The Company believes Cash NOI provides useful informationLand Operations segment results also included $0.2 million of other net expense primarily consisting of other pension expense.
39

Financial Results - First nine months of 2020 compared with 2019
Nine Months Ended September 30,
(amounts in millions; unaudited)20202019
Development sales revenue$7.9 $31.2 
Unimproved/other property sales revenue3.7 32.4 
Other operating revenue1
17.4 18.8 
Total Land Operations operating revenue29.0 82.4 
Land Operations operating costs and expenses(24.0)(68.5)
Selling, general and administrative(3.6)(4.1)
Gain (loss) on disposal of assets, net8.9 — 
Earnings (loss) from joint ventures3.6 5.3 
Interest and other income (expense), net(0.8)0.8 
Total Land Operations operating profit (loss)$13.1 $15.9 
1 Other operating revenue includes revenue related to investors regardingtrucking, renewable energy and diversified agriculture.
First nine months of 2020: Land Operations revenue during the nine months ended September 30, 2020 was $29.0 million and included the sales of development parcels at Maui Business Park II and unimproved land sales on the island of Kauai and Maui. Revenue also included other operating revenue related to the Company's financial conditionlegacy business activities in the Land Operations segment (e.g., trucking service, renewable energy, and resultsdiversified agribusiness operations).
Land Operations operating profit of $13.1 million during the nine months ended September 30, 2020 was composed of the margins on the sales noted above, as well as profits generated from the operations because it reflects only those cash income and expense items that are incurred atof the property level, and when compared across periods, can be used to determine trends in earningssegment's other legacy business activities. Other primary drivers of operating profit during the nine months ended September 30, 2020 included the gain of $8.9 million realized on the sale of the Company's propertiessolar power facility in Port Allen during the third quarter, a charge of $6.7M related to the estimated costs of probable remediation work for reservoirs on Kauai, as this measure is not affected by non-cash revenue and expense recognition items,well as the impact of depreciationa favorable resolution of certain contingent liabilities during the nine months ended September 30, 2020 related to the sale of agricultural land on Maui in 2018.
First nine months of 2019: Land Operations revenue was $82.4 million and amortization expenses orincluded the impact of the sales of 42 acres of land and related improvements in Wailea, the remaining 44 units in Increment 1 of the Kamalani planned community, two Kahala lots, approximately 800 acres of agricultural land on Maui, two Maui Business Park lots and a 1-acre parcel on the island of Kauai. Revenue also included other gains or losses that relateoperating revenue related to the Company's ownership of properties. The Company believes the exclusion of these items from operatingtrucking service, renewable energy, and diversified agribusiness operations. Operating profit (loss) is useful because the resulting measure captures the actual revenue generated and actual expenses incurred in operating the Company's Commercial Real Estate portfolio as well as trends in occupancy rates, rental rates, and operating costs. Cash NOI should not be viewed as a substitute for, or superior to, financial measures calculated in accordance with GAAP.
Cash NOI is calculated as total Commercial Real Estate operating revenues less direct property-related operating expenses. Cash NOI excludes straight-line lease adjustments, amortization of favorable/unfavorable leases, amortization of lease incentives, selling, general and administrative expenses, impairment of commercial real estate assets, lease termination income, other income and expense, net, and depreciation and amortization (including amortization of maintenance capital, tenant improvements and leasing commissions).
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.


A reconciliation of Commercial Real Estate operating profit (loss) to Commercial Real Estate Cash NOI for the three and nine months ended September 30, 2019 of $15.9 million was primarily driven by the sales of land and 2018 are as follows (in millions):related improvements mentioned above and also included real estate development joint venture earnings of $5.3 million, a gain of $2.6 million related to the sale of 50% interest in EMI and $2.2 million in pension related expenses
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions, unaudited)2019 2018 2019 2018
Commercial Real Estate Operating Profit (Loss)$18.0
 $15.9
 $50.6
 $45.0
Plus: Depreciation and amortization9.8
 7.2
 26.3
 20.5
Less: Straight-line lease adjustments(1.9) (2.0) (4.6) (2.7)
Less: Favorable/(unfavorable) lease amortization(0.1) (0.4) (1.1) (1.4)
Less: Termination income(0.1) —
 (0.1) (1.1)
Plus: Other (income)/expense, net(0.7) —
 (2.2) 0.1
Plus: Selling, general, administrative and other expenses2.3
 1.4
 7.8
 4.7
Less: Impact of adoption of ASU 2016-021
—
 (0.2) —
 (0.5)
Commercial Real Estate Cash NOI$27.3
 $21.9
 $76.7
 $64.6
 1 Represents legal costs related to leasing activity that were previously capitalized when incurred and recognized as amortization expense over the term of the lease contract. Upon the Company's adoption of ASU 2016-02, Leases, on January 1, 2019, such legal costs are directly expensed as operating costs and are included in Cash NOI. For comparability purposes, Cash NOI for the 2018 periods presented have been adjusted to include legal fees in conformity with Cash NOI for the 2019 periods presented.
Land Operations - Third quarter of 2019 compared with 2018Known Trends, Events and Uncertainties
The asset class mix of real estate sales in any given year or quarter can be diverse and may include developed residential real estate, developable subdivision lots, undeveloped land, or property sold under threat of condemnation. Further, the timing of property or parcel sales can significantly affect operating results in a given period.
Additionally, the operating profit reported in each quarter 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 generally provides higher margins than does the sale of developed property, due to the low historical cost basis of the Company's land owned in Hawai‘i.
As 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 amount of real estate held for sale on the Company's balance sheet do not necessarily indicate future profitability trends for this segment.
40
 Three Months Ended September 30,
(in millions, unaudited)2019
2018
Development sales revenue$0.8
 $9.0
Unimproved/other property sales revenue1.5
 9.1
Other operating revenue1
6.2
 5.9
Total Land Operations operating revenue8.5
 24.0
Land Operations costs and operating expenses(7.4) (19.3)
Earnings (loss) from joint ventures1.9
 4.5
Interest and other income (expense), net(0.2) 3.9
Land Operations operating profit (loss)$2.8
 $13.1
1 Other operating revenue includes revenue related to trucking, renewable energy and diversified agriculture.
Third quarter of 2019: Land Operations revenue was $8.5 million and included the impact of sales of 0.5 acres at Maui Business Park II and a 1-acre unimproved parcel on the island of Kauai. Revenue also included other operating revenues related to the Company's trucking service, renewable energy, and diversified agribusiness operations.


Land Operations operating profit of $2.8 million during the third quarter ended September 30, 2019 was composed of the margins on the Maui Business Park II development lot and Kauai unimproved property, as well as income from the operations of the Company's trucking service and renewable energy businesses. The Land Operations segment results also included $0.2 million of other net expense primarily consisting of other pension expense.
Third quarter of 2018: Land Operations revenue was $24.0 million and included sales of 22 units at the Company's Kamalani project in Kihei, Maui, the sale of 313 acres to the State of Hawai‘i for the expansion of the Kahului airport on Maui, and trucking service, renewable energy, and diversified agribusiness operations.
The Land Operations segment incurred an operating profit of $13.1 million during the third quarter ended September 30, 2018 that primarily resulted from the Kahului airport expansion sale and earnings from the Company's real estate development-related joint ventures and investments. The Land Operations segment results also included $4.2 million of other net income primarily resulting from the sale of the Company's equity investment in a real estate development-related joint venture.
Land Operations - First nine months of 2019 compared with 2018
 Nine Months Ended September 30,
(in millions, unaudited)2019 2018
Development sales revenue$31.2
 $42.8
Unimproved/other property sales revenue32.4
 11.5
Other operating revenue1
18.8
 18.3
Total Land Operations operating revenue82.4
 72.6
Land Operations costs and operating expenses(72.6) (71.8)
Earnings (loss) from joint ventures5.3
 6.0
Interest and other income (expense), net0.8
 2.5
Land Operations operating profit (loss)$15.9
 $9.3
1Other operating revenue includes revenue related to trucking, renewable energy and diversified agriculture.
First nine months of 2019: Land Operations revenue was $82.4 million and included the impact of the sales of 42 acres of land and related improvements in Wailea, the remaining 44 units in Increment 1 of the Kamalani planned community, two Kahala lots, approximately 800 acres of agricultural land on Maui, two Maui Business Park lots, and a 1-acre parcel on the island of Kauai. Revenue also included other operating revenues related to the Company's trucking service, renewable energy, and diversified agribusiness operations.
Operating profit for the nine months ended September 30, 2019 of $15.9 million was primarily driven by the sales of land and related improvements mentioned above and also included real estate development joint venture earnings of $5.3 million, a gain of $2.6 million related to the sale of 50% interest in EMI, and $2.2 million in pension related expenses.
First nine months of 2018:Land Operations revenue was $72.6 million and included sales of 68 units for the Company's Kamalani project in Kihei, Maui, the sale of one Kahala Avenue parcel, the sale of 313 acres to the State of Hawai‘i for the expansion of the Kahului airport on Maui, and trucking service and power sales revenues. The Land Operations segment incurred an operating profit of $9.3 million during the nine months ended September 30, 2018 that primarily resulted from the Kahului airport expansion sale and earnings from the Company's real estate development-related joint ventures and investments. The Land Operations segment results also included $2.9 million from other net income primarily resulting from the sale of the Company's equity investment in a real estate development-related joint venture offset by other pension expense.


Materials & Construction
Financial Results - Third quarter of 20192020 compared with 20182019
 Three Months Ended September 30,    
(in millions, unaudited)2019 2018 $ Change Change
Materials & Construction operating revenue$37.9
 $59.5
 $(21.6) (36.3)%
Operating Profit (Loss)$(57.9) $3.4
 $(61.3) NM
Operating margin percentage(152.8)% 5.7%    
Depreciation and amortization$2.7
 $3.0
 $(0.3) (10.0)%
Aggregate tons delivered (tons in thousands)209.9
 191.2
 18.7
 9.8%
Asphalt tons delivered (tons in thousands)68.3
 152.3
 (84.0) (55.2)%
Backlog1 at period end
$93.9
 $157.4
 $(63.5) (40.3)%
(dollars in millions, tons delivered in thousands; unaudited)Three Months Ended September 30,
20202019$ ChangeChange
Materials & Construction
Operating revenue$34.4 $37.9 $(3.5)(9.2)%
Operating costs and expenses(30.2)(42.0)11.8 (28.1)%
Selling, general and administrative(3.6)(4.1)0.5 (12.2)%
Intersegment operating charges, net1
(0.3)(0.6)0.3 (50.0)%
Impairment of assets— (49.7)49.7 (100.0)%
Gain (loss) on disposal of assets, net0.1 — 0.1 NM
Income (loss) related to joint ventures0.8 0.5 0.3 60.0%
Interest and other income (expense), net0.1 0.1 — —%
Materials & Construction operating profit (loss)$1.3 $(57.9)$59.2 (102.2)%
Operating margin percentage3.8 %(152.8)%
Depreciation and amortization$2.7 $2.7 $— —%
Aggregate tons delivered176.6 209.9 (33.3)(15.9)%
Asphalt tons delivered51.3 68.3 (17.0)(24.9)%
Backlog at period end2
$114.0 $93.9 $20.1 21.4%
1 Intersegment operating charges, net for Materials & Construction is primarily from the Commercial Real Estate segment and are eliminated in the consolidated results of operations.
2 Backlog represents the total amount of revenue that Grace Pacific and Maui Paving, LLC, a 50-percent-owned unconsolidated affiliate, expect to realize on contracts awarded. 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. As of September 30, 20192020 and 2018,2019, these amounts include $17.0$57.4 million and $12.2$21.0 million of opportunity backlog consisting of government contracts in which Grace Pacific has been confirmed to be the lowest bidder and formal communication of the award is perfunctory at the time of this disclosure. Circumstances outside the Company's control such as procurement or technical protests may arise that prevent the finalization of such contracts. Maui Paving's backlog at September 30, 2020 and 2019 was $7.3 million and 2018 was $7.2 million, and $4.0 million, respectively.

Materials & Construction revenue was $34.4 million for the third quarter ended September 30, 2020, compared to $37.9 million for the third quarter ended September 30, 2019, compared to $59.52019. Operating profit was $1.3 million for the third quarter ended September 30, 2018. Operating2020, compared to operating loss wasof $57.9 million for the third quarter ended September 30, 2019, compared to2019. During the quarter ended September 30, 2020, the segment operating profit of $3.4 million forwas primarily driven by improved results from Grace paving and quarry operations during the third quarter ended September 30, 2018.2020. During the quarter ended September 30, 2019, the Company recorded asegment operating loss was primarily driven by the $49.7 million non-cash impairment of $49.7 million to the carrying value of itsthe Company's goodwill balance due to continued, adverse market conditions. In addition tobalance.
Backlog at September 30, 2020 was $114.0 million (as a result of the goodwill impairment, the segment operating loss was impacted by lower paving volume and margins. Earnings from joint venture investments are not included in segment revenue but are included in operating profit (loss).
Backlogdisposal of GPRM at the end of Septemberthe second quarter ended June 30, 2019 was $93.9 million, compared2020, this metric excludes backlog related to $157.4GPRM). On a comparable basis (i.e., adjusted to exclude GPRM backlog of $24.5 million as of September 30, 2018 and $128.72019), backlog increased from $93.9 million as of December 31, 2018.at September 30, 2019. The decreaseincrease in backlog from the comparable prior year period reflects both a decline in recent government contracts that have been put out to bid, as well as a changewas primarily driven by an increase in the natureamount of government contracting that precludesmarketed bid opportunities and an improvement in the rate of bids won by the Company.
Related to the calculation of the backlog metric, as noted in prior periods, certain contracts from being included in backlog. Certain agencies are now awardingaward "maintenance contracts" under which a contractor can secure all paving work within a certain geographic area, but jobs are not identified in advance meeting(and, therefore, will not meet the requirement for inclusion in backlog.backlog). Under this maintenance contract system, during the nine months ended September 30, 2020, the Company also secured significant maintenance contract awards, including the Oahu State Pavement Preservation maintenance contracts for the entire island of Oahu. Procedurally, the Company must receive specific work orders that would meet the definition of backlog and provide actionable scopes of work, including quantities, location, materials and project economics.
41

Materials & ConstructionFinancial Results - First nine months of 20192020 compared with 20182019
(dollars in millions, tons delivered in thousands; unaudited)Nine Months Ended September 30,
20202019$ ChangeChange
Materials & Construction
Operating revenue$90.4 $126.6 $(36.2)(28.6)%
Operating costs and expenses(83.4)(127.2)43.8 (34.4)%
Selling, general and administrative(12.0)(15.8)3.8 (24.1)%
Intersegment operating charges, net1
(1.6)(1.5)(0.1)6.7%
Impairment of assets(5.6)(49.7)44.1 (88.7)%
Gain (loss) on disposal of assets, net0.1 — 0.1 NM
Income (loss) related to joint ventures1.7 0.8 0.9 112.5%
Interest and other income (expense), net0.3 0.1 0.2 200.0%
Materials & Construction operating profit (loss)$(10.1)$(66.7)$56.6 (84.9)%
Operating margin percentage(11.2)%(52.7)%
Depreciation and amortization$8.2 $8.5 $(0.3)(3.5)%
Aggregate tons delivered485.0 620.5 (135.5)(21.8)%
Asphalt tons delivered123.7 238.0 (114.3)(48.0)%
1 Intersegment operating charges, net for Materials & Construction is primarily from the Commercial Real Estate segment and are eliminated in the consolidated results of operations.
 Nine Months Ended September 30,    
(in millions, unaudited)2019 2018 $ Change Change
Materials & Construction operating revenue$126.6
 $167.3
 $(40.7) (24.3)%
Operating Profit (Loss)$(66.7) $7.2
 $(73.9) NM
Operating margin percentage(52.7)% 4.3%    
Depreciation and amortization$8.5
 $9.1
 $(0.6) (6.6)%
Aggregate tons delivered (tons in thousands)620.5
 542.0
 78.5
 14.5%
Asphalt tons delivered (tons in thousands)238.0
 412.6
 (174.6) (42.3)%

Materials & Construction revenue was $90.4 million for the nine months ended September 30, 2020, compared to $126.6 million for the nine months ended September 30, 2019, compared to $167.32019. Operating loss was $10.1 million for the nine months ended September 30, 2018.
Operating2020, compared to operating loss wasof $66.7 million for the nine months ended September 30, 2019, compared to operating profit of $7.2 million for2019. During the nine months ended September 30, 2018. The decline in2020, the segment resultsoperating loss was primarily driven by the write-down of operations from$5.6 million (based on fair value less cost to sell) related to GPRM that was recorded in advance of the sale and disposal consummated at the close of the quarter ended June 30, 2020. During the nine months ended September 30, 2019, the segment operating loss of 2018$66.7 million was primarily driven by the $49.7 million non-cash impairment to the carrying value of the Company's goodwill balance.
The remaining operating loss during the nine months of 2019ended September 30, 2020 was due primarily to the impact of low paving volumes due in part to government agency-imposed delays and the impact of COVID-19 (including travel restrictions and resource availability for projects on neighbor islands) during the second quarter; these losses were only partially offset by the operating profit generated in the third quarter (described above). The Company is continuing to monitor the performance of the M&C segment in the context of the COVID-19 pandemic. However, based on the inherent uncertainty in the general economic environment, there can be no assurance that the carrying values associated with the long-lived assets and goodwill will be recoverable and impairments on such long-lived assets and goodwill may be required.
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 non-cash impairment chargeconsistent 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 (calculated in accordance with GAAP), excluding (1) depreciation and amortization related to goodwillreal estate, (2) gains and lower paving volumelosses from the sale of certain real estate assets, (3) gains and margins. Earningslosses from joint venturechange in control and (4) impairment write-downs of certain real estate assets and investments arein entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity.
42

The Company believes that, subject to the following limitations, FFO provides a supplemental measure to net income (calculated in accordance with GAAP) for comparing its performance and operations to those of other REITs. FFO does not represent an alternative to net income calculated in accordance with GAAP. In addition, FFO does not represent cash generated from operating activities in accordance with GAAP, nor does it represent cash available to pay distributions and should not be considered as an alternative to cash flow from operating activities, determined in accordance with GAAP, as a measure of our 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 segmentCRE 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). 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 those cash income and expense items that are incurred at the property level, and when compared across periods, can be used to determine trends in earnings of the Company's properties as this measure is not affected by non-cash revenue butand expense recognition items, the impact of depreciation and amortization expenses or other gains or losses that relate to the Company's ownership of properties. The Company believes the exclusion of these items from operating profit (loss) is useful because the resulting measure captures the actual revenue generated and actual expenses incurred in operating the Company's Commercial Real Estate portfolio as well as trends in occupancy rates, rental rates, and operating costs. NOI should not be viewed as a substitute for, or superior to, financial measures calculated in accordance with GAAP.
NOI represents total Commercial Real Estate cash-based operating revenues (i.e., billings for which collectability is deemed probable), less direct property-related operating expenses. The calculation of NOI excludes the impact of depreciation and amortization (including amortization of maintenance capital, tenant improvements and leasing commissions); straight-line lease adjustments (including amortization of lease incentives); amortization of favorable/unfavorable lease assets/liabilities; lease termination income; other income and expense, net; selling, general, administrative and other expenses; and impairment of commercial real estate assets.
The Company reports NOI and Occupancy on a Same-Store basis, which includes the results of properties that were owned and operated for the entirety of the prior calendar year and current reporting period, year-to-date. The 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. New developments and redevelopments are generally considered stabilized upon the initial attainment of 90% occupancy. 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 loss.performance of comparable assets separate from other factors (such as the effect of developments, redevelopments, acquisitions or dispositions).
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.
43

Reconciliations of net income (loss) available to A&B common shareholders to FFO and Core FFO for the three and nine months ended September 30, 2020and 2019 are as follows (in millions):
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Net income (loss) available to A&B common shareholders$3.0 $(49.8)$4.5 $(41.6)
Depreciation and amortization of commercial real estate properties9.5 9.8 30.3 26.3 
Gain on the disposal of commercial real estate properties, net— — (0.5)— 
FFO$12.5 $(40.0)$34.3 $(15.3)
Exclude items not related to core business:
Land Operations Operating Profit(3.4)(2.8)(13.1)(15.9)
Materials & Construction Operating (Profit) Loss(1.3)57.9 10.1 66.7 
Loss from discontinued operations— 0.1 0.8 0.8 
Income (loss) attributable to noncontrolling interest0.2 (1.1)(0.4)(1.8)
Income tax expense (benefit)— — — (1.1)
Non-core business interest expense3.6 4.4 11.3 13.2 
Core FFO$11.6 $18.5 $43.0 $46.6 
Reconciliations of Core FFO starting from CRE operating profit for the three and nine months ended September 30, 2020 and 2019 are as follows (in millions):
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
CRE Operating Profit$11.0 $18.0 $37.9 $50.6 
Depreciation and amortization of commercial real estate properties9.5 9.8 30.3 26.3 
Corporate and other expense(5.4)(5.5)(13.8)(18.1)
Core business interest expense(3.5)(3.8)(11.4)(12.2)
Core FFO$11.6 $18.5 $43.0 $46.6 
Reconciliations of Commercial Real Estate operating profit to Commercial Real Estate NOI for the three and nine months ended September 30, 2020 and 2019 are as follows (in millions):
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Commercial Real Estate Operating Profit (Loss)$11.0 $18.0 $37.9 $50.6 
Plus: Depreciation and amortization9.5 9.8 30.3 26.3 
Less: Straight-line lease adjustments0.6 (1.9)1.1 (4.6)
Less: Favorable/(unfavorable) lease amortization(0.1)(0.1)(0.8)(1.1)
Plus: Other (income)/expense, net— (0.7)(0.3)(2.2)
Plus: Selling, general, administrative and other expenses1.7 2.3 5.6 7.8 
Commercial Real Estate NOI21.6 27.3 72.7 76.7 
Less: NOI from acquisitions, dispositions, and other adjustments(2.9)(4.2)(10.6)(7.4)
Same-Store NOI$18.7 $23.1 $62.1 $69.3 

44

LIQUIDITY AND CAPITAL RESOURCES
Overview: A&B'sOverview
The Company's primary liquidity needs have historically been to support and fund shareholder distributions; satisfaction of its regular debt service requirements and maturities under its notes payable and other debt arrangements; working capital requirementsrequirements; and fund capital expenditures, commercial real estate acquisitions and real estate developments. A&B'sThe Company's principal sources of liquidity have been available cash and cash equivalent balances; cash flows provided by operating activities, available cash and cash equivalent balances,activities; and borrowing capacity under its various credit facilities.
A&B'sThe Company's operating income (loss) is generated by its subsidiaries. There are no material restrictions on the ability of A&B'sthe Company's wholly owned subsidiaries to pay dividends or make other distributions to A&B. A&Bthe Company. The Company regularly evaluates investment opportunities, including development-for-hold projects, commercial real estate acquisitions, joint venture investments, share repurchases, business acquisitions and other strategic transactions to increase shareholder value. A&BThe Company cannot predict whether or when it may make investments or what impact any such transactions could have on A&B'sthe Company's results of operations, cash flows or financial condition.
As noted above, the COVID-19 pandemic has adversely impacted global commercial activity; has contributed to significant volatility in financial markets; and both its near-term and long-term economic impacts remain uncertain. As a result, the Company proactively drew $120 million on its credit facility at the end of the first quarter ended March 31, 2020 to ensure it had ample access to capital and increase flexibility (and, at the end of the second quarter ended June 30, 2020, elected to repay $50 million of the amounts outstanding, in part, with proceeds from asset monetization efforts in the quarter). Additionally, the Company announced in the second quarter ended June 30, 2020 that it has temporarily suspended quarterly dividend distributions. The Company will continue to monitor its financial performance and economic outlook each quarter with the intention of paying 100% of REIT taxable income, and ensuring compliance with REIT taxable income distribution requirements for the full year.
Cash Flows: Flows
Cash flows provided by operations were $104.0$37.2 million and $37.7$104.0 million for the nine months ended September 30, 2020 and 2019, and 2018, respectively. The change in cashCash flows from operating activities isfor the nine months ended September 30, 2020 were primarily attributable to cash receipts of $24.6 million related to Federal Income Tax receivables as well as an increase indriven by the cash generated from the Company's CRE segment, andwhich represents the Company's core business. Cash flows from the Land Operations segment has decreased as compared to the prior year's nine months ended September 30, 2018.year comparable period due to Land Operations successfully closing out of two development-for-sale projects in 2019 (resulting in a lower volume of comparable development-for-sale projects in the current period).
Cash flows used inprovided by investing activities was $238.3 million and $60.8$20.5 million for the nine months ended September 30, 2019 and 2018, respectively. During2020 as compared to cash flows used in investing activities of $238.3 million for the nine months ended September 30, 2019,2019. The nine months ended September 30, 2020 included cash proceeds from the netdisposal of property, investments and other assets of $27.1 million (which was primarily driven by the consummation of sales related to the Company's solar power facility in Port Allen on Kauai and also its former GPRM subsidiary described above), cash usedoutlays of $17.7 million related to capital expenditures and cash returns of $11.1 million received from investments in investing activitiesaffiliates and other investments as cash distributions. The nine months ended September 30, 2019 included cash outlays of $250.2 million related to capital expenditures which included cash outflows ofwas largely driven by $218.4 million related to the Company's acquisitionsacquisition of five commercial real estate assets. Cash used
As it relates to the CRE segment, the Company differentiates capital expenditures as follows:
•Growth Capital Expenditures: Property acquisition, development 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 investingthe market.

Capital expenditures for the respective periods were as follows:
45

Nine Months Ended September 30,
(dollars in millions; unaudited)20202019Change
CRE property acquisitions, development and redevelopment$8.1 $237.0 (96.6)%
Building/area improvements (Maintenance Capital Expenditures)3.8 5.7 (33.3)%
Tenant space improvements (Maintenance Capital Expenditures)2.1 2.6 (19.2)%
Quarrying and paving2.6 3.6 (27.8)%
Agribusiness and other1.1 1.3 (15.4)%
Total capital expenditures¹$17.7 $250.2 (92.9)%
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 duringand are excluded from the nine months ended September 30, 2019 also included $3.3 milliontables above.
Given the uncertainty around the duration and economic impact of the COVID-19 pandemic, the Company is not able to project capital expenditures in 2020 related to capital contributions with respect toany of its investments in unconsolidated affiliates. Cash flows used in investing activities duringsegments. However, for 2020, the nine months ended September 30, 2019 included $12.2 millionCompany anticipates activity related to distributions from joint venturesproperty acquisitions, development and other investmentsredevelopment will decline over the prior year, and $2.7 million of proceeds relatedthe Company expects building/area improvements and tenant space improvements to the sale of 50% of the Company's interests in a joint venture.be consistent or lower than 2019 expenditures.
Net cash flows used in investing activities for capital expenditures were as follows:
 Three Months Ended September 30,  
(in millions, unaudited)2019 2018 Change
Commercial real estate property acquisitions/improvements$2.7
 $16.8
 (83.9)%
Tenant improvements1.2
 1.9
 (36.8)%
Quarrying and paving0.1
 1.9
 (94.7)%
Agribusiness and other0.4
 1.0
 (60.0)%
Total capital expenditures¹$4.4
 $21.6
 (79.6)%
 Nine Months Ended September 30,  
(in millions, unaudited)2019 2018 Change
Commercial real estate property acquisitions/improvements$242.7
 $226.8
 7.0%
Tenant improvements2.6
 6.7
 (61.2)%
Quarrying and paving3.6
 6.0
 (40.0)%
Agribusiness and other1.3
 2.1
 (38.1)%
Total capital expenditures¹$250.2
 $241.6
 3.6%
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 tables above.
Net cash flows used inprovided by financing activities was $93.2$44.2 million for the nine months ended September 30, 2019,2020, as compared to net cash used in financing activities for the nine months ended September 30, 20182019 of $72.4$93.2 million. The change in cash flows used infrom financing activities in 20192020 as compared to 20182019 was due primarily to higher net paymentsthe Company drawing $120 million on debt (i.e., debt payments net of additional borrowings)its credit facility as compareda safeguard due to net borrowingsuncertainty caused by the COVID-19 pandemic during the first quarter ended March 31, 2020 (offset by the subsequent election to repay $50 million in the prior period partially offset by lower cash dividend payments as comparedsecond quarter ended June 30, 2020).
Other Sources of Liquidity
In addition to the prior period.
The Company believes that funds generated from results 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, 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$117.1 million as of September 30, 2020, other sources of liquidity for the Company include trade receivables, contracts retention, and inventories (excluding parts, materials and supplies), totaling $91.0$76.2 million at September 30, 2019, a decrease of $20.5 million from December 31, 2018.
The Company also has2020. Further, the Company's 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. AtWith respect to the revolving credit facility, as of September 30, 2019,2020, the Company had $118.4$181.0 million of revolving credit borrowings outstanding, $1.7$1.1 million in letters of credit had been issued against and $267.9 million of available capacity on such revolving credit facility.
Known Trends, Events and Uncertainties
As noted above, the COVID-19 pandemic has adversely impacted the global economy; has contributed to significant volatility in financial markets; and both its near-term and long-term economic impacts remain uncertain. This uncertainty includes the potential need for additional capital resources to maintain the Company's business and operations during a period of potential declining or delayed rent payments from CRE tenants and/or potential declining revenue from its other businesses.
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 $329.9other terms of the Company's notes payable and other debt arrangements. The Company was in compliance with its financial covenants for all outstanding balances as of September 30, 2020. However, as a result of the various uncertainties and factors surrounding COVID-19, 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 a material adverse impact on the Company's financial condition. The Company intends to closely monitor the impact of COVID-19 on its business 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.
As of September 30, 2020, the Company had $14.5 million remained unused.of future payments related to notes payable and other debt maturing/coming due in the next twelve months (based on the filing date of this report) and $14.7 million of future payments related to notes payable and other debt maturing/coming due in 2021.
Based on its current outlook, the Company believes that funds generated from results 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 twelve months, including debt service and maturities under its notes payable and other debt arrangements; working capital; capital expenditures; and distributions to shareholders. However, as the circumstances underlying its current outlook may change, the Company will continue to actively monitor the situation and may take further actions that it determines is in the best interest of its business, financial condition and liquidity and capital resources.
46

Tax-Deferred Real Estate Exchanges:Exchanges
Sales: During the third quarter ended September 30, 2019,2020, there were no cash proceeds from sales activity that qualified for potential tax-deferral treatment under Internal Revenue Code §1031 or §1033.
Purchases: During the third quarter ended September 30, 2019,2020, there were no acquisitions utilizing proceeds from tax-deferred sales or condemnations.
Proceeds from §1031 tax-deferred sales are held in escrow pending future use to purchase new real estate assets. The proceeds from §1033 condemnations are held by the Company until the funds are redeployed. As of September 30, 2019,2020, there wereare no cash proceeds from tax-deferred sales and approximately $14.5$14.3 million from tax-deferred condemnations that had not yet been reinvested.
OTHER MATTERS
Commitments, Contingencies and Off-balance Sheet ArrangementsArrangements: : A description of other commitments, contingencies, and off-balance sheet arrangements at September 30, 2019,2020, and herein incorporated by reference, is included in Note 310 to the condensed consolidated financial statements of Item 1 in this Form 10-Q.
OTHER MATTERS
Critical Accounting Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, upon which the Management'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 in Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Company's 20182019 Form 10-K.



47

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information concerning market risk is incorporated herein by reference to Item 7A of the Company's Form 10-K for the fiscal year ended December 31, 2018.2019. There hashave been no material changechanges in the quantitative and qualitative disclosures about market risk since December 31, 2018.2019.
As noted above, the COVID-19 pandemic has adversely impacted the global economy; has contributed to significant volatility in financial markets; and both its near-term and long-term economic impacts remain uncertain. With respect to material market risk exposures, as the Company is exposed to changes in interest rates, primarily as a result of its borrowing and investing activities used to maintain liquidity and to fund business operations, the Company will continue to actively monitor the situation and its impact on interest rates and may take further actions that it determines is in the best interest of its business, financial condition and liquidity and capital resources.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
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 Exchange 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 September 30, 2019,2020, the Company’s disclosure controls and procedures were effective.
Internal Control Over Financial Reporting
Reporting: There have not been any changes in the Company's internal control 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 third quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

48

PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information set forth under the "Legal Proceedings and Other Contingencies" section in Note 310 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
With the exception of the following, there have been no material changes to the risk factors previously disclosed in Item 1A. "Risk Factors" in our most recent annual report on Form 10-K.
Risks Relating to Our Business
The COVID-19 pandemic and measures intended to prevent its spread has had, and could continue to have, an adverse effect on our business, results of operations, cash flows and financial condition.

In December 2019, a new strain of coronavirus ("COVID-19") was first reported in Wuhan, China, and on March 11, 2020, the World Health Organization declared COVID-19 a pandemic. The pandemic has led governments around the world, including federal, state and local authorities in the United States, to implement measures intended to control its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings, business closures, quarantines and shelter-in-place orders. The pandemic has caused a decline in Hawai‘i tourism, visitor arrivals and commercial activity, which, if prolonged, may have an adverse impact on Hawai‘i’s economy.
The impact of the COVID-19 pandemic and measures to prevent its spread has adversely affected, and could continue to adversely affect, our businesses, results of operations, cash flows and financial condition. Our leasing rental revenue and operating results depend significantly on the occupancy levels at our properties and the ability of our tenants to meet their rent and other obligations to us. Tenants that experience deteriorating financial conditions as a result of the pandemic may be unwilling or unable to pay rent in full on a timely basis or at all. Certain of our tenants may incur significant costs or losses responding to the pandemic, lose business due to any interruption in the operations of our properties, or incur other losses or liabilities related to shelter-in-place orders, quarantines, infection or other related factors. Federal, state, local and industry-initiated efforts may also limit our ability to collect rent or enforce remedies for the failure to pay rent. In addition, the deterioration of economic conditions as a result of the pandemic may decrease occupancy levels and rents across our portfolio as tenants reduce or defer their spending, which could adversely affect the value of our properties.
The COVID-19 pandemic has caused, and may continue to cause, severe economic, market and other disruptions worldwide. Conditions in the lending, capital and other financial markets may continue to deteriorate as a result of the pandemic, and our access to capital and other sources of funding may become constrained, which could adversely affect the availability and terms of future borrowings, renewals, or refinancings.
Failure to comply with certain restrictive financial covenants contained in our credit facilities could impose restrictions on our business segments, capital availability or the ability to pursue other activities.

Our credit facilities and term debt contain certain restrictive financial covenants. If we breach any of the covenants and such breach is not cured in a timely manner or waived by the lenders, and such event results in default, our access to credit may be limited or terminated and the lenders could declare any outstanding amounts immediately due and payable. We further may be limited in our ability to make distributions to our shareholders in event of default.
An economic downturn, which may be brought on by the COVID-19 pandemic, could challenge our ability to maintain ongoing compliance with these financial covenants. While we, if in breach of such covenants, intend to apply for temporary waivers of such requirements, our failure to receive such waivers would have an adverse effect on our liquidity and capital resources.
The COVID-19 pandemic has led to remote working by our employees, which may result in certain increases in cyber and privacy risks, which could have an adverse effect on us.

We have transitioned a significant subset of our employees to a remote work environment in compliance with State and local orders pertaining to individuals and businesses and safe practices, which may exacerbate certain risks to our businesses, including an increased demand for information technology resources, increased risk of phishing and other cybersecurity attacks and increased risk of unauthorized dissemination of sensitive personal information or proprietary or confidential information.
49

Risks Relating to Our Commercial Real Estate Segment

The COVID-19 pandemic may have an adverse effect on our tenants' operations and financial condition and could adversely impact our profitability.

Considerable uncertainty surrounds the COVID-19 pandemic and its effects on the population, as well as the effectiveness of any responses taken by government authorities. The pandemic has caused a decline in Hawai‘i tourism, visitor arrivals and commercial activity, which, if prolonged, may have an adverse impact on Hawai‘i’s economy and our tenants' operations and financial condition.
On March 21, 2020, the Hawai‘i governor issued a proclamation requiring all persons arriving or returning to the State of Hawai‘i to comply with a mandatory fourteen day (or the duration the individual's presence in the State, if shorter) self-quarantine. Following this order, the governor and mayors of the Hawai‘i counties have issued and continue to issue proclamations and orders in response to the pandemic restricting activities and mandating safe practices and procedures for individuals and businesses. Such proclamations and orders continue to evolve and such restrictions could be in place for an extended period.
These restrictions have adversely impacted, and could continue to adversely impact, our tenants, as governmental instructions regarding safe practices and travel to the State have reduced and, in some cases, eliminated customer foot traffic and has also caused certain of our tenants to close their brick-and-mortar stores and spaces.
The COVID-19 pandemic may have a continued adverse impact on economic and market conditions and may trigger a protracted period of economic slowdown globally and in Hawai‘i. The rapidly evolving nature of the COVID-19 pandemic makes it difficult to ascertain the long-term impact it will have on commercial real estate markets and our real estate investments.
Risks Relating to Our Materials & Construction Segment
The COVID-19 pandemic may have an adverse effect on infrastructure and other projects and could reduce our revenues and profits from our materials and construction businesses.

Considerable uncertainty surrounds the COVID-19 pandemic and its effect on the economy globally and in Hawai‘i. Any resulting slowdown or delays in, or work stoppages or workforce disruptions relating to, infrastructure and other projects could reduce the revenues and profits from our materials and construction businesses.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
PeriodTotal Number of Shares Purchased¹Average 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, 2019—$—
——
August 1-31, 201990$22.70
——
September 1-30, 20192,616$22.70
——
Issuer Purchases of Equity Securities
PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
July 1-31, 2020340 $12.06 — — 
August 1-31, 2020— $— — — 
September 1-30, 2020— $— — — 
1Represents shares accepted in satisfaction of tax withholding obligations arising upon the vesting of restricted stock unit awards.
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
On October 30, 2019, the Company hosted a live webcast of its conference call with financial analysts and institutional investors. In response to a question during the call, the Company inadvertently stated that the carrying value of Grace Pacific LLC was approximately $217 million. The actual carrying value of equity on a cash-free, debt-free basis for the Company's Materials & Construction segment was approximately $208 million as of September 30, 2019, of which approximately $183 million related to Grace Pacific LLC and the remainder of which related to the Company's minority interest in a materials business.

50

ITEM 6. EXHIBITS
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 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 September 30, 2020, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019; (ii) Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019; (iii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2020 and 2019; (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019; (v) Condensed Consolidated Statements of Equity for the three and nine months ended September 30, 2020 and 2019; and (vi) Notes to Condensed Consolidated Financial Statements.
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SIGNATURES
10.b.1.(xxvi)
Alexander & Baldwin, Inc. Executive Severance Plan, amended and restated as of July 29, 2019.
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
101The following information from Alexander & Baldwin, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018, (ii) Condensed Consolidated Statement of Comprehensive Income (Loss) for the three and nine months ended September 30, 2019 and 2018, (iii) Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018, (iv) Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2019 and 2018, (v) Condensed Consolidated Statements of Equity for the three and nine months ended September 30, 2019 and 2018, and (vi) the Notes to the Condensed Consolidated Financial Statements.


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.
November 1, 2019October 30, 2020By: /s/ Brett A. Brown
Brett A. Brown
Executive Vice President and Chief Financial Officer
November 1, 2019October 30, 2020By: /s/ Clayton K.Y. Chun
Clayton K.Y. Chun
Senior Vice President, Chief Accounting Officer and Controller

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