10-Q 1 alex-20230331.htm 10-Q alex-20230331
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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 March 31, 2023
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.)
822 Bishop Street
P. O. Box 3440,Honolulu,Hawaii96801
(Address of principal executive offices)(Zip Code)
(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 March 31, 2023: 72,593,773

1

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

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


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALEXANDER & BALDWIN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in millions; unaudited)
March 31, December 31,
20232022
ASSETS
Real estate investments
Real estate property$1,600.7 $1,598.9 
Accumulated depreciation(209.3)(202.3)
Real estate property, net1,391.4 1,396.6 
Real estate developments59.9 59.9 
Investments in real estate joint ventures and partnerships7.4 7.5 
Real estate intangible assets, net41.8 43.6 
Real estate investments, net1,500.5 1,507.6 
Cash and cash equivalents10.7 33.3 
Restricted cash1.0 1.0 
Accounts receivable, net of allowances (credit losses and doubtful accounts) of $2.4 million and $2.5 million as of March 31, 2023, and December 31, 2022, respectively
4.2 6.1 
Other property, net2.3 2.5 
Operating lease right-of-use assets3.0 5.4 
Goodwill8.7 8.7 
Other receivables, net of allowances of $3.6 million and $2.7 million as of March 31, 2023, and December 31, 2022, respectively
8.0 6.9 
Prepaid expenses and other assets92.6 89.0 
Assets held for sale125.1 126.8 
Total assets$1,756.1 $1,787.3 
LIABILITIES AND EQUITY
Liabilities:
Notes payable and other debt$479.2 $472.2 
Accounts payable4.9 4.5 
Operating lease liabilities2.9 4.9 
Accrued pension and post-retirement benefits10.1 10.1 
Deferred revenue71.9 68.8 
Accrued and other liabilities81.7 102.1 
Liabilities associated with assets held for sale77.8 81.0 
Total liabilities728.5 743.6 
Commitments and Contingencies (Note 7)
Redeemable Noncontrolling Interest7.6 8.0 
Equity:
Common stock - no par value; authorized, 150.0 million shares; outstanding, 72.6 million and 72.5 million shares at March 31, 2023 and December 31, 2022, respectively
1,807.6 1,808.4 
Accumulated other comprehensive income (loss)(2.2)1.8 
Distributions in excess of accumulated earnings(785.4)(774.5)
Total A&B shareholders' equity1,020.0 1,035.7 
Total liabilities and equity$1,756.1 $1,787.3 
See Notes to Condensed Consolidated Financial Statements.
1

ALEXANDER & BALDWIN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in millions, except per share data; unaudited)

Three Months Ended March 31,
20232022
Operating Revenue:
Commercial Real Estate$47.9 $46.3 
Land Operations2.5 12.9 
Total operating revenue50.4 59.2 
Operating Costs and Expenses: 
Cost of Commercial Real Estate25.0 24.0 
Cost of Land Operations3.6 9.2 
Selling, general and administrative8.7 8.8 
Total operating costs and expenses37.3 42.0 
Gain (loss) on disposal of non-core assets, net1.1 — 
Operating Income (Loss)14.2 17.2 
Other Income and (Expenses):
Income (loss) related to joint ventures0.4 1.4 
Pension termination— (3.2)
Interest and other income (expense), net (Note 2)
(0.1)(0.1)
Interest expense(5.0)(5.7)
Income (Loss) from Continuing Operations9.5 9.6 
Income (loss) from discontinued operations, net of income taxes(4.2)1.4 
Net Income (Loss)5.3 11.0 
Loss (income) attributable to discontinued noncontrolling interest$— $(0.5)
Net Income (Loss) Attributable to A&B Shareholders$5.3 $10.5 
Earnings (Loss) Per Share Available to A&B Shareholders:
Basic Earnings (Loss) Per Share of Common Stock: 
Continuing operations available to A&B shareholders$0.13 $0.13 
Discontinued operations available to A&B shareholders(0.06)0.01 
Net income (loss) available to A&B shareholders$0.07 $0.14 
Diluted Earnings (Loss) Per Share of Common Stock:
Continuing operations available to A&B shareholders$0.13 $0.13 
Discontinued operations available to A&B shareholders(0.06)0.01 
Net income (loss) available to A&B shareholders$0.07 $0.14 
Weighted-Average Number of Shares Outstanding:
Basic72.572.6 
Diluted72.672.8 
Amounts Available to A&B Common Shareholders (Note 14):
Continuing operations available to A&B common shareholders$9.5 $9.6 
Discontinued operations available to A&B common shareholders(4.2)0.9 
Net income (loss) available to A&B common shareholders$5.3 $10.5 

See Notes to Condensed Consolidated Financial Statements.
2

ALEXANDER & BALDWIN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(amounts in millions; unaudited)
Three Months Ended March 31,
 20232022
Net Income (Loss)$5.3 $11.0 
Other Comprehensive Income (Loss), net of tax:
Cash flow hedges:
Unrealized interest rate hedging gain (loss)(3.7)3.4 
Impact of reclassification adjustment to interest expense included in Net Income (Loss)(0.3)0.4 
Employee benefit plans:
Amortization of net loss included in net periodic benefit cost— 0.9 
Pension termination— 3.2 
Other comprehensive income (loss), net of tax(4.0)7.9 
Comprehensive Income (Loss)1.3 18.9 
Comprehensive (income) loss attributable to discontinued noncontrolling interest— (0.5)
Comprehensive Income (Loss) Attributable to A&B Shareholders$1.3 $18.4 
See Notes to Condensed Consolidated Financial Statements.
3

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

Three Months Ended March 31,
20232022
Other Cash Flow Information:
Interest paid, net of capitalized interest$(4.9)$(4.9)
Income tax (payments)/refunds, net$0.2 $— 
Noncash Investing and Financing Activities from continuing operations:
Increase (decrease) in capital expenditures included in accounts payable and accrued and other liabilities$0.3 $— 
Dividends declared but unpaid at end of period$0.6 $— 
Increase (decrease) in escrow and other receivables from subsidiary and asset disposals$0.3 $— 
Noncash Investing and Financing Activities from discontinued operations:
Increase (decrease) in capital expenditures included in liabilities associated with assets held for sale$0.2 $0.1 
Distribution to noncontrolling interests included in liabilities associated with assets held for sale$0.3 $— 
Reconciliation of cash, cash equivalents, restricted cash, and cash included in assets held for sale:
Beginning of the period:
Cash and cash equivalents$33.3 $65.4 
Restricted cash1.0 1.0 
Cash included in assets held for sale0.1 4.6 
Cash, cash equivalents, restricted cash, and cash included in assets held for sale$34.4 $71.0 
End of the period:
Cash and cash equivalents$10.7 $32.6 
Restricted cash1.0 1.0 
Cash included in assets held for sale1.1 1.1 
Cash, cash equivalents, restricted cash, and cash included in assets held for sale$12.8 $34.7 
See Notes to Condensed Consolidated Financial Statements.
5

ALEXANDER & BALDWIN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY AND
REDEEMABLE NONCONTROLLING INTEREST
For the Three Months Ended March 31, 2023 and 2022
(amounts in millions, except per share data; unaudited)
Total Equity
Common StockAccumulated
 Other
 Comprehensive Income (Loss)		(Distribution
in Excess of Accumulated Earnings)
Earnings Surplus		TotalRedeemable
Non-
Controlling
Interest
SharesStated Value
Balance, January 1, 202272.5 $1,810.5 $(80.7)$(663.2)$1,066.6 $6.9 
Net income (loss)— — — 10.5 10.5 0.5 
Other comprehensive income (loss), net of tax— — 7.9 — 7.9 — 
Dividend on common stock ($0.19 per share)
— — — (13.9)(13.9)— 
Share-based compensation— 1.5 — — 1.5 — 
Shares issued (repurchased), net0.2 (2.4)— 0.2 (2.2)— 
Balance, March 31, 202272.7 $1,809.6 $(72.8)$(666.4)$1,070.4 $7.4 
Total Equity
Common StockAccumulated
 Other
 Comprehensive Income (Loss)		(Distribution
in Excess of Accumulated Earnings)
Earnings Surplus		TotalRedeemable
Non-
Controlling
Interest
SharesStated Value
Balance, January 1, 202372.5 $1,808.4 $1.8 $(774.5)$1,035.7 $8.0 
Net income (loss)— — — 5.3 5.3 — 
Other comprehensive income (loss), net of tax— — (4.0)— (4.0)— 
Dividend on common stock ($0.22 per share)
— — — (16.2)(16.2)— 
Distributions to noncontrolling interest— — — — — (0.4)
Share-based compensation— 1.6 — — 1.6 — 
Shares issued (repurchased), net0.1 (2.4)— — (2.4)— 
Balance, March 31, 202372.6 $1,807.6 $(2.2)$(785.4)$1,020.0 $7.6 
See Notes to Condensed Consolidated Financial Statements
6

Alexander & Baldwin, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1.    Background and Basis of Presentation
Description of Business: Alexander & Baldwin, Inc. ("A&B" or the "Company") is a fully integrated real estate investment trust ("REIT") headquartered in Honolulu, Hawai‘i, whose history in Hawai‘i dates back to 1870. Over time, the Company has evolved from a 571-acre sugar plantation on Maui to become one of Hawai‘i's premier commercial real estate companies and the owner of the largest grocery-anchored, neighborhood shopping center portfolio in the state. The Company operates in two segments: Commercial Real Estate ("CRE") and Land Operations. As of March 31, 2023, the Company's commercial real estate portfolio resides entirely in Hawai‘i and consists of 22 retail centers, 12 industrial assets and four office properties, representing a total of 3.9 million square feet of gross leasable area ("GLA"), as well as 142.0 acres of land under ground leases. 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.
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, 2022 and 2021, and the related consolidated statements of operations, comprehensive income (loss), cash flows, and equity and redeemable noncontrolling interest for each of the three years ended December 31, 2022, 2021, and 2020, respectively, and the notes thereto included in the Company's Annual Report filed on Form 10-K for the year ended December 31, 2022 ("2022 Form 10-K"), and other subsequent filings with the U.S. Securities and Exchange Commission ("SEC").
Reclassifications: Prior to December 31, 2022, the Company operated and reported on three segments: Commercial Real Estate; Land Operations; and Materials & Construction ("M&C"). During the fourth quarter of 2022, the Company's wholly-owned subsidiary, Grace Pacific LLC ("Grace Pacific") and Company-owned quarry land on Maui ("Maui Quarries") (collectively, the "Grace Disposal Group"), which made up the majority of activity in the Company’s former M&C segment, met the criteria for classification as held for sale and discontinued operations. Accordingly, the assets and liabilities associated with the Grace Disposal Group are classified as held for sale in the condensed consolidated balance sheets, its financial results are classified as discontinued operations in the condensed consolidated statements of operations and cash flows for all periods presented, and the Company’s former Materials and Construction ("M&C") segment has been eliminated. As a result of this strategic shift, the chief operating decision maker began reviewing all investments in unconsolidated affiliates together within the Land Operations segment. This change resulted in a reorganization to present the income (loss) related to one joint venture, which historically was included in the results of the former M&C segment, to now be included in the results of the Land Operations segment. All comparable information for the historical periods has been retrospectively adjusted to reflect the impact of these changes. Refer to Note 17 – Held for Sale and Discontinued Operations for additional information regarding the Grace Disposal Group, including the assets held for sale, liabilities associated with held for sale and income (loss) from discontinued operations. Unless otherwise noted, disclosures within the remaining notes to these condensed consolidated financial statements relate solely to the Company's continuing operations.
Rounding: Amounts in the condensed consolidated financial statements and notes are rounded to the nearest tenth of a million. Accordingly, a recalculation of some per-share amounts and percentages, if based on the reported data, may result in differences.
2.    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 2022 Form 10-K. There have not been any changes to the Company's significant accounting policies as described in the Company's 2022 Form 10-K.
7

Recently issued accounting pronouncements
In March 2020, the FASB issued Accounting Standards Update ("ASU") No. 2020-04, Reference Rate Reform, establishing ASC Topic 848, and amended the standard thereafter through ASU No. 2021-01 and ASU No. 2022-06 (collectively, "ASC 848"). ASC 848 provides optional practical expedients and exceptions related to the impacts of reference rate reform that affect certain 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, 2024. The Company plans to adopt ASU 2020-04 during the second quarter of 2023 after modifying certain debt to update the reference rate from LIBOR to the Secured Overnight Financing Rate (SOFR). The Company will continue to assess the impact of the guidance and may apply other elections as applicable going forward.
Interest and other income (expense), net
Interest and other income (expense), net for the three months ended March 31, 2023 and 2022, included the following (in millions):
Three Months Ended March 31,
20232022
Interest income$0.1 $0.1 
Pension and post-retirement benefit (expense)(0.2)(0.2)
Interest and other income (expense), net$(0.1)$(0.1)

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


8

Fair Value Measurements at
March 31, 2023
Condensed Consolidated Balance Sheet LocationTotalQuoted Prices in Active Markets (Level 1)Significant Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)
Assets
Derivative financial instruments - interest rate swapsPrepaid expenses and other assets$4.4 $— $4.4 $— 
Liabilities
Derivative financial instruments - interest rate swapsAccrued and other liabilities$(5.7)$— $(5.7)$— 
Fair Value Measurements at
December 31, 2022
Condensed Consolidated Balance Sheet LocationTotalQuoted Prices in Active Markets (Level 1)Significant Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)
Assets
Derivative financial instruments - interest rate swapsPrepaid expenses and other assets$5.5 $— $5.5 $— 
Liabilities
Derivative financial instruments - interest rate swapsAccrued and other liabilities$(2.8)$— $(2.8)$— 
Derivative Financial Instruments: The Company records its interest rate swaps at fair value. The fair values of the Company's interest rate swaps are classified as Level 2 measurements in the fair value hierarchy and 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 (refer to Note 6 – Derivative Instruments for fair value information regarding the Company's derivative instruments).
Non-Recurring Fair Value
Certain financial and nonfinancial assets and liabilities are measured at fair value on a nonrecurring basis and are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment. The Company’s process for identifying and recording impairment is discussed in Note 2 to the consolidated financial statements included in Item 8 of the Company's 2022 Form 10-K.
The following table presents the fair value hierarchy and quantitative information about the significant unobservable inputs used to determine the fair value of long-lived assets held and used and assets held for sale, net for which a nonrecurring fair value adjustment was recorded (in millions):
9

Fair Value Measurements atQuantitative Information about
December 31, 2022Level 3 Fair Value Measurements
TotalQuoted Prices in Active Markets (Level 1)Significant Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)		Total Gains (Losses)Valuation Technique/ Unobservable InputsWeighted Average Discount Rate
Assets held for sale, net1,2
$50.0 $— $— $50.0 $(89.8)Indicative bidsN/A
Long-lived assets3
— — — — (5.0)Discounted cash flows/16%
Market comparablesN/A
Total$50.0 $— $— $50.0 $(94.8)
1 Assets or liabilities are presented in Assets held for sale or Liabilities associated with assets held for sale, respectively, in the Condensed Consolidated Balance Sheets. Impairment loss is presented in Income (loss) from discontinued operations, net of income taxes in the Condensed Consolidated Statements of Operations.
2 Assets held for sale of $126.8 million, net of liabilities associated with assets held for sale of $81.0 million, and excluding estimated selling costs of $4.2 million.
3 Included in Real estate property in the Condensed Consolidated Balance Sheets. Impairment loss is presented in Cost of Land Operations in the Condensed Consolidated Statements of Operations.
Assets Held for Sale, net: As a result of the Grace Disposal Group's classification as held for sale as of December 31, 2022, the Company measured the disposal group at its fair value less costs to sell and recorded an impairment charge of $89.8 million for the year ended December 31, 2022. During the three months ended March 31, 2023, the Company recorded no additional impairment charges related to assets and liabilities held for sale. The fair value of the Grace Disposal Group is classified as a Level 3 measurement in the fair value hierarchy because it is determined using significant unobservable inputs such as management assumptions about expected sales proceeds from third parties.
Impairment of Long-lived Assets Held and Used and Finite-Lived Intangible Assets: During the year ended December 31, 2022, the Company recognized an impairment charge of $5.0 million related to parcels of conservation and agriculture zoned land on Oahu. During the three months ended March 31, 2023, the Company did not recognize any impairments of long-lived assets held and used or finite-lived intangible assets. The Company classifies these fair value measurements as Level 3 in the fair value hierarchy because they involve significant unobservable inputs such as cash flow projections, discount rates, and management assumptions.
Financial Assets and Liabilities not Measured at Fair Value
Financial assets and liabilities that are not measured at fair value on our condensed consolidated balance sheets include cash and cash equivalents, restricted cash, accounts and notes receivable, net and notes payable and other debt. The fair value of the Company's cash and cash equivalents, restricted cash, accounts receivable, net and short-term borrowings approximate their carrying values due to the short-term nature of the instruments, which is classified as Level 1 measurement in the fair value hierarchy.

The fair value of the Company's notes receivable approximated the carrying amount of $1.9 million as of March 31, 2023 and December 31, 2022. The fair value of these notes 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 is classified as a Level 3 measurement in the fair value hierarchy.
At March 31, 2023, the carrying amount of the Company's notes payable and other debt was $479.2 million and the corresponding fair value was $461.4 million. At December 31, 2022, the carrying amount of the Company's notes payable and other debt was $472.2 million and the corresponding fair value was $449.2 million. The fair value of debt is calculated by discounting the future cash flows of the debt at rates based on instruments with similar risk, terms and maturities as compared to the Company's existing debt arrangements, and is classified as a Level 3 measurement in the fair value hierarchy.

10

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

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

6.    Derivative Instruments
The Company is 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-rate and variable-rate debt. From time to time, the Company may use interest rate swaps to manage its exposure to interest rate risk.
11

Cash Flow Hedges of Interest Rate Risk
The Company has three interest rate swap agreements designated as cash flow hedges, whose key terms are as follows (dollars in millions):

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

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

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

As of March 31, 2023, the Company expects to reclassify $1.4 million of net gains (losses) on derivative instruments from accumulated other comprehensive income to earnings during the next 12 months.
7.    Commitments and Contingencies
Commitments and other financial arrangements
The Company has various financial commitments and other arrangements including standby letters of credit and bonds that are not recorded as liabilities on the Company's condensed consolidated balance sheet as of March 31, 2023:
•Standby letters of credit issued by the Company's lenders under the Company's revolving credit facility totaled $1.1 million as of March 31, 2023. These letters of credit primarily relate to the Company's workers' compensation plans and if drawn upon, the Company would be obligated to reimburse the issuer.
•Bonds related to the Company's real estate activities totaled $18.6 million as of March 31, 2023, and represent 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.
•Bonds related to Grace Pacific totaled $328.4 million as of March 31, 2023, and represent the face value of construction bonds issued by third party sureties (bid, performance and payment 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 March 31, 2023, the Company's maximum remaining exposure, in the event of defaults on all existing contractual construction obligations, was approximately $130.3 million.
The Company also provides certain bond indemnities and guarantees of indebtedness for unconsolidated affiliates accounted for as equity method investments related to Grace Pacific.
•Bond indemnities are provided for the benefit of the third-party surety in exchange for construction bonds (bid, performance and payment bonds). Under such bond indemnities, the Company and the joint venture partners agree to
12

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 reimburse the surety that issued the bond for the amount of the bond, reduced for the work completed to date if the joint venture does not perform.
•Guarantees of indebtedness may be provided by the Company for the benefit of financial institutions providing credit to unconsolidated equity method investees. As of March 31, 2023, the Company had no such arrangements with third party lenders related to its unconsolidated equity method investees and no amounts outstanding.
The recorded amounts of the bond indemnities and guarantee of indebtedness were not material individually or in the aggregate. Other than those described above, 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 held four water licenses to approximately 30,000 acres owned by the State of Hawai‘i in East Maui. The sale to Mahi Pono included the sale of a 50% interest in EMI (which closed February 1, 2019), and provided for the Company and Mahi Pono, through EMI, to jointly continue the existing process to secure a long-term lease from the State for delivery of irrigation water to Mahi Pono for use in Central Maui.
The last of these water license agreements expired in 1986, and all four agreements were then extended as revocable permits that were renewed annually. In 2001, a request was made to the State Board of Land and Natural Resources (the "BLNR") to replace these revocable permits with a long-term water lease. Pending the 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. Three parties (Healoha Carmichael; Lezley Jacintho; and Na Moku Aupuni O Ko‘olau Hui) 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 challenged the BLNR’s decision to continue the revocable permits for calendar year 2015 and asked the court to void the revocable permits and to declare that the renewals were illegally issued without preparation of an environmental assessment ("EA"). In December 2015, the BLNR decided to reaffirm its prior decisions to keep the permits in holdover status. This decision by the BLNR was challenged by the three 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.
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 and, on May 5, 2020, oral argument was held.
On October 11, 2019, the BLNR took up the renewal of all the existing water revocable permits in the state, acting under the ICA Ruling, and approved the continuation of the four East Maui water revocable permits for another one-year period through December 31, 2020. On November 13, 2020, the BLNR approved another renewal of such permits through December 31, 2021.
On March 2, 2022, the Supreme Court of Hawai’i vacated the ICA’s ruling relating to the BLNR's decision to continue the revocable permits for the calendar year 2015, holding that Hawaii Revised Statutes Chapter 343 (the Hawaii Environmental Policy Act) did apply to the permits. The court remanded the matter back to the Circuit Court to determine if any exceptions would apply and, if not, how HRS Chapter 343 should be applied in light of the steps taken by A&B/EMI toward the long-term water lease. The Supreme Court of Hawai’i also determined that the BLNR had the statutory authority to continue the permits
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for more than one year, but required BLNR to make findings of fact and conclusions of law determining that the action would serve the best interests of the State. A&B/EMI will continue to defend against the plaintiffs’ claims on remand.
In a separate matter, on December 7, 2018, a contested case request filed by the Sierra Club (contesting the BLNR's November 2018 approval of the 2019 revocable permits) was denied by the BLNR. On January 7, 2019, the Sierra Club filed a lawsuit in the circuit court of the first circuit in Hawai‘i against BLNR, A&B and EMI, seeking to invalidate the 2019 and 2020 holdovers of the revocable permits for, among other things, failure to perform an EA. The lawsuit also sought to enjoin A&B/EMI from diverting more than 25 million gallons a day until a permit or lease is properly issued by the BLNR, and for the imposition of certain conditions on the revocable permits by the BLNR. The count seeking to invalidate the revocable permits based on the failure to perform an EA was dismissed by the court, based on the ICA Ruling in the Initial Lawsuit. The Sierra Club’s lawsuit was amended to include a challenge to the BLNR’s renewal of the revocable permits for calendar year 2020. After a full trial on the merits held beginning in August of 2020, the court ruled, on April 6, 2021, against the Sierra Club on its lawsuit challenging the 2019 and 2020 revocable permits. On February 17, 2022, the Sierra Club filed its notice of appeal challenging the decision on the August 2020 trial. The court separately considered a lawsuit filed by the Sierra Club appealing the BLNR’s decision to deny it a contested case hearing on the 2021 revocable permits, which were granted by the BLNR on or about November 13, 2020. In that case, on May 28, 2021, the court issued an interim decision that the Sierra Club’s due process rights were violated, ordered the BLNR to hold a contested case hearing on the 2021 permits, and that the permits would be vacated. On July 30, 2021, the court modified its ruling to say that the permits would not be invalidated, but left in place pending the outcome of the contested case hearing. The contested case hearing was held by the BLNR in December 2021 to address the continuation of the revocable permits for both calendar years 2021 and 2022 and BLNR issued a decision on June 30, 2022. On December 27, 2021, while BLNR’s decision in the contested case hearing was pending, the court further modified its ruling to allow the permits to remain in place until the earlier of May 1, 2022, the date on which the BLNR renders a substantive decision on the continuation of the permits for calendar year 2022, or further order of the court. On April 26, 2022, the court orally granted an extension of the May 1, 2022 deadline to the earlier of June 15, 2022, or the date on which the BLNR renders a substantive decision on the continuation of the permits for calendar year 2022, or as may be further ordered by the court. On June 1, 2022, the court granted an extension of the June 15, 2022 deadline to the earlier of July 15, 2022 or the date on which the BLNR renders a substantive decision on the continuation of the permits for calendar year 2022 or as may be further ordered by the court. On June 30, 2022, the BLNR issued its final decision on the contested case hearing on the permits for calendar years 2021 and 2022, approving the continuation of the permits through the end of calendar year 2022. The Sierra Club filed a notice of appeal of that decision to the Circuit Court of the First Circuit in Hawai‘i and on March 31, 2023, the Circuit Court entered its Order on Appeal dismissing the Sierra Club's appeal as moot. The Company and the BLNR also appealed the court’s determination that the Sierra Club was entitled to a contested case hearing on the 2021 revocable permits.
On November 10, 2022, the BLNR voted to continue the revocable permits for calendar year 2023 and, at that same meeting, denied the Sierra Club’s oral request for a contested case hearing. The Sierra Club subsequently submitted a written request to the BLNR for a contested case hearing on the continuation of the revocable permits, which the BLNR denied on December 9, 2022. On November 29, 2022, the Sierra Club filed an appeal of BLNR’s decisions to deny its oral request for a contested case hearing and to continue the revocable permits for 2023 and on December 15, 2022, the Sierra Club amended its appeal to also challenge the BLNR’s denial of its written request for a contested case hearing. The BLNR’s decision to continue the permits through the end of calendar year 2023 will stand unless overturned on appeal or the Sierra Club obtains a preliminary injunction to prevent the decision from remaining in place.
In connection with A&B’s obligation to continue the existing process to secure a long-term water lease from the State, A&B and EMI will defend against the remaining claims made by the Sierra Club.
In addition to the litigation described above, 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. While the outcomes of such litigation and claims cannot be predicted with certainty, in the opinion of management after consultation with counsel, the reasonably possible losses would not have a material effect on the Company's consolidated financial statements as a whole.
Further note that certain of the Company's properties and assets may become the subject of other types of claims and assessments at various times (e.g., environmental matters based on normal operations of such assets). Depending on the facts and circumstances surrounding such potential claims and assessments, the Company records an accrual if it is deemed probable that a liability has been incurred and the amount of loss can be reasonably estimated/valued as of the date of the financial statements.
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8.    Revenue and Contract Balances
The Company generates revenue through its Commercial Real Estate and Land Operations segments. Through its Commercial Real Estate segment, the Company owns and operates a portfolio of commercial real estate properties and generates income (i.e., revenue) as a lessor through leases of such assets. Refer to Note 9 – Leases - The Company as a Lessor for further discussion of lessor income recognition. The Land Operations segment generates revenue from contracts with customers. The Company further disaggregates revenue from contracts with customers by revenue type when appropriate if the Company believes disaggregation best depicts how the nature, amount, timing, and uncertainty of the Company's revenue and cash flows are affected by economic factors. Revenue by type for the three months ended March 31, 2023 and 2022, was as follows (in millions):
Three Months Ended March 31,
20232022
Revenues:
Commercial Real Estate$47.9 $46.3 
Land Operations:
Development sales revenue— 6.3 
Unimproved/other property sales revenue0.9 1.8 
Other operating revenue1.6 4.8 
Land Operations2.5 12.9 
Total revenues$50.4 $59.2 
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers (in millions):
March 31, 2023December 31, 2022
Accounts receivable$6.6 $8.6 
Allowances (credit losses and doubtful accounts)(2.4)(2.5)
Accounts receivable, net of allowance for credit losses and allowance for doubtful accounts$4.2 $6.1 
Variable consideration1
$62.0 $62.0 
Prepaid rent7.4 4.4 
Other deferred revenue2.5 2.4 
Deferred revenue$71.9 $68.8 
1 Variable consideration deferred as of the end of the periods related to amounts received in the sale of agricultural land on Maui in 2018 that, under revenue recognition guidance, could not be included in the transaction price.
For the three months ended March 31, 2023, the Company did not recognize any revenue related to the Company's variable consideration and other deferred revenue reported as of December 31, 2022.


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9.    Leases - The Company as a Lessor
The Company leases real estate property to tenants under operating leases. Such activity is primarily composed of operating leases within its CRE segment.
The historical cost of, and accumulated depreciation on, leased property as of March 31, 2023, and December 31, 2022, were as follows (in millions):
March 31, 2023December 31, 2022
Leased property - real estate$1,573.5 $1,572.0 
Less: accumulated depreciation(208.9)(201.8)
Property under operating leases - net$1,364.6 $1,370.2 
Total rental income (i.e., revenue) under these operating leases during the three months ended March 31, 2023 and 2022, relating to lease payments and variable lease payments were as follows (in millions):
Three Months Ended March 31,
20232022
Lease payments$33.1 $32.2 
Variable lease payments15.6 14.9 
Revenues deemed uncollectible, net(0.7)0.3 
Total rental income$48.0 $47.4 
Contractual future lease payments to be received on non-cancelable operating leases as of March 31, 2023, were as follows (in millions):
March 31, 2023
2023$94.3 
2024116.9 
2025100.1 
202686.8 
202775.7 
202863.4 
Thereafter497.5 
Total future lease payments to be received$1,034.7 
10.    Leases - The Company as a Lessee
There have been no material changes from the Company's leasing activities as a lessee described in Note 13 to the consolidated financial statements included in Item 8 of the Company's 2022 Form 10-K. The following table provides information about the Company's operating lease costs recognized during the three months ended March 31, 2023 and 2022, (in millions):
Three Months Ended March 31,
20232022
Operating lease cost$0.6 $0.6 

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11.    Share-based Payment Awards
The 2022 Incentive Compensation Plan ("2022 Plan") allows for the granting of stock options, stock appreciation rights, stock awards, restricted stock units, dividend equivalent rights, and other awards. The shares of common stock authorized to be issued under the 2022 Plan are to be drawn from the shares of the Company's authorized but unissued common stock or from shares of its common stock that the Company acquired, including shares purchased on the open market or private transactions.
During the three months ended March 31, 2023, the Company granted approximately 310,200 of restricted stock unit awards with a weighted average grant date fair value of $22.36. During the three months ended March 31, 2022, the Company granted approximately 266,300 of restricted stock unit awards with a weighted average grant date fair value of $25.99.
The fair value of the Company's time-based awards is determined using the Company's stock price on the date of grant. The fair value of the Company's market-based awards is estimated using the Company's stock price on the date of grant and the probability of vesting using a Monte Carlo simulation with the following weighted-average assumptions:
2023 Grants2022 Grants
Volatility of A&B common stock49.1%47.7%
Average volatility of peer companies48.2%49.5%
Risk-free interest rate3.8%1.4%
The Company recognizes compensation cost net of actual forfeitures of time-based or market-based awards. A summary of compensation cost related to share-based payments is as follows (in millions):
Three Months Ended March 31,
20232022
Share-based expense:
Time-based and market-based restricted stock units$1.6 $1.5 

12.    Employee Benefit Plans
During 2022, the Company completed the termination of its funded single-employer defined benefit pension plans that covered certain non-bargaining unit employees and bargaining unit employees of the Company and transferred the life insurance benefits for retirees as of June 30, 2022, to an insurance company. The Company continues to maintain its plans that provide retiree health care and the remaining life insurance benefits to certain salaried and hourly employees.
Components of the net periodic benefit cost for the Company's pension and post-retirement plans for the three months ended March 31, 2023 and 2022, are shown below (in millions):
Three Months Ended March 31,
20232022
Service cost$— $0.7 
Interest cost0.1 0.5 
Expected return on plan assets— (1.2)
Amortization of net loss— 0.9 
Pension termination— 3.2 
Net periodic benefit cost$0.1 $4.1 

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

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

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