What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-27 compared with 2025-02-28 · 102 added, 116 removed, 253 unchanged (46% of the section changed)

5 unchanged sentences

Except for historical information contained in these written or oral communications, all other statements are forward-looking statements.

These include, for example, all references to 2025 or future years, including such references included under “Fourth Quarter 2024 Discussion and Outlook for 2025,” as well as statements generally identified through the inclusion of words such as “anticipate,” “believe,” “can,” “commit,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “seek,” “should,” “target,” and “will,” or similar statements or variations of such terms and other similar expressions.

These include, for example, all references to 2026 or future years, including such references included under “Fourth Quarter 2025 Discussion and Outlook for 2026,” as well as statements generally identified through the inclusion of words such as “anticipate,” “believe,” “can,” “commit,” “estimate,” “expect,” “focus,” “goal,” “hope,” “intend,” “may,” “plan,” “seek,” “should,” “target,” and “will,” or similar statements or variations of such terms and other similar expressions.

New risks or uncertainties may emerge from time to time, risks that the Company currently does not consider to be material could become material, and it is not possible for the Company to predict all such risks, nor can it assess the impact of all such risks on the Company’s business or the extent to which any factor, or combination of factors, may cause actual results or outcomes, or the timing of results or outcomes, to differ materially from those contained in any forward-looking statements.

43 unchanged sentences

Shares outstanding

(1) The Ocean Transportation segment includes $(1.0) million, $2.2 million, $83.1 million, $56.3 million and $26.3 million of equity in (loss)/income from the Company’s investment in SSAT for 2024, 2023, 2022, 2021 and 2020, respectively.

(1) The Ocean Transportation segment includes $32.5 million, $(1.0) million, $2.2 million, $83.1 million and $56.3 million of equity in income/(loss) from the Company’s investment in SSAT for 2025, 2024, 2023, 2022 and 2021, respectively.

(2) Capital expenditures represent amounts included in cash flows from investing activities in the Company’s Consolidated Statements of Cash Flows for the years presented.

3 unchanged sentences

Ocean Transportation:

The Company’s container volume in the Hawaii service in the fourth quarter 2024 was 1.7 percent lower year-over-year.

The decrease was primarily due to lower general demand.

Hawaii’s economy is expected to continue to grow slowly supported by modest gains in tourism, a low unemployment rate, and increased construction activity, but partially restrained by continued challenges in population growth and lower discretionary income as a result of high inflation and interest rates.

The Company expects volume in 2025 to be comparable to the level achieved in 2024, reflecting modest economic growth in Hawaii and stable market share.

In China, the Company achieved significantly higher freight rates in the fourth quarter 2024 compared to the year ago period.

The Company’s container volume in the fourth quarter 2024 also increased 7.2 percent year-over-year due to seasonally stronger freight demand.

The elevated freight rates in the fourth quarter 2024 were supported by a resilient U.S.

economy and a stable consumer demand environment coupled with tighter supply chain conditions.

The Company expects elevated freight rates to continue into the first quarter 2025.

Beyond the first quarter, the Company expects freight rates will largely be driven by the timing of trade flow normalization in the Red Sea, other geopolitical factors, supply chain activity and the trajectory of the U.S.

With respect to the Red Sea, assuming trade conditions normalize by the middle of the year, the Company expects freight rates to moderate in the second half of the year.

However, if the Red Sea remains disrupted through year end, the Company expects freight rates to remain elevated throughout the year.

In Guam, the Company’s container volume in the fourth quarter 2024 decreased 10.0 percent year-over-year.

The decrease was primarily due to lower demand from retail and food and beverage segments.

In the near term, the Company expects Guam’s economy to grow modestly supported by a low unemployment rate and an increase in construction activity.

For the full year 2025, the Company expects volume to be modestly higher than the level achieved last year.

In Alaska, the Company’s container volume for the fourth quarter 2024 increased 1.1 percent year-over-year.

The increase was primarily due to higher northbound volume, partially offset by an additional sailing in the year ago period.

The Company’s container volume in the Hawaii service in the fourth quarter 2025 was 0.6 percent higher year-over-year primarily due to higher general demand.

Hawaii’s economy remains sluggish as softer tourism and ongoing inflationary pressures, including elevated interest rates, more than offset strength in construction activity.

The Company expects volume in full year 2026 to be comparable to the level achieved in 2025, reflecting similar economic conditions and stable market share.

In China, the Company’s container volume in the fourth quarter 2025 decreased 7.2 percent year-over-year.

The Company saw higher than expected freight rates and volume driven by strong e-commerce and e-goods demand.

The Company benefited from strong freight demand in its key customer segments as well as a more stable trading environment in the Transpacific tradelane as a result of the U.S.-China trade and economic deal announced on October 30, 2025, which reduced uncertainty regarding tariffs, port entry fees, global trade and other geopolitical factors.

In the first quarter 2026, the Company expects lower volume compared to the prior year period.

The Company expects volume in full year 2026 to be modestly higher than the level achieved in 2025 based on our expectations of continued solid U.S.

consumer demand and a stable trading environment in the Transpacific tradelane.

In Guam, the Company’s container volume in the fourth quarter 2025 increased 4.4 percent year-over-year primarily due to higher general demand.

In the near term, the Company expects Guam’s economy to moderate reflecting a challenging tourism environment.

For full year 2026, the Company expects volume to be comparable to the level achieved last year.

In Alaska, the Company’s container volume for the fourth quarter 2025 decreased 3.3 percent year-over-year.

The decrease was primarily due to one less northbound sailing compared to the year ago period, partially offset by higher export seafood volume on AAX.

In the near term, the Company expects continued economic growth in Alaska supported by a low unemployment rate, jobs growth and continued oil and gas exploration and production activity.

For the full year 2025, the Company expects volume to approximate the level achieved last year.

The loss in the fourth quarter 2024 from the Company’s SSAT joint venture investment was $9.5 million, or $13.6 million lower than the income of $4.1 million in fourth quarter 2023.

The decrease was due to a $18.4 million impairment charge related to the write-down of a terminal operating lease asset, partially offset by higher year-over-year lift volume.

On an after-tax basis, the impairment charge impacted fourth quarter 2024 net income and diluted EPS by $14.0 million and $0.42 per share, respectively.

For 2025, the Company expects the contribution from SSAT to approximate the level achieved in 2024, without taking into account the $18.4 million impairment charge in the fourth quarter 2024.

Based on the outlook trends noted above, the Company expects Ocean Transportation operating income for the first quarter 2025 to be meaningfully higher than the $27.6 million achieved in the first quarter 2024.

For full year 2025, the Company expects Ocean Transportation operating income to be largely driven by the timing of trade flow normalization in the Red Sea, other geopolitical factors, supply chain activity and the trajectory of the U.S.

Assuming trade conditions in the Red Sea normalize by the middle of the year and there are no significant changes from today in the other factors referenced above, the Company expects full year 2025 Ocean Transportation operating income to be moderately lower than the $500.9 million achieved in 2024.

However, if trade conditions in the Red Sea remain disrupted through year end and there are no significant changes from today in the other factors noted above, the Company expects full year 2025 Ocean Transportation operating income to approach the level achieved in 2024.

In the fourth quarter 2024, operating income for the Company’s Logistics segment was $10.1 million, or $1.2 million higher compared to the level achieved in the fourth quarter 2023.

The increase was primarily due to a higher contribution from supply chain management.

For 2025, the Company expects challenging business conditions for transportation brokerage for most of the year and a lower contribution from supply chain management, which the Company expects to lead to modestly lower operating income compared to the level achieved in 2024.

For full year 2026, the Company expects volume to be comparable to the level achieved last year.

The contribution in the fourth quarter 2025 from the Company’s SSAT joint venture investment was $9.3 million, or $18.8 million higher than fourth quarter 2024.

The increase was primarily due to an impairment charge related to the write-down of a terminal operating lease asset at SSAT which impacted fourth quarter 2024 operating income, net income and diluted earnings per share by $18.4 million, $14.0 million and $0.42 per share, respectively.

For full year 2026, the Company expects the contribution from SSAT to be comparable to the $32.5 million achieved in full year 2025.

Based on the outlook trends noted above, the Company expects Ocean Transportation operating income for the first quarter 2026 to be approximately $50 million.

For full year 2026, the Company expects Ocean Transportation operating income to approach the level achieved in full year 2025 .

For 2026 compared to 2025, the Company also expects to see a more normal operating income seasonality pattern with second and third quarters being the strongest relative to the first and fourth quarters.

In the fourth quarter 2025, operating income for the Company’s Logistics segment was $7.7 million, or $2.4 million lower compared to the level achieved in the fourth quarter 2024.

The decrease was primarily due to a lower contribution from supply chain management.

For the first quarter 2026, the Company expects Logistics operating income to be modestly lower than the $8.5 million achieved in the first quarter 2025.

For full year 2026, the Company expects Logistics operating income to approach the $44.2 million achieved in full year 2025.

Consolidated Operating Income:

For the first quarter 2025, the Company expects consolidated operating income to be meaningfully higher than the $36.9 million achieved in the first quarter 2024.

For full year 2025, the Company expects consolidated operating income to be largely driven by the timing of trade flow normalization in the Red Sea, other geopolitical factors, supply chain activity and the trajectory of the U.S.

Assuming trade conditions in the Red Sea normalize by the end of the first half of the year and there are no significant changes from today in the other factors referenced above, the Company expects full year 2025 consolidated operating income to be moderately lower than the $551.3 million achieved in 2024.

However, if trade conditions in the Red Sea remain disrupted through year end and there are no significant changes from today in the other factors noted above, the Company expects full year 2025 consolidated operating income to approach the level achieved in 2024.

For the first quarter 2026, the Company expects consolidated operating income to be lower than the $82.1 million achieved in the first quarter 2025.

For full year 2026, the Company expects consolidated operating income to approach the level achieved in full year 2025 based on our expectations of continued solid U.S.

consumer demand and a stable trading environment.

Depreciation and Amortization:

7 unchanged sentences

Income Taxes:

In the fourth quarter 2024, the Company’s effective tax rate was 19.1 percent.

In the fourth quarter 2025, the Company’s effective tax rate was 5.2 percent and benefited from a one-time tax adjustment of $18.5 million, or $0.59 per share, related to the Company’s deferred tax assets and liabilities.

For the full year 2025, the Company’s effective tax rate was 16.7 percent.

For the full year 2026, the Company expects its effective tax rate to be approximately 21.0 percent.

18 unchanged sentences

Fiscal years ended December 31, 2025 and 2024 include 52 weeks.

Consolidated Operating Revenue for the year ended December 31, 2024 increased $327.2 million, or 10.6 percent, compared to the prior year.

The increase was due to an increase in Ocean Transportation revenue of $332.7 million which was partially offset by a decrease in Logistics revenue of $5.5 million.

Operating Costs and Expenses for the year ended December 31, 2024 increased $118.7 million, or 4.3 percent, compared to the prior year.

The increase was due to an increase in Ocean Transportation operating costs and expenses of $126.6 million which was partially offset by a decrease in Logistics operating costs and expenses of $7.9 million.

Operating Income for the year ended December 31, 2024 increased $208.5 million, or 60.8 percent, compared to the prior year.

The increase was due to an increase in Ocean Transportation operating income of $206.1 million and an increase in Logistics operating income of $2.4 million.

Consolidated Operating Revenue for the year ended December 31, 2025 decreased $77.3 million, or 2.3 percent, compared to the prior year.

The decrease was due to a decrease in Ocean Transportation revenue of $74.2 million and a decrease in Logistics revenue of $3.1 million.

Operating Costs and Expenses for the year ended December 31, 2025 decreased $25.8 million, or 0.9 percent, compared to the prior year.

The decrease was due to a decrease in Ocean Transportation operating costs and expenses of $28.9 million which was partially offset by an increase in Logistics operating costs and expenses of $3.1 million.

Operating Income for the year ended December 31, 2025 decreased $51.5 million, or 9.3 percent, compared to the prior year.

The decrease was due to a decrease in Ocean Transportation operating income of $45.3 million and a decrease in Logistics operating income of $6.2 million.

The reasons for changes in operating revenue, operating costs and expenses, and operating income are described below, by business segment, in “Analysis of Operating Revenue and Income by Segment.”

Interest Income was $31.7 million for the year ended December 31, 2025, compared to $48.3 million in the prior year.

The increase in interest income was due to interest of $10.2 million earned on a federal income tax refund received during the year ended December 31, 2024.

The increase in interest income was also due to increased amounts of cash and cash equivalent accounts, and cash on deposit within the Capital Construction Fund that were invested in interest bearing accounts during the year ended December 31, 2024, compared to the prior year.

The interest income for the year ended December 31, 2024 included interest of $10.2 million earned on a federal income tax refund.

Excluding that amount, the decrease in interest income was due to a decreased amount of cash and cash

equivalent accounts, and cash on deposit and investments within the CCF that were invested in interest bearing accounts during the year ended December 31, 2025, compared to the prior year.

Interest Expense was $6.8 million for the year ended December 31, 2025, compared to $7.5 million in the prior year.

The decrease in interest expense was due to lower outstanding debt and a higher offset of capitalized interest related to the construction of new vessels during the year ended December 31, 2024, compared to the prior year.

The decrease in interest expense was due to lower outstanding debt, offset by capitalized interest related to the construction of new vessels during the year ended December 31, 2025, compared to the prior year.

Other Income (Expense), net was $9.1 million for the year ended December 31, 2025, compared to $7.3 million in the prior year, and relates to the amortization of certain components of net periodic benefit costs or gains related to the Company’s pension and post-retirement plans.

The increase in other income (expense) was due to favorable adjustments reflected in the Company’s pension and post-retirement plan liabilities during the year ended December 31, 2024, compared to the prior year.

The increase in other income (expense) was due to an increase in the amortization of favorable adjustments reflected in the Company’s pension and post-retirement plan liabilities.

Income Taxes for the year ended December 31, 2025 were $89.0 million, or 16.7 percent of income before income taxes, compared to $123.0 million, or 20.5 percent of income before income taxes in the prior year.

The 2023 income tax rate benefited from certain discrete tax adjustments that lowered the effective tax rate in the prior year.

Net Income during the year ended December 31, 2024 increased $179.3 million, or 60.4 percent, to $476.4 million, compared to the prior year.

The effective tax rate for the year ended December 31, 2025 benefited from a one-time adjustment of $18.5 million or 3.5 percent related to the Company’s deferred tax assets and liabilities.

Excluding this adjustment, the effective tax rate for the year ended December 31, 2025 would have been 20.1 percent.

Net Income during the year ended December 31, 2025 decreased $31.6 million, or 6.6 percent, to $444.8 million, compared to the prior year.

ANALYSIS OF OPERATING REVENUE AND INCOME BY SEGMENT

8 unchanged sentences

Operating income margin

Volume (Forty-foot equivalent units (FEU), except for automobiles) (1)

Volume (Forty-foot equivalent units (FEU)) (1)

Hawaii containers

Hawaii automobiles

Alaska containers

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(1) Approximate volume included for the period are based on the voyage departure date, but revenue and operating income are adjusted to reflect the percentage of revenue and operating income earned during the reporting period for voyages in transit at the end of each reporting period.

(2) Includes containers from China and other Asia origins.

(3) Includes containers from services in various islands in Micronesia and the South Pacific, and Okinawa, Japan.

Ocean Transportation revenue increased $332.7 million, or 13.4 percent, during the year ended December 31, 2024, compared with the year ended December 31, 2023.

The increase was primarily due to significantly higher freight rates in China, higher freight rates in the domestic tradelanes, and higher volume in China, partially offset by lower domestic tradelane volume.

On a year-over-year FEU basis, Hawaii container volume decreased 2.3 percent primarily due to lower general demand;

Alaska volume increased 0.6 percent due to higher general demand, partially offset by one less northbound sailing;

China volume increased 2.4 percent due to stronger seasonal volume in the fourth quarter 2024 and one additional sailing;

Ocean Transportation revenue decreased $74.2 million, or 2.6 percent, during the year ended December 31, 2025, compared with the year ended December 31, 2024.

The decrease was primarily due to lower volume in China.

On a year-over-year FEU basis, Hawaii container volume increased 1.6 percent primarily due to higher general demand and the dry-docking of a competitor’s vessel in the first half of 2025;

Alaska volume increased 1.7 percent primarily due to higher export seafood volume on AAX, partially offset by one less northbound sailing;

China volume decreased 9.5 percent primarily due to the difficult trading environment in the Transpacific in the last three quarters of 2025 marked by continued uncertainty and volatility arising from tariffs and global trade;

Guam volume decreased 4.3 percent primarily due to lower general demand;

and Other containers volume decreased 2.9 percent.

Ocean Transportation operating income increased $206.1 million, or 69.9 percent, during the year ended December 31, 2024, compared with the year ended December 31, 2023.

The increase was primarily due to significantly higher freight rates in China, higher freight rates in the domestic tradelanes, and higher volume in China, partially offset by higher operating costs and general and administrative expenses.

The Company’s SSAT terminal joint venture investment incurred a loss of $1.0 million during the year ended December 31, 2024, compared to income of $2.2 million during the year ended December 31, 2023.

The decrease was due to an impairment charge related to the write-down of a terminal operating lease asset in the fourth quarter 2024 of $18.4 million, partially offset by higher lift volume.

and Other containers volume increased 1.2 percent.

Ocean Transportation operating income decreased $45.3 million, or 9.0 percent, during the year ended December 31, 2025, compared with the year ended December 31, 2024.

The decrease was primarily due to a lower contribution from China, partially offset by a higher contribution from SSAT.

The Company’s SSAT terminal joint venture investment contributed $32.5 million during the year ended December 31, 2025, compared to a loss of $1.0 million during the year ended December 31, 2024.

The increase was primarily due to an impairment charge related to the write-down of a terminal operating lease asset at SSAT in the year ago period which impacted operating income by $18.4 million and higher lift volume.

2025 compared with 2024:

6 unchanged sentences

Logistics revenue decreased $3.1 million, or 0.5 percent, during the year ended December 31, 2025, compared with the year ended December 31, 2024.

The decrease was primarily due to lower revenue in transportation brokerage, partially offset by higher revenue in supply chain management.

Logistics operating income increased $2.4 million, or 5.0 percent, during the year ended December 31, 2024, compared with the year ended December 31, 2023.

The increase was primarily due to a higher contribution from supply chain management.

The decrease was primarily due to lower revenue in transportation brokerage and supply chain management, partially offset by higher revenue in freight forwarding.

Logistics operating income decreased $6.2 million, or 12.3 percent, during the year ended December 31, 2025, compared with the year ended December 31, 2024.

The decrease was primarily due to lower contributions from freight forwarding and transportation brokerage.

LIQUIDITY AND CAPITAL RESOURCES

6 unchanged sentences

Cash and cash equivalents

Restricted cash

Accounts receivable, net (1)

8 unchanged sentences

Net cash used in financing activities (3)

Net increase (decrease) in cash, cash equivalents and restricted cash

Net (decrease) increase in cash, cash equivalents and restricted cash

Cash and cash equivalents, and restricted cash, beginning of the period

4 unchanged sentences

Non-cash depreciation and amortization

Deferred income taxes

Deferred income taxes, net

Other non-cash related changes, net

8 unchanged sentences

Other long-term liabilities

Loss from SSAT was $1.0 million for the year ended December 31, 2024, compared to income from SSAT of $2.2 million in the prior year.

Excluding the Company’s portion of an impairment charge of $18.4 million that was included in the loss from SSAT during the year ended December 31, 2024 related to the write-down of a terminal operating lease asset, the increase in income from SSAT was due to higher operating profits generated by SSAT during the year ended December 31, 2024 due to increased lift volume.

Income from SSAT was $32.5 million for the year ended December 31, 2025, compared to a loss from SSAT of $1.0 million in the prior year, which included the Company’s portion of an impairment charge of $18.4 million related to the write-down of a terminal operating lease asset.

Excluding this impairment charge, the increase in income from SSAT was due to higher operating profits generated by SSAT during the year ended December 31, 2025 due to increased lift volume.

No impairment charge was recorded by SSAT during the year ended December 31, 2025.

Cash dividends received from SSAT was $14.0 million for the year ended December 31, 2024, compared to no cash distributions received in the prior year.

Cash dividends received from SSAT was $21.0 million for the year ended December 31, 2025, compared to $14.0 million in the prior year.

Cash distributions from SSAT are dependent on the level of cash available for distribution after consideration of SSAT’s operational and capital needs.

Changes in accounts receivable were primarily due to the timing of collections associated with those receivables.

Changes in prepaid expenses and other assets were primarily due to a decrease in prepaid income tax receivables at

December 31, 2024 due to a refund of $118.6 million related to the Company’s 2021 federal tax return that was received during the year ended December 31, 2024, offset by higher prepaid fuel.

Changes in prepaid expenses and other assets were primarily due to a decrease in prepaid income tax receivables at December 31, 2024 due to a refund of $118.6 million related to the Company’s 2021 federal tax return that was received during the year ended December 31, 2024.

Changes in accounts payable, accruals and other liabilities were primarily due to the timing of payments associated with those liabilities.

Changes in operating lease liabilities were primarily due to new operating leases entered into during the year ended December 31, 2024, offset by operating leases that expired during the year ended December 31, 2024.

Changes in operating lease assets and liabilities, net, were primarily due to new operating leases entered into during the year ended December 31, 2025, offset by lease payments and operating leases that expired during the same year.

Deferred dry-docking payments were $49.4 million for the year ended December 31, 2025, compared to $30.2 million in the prior year.

The increase in deferred dry-docking payments was due to an increase in vessel dry-dock related activities during the year ended December 31, 2024.

The increase in deferred dry-docking payments was due to an increase in vessel drydock related activities during the year ended December 31, 2025.

Changes in other long-term liabilities primarily related to payments of pension and post-retirement liabilities, and multi-employer liabilities.

4 unchanged sentences

Withdrawals from CCF

Capitalized vessel construction expenditures

Vessel construction expenditures

Capital expenditures (excluding vessel construction expenditures)

1 unchanged sentence

Payments for asset acquisitions

During the year ended December 31, 2024, cash and interest deposited into the CCF were $50.0 million and $18.8 million, compared to $100.0 million and $31.1 million in the prior year, respectively.

During the year ended December 31, 2024, cash withdrawals from the CCF were $89.6 million, compared to $49.9 million in the prior year, related to vessel construction milestone payments.

During the year ended December 31, 2024, the Company repurchased $53.8 million of assigned accounts receivable.

No assigned accounts receivable were repurchased during the year ended December 31, 2023.

During the year ended December 31, 2025, cash deposits into the CCF included $100.7 million from the repurchase of assigned accounts receivables and $17.9 million of interest income, compared to $50.0 million of cash deposits, $53.8 million from the repurchase of assigned accounts receivable and $16.9 million of interest income in the prior year, respectively.

During the year ended December 31, 2025, cash withdrawals from the CCF for the payment of vessel construction milestone payments were $237.3 million, compared to $89.6 million in the prior year.

Capitalized vessel construction expenditures were $244.3 million for the year ended December 31, 2025, compared to $95.6 million in the prior year.

The increase in capitalized vessel construction expenditures was due to the timing of milestone payments related to the Company’s fleet renewal program.

Capital expenditures (excluding vessel construction expenditures) were $214.5 million for the year ended December 31, 2024, compared to $195.5 million for the prior year.

Capital expenditures (excluding vessel construction expenditures) during the year ended December 31, 2024 included costs associated with LNG installations, the reengining of an existing vessel, and the purchase of additional containers, chassis and other terminal equipment to support the Company’s operating activities.

During the year ended December 31, 2024, the Company paid $0.8 million related to asset acquisitions, compared to $12.4 million in the prior year.

Capital expenditures (excluding vessel construction expenditures) were

$149.1 million for the year ended December 31, 2025, compared to $214.5 million for the prior year.

Capital expenditures for the year ended December 31, 2024 included costs associated with LNG installations and the reengining of an existing vessel, which were completed during that year.

No comparable costs were incurred during the year ended December 31, 2025.

Capital expenditures (excluding vessel construction expenditures) during the year ended December 31, 2025 included the purchase of containers, chassis and other terminal equipment to support the Company’s operating activities.

(3) Changes in Net Cash Used in Financing Activities:

5 unchanged sentences

Dividends paid

Payments of deferred loan fees

The Company paid $303.3 million to repurchase common stock during the year ended December 31, 2025, compared to $199.1 million in the prior year.

The Company did not issue any new fixed interest debt during the years ended December 31, 2025 and 2024.

The Company paid $39.7 million of scheduled fixed interest debt principal payments during the year ended December 31, 2024, compared to $76.9 million of prepaid and scheduled fixed interest debt principal payments during the prior year.

The Company paid $39.7 million of scheduled fixed interest debt principal payments in each of the years ended December 31, 2025 and 2024.

The value of shares withheld by the Company for taxes related to the settlement of restricted stock units was $16.4 million for the year ended December 31, 2025, compared to $17.6 million in the prior year.

2 unchanged sentences

The Company’s CCF is described in Note 7 to the Consolidated Financial Statements.

Cash on deposit and investments in the CCF and assigned accounts receivable as of December 31, 2024 and 2023 were as follows:

Cash on deposit and investments in the CCF as of December 31, 2025 and 2024 were as follows:

As of December 31,

(In millions)

Capital Construction Fund:

Cash and cash equivalents, and investments account

Assigned accounts receivables

Capital Construction Fund - Cash and cash equivalents, and investments account

Cash on deposit in the CCF is invested in a U.S.

Treasury obligations fund with daily liquidity.

At December 31, 2024, securities held within the U.S.

Treasury obligations fund had a weighted average life of 96 days.

The Company’s CCF investments are in fixed-rate U.S.

Treasury obligations with various maturity dates of up to 3 years.

Cash on deposit and investments in the CCF are classified as a long-term asset in the Company’s Consolidated Balance Sheets, as the Company intends to use qualified cash withdrawals from the CCF to fund long-term investments in the construction of new vessels .

Assigned accounts receivable in the CCF are classified as part of accounts receivable in the Consolidated Balance Sheets due to the nature of the assignment.

The CCF decreased by $109.9 million during the year ended December 31, 2025 due to vessel milestone payments of $237.3 million paid during the year ended December 31, 2025, offset by $100.7 million of cash deposited into the CCF for the repurchase of assigned accounts receivable, and interest income and investment accretion earned in the CCF.

The Company utilizes a mix of fixed and variable debt for liquidity and to fund the Company’s operations.

The Company’s debt is described in Note 8 to the Consolidated Financial Statements in Item 8 of Part II.

Total debt as of December 31, 2025 and 2024 is as follows:

1 unchanged sentence

(In millions)

Variable interest debt

Fixed interest debt

Variable interest debt - Revolving credit facility

Fixed interest debt - Title XI debt and private placement term loans

Total Debt (excluding deferred loan fees)

1 unchanged sentence

The decrease in fixed interest debt was due to the scheduled debt repayments made during the year ended December 31, 2025.

As of December 31, 2024, the Company had $643.9 million of unused capacity under the revolving credit facility, with a maturity date of March 31, 2026.

The Company’s debt is described in Note 8 to the Consolidated Financial Statements in Item 8 of Part II.

As of December 31, 2025, the Company had $544.3 million of unused capacity under the revolving credit facility, with a maturity date of July 23, 2030.

Working Capital:

The Company had a working capital surplus of $49.2 million at December 31, 2024, compared to a working capital surplus of $40.0 million at December 31, 2023.

The Company had a working capital deficit of $55.5 million at December 31, 2025, compared to a working capital surplus of $49.2 million at December 31, 2024.

Working capital is primarily impacted by the amount of net cash provided by operating activities, the amount of capital expenditures, the amount and timing of collections associated with accounts receivable, prepaid expenses and other assets, and the amount and timing of payments associated with accounts payable, accruals, income taxes, debt and other liabilities.

The increase in the Company’s working capital surplus during the year ended December 31, 2024 was due to the increase in cash provided by operating activities offset by higher capital expenditures during the year.

The decrease in the Company’s working capital during the year ended December 31, 2025 was due to a decrease in cash provided by operating activities and higher capital expenditures during the year.

Capital Expenditures:

1 unchanged sentence

(In millions)

New vessel construction milestone payments and related costs

New vessel construction milestone payments and related costs, owner’s items and change orders

Maintenance and other capital expenditures

Total Estimated Capital Expenditures

New vessel construction milestone payments and related costs are for the Company’s construction of three new vessels at a cost of approximately $1.0 billion (excluding owners’ items and change orders) with expected delivery dates during the first quarter 2027, the third quarter 2027 and the second quarter 2028.

Future milestone payments are expected to be financed with cash currently on deposit in the Company’s CCF, cash and cash equivalents on the Consolidated Balance Sheets, cash flows generated from future operations, borrowings available under the Company’s unsecured revolving credit facility or additional debt financings.

New vessel construction milestone payments and related costs (including owner’s items and change orders) are for the Company’s construction of three new Aloha class vessels with expected delivery dates during the first quarter 2027, the third quarter 2027 and the second quarter 2028.

Future construction milestone payments are expected to be financed with cash currently on deposit in the Company’s CCF, cash and cash equivalents on the Consolidated Balance Sheets, cash flows generated from future operations, borrowings available under the Company’s unsecured revolving credit facility or additional debt financings.

Maintenance and other capital expenditures include amounts that the Company expects to spend on various capital projects, including capital expenditures related to the second and third phase of its program to modernize and renovate its terminal facility at Sand Island, Honolulu, Hawaii, repurchases of leased equipment, vessel capital maintenance and annual equipment purchases to support the Company’s operations.

The Company expects to fund these capital expenditures with cash and cash equivalents on the Consolidated Balance Sheets and through cash flows generated from future operating activities.

The Company expects to fund capital expenditures with cash and cash equivalents on the Consolidated Balance Sheets and through cash flows generated from future operating activities.

Repurchase of Shares:

During the year ended December 31, 2025, the Company repurchased approximately 2.7 million shares for a total cost of $307.4 million.

The remaining number of shares that may be repurchased under the Company’s stock repurchase program was 830,527 shares at December 31, 2024.

On February 27, 2025, the Company’s Board approved an additional 3.0 million shares of common stock to be added to the Company’s existing share repurchase program and extended the program’s expiration date to December 31, 2027.

The remaining number of shares that may be repurchased under the Company’s stock repurchase program was approximately 1.1 million shares at December 31, 2025.

COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET ARRANGEMENTS

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The critical accounting policies and estimates considered in the preparation of the Company’s Consolidated Financial Statements are described below.

Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board.

Long-Lived Assets, Intangible Assets and Goodwill:

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If this review determines that the amount recorded will not be recovered, the amount recorded for the asset group is reduced to its estimated fair value.

These asset impairment analyses are highly subjective because they require management to make assumptions and apply considerable judgments to, among other things, estimates of the timing and amount of future cash flows, expected useful lives of the assets, potential impact of future events, including changes in economic conditions and operating performance, and future costs

of maintenance and improvements of the assets.

If management uses different assumptions or if different conditions occur in future periods, the Company’s financial condition or its future operating results could be materially impacted.

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Indefinite-life Intangible Assets and Goodwill:

The Company’s intangible assets include goodwill and a trade name, and are grouped at the lowest level reporting unit for which identifiable cash flows are available.

In estimating the fair value of a reporting unit, the Company uses a combination of a discounted cash flow model and fair value based on market multiples of earnings before interest, income taxes, depreciation and amortization (“EBITDA”).

The Company’s indefinite-life intangible assets include goodwill and a trade name, and are grouped at the lowest level reporting unit for which identifiable cash flows are available.

In estimating the fair value of a reporting unit, the Company uses a combination of a discounted cash flow model and fair value based on market multiples of EBITDA.

The discounted cash flow approach requires the Company to use a number of assumptions, including market factors specific to the business, the amount and timing of estimated future cash flows generated by the business over an extended period of time, long-term growth rates for the business, and a discount rate that considers the risks related to the amount and timing of the cash flows.

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Insurance related liabilities were $43.1 million and $52.8 million at December 31, 2025 and 2024, respectively.

The Company’s estimate of insurance related liabilities could change if management uses different assumptions or if different conditions occur in future periods, however the Company does not expect any such change would have a material impact on the Company’s financial condition and results of operations.

Pension and Post-Retirement Plans:

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These assumptions include factors such as discount rates, expected long-term rate of return on pension plan assets, salary growth, health care cost trend rates, inflation, retirement rates, mortality rates and expected contributions.

Actual results that differ from the assumptions made could materially affect the Company’s financial condition or its future operating results.

Actual results that differ from the assumptions made could

materially affect the Company’s financial condition or its future operating results.

The effects of changing assumptions are included in unamortized net gains and losses, which directly affect accumulated other comprehensive income (loss).

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Income Taxes:

The Company’s income tax expense requires the Company to make various estimates and judgments.

These estimates and judgments are applied in the calculation of taxable income, tax credits, tax benefits, CCF related tax deductions, foreign-derived intangible income and other tax deductions, and in the calculation of certain deferred tax assets and liabilities, which arise from differences in the timing of recognition of revenue, costs and expenses for tax purposes.

The Company’s income tax expense requires the Company to make various judgments and estimates.

These judgments and estimates are applied in the calculation of taxable income, tax credits, tax benefits, CCF related tax deductions, foreign-derived deduction eligible income and other tax deductions, and in the calculation of certain deferred tax assets and liabilities, which arise from differences in the timing of recognition of revenue, costs and expenses for tax purposes.

The calculation of deferred tax assets and liabilities may be impacted by various factors including but not limited to changes in tax rates;

changes in tax laws, regulations, rulings and interpretations of existing tax laws;

changes in the evaluation of the Company’s ability to realize deferred tax assets including operating loss and tax credit carryforwards.

Significant changes to these estimates may result in an increase or decrease to the Company’s income taxes in a subsequent period.

and changes in the evaluation of the Company’s ability to realize deferred tax assets including operating loss and tax credit carryforwards in future years.

Significant changes to these judgments and estimates may result in an increase or decrease to the Company’s income taxes in a subsequent period.

Additional information about the Company’s income taxes is included in Note 10 to the Consolidated Financial Statements in Item 8 of Part II below.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis