What changed in this filing

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Item 1. Financial Statements

2022-11-03 compared with 2022-08-02 · 141 added, 68 removed, 417 unchanged (33% of the section changed)

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In millions, except per share amounts)

8 unchanged sentences

Operating Income

Interest income

Interest expense

14 unchanged sentences

Condensed Consolidated Balance Sheets

September 30,

(In millions)

9 unchanged sentences

Intangible assets, net

Capital Construction Fund

Deferred dry-docking costs, net

24 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30,

Nine Months Ended September 30,

(In millions)

6 unchanged sentences

Income from SSAT

Distribution from SSAT

Distributions from SSAT

Changes in assets and liabilities:

10 unchanged sentences

Other capital expenditures

Proceeds from disposal of property and equipment

Cash deposits into Capital Construction Fund

10 unchanged sentences

Net cash used in financing activities

Net Increase in Cash, Cash Equivalents and Restricted Cash

Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash

Cash, Cash Equivalents and Restricted Cash, Beginning of the Period

9 unchanged sentences

Capital expenditures included in accounts payable, accruals and other liabilities

Accrued dividends

See Notes to Condensed Consolidated Financial Statements.

17 unchanged sentences

Balance at June 30, 2022

Other comprehensive income (loss), net of tax

Share-based compensation

Equity interest in SSAT

Shares repurchased

Balance at September 30, 2022

Comprehensive

12 unchanged sentences

Balance at June 30, 2021

Other comprehensive income (loss), net of tax

Share-based compensation

Shares issued, net of shares withheld for employee taxes

Shares repurchased

Balance at September 30, 2021

See Notes to Condensed Consolidated Financial Statements.

21 unchanged sentences

and (iv) supply chain management, non-vessel operating common carrier (“NVOCC”) freight forwarding and other services.

SIGNIFICANT ACCOUNTING POLICIES

GENERAL AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation:

8 unchanged sentences

Fiscal Period:

The period end for Matson covered by this report is June 30, 2022.

The period end for MatNav and its subsidiaries covered by this report occurred on July 1, 2022.

The period end for Matson covered by this report is September 30, 2022.

The period end for MatNav and its subsidiaries covered by this report is September 30, 2022.

Significant Accounting Policies:

17 unchanged sentences

Future results could be materially affected if actual results differ from these estimates and assumptions.

Prepaid Expenses and Other Assets:

Prepaid expenses and other assets consist of the following at September 30, 2022 and December 31, 2021:

September 30,

Prepaid Expenses and Other Assets (in millions)

Income tax receivables

Prepaid insurance and insurance related receivables

Restricted cash - vessel construction obligations

Income tax receivables include a federal income tax refund related to the Company’s 2021 federal tax return, overpayments of federal and state taxes paid during the nine months ended September 30, 2022, and other income tax receivables.

Recognition of Revenues and Expenses:

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Ocean Transportation (in millions) (1)

12 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Logistics (in millions) (1)

7 unchanged sentences

Revenue and the related purchased third-party transportation costs are recognized over the duration of a delivery based upon the relative transit time completed in each reporting period.

commissions, and other operating costs are expensed as incurred.

Labor, agent commissions, and other operating costs are expensed as incurred.

The Company reports revenue on a gross basis as the Company serves as the principal in these transactions because it is responsible for fulfilling the contractual arrangements with the customer and has latitude in establishing prices.

8 unchanged sentences

The Company expenses sales commissions and contract acquisition costs as incurred because the amounts are generally immaterial.

These expenses are included in selling, general and administration expenses in the Condensed Consolidated Statements of Income and Comprehensive Income.

These expenses are included in selling, general and administrative expenses in the Condensed Consolidated Statements of Income and Comprehensive Income.

Capital Construction Fund:

The Company’s Capital Construction Fund (“CCF”) is described in Note 7 to the Consolidated Financial Statements included in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

As of June 30, 2022 and December 31, 2021, $ 9.8 million of eligible accounts receivable was assigned to the CCF.

As of September 30, 2022 and December 31, 2021, $ 9.8 million of eligible accounts receivable was assigned to the CCF.

Due to the nature of the assignment of eligible accounts receivable into the CCF, such assigned amounts are classified as part of accounts receivable in the Condensed Consolidated Balance Sheets.

Cash on deposit in the CCF is held in a money market account and classified as a long-term asset in the Company’s Condensed Consolidated Balance Sheets, as the Company intends to use qualified cash withdrawals to fund long-term investment in the construction of new vessels.

During the six months ended June 30, 2022 and 2021, the Company deposited $ 10.7 million and $ 31.2 million into the CCF and made qualifying cash withdrawals of $ 10.7 million and $ 31.2 million from the CCF, respectively.

The balance of cash on deposit at June 30, 2022 and December 31, 2021 was nominal.

Cash on deposit in the CCF is held in short term U.S.

Treasury Obligation Funds and classified as a long-term asset in the Company’s Condensed Consolidated Balance Sheets, as the Company intends to use qualified cash withdrawals to fund long-term investment in the construction of new vessels.

During the three months ended September 30, 2022, the Company deposited $ 569.0 million into the CCF and made qualifying cash withdrawals of $ 4.0 million from the CCF.

No CCF deposits or withdrawals were made during the three months ended September 30, 2021.

During the nine months ended September 30, 2022 and 2021, the Company deposited $ 579.7 million and $ 31.2 million into the CCF and made qualifying cash withdrawals of $ 14.7 million and $ 31.2 million from the CCF, respectively.

The balance of cash on deposit at September 30, 2022 was $ 565.0 million and was nominal at December 31, 2021.

Investment in SSAT:

Condensed income statement information for SSAT for the three and six months ended June 30, 2022 and 2021 consisted of the following:

Condensed income statement information for SSAT for the three and nine months ended September 30, 2022 and 2021 consisted of the following:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In millions)

6 unchanged sentences

(2) The Company records its share of net income from SSAT in costs and expenses in the Condensed Consolidated Statement of Income and Comprehensive Income due to the nature of SSAT’s operations.

The Company’s investment in SSAT was $ 93.1 million and $ 58.7 million at June 30, 2022 and December 31, 2021, respectively.

The Company’s second quarter 2022 cash dividend of $ 0.30 per share was paid on June 2, 2022.

On June 22, 2022, the Company’s Board of Directors declared a cash dividend of $ 0.31 per share payable on September 1, 2022 to shareholders of record on August 4, 2022.

The Company’s investment in SSAT was $ 87.2 million and $ 58.7 million at September 30, 2022 and December 31, 2021, respectively.

On September 16, 2022, SSAT completed the purchase of a 20 percent non-controlling equity interest in SSAT Terminals (Oakland), LLC (“SSAT Oakland”) from a third-party company.

After completion of this transaction, SSAT Oakland became a wholly-owned subsidiary of SSAT.

The operating results of SSAT Oakland continue to consolidate into the operating results of SSAT.

As a result of this transaction, the Company recorded a decrease of $ 15.5 million in its investment in SSAT and a corresponding decrease in retained earnings during the three months ended September 30, 2022 to reflect its proportionate share of this purchase.

The Company’s third quarter 2022 cash dividend of $ 0.31 per share was paid on September 1, 2022.

On October 27, 2022, the Company’s Board of Directors declared a cash dividend of $ 0.31 per share payable on December 1, 2022 to shareholders of record on November 10, 2022.

Repurchase of Shares:

During the three months ended June 30, 2022, the Company repurchased approximately 1.6 million shares for a total cost of $ 138.1 million.

During the six months ended June 30, 2022, the Company repurchased approximately 2.3 million shares for a total cost of $ 206.7 million.

As of June 30, 2022, the maximum number of remaining shares that may be repurchased under the Company’s stock repurchase program was approximately 1.2 million shares.

During the three months ended September 30, 2022, the Company repurchased approximately 1.1 million shares for a total cost of $ 88.0 million.

During the nine months ended September 30, 2022, the Company repurchased approximately 3.5 million shares for a total cost of $ 294.7 million.

As of September 30, 2022, the maximum number of remaining shares that may be repurchased under the Company’s share repurchase program was approximately 3.0 million shares.

Deferred Income Taxes:

During the three months ended September 30, 2022, the Company filed its 2021 federal income tax return.

As a result of the Company depositing $ 565.0 million into the Capital Construction Fund, the Company’s federal income tax return resulted in a federal income tax refund position as the deposit is allowed as a deduction in the 2021 taxable period.

The Company recorded the federal income tax refund receivable in Prepaid expenses and other assets, and a corresponding increase in Deferred income taxes in the Company’s Condensed Consolidated Balance Sheet at September 30, 2022.

Other changes in deferred income taxes related to the recording of the Company’s income tax provision for the nine months ended September 30, 2022.

Tax Legislation:

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law in the United States.

The new provisions impose a one percent excise tax on the fair market value of share repurchases after December 31, 2022.

The provisions of the IRA also include a 15 percent alternative minimum tax rate that generally applies to U.S.

corporations with adjusted financial statement income in excess of $1 billion, and is effective in taxable years beginning after December 31, 2022.

The Company is reviewing the provisions of the IRA and monitoring any guidance with respect to having these provisions apply to the Company’s tax provision in future periods.

Subsequent Events:

On November 1, 2022, MatNav signed vessel construction agreements with Philly Shipyard, Inc.

for three new LNG-ready Aloha Class containerships.

Each of the new 3,600 TEU vessels is expected to provide 500 containers of additional capacity per voyage in the CLX service.

The contract cost of this new Jones Act vessel program is expected to be approximately $ 1 billion and delivery of the first vessel is currently anticipated to be in the fourth quarter of 2026 with subsequent deliveries in the second and fourth quarters of 2027.

Upon signing the agreements, the Company made its first milestone payment of $ 50 million from the CCF.

The Company expects to finance the remaining construction-related payments with cash currently on deposit in the CCF, cash and cash equivalents on the balance sheet and through cash flows from operations, borrowings available under the Company’s unsecured revolving credit facility and additional debt financings.

REPORTABLE SEGMENTS

6 unchanged sentences

The Company’s Ocean Transportation segment provides ocean transportation services to the Logistics segment, and the Logistics segment provides logistics services to the Ocean Transportation segment in certain transactions.

Accordingly, inter-segment revenue of $ 69.2 million and $ 49.0 million for the three months ended June 30, 2022 and 2021, and $ 142.4 million and $ 82.7 million for the six months ended June 30, 2022 and 2021, respectively, have been eliminated from operating revenues in the table below.

Reportable segment financial information for the three and six months ended June 30, 2022 and 2021 are as follows:

Accordingly, inter-segment revenue of $ 78.2 million and $ 57.8 million for the three months ended September 30, 2022 and 2021, and $ 220.6 million and $ 140.5 million for the nine months ended September 30, 2022 and 2021, respectively, have been eliminated from operating revenues in the table below.

Reportable segment financial information for the three and nine months ended September 30, 2022 and 2021 are as follows:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In millions)

6 unchanged sentences

Total Operating Income

Interest expense, net

Interest income

Interest expense

Other income (expense), net

Income before Taxes

(1) Ocean Transportation operating revenue excludes inter-segment revenue of $ 24.0 million and $ 18.7 million for the three months ended June 30, 2022 and 2021, and $ 45.8 million and $ 33.8 million for the six months ended June 30, 2022 and 2021, respectively.

(2) Logistics operating revenue excludes inter-segment revenue of $ 45.2 million and $ 30.3 million for the three months ended June 30, 2022 and 2021, and $ 96.6 million and $ 48.9 million for the six months ended June 30, 2022 and 2021, respectively.

(3) Ocean Transportation segment information includes $ 24.7 million and $ 12.8 million of equity in income from the Company’s equity investment in SSAT for the three months ended June 30, 2022 and 2021, and $ 58.7 million and $ 22.0 million for the six months ended June 30, 2022 and 2021, respectively.

(1) Ocean Transportation operating revenue excludes inter-segment revenue of $ 28.0 million and $ 21.8 million for the three months ended September 30, 2022 and 2021, and $ 73.8 million and $ 55.6 million for the nine months ended September 30, 2022 and 2021, respectively.

(2) Logistics operating revenue excludes inter-segment revenue of $ 50.2 million and $ 36.0 million for the three months ended September 30, 2022 and 2021, and $ 146.8 million and $ 84.9 million for the nine months ended September 30, 2022 and 2021, respectively.

(3) Ocean Transportation segment information includes $ 23.4 million and $ 13.0 million of equity in income from the Company’s equity investment in SSAT for the three months ended September 30, 2022 and 2021, and $ 82.1 million and $ 35.0 million for the nine months ended September 30, 2022 and 2021, respectively.

PROPERTY AND EQUIPMENT

Property and equipment as of June 30, 2022 and December 31, 2021 consisted of the following:

Property and equipment as of September 30, 2022 and December 31, 2021 consisted of the following:

September 30,

(In millions)

7 unchanged sentences

GOODWILL AND INTANGIBLES

Goodwill by segment as of June 30, 2022 and December 31, 2021 consisted of the following:

Goodwill by segment as of September 30, 2022 and December 31, 2021 consisted of the following:

(In millions)

Transportation

Intangible assets as of June 30, 2022 and December 31, 2021 consisted of the following:

Intangible assets as of September 30, 2022 and December 31, 2021 consisted of the following:

September 30,

(In millions)

5 unchanged sentences

Total Intangible Assets, net

The change in customer relationships related to new customers acquired during the three months ended September 30, 2022.

The Company evaluates its goodwill and intangible assets for possible impairment in the fourth quarter, or whenever events or changes in circumstances indicate that it is more likely than not that the fair value is less than its carrying amount.

1 unchanged sentence

The Company considered the general economic and market conditions and its impact on the performance of each of the Company’s reporting units.

Based on the Company’s assessment of its market capitalization, future forecasts and the amount of excess of fair value over the carrying value of the reporting units in the 2021 annual impairment tests, the Company concluded that an impairment triggering event did not occur during the three months ended June 30, 2022.

The Company will monitor events and changes in circumstances that could negatively impact the key assumptions used in determining the fair value, including the amount and timing of estimated future cash flows generated by the reporting units, long-term growth and discount rates, comparable company market valuations, and industry and economic trends.

It is possible that future changes in such circumstances, including future changes in the assumptions and estimates used in assessing the fair value of the reporting unit, could require the Company to record a non-cash impairment charge.

As of June 30, 2022 and December 31, 2021, the Company’s debt consisted of the following:

As of September 30, 2022 and December 31, 2021, the Company’s debt consisted of the following:

September 30,

(In millions)

17 unchanged sentences

The Company’s revolving credit facility has committed available borrowing of up to $ 650 million and matures on March 31, 2026.

As of June 30, 2022, the Company had $ 642.0 million of remaining borrowing availability under the revolving credit facility.

The Company used $ 8.0 million of the revolving credit facility for letters of credit outstanding as of June 30, 2022.

There were no outstanding borrowings under the revolving credit facility as of June 30, 2022 and December 31, 2021.

As of September 30, 2022, the Company had $ 642.2 million of remaining borrowing availability under the revolving credit facility.

The Company used $ 7.8 million of the revolving credit facility for letters of credit outstanding as of September 30, 2022.

There were no outstanding borrowings under the revolving credit facility as of September 30, 2022 and December 31, 2021.

Private Placement Term Loans:

On September 15, 2022, the Company prepaid $ 26.2 million of outstanding principal on the 4.16 percent term loans due in 2027, and $ 24.2 million of outstanding principal on the 4.31 percent term loans due in 2032, which represented all of the remaining outstanding principal for both term loans.

Debt Security and Guarantees:

All of the debt of the Company and MatNav, including related guarantees, as of June 30, 2022 was unsecured, except for the Title XI debt.

All of the debt of the Company and MatNav, including related guarantees, as of September 30, 2022 was unsecured, except for the Title XI debt.

Debt Maturities:

As of June 30, 2022, debt maturities during the next five years and thereafter are as follows:

As of September 30, 2022, debt maturities during the next five years and thereafter are as follows:

Year (in millions)

June 30, 2022

September 30, 2022

Remainder of 2022

1 unchanged sentence

Components of Lease Cost:

Components of lease cost recorded in the Company’s Condensed Consolidated Statement of Income and Comprehensive Income for the three and six months ended June 30, 2022 and 2021 consisted of the following:

Components of lease cost recorded in the Company’s Condensed Consolidated Statement of Income and Comprehensive Income for the three and nine months ended September 30, 2022 and 2021 consisted of the following:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In millions)

3 unchanged sentences

Total lease cost

Maturities of operating lease liabilities at June 30, 2022 are as follows:

Maturities of operating lease liabilities at September 30, 2022 are as follows:

Year (in millions)

June 30, 2022

September 30, 2022

Remainder of 2022

4 unchanged sentences

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Changes in accumulated other comprehensive income (loss) by component, net of tax, for the six months ended June 30, 2022 consisted of the following:

Changes in accumulated other comprehensive income (loss) by component, net of tax, for the nine months ended September 30, 2022 consisted of the following:

Comprehensive

11 unchanged sentences

Balance at June 30, 2022

Changes in accumulated other comprehensive income (loss) by component, net of tax, for the six months ended June 30, 2021 consisted of the following:

Amortization of prior service cost

Amortization of net loss

Foreign currency exchange

Other adjustments

Balance at September 30, 2022

Changes in accumulated other comprehensive income (loss) by component, net of tax, for the nine months ended September 30, 2021 consisted of the following:

Comprehensive

11 unchanged sentences

Balance at June 30, 2021

Amortization of prior service cost

Amortization of net loss (gain)

Foreign currency exchange

Balance at September 30, 2021

FAIR VALUE OF FINANCIAL INSTRUMENTS

4 unchanged sentences

If the technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy, the lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy.

The Company uses Level 1 inputs for the fair values of its cash, cash equivalents and restricted cash, and Level 2 inputs for its variable and fixed rate debt.

The fair values of cash, cash equivalents and restricted cash, and variable rate debt approximate their carrying values due to the nature of the instruments.

The Company uses Level 1 inputs for the fair values of its cash, cash equivalents, restricted cash and Capital Construction Fund, and Level 2 inputs for its variable and fixed rate debt.

The fair values of cash, cash equivalents, restricted cash and Capital Construction Fund, and variable rate debt approximate their carrying values due to the nature of the instruments.

The fair value of fixed rate debt is calculated based upon interest rates available for debt with terms and maturities similar to the Company’s existing debt arrangements.

The carrying value and fair value of the Company’s financial instruments as of June 30, 2022 and December 31, 2021 are as follows:

The carrying value and fair value of the Company’s financial instruments as of September 30, 2022 and December 31, 2021 are as follows:

Quoted Prices in

4 unchanged sentences

(In millions)

June 30, 2022

Fair Value Measurements at June 30, 2022

September 30, 2022

Fair Value Measurements at September 30, 2022

Cash and cash equivalents

Restricted cash

Capital Construction Fund

Fixed rate debt

8 unchanged sentences

The calculation of diluted earnings per share includes the dilutive effect of unexercised non-qualified stock options and non-vested restricted stock units.

The computation of weighted average common shares outstanding excluded a nominal amount of anti-dilutive non-qualified stock options for each period ended June 30, 2022 and 2021.

The computations for basic and diluted earnings per share for the three and six months ended June 30, 2022 and 2021 are as follows:

Three Months Ended June 30, 2022

Six Months Ended June 30, 2022

The computation of weighted average common shares outstanding excluded a nominal amount of anti-dilutive non-qualified stock options for each period ended September 30, 2022 and 2021.

The computations for basic and diluted earnings per share for the three and nine months ended September 30, 2022 and 2021 are as follows:

Three Months Ended September 30, 2022

Nine Months Ended September 30, 2022

(In millions, except per share amounts)

Effect of Dilutive Securities

Three Months Ended June 30, 2021

Six Months Ended June 30, 2021

Three Months Ended September 30, 2021

Nine Months Ended September 30, 2021

(In millions, except per share amounts)

1 unchanged sentence

SHARE-BASED COMPENSATION

The Company granted time-based restricted stock units and performance-based shares to certain of its employees totaling approximately 12,400 and 180,500 shares with a weighted average grant date fair value of $ 93.32 and $ 100.83 per share during the three and six months ended June 30, 2022, respectively.

Total share-based compensation cost recognized in the Condensed Consolidated Statements of Income and Comprehensive Income as a component of selling, general and administrative expenses was $ 5.8 million and $ 4.7 million for the three months ended June 30, 2022 and 2021, and $ 10.5 million and $ 9.5 million for the six month ended June 30, 2022 and 2021, respectively.

Total unrecognized compensation cost related to unvested share-based compensation arrangements was $ 33.9 million at June 30, 2022, and is expected to be recognized over a weighted average period of approximately 2.1 years.

The Company granted time-based restricted stock units and performance-based shares to certain of its employees totaling approximately 2,400 shares with a weighted average grant date fair value of $ 80.36 per share during the three months ended September 30, 2022, and 182,900 shares with a weighted average grant date fair value of $ 100.55 per share during the nine months ended September 30, 2022.

Total share-based compensation cost recognized in the Condensed Consolidated Statements of Income and Comprehensive Income as a component of selling, general and administrative expenses was $ 5.0 million and $ 4.7 million for the three months ended September 30, 2022 and 2021, and $ 15.5 million and $ 14.2 million for the nine months ended September 30, 2022 and 2021, respectively.

Total unrecognized compensation cost related to unvested share-based compensation arrangements was $ 28.1 million at September 30, 2022, and is expected to be recognized over a weighted average period of approximately 1.9 years.

Total unrecognized compensation cost may be adjusted for any unearned performance shares or forfeited shares.

1 unchanged sentence

The Company’s pension and post-retirement plans are described in Note 11 to the Consolidated Financial Statements included in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 .

Components of net periodic benefit cost and other amounts recognized in Other Comprehensive Income (Loss) for the qualified pension plans and the post-retirement benefit plans for the three and six months ended June 30, 2022 and 2021 consisted of the following:

Components of net periodic benefit cost and other amounts recognized in Other Comprehensive Income (Loss) for the qualified pension plans and the post-retirement benefit plans for the three and nine months ended September 30, 2022 and 2021 consisted of the following:

Pension Benefits

Post-retirement Benefits

Three Months Ended June 30,

Three Months Ended September 30,

(In millions)

7 unchanged sentences

Post-retirement Benefits

Six Months Ended June 30,

Nine Months Ended September 30,

(In millions)

19 unchanged sentences

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-Q

Item 1. Financial Statements