What changed in this filing

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Item 1. Financial Statements

2023-08-02 compared with 2023-05-05 · 113 added, 72 removed, 393 unchanged (32% of the section changed)

3 unchanged sentences

Three Months Ended

Six Months Ended

(In millions, except per share amounts)

15 unchanged sentences

Amortization of prior service cost

Amortization of net loss

Amortization of net loss (gain)

Total Other Comprehensive Income (Loss), Net of Income Taxes

44 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

(In millions)

6 unchanged sentences

Loss (income) from SSAT

Distributions from SSAT

Changes in assets and liabilities:

10 unchanged sentences

Other capital expenditures

Proceeds from disposal of property and equipment

Payment for asset acquisition

Proceeds from disposal of property and equipment, net

Payment for intangible asset acquisition

Cash deposits and interest into the Capital Construction Fund

19 unchanged sentences

Capital expenditures included in accounts payable, accruals and other liabilities

Non-cash payment for asset acquisition

Non-cash payment for intangible asset acquisition

Accrued dividends

See Notes to Condensed Consolidated Financial Statements.

11 unchanged sentences

Balance at March 31, 2023

Other comprehensive income (loss), net of tax

Share-based compensation

Shares issued, net of shares withheld for employee taxes

Shares repurchased

Dividends ( $ 0.31 per share and $ 0.32 per share)

Balance at June 30, 2023

Comprehensive

8 unchanged sentences

Balance at March 31, 2022

Other comprehensive income (loss), net of tax

Share-based compensation

Shares issued, net of shares withheld for employee taxes

Shares repurchased

Dividends ( $ 0.30 per share and $ 0.31 per share)

Balance at June 30, 2022

See Notes to Condensed Consolidated Financial Statements.

32 unchanged sentences

Fiscal Period:

The period end for Matson covered by this report is March 31, 2023.

The period end for MatNav and its subsidiaries covered by this report is March 31, 2023.

The period end for Matson covered by this report is June 30, 2023.

The period end for MatNav and its subsidiaries covered by this report is June 30, 2023.

Significant Accounting Policies:

18 unchanged sentences

Prepaid Expenses and Other Assets:

Prepaid expenses and other assets consist of the following at March 31, 2023 and December 31, 2022:

Prepaid expenses and other assets consisted of the following at June 30, 2023 and December 31, 2022:

Prepaid Expenses and Other Assets (in millions)

Income tax receivables

Income tax receivables, net

Prepaid insurance and insurance related receivables

Restricted cash - vessel construction obligations

Income tax receivables include an expected federal income tax refund related to the Company’s 2021 federal tax return and other income tax receivables.

Income tax receivables include an expected federal income tax refund related to the Company’s 2021 federal tax return and other income tax receivables, offset by current federal income tax payables.

Recognition of Revenues and Expenses:

1 unchanged sentence

The following is a description of the Company’s principal revenue generating activities by segment, and the Company’s revenue recognition policy for each activity for the periods presented:

Three Months Ended

Six Months Ended

Ocean Transportation (in millions) (1)

11 unchanged sentences

Related costs are recognized as incurred.

Three Months Ended

Six Months Ended

Logistics (in millions) (1)

21 unchanged sentences

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, 2022.

A summary of the CCF cash account for the three months ended March 31, 2023 and 2022 is as follows:

Three Months Ended

A summary of the CCF cash account for the six months ended June 30, 2023 and 2022 consisted of the following:

Six Months Ended

(In millions)

CCF balance at beginning of period

Cash deposits

Interest earned

Qualifying cash withdrawal payments

Cash deposits into CCF

Interest earned on deposits

Qualifying withdrawal payments

CCF balance at end of period

Cash on deposit in the CCF is currently held in a U.S.

The Company had $ 583.9 million and $ 518.2 million on deposit in the CCF as of June 30, 2023, and December 31, 2022, respectively.

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

Treasury obligations fund with daily liquidity.

At March 31, 2023, securities held within the fund had a weighted average life of 35 days .

CCF cash is classified as a long-term asset on 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 March 31, 2023, the Company pledged $ 200.0 million of accounts receivable into the CCF.

There were no pledges during the three months ended March 31, 2022.

As of March 31, 2023 and December 31, 2022, $ 209.9 million and $ 9.9 million of eligible accounts receivable were assigned to the CCF, respectively.

At June 30, 2023, securities held within this fund had a weighted average life of 41 days .

Cash on deposit in the CCF is classified as a long-term asset on the Company’s Condensed Consolidated Balance Sheets, as the Company intends to use withdrawals to fund qualified milestone progress payments for the construction of three new Jones Act vessels.

During the six months ended June 30, 2023, the Company pledged $ 200.0 million of accounts receivable into the CCF.

There were no pledged amounts during the six months ended June 30, 2022.

As of June 30, 2023 and December 31, 2022, $ 210.0 million and $ 9.9 million of eligible accounts receivable were assigned to the CCF, respectively.

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.

Investment in SSAT:

Condensed income statement information for SSAT for the three months ended March 31, 2023 and 2022 consisted of the following:

Condensed income statement information for SSAT for the three and six months ended June 30, 2023 and 2022 consisted of the following:

Three Months Ended

Six Months Ended

(In millions)

6 unchanged sentences

(2) The Company records its share of net (loss) 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 $ 81.5 million and $ 81.2 million at March 31, 2023 and December 31, 2022, respectively.

The Company’s first quarter 2023 cash dividend of $ 0.31 per share was paid on March 2, 2023.

On April 27, 2023, the Company’s Board of Directors declared a cash dividend of $ 0.31 per share payable on June 1, 2023 to shareholders of record on May 11, 2023.

The Company’s investment in SSAT was $ 80.1 million and $ 81.2 million at June 30, 2023 and December 31, 2022, respectively.

The Company’s second quarter 2023 cash dividend of $ 0.31 per share was paid on June 1, 2023.

On June 22, 2023, the Company’s Board of Directors declared a cash dividend of $ 0.32 per share payable on September 7, 2023 to shareholders of record on August 3, 2023.

Repurchase of Shares:

During the three months ended March 31, 2023, the Company repurchased approximately 0.7 million shares for a total cost of $ 42.1 million.

As of March 31, 2023, the maximum number of remaining shares that may be repurchased under the Company’s share repurchase program was approximately 0.9 million shares.

During the three months ended June 30, 2023, the Company repurchased approximately 0.6 million shares for a total cost of $ 42.4 million.

As of June 30, 2023, the maximum number of remaining shares that may be repurchased under the Company’s share repurchase program was approximately 3.3 million shares.

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 $ 40.1 million and $ 73.2 million for the three months ended March 31, 2023 and 2022, respectively, have been eliminated from operating revenues in the table below.

Reportable segment financial information for the three months ended March 31, 2023 and 2022 are as follows:

Accordingly, inter-segment revenue of $ 54.4 million and $ 69.2 million for the three months ended June 30, 2023 and 2022, and $ 94.5 million and $ 142.4 million for the six months ended June 30, 2023 and 2022, respectively, have been eliminated from operating revenues in the table below.

Reportable segment financial information for the three and six months ended June 30, 2023 and 2022 are as follows:

Three Months Ended

Six Months Ended

(In millions)

10 unchanged sentences

Income before Taxes

(1) Ocean Transportation operating revenue excludes inter-segment revenue of $ 16.1 million and $ 21.8 million for the three months ended March 31, 2023 and 2022, respectively.

(2) Logistics operating revenue excludes inter-segment revenue of $ 24.0 million and $ 51.4 million for the three months ended March 31, 2023 and 2022, respectively.

(3) Ocean Transportation segment information includes $ ( 1.8 ) million and $ 34.0 million of equity in income from the Company’s equity investment in SSAT for the three months ended March 31, 2023 and 2022, respectively.

(1) Ocean Transportation operating revenue excludes inter-segment revenue of $ 19.0 million and $ 24.0 million for the three months ended June 30, 2023 and 2022, and $ 35.1 million and $ 45.8 million for the six months ended June 30, 2023 and 2022, respectively.

(2) Logistics operating revenue excludes inter-segment revenue of $ 35.4 million and $ 45.2 million for the three months ended June 30, 2023 and 2022, and $ 59.4 million and $ 96.6 million for the six months ended June 30, 2023 and 2022, respectively.

(3) Ocean Transportation segment information includes $ ( 1.4 ) million and $ 24.7 million of equity in income from the Company’s equity investment in SSAT for the three months ended June 30, 2023 and 2022, and $ ( 3.2 ) million and $ 58.7 million for the six months ended June 30, 2023 and 2022, respectively.

PROPERTY AND EQUIPMENT

Property and equipment as of March 31, 2023 and December 31, 2022 consisted of the following:

Property and equipment as of June 30, 2023 and December 31, 2022 consisted of the following:

(In millions)

6 unchanged sentences

Total Property and Equipment, net

New vessel construction in progress at March 31, 2023 and December 31, 2022 includes milestone progress payments and capitalized interest, and other costs related to the construction of three new Jones Act vessels.

New vessel construction in progress at June 30, 2023 and December 31, 2022 includes milestone progress payments, capitalized interest and other costs related to the construction of three new Jones Act vessels.

GOODWILL AND INTANGIBLES

Goodwill by segment as of March 31, 2023 and December 31, 2022 consisted of the following:

Goodwill by segment as of June 30, 2023 and December 31, 2022 consisted of the following:

(In millions)

Transportation

Intangible assets as of March 31, 2023 and December 31, 2022 consisted of the following:

Intangible assets as of June 30, 2023 and December 31, 2022 consisted of the following:

(In millions)

5 unchanged sentences

Total Intangible Assets, net

During the three months ended March 31, 2023, the Company completed an asset acquisition consisting of customer relationship intangible assets for $ 16.5 million, which are being amortized over seven years .

On February 27, 2023, the Company completed an asset acquisition consisting of customer relationship intangible assets for $ 16.5 million, which are being amortized over seven years .

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 2022 annual impairment tests, the Company concluded that an impairment triggering event did not occur during the three months ended March 31, 2023.

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 March 31, 2023 and December 31, 2022, the Company’s debt consisted of the following:

As of June 30, 2023 and December 31, 2022, the Company’s debt consisted of the following:

(In millions)

15 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 March 31, 2023, the Company had $ 642.1 million of remaining borrowing availability under the revolving credit facility.

As of June 30, 2023, the Company had $ 642.5 million of remaining borrowing availability under the revolving credit facility.

The Company used $ 7.5 million of the revolving credit facility

for letters of credit outstanding as of March 31, 2023.

There were no outstanding borrowings under the revolving credit facility as of March 31, 2023 and December 31, 2022.

for letters of credit outstanding as of June 30, 2023.

There were no outstanding borrowings under the revolving credit facility as of June 30, 2023 and December 31, 2022.

On February 9, 2023, the Company amended the revolving credit facility to replace LIBOR with a new benchmark interest rate, the Secured Overnight Financing Rate (“SOFR”).

4 unchanged sentences

Debt Security and Guarantees:

All of the debt of the Company and MatNav, including related guarantees, as of March 31, 2023 was unsecured, except for the Title XI debt.

All of the debt of the Company and MatNav, including related guarantees, as of June 30, 2023 was unsecured, except for the Title XI debt.

Debt Maturities:

As of March 31, 2023, debt maturities during the next five years and thereafter are as follows:

As of June 30, 2023, debt maturities during the next five years and thereafter are as follows:

Year (in millions)

March 31, 2023

June 30, 2023

Remainder of 2023

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 months ended March 31, 2023 and 2022 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 six months ended June 30, 2023 and 2022 consisted of the following:

Three Months Ended

Six Months Ended

(In millions)

3 unchanged sentences

Total lease cost

Maturities of operating lease liabilities at March 31, 2023 are as follows:

Maturities of operating lease liabilities at June 30, 2023 are as follows:

Year (in millions)

March 31, 2023

June 30, 2023

Remainder of 2023

4 unchanged sentences

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Changes in accumulated other comprehensive income (loss) by component, net of tax, for the three months ended March 31, 2023 consisted of the following:

Changes in accumulated other comprehensive income (loss) by component, net of tax, for the six months ended June 30, 2023 consisted of the following:

Comprehensive

6 unchanged sentences

Balance at March 31, 2023

Changes in accumulated other comprehensive income (loss) by component, net of tax, for the three months ended March 31, 2022 consisted of the following:

Amortization of prior service cost

Amortization of net loss (gain)

Foreign currency exchange

Balance at June 30, 2023

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

Comprehensive

3 unchanged sentences

Amortization of prior service cost

Amortization of net loss

Amortization of net loss (gain)

Foreign currency exchange

Balance at March 31, 2022

Amortization of prior service cost

Amortization of net loss (gain)

Foreign currency exchange

Other adjustments

Balance at June 30, 2022

FAIR VALUE OF FINANCIAL INSTRUMENTS

5 unchanged sentences

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

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

The fair values of cash, cash equivalents, restricted cash and cash on deposit in the CCF, 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 March 31, 2023 and December 31, 2022 are as follows:

The carrying value and fair value of the Company’s financial instruments as of June 30, 2023 and December 31, 2022 are as follows:

Quoted Prices in

4 unchanged sentences

(In millions)

March 31, 2023

Fair Value Measurements at March 31, 2023

June 30, 2023

Fair Value Measurements at June 30, 2023

Cash and cash equivalents

12 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 March 31, 2023 and 2022.

The computations for basic and diluted earnings per share for the three months ended March 31, 2023 and 2022 are as follows:

Three Months Ended March 31, 2023

Three Months Ended March 31, 2022

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, 2023 and 2022.

The computations for basic and diluted earnings per share for the three and six months ended June 30, 2023 and 2022 are as follows:

Three Months Ended June 30, 2023

Six Months Ended June 30, 2023

(In millions, except per share amounts)

Effect of Dilutive Securities

Three Months Ended June 30, 2022

Six Months Ended June 30, 2022

(In millions, except per share amounts)

Effect of Dilutive Securities

SHARE-BASED COMPENSATION

The Company granted time-based restricted stock units and performance-based shares to certain of its employees totaling approximately 253,300 shares with a weighted average grant date fair value of $ 65.94 per share during the three months ended March 31, 2023.

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 $ 4.6 million and $ 4.7 million for the three months ended March 31, 2023 and 2022, respectively.

Total unrecognized compensation cost related to unvested share-based compensation arrangements was $ 31.4 million at March 31, 2023, and is expected to be recognized over a weighted average period of approximately 2.2 years.

The Company granted time-based restricted stock units and performance-based shares to certain of its employees totaling approximately 12,600 and 265,900 shares with a weighted average grant date fair value of $ 63.78 and $ 65.84 per share during the three and six months ended June 30, 2023, 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 $ 5.2 million and $ 5.8 million for the three months ended June 30, 2023 and 2022, and $ 9.8 million and $ 10.5 million for the six months ended June 30, 2023 and 2022, respectively.

Total unrecognized compensation cost related to unvested share-based compensation arrangements was $ 28.1 million at June 30, 2023, and is expected to be recognized over a weighted average period of approximately 2.0 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, 2022 .

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 months ended March 31, 2023 and 2022 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 six months ended June 30, 2023 and 2022 consisted of the following:

Pension Benefits

Post-retirement Benefits

Three Months Ended March 31,

Three Months Ended June 30,

(In millions)

5 unchanged sentences

Net periodic benefit cost (benefit)

Pension Benefits

Post-retirement Benefits

Six Months Ended June 30,

(In millions)

Components of net periodic benefit cost (benefit):

Interest cost

Expected return on plan assets

Amortization of net loss (gain)

Amortization of prior service credit

Net periodic benefit cost (benefit)

COMMITMENTS AND CONTINGENCIES

1 unchanged sentence

The Company’s Ocean Transportation business has certain risks that could result in expenditures for environmental remediation.

Except as described below, the Company believes that based on all information available to it, the Company is currently in compliance, in all material respects, with applicable environmental laws and regulations.

On November 10, 2021, the California Air Resources Board (“CARB”) issued a Notice of Violation (the “NOV”) to Matson for alleged violations of the Airborne Toxic Control Measure for Auxiliary Diesel Engines Operated on Ocean-Going Vessels At-Berth in a California Port pursuant to California Code of Regulations, title 17, section 93118.3.

CARB regulations require that a company’s fleet plug into shore power for at least 80 percent of visits at California ports and reduce auxiliary engine power generation by at least 80 percent.

The NOV alleges that Matson’s fleet did not meet the 80 percent thresholds during visits to the Port of Long Beach in 2020.

The violations were alleged to have been incurred by chartered vessels in the CLX+ service.

These chartered vessels were not outfitted with alternative maritime power (“AMP”) capability which would have allowed them to plug into the shore power grid and shut down the vessel diesel generators when at dock.

On April 14, 2023, the Company and CARB entered into a settlement agreement pursuant to which the Company agreed to pay approximately $ 2.2 million in civil penalties for 2020, 2021 and 2022 violations.

The Company believes that based on all information available to it, the Company is currently in compliance, in all material respects, with applicable environmental laws and regulations.

Other Matters:

1 unchanged sentence

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