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Item 8. Financial Statements and Supplementary Data

2024-02-23 compared with 2023-02-24 · 181 added, 193 removed, 1050 unchanged (26% of the section changed)

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and subsidiaries (the “Company”) has the responsibility for establishing and maintaining adequate internal control over financial reporting.

Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:

Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:

● Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets of the company;

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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, taxes, depreciation and amortization (“EBITDA”).

The discounted cash flow approach requires the Company to make several business assumptions, including, but not limited to, the discount rate.

The discounted cash flow approach requires the Company to make several business and valuation assumptions, including, but not limited to, those related to the discount rate.

Changes in assumptions and estimates could have a material effect on either the fair value, the amount of any goodwill impairment charge, or both.

The goodwill balance was $327.8 million as of December 31, 2022, of which $78.6 million is allocated to a reporting unit in the Logistics reportable segment, resulting from the acquisition of Span Intermediate, LLC (“Span Alaska”) in fiscal year 2016.

The goodwill balance was $327.8 million as of December 31, 2023, of which $78.6 million is allocated to the Span Alaska reporting unit in the Logistics reportable segment, resulting from the acquisition of Span Intermediate, LLC (“Span Alaska”) in fiscal year 2016.

The Company has evaluated its goodwill for impairment as part of its annual assessment in fiscal year 2023 and determined that the fair value of the Span Alaska reporting unit exceeded the carrying amount as of the date of the impairment review.

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Other Comprehensive Income (Loss):

Amortization of prior service cost

Amortization of net loss (gain)

Net change in pension and post-retirement liabilities

Other adjustments

Total Other Comprehensive Income (Loss)

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

Comprehensive Income

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Deferred income taxes

(Gain) Loss on disposal of property and equipment

Loss (Gain) on disposal of property and equipment

Share-based compensation expense

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Capitalized vessel construction expenditures

Other capital expenditures

Proceeds from disposal of property and equipment, and other

Capital expenditures (excluding vessel construction expenditures)

Proceeds from disposal of property and equipment

Payments for intangible asset acquisitions

Cash and interest deposits into Capital Construction Fund

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Cash Flows From Financing Activities:

Proceeds from issuance of debt

Repayments of debt

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Payment of financing costs

Proceeds from issuance of common stock

Dividends paid

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Capital expenditures included in accounts payable, accruals and other liabilities

Non-cash payments for intangible asset acquisitions

See Notes to Consolidated Financial Statements.

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Shares issued, net of shares withheld for employee taxes

Equity interest in SSAT

Share repurchase

Dividends ($ 1.06 per share)

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Share repurchase

Equity interest in SSAT (see Note 4)

Dividends ($ 1.22 per share)

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Share repurchase

Equity interest in SSAT

Dividends ($ 1.26 per share)

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The period end for MatNav occurred on the last Friday in December, except for certain Company subsidiaries whose period closed on December 31.

Included in these Consolidated Financial Statements are 53 weeks in the 2021 and 52 weeks in the 2022 and 2020 fiscal years for MatNav.

Included in these Consolidated Financial Statements are 52 weeks in fiscal years 2023 and 2022 and 53 weeks in fiscal year 2021 for MatNav.

Foreign Currency Transactions:

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insurance reserves and other related liabilities;

contingent acquisition related consideration;

accrual estimates;

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operating lease assets and liabilities;

income from SSAT;

income (loss) from SSAT;

and income taxes.

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Beginning of Year

(1) Expense is shown net of amounts recovered from previously reserved doubtful accounts.

(1) Expense is shown net of amounts recovered from previously reserved doubtful accounts receivable.

Prepaid Expenses and Other Assets:

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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 a federal income tax refund related to the Company’s 2021 federal tax return, overpayments of federal and state taxes paid during the year ended December 31, 2022, and other income tax receivables.

Income tax receivables primarily include a federal income tax refund related to the Company’s 2021 federal tax return of approximately $ 118.6 million, overpayments of federal and state taxes paid during the year ended December 31, 2023, and other income tax receivables.

Deferred Loan Fees:

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These costs are being amortized over the life of the related debt using the effective interest method (see Note 8).

Deferred loan fees related to the Company’s revolving credit facility are recorded in other long-term assets in the Company’s Consolidated Balance Sheets and are amortized using the straight-line method as the difference between that and the use of the effective interest method is not material.

Deferred loan fees related to the Company’s revolving credit facility are recorded in other long-term assets in the Company’s Consolidated Balance Sheets and are amortized using the straight-line method, as the difference between that method and the use of the effective interest method is not material.

Other Long-Term Assets:

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Property and equipment is depreciated using the straight-line method over the estimated useful lives of the assets.

The estimated useful lives of property and equipment range up to the following maximum life:

The estimated useful lives of property and equipment range up to the following maximum life as follows:

Classification

Machinery and equipment

Terminal facilities

Terminal cranes

Containers and chassis

Terminal facilities and other property

Capitalized Interest:

The Company capitalizes interest costs during the period the qualified assets are being readied for their intended use.

The Company determined that the vessel construction costs are considered qualifying assets for the purposes of capitalizing interest on these assets.

The Company determined that vessel construction costs are considered qualifying assets for the purposes of capitalizing interest on these assets.

The amount of capitalized interest is calculated based on the amount of payments incurred related to the construction of these vessels using a weighted average interest rate.

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Impairment Evaluation of Long-Lived Assets, Intangible Assets and Goodwill :

The Company evaluates its long-lived assets, intangible assets and goodwill 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.

The Company evaluates its long-lived assets, intangible assets and goodwill 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.

The Company has reporting units within the Ocean Transportation and Logistics reportable segments.

Long-lived assets and finite-lived intangible assets are grouped at the lowest level reporting unit for which identifiable cash flows are available.

In evaluating for impairment, the estimated future undiscounted cash flows generated by each

of these asset groups are compared with the carrying value recorded for each asset group to determine if its carrying value is recoverable.

In evaluating for impairment, the estimated future undiscounted cash flows generated by each of these asset groups are compared with the carrying value recorded for each asset group to determine if its carrying value is recoverable.

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.

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If any impairment is identified, the Company evaluates if the decrease in the fair value of the investment below its carrying value is other-than-temporary.

No impairment was identified during the years ended December 31, 2022, 2021 and 2020.

No impairment of the Company’s investment in SSAT was identified during the years ended December 31, 2023, 2022 and 2021.

Other Liabilities:

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Insurance reserves and other related liabilities - short term

Multi-employer withdrawal liabilities - short term (see Note 12)

Multi-employer withdrawal liabilities - short term

Income tax and other tax related liabilities

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Other Long-Term Liabilities (in millions)

Multi-employer withdrawal liability (see Note 12)

Pension and post-retirement liabilities (see Note 11)

Multi-employer withdrawal liability

Insurance reserves and other related liabilities

Pension and post-retirement liabilities

Other long-term liabilities

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Insurance Related Liabilities:

The Company is uninsured for certain risks but when feasible, many of these risks are mitigated by insurance.

The Company purchases insurance with deductibles or self-insured retentions.

The Company purchases insurance with deductibles or self-insured retentions to mitigate significant risks that it is exposed to.

Such insurance includes, but is not limited to, employee health, workers’ compensation, marine liability, cybersecurity, auto liability and physical damage to property and equipment.

For certain risks, the Company elects to not purchase insurance because of the excessive cost of insurance or the perceived remoteness of the risk.

In addition, the Company retains all risk of loss

that exceeds the limits of the Company’s insurance policies, or for other risks where insurance is not commercially available.

For certain risks, the Company elects to not purchase insurance because of the excessive cost of insurance, the perceived remoteness of the risk or insurance coverage is not commercially available.

The Company retains the risk of loss for insurance deductibles and self-insured retentions, for amounts that exceed the limits of the Company’s insurance policies, and for other risks not covered by insurance.

When estimating its reserves for retained risks and related liabilities, the Company considers a number of factors, including historical claims experience, demographic factors, current trends, and analyses provided by independent third parties.

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The Company generally invoices its customers at the commencement of the voyage or the transportation service being provided, or as other services are being performed.

Revenue is deferred when services are invoiced in advance to the

Revenue is deferred when services are invoiced in advance to the customer.

The Company’s receivables are classified as short-term as collection terms are for periods of less than one year.

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Repurchase of Shares:

During the years ended December 31, 2022 and 2021, the Company repurchased approximately 5.0 million and 2.5 million shares for a total cost of $ 397.0 million and $ 200.1 million, respectively.

The Company did not repurchase any shares during the year ended December 31, 2019.

As of December 31, 2022, the maximum number of remaining shares that may be repurchased under the Company’s share repurchase program was approximately 1.5 million shares.

During the years ended December 31, 2023, 2022 and 2021, the Company repurchased approximately 2.1 million, 5.0 million and 2.5 million shares, respectively, for $ 158.2 million, $ 397.0 million and $ 200.1 million, respectively.

As of December 31, 2023, the number of remaining shares that may be repurchased under the Company’s share repurchase program was approximately 2.5 million shares.

Share-Based Compensation:

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The estimate of 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 and 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.

These estimates and judgments are applied in the calculation of taxable income, tax credits, tax benefits, CCF 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 also considers the impact of expected future events such as changes in tax rates, changes in tax laws, regulations and rulings.

Deferred tax assets and liabilities are adjusted to the extent necessary to reflect tax rates expected to be in effect when the temporary differences reverse.

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The Company’s income taxes are more fully described in Note 10.

Amounts in the Consolidated Financial Statements and Notes to the Consolidated Financial Statements are rounded to millions, except for per share calculations and percentages which were determined based on amounts before rounding.

Amounts in the Consolidated Financial Statements and Notes to the Consolidated Financial Statements are rounded to tenth of millions, except for per share calculations and percentages which were determined based on amounts before rounding.

Accordingly, a recalculation of some per-share amounts and percentages, if based on the reported data, may be slightly different.

New Accounting Pronouncements:

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”).

ASU 2023-07 requires disclosure of incremental segment information on an annual and interim basis.

The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements.

Early adoption is permitted.

The Company is currently evaluating the effects of adopting ASU 2023-07 but does not expect it will have a material impact on the Company’s consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”).

ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid.

ASU 2023-09 is effective for annual periods beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025.

The Company is currently evaluating the effects

of adoption ASU 2023-09 but does not expect it to have a material impact on the Company’s consolidated financial statements.

REPORTABLE SEGMENTS

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(2) Logistics operating revenue excludes inter-segment revenue of $ 132.2 million, $ 177.3 million and $ 132.8 million for the years ended December 31, 2023, 2022 and 2021, respectively.

(3) Ocean Transportation segment information includes $ 83.1 million, $ 56.3 million, and $ 26.3 million of equity in income from the Company’s equity investment in SSAT for the years ended December 31, 2022, 2021 and 2020, respectively.

(3) Ocean Transportation segment information includes $ 2.2 million, $ 83.1 million, and $ 56.3 million of income from the Company’s investment in SSAT for the years ended December 31, 2023, 2022 and 2021, respectively.

As of December 31,

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Ocean Transportation (1)

(1) The Ocean Transportation segment includes $ 81.2 million and $ 58.7 million related to the Company’s equity investment in SSAT as of December 31, 2022 and 2021, respectively.

(1) The Ocean Transportation segment includes $ 85.5 million and $ 81.2 million related to the Company’s investment in SSAT as of December 31, 2023 and 2022, respectively.

INVESTMENT IN SSAT

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The operating results of SSAT Oakland 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, an increase in deferred tax assets of $ 3.9 million, and a corresponding decrease in retained earnings of $ 11.6 million during the year ended

December 31, 2022.

During the year ended December 31, 2020, the Company recorded an increase of $ 2.2 million in its investment in SSAT and a corresponding increase in retained earnings related to the formation of a new subsidiary of SSAT, whose controlling interest is retained by SSAT.

The Company’s share of income recorded in the Consolidated Statements of Income and Comprehensive Income and dividends received by the Company during the years ended December 31, 2023, 2022 and 2021 are as follows:

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(In millions)

Company's share of net income

Distributions received

The Company’s Ocean Transportation segment operating costs include $ 308.3 million, $ 284.9 million and $ 251.6 million for the years ended December 31, 2022, 2021 and 2020, respectively, for terminal services provided by SSAT.

Accounts payable and accrued liabilities in the Consolidated Balance Sheets include $ 43.6 million and $ 38.8 million for terminal services payable to SSAT at December 31, 2022 and 2021, respectively.

Company’s share of income from SSAT

Distributions received from SSAT

The Company’s Ocean Transportation segment operating costs for terminal services provided by SSAT include $ 297.2 million, $ 308.3 million and $ 284.9 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Accounts payable and accrued liabilities in the Consolidated Balance Sheets for terminal services payable to SSAT include $ 43.4 million and $ 43.6 million at December 31, 2023 and 2022, respectively.

A summary of the Condensed Balance Sheets of SSAT at December 31, 2023 and 2022 are as follows:

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Total Liabilities and Equity

A summary of the condensed statements of operating income and net income of SSAT for years ended December 31, 2022, 2021 and 2020 are as follows:

A summary of the Condensed Statements of Operating Income and Net Income of SSAT for the years ended December 31, 2023, 2022 and 2021 are as follows:

Years Ended December 31,

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(1) Includes earnings from equity method investments held by SSAT less earnings allocated to non-controlling interests.

(2) Includes net income or loss attributable to noncontrolling interests.

PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2022 and 2021, and depreciation expense for the years ended December 31, 2022, 2021 and 2020 are as follows:

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

As of December 31, 2023

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Terminal facilities and other property

Vessel construction in progress

New vessel construction in progress

Other construction in progress

Vessel construction in progress at December 31, 2022 includes milestone progress payments and capitalized interest related to the construction of three new Jones Act vessels.

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.

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

Delivery of the first vessel is currently anticipated to be in the fourth quarter of 2026, with subsequent deliveries expected in the second and fourth quarters of 2027.

Depreciation expense for the years ended December 31, 2023, 2022 and 2021 are as follows:

Years Ended December 31,

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Transportation

Logistics goodwill of $ 105.2 million includes $ 78.6 million acquired as part of the acquisition of Span Intermediate, LLC (“Span Alaska”) in August 2016 that was allocated to the Span Alaska reporting unit, and $ 26.6 million relates to other Logistics acquisitions that were allocated to the Logistics reporting unit.

Ocean Transportation goodwill of $ 222.6 million includes $ 221.8 million related to the acquisition of Horizon Lines, Inc.

(“Horizon”) in May 2015.

Logistics goodwill of $ 105.2 million includes $ 78.6 million related to the acquisition of Span Intermediate, LLC (“Span Alaska”) in August 2016 that was allocated to the Span Alaska reporting unit, and $ 26.6 million of other Logistics acquisitions that were allocated to the Logistics reporting unit.

Intangible assets by segment consist of the following as of December 31, 2023 and 2022:

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Total Logistics

Ocean Transportation intangible assets of $ 140.6 million relate to customer relationships acquired as part of the acquisition of Horizon Lines, Inc.

(“Horizon”) on May 29, 2015, and are being amortized over 21 years .

Logistics intangible assets include $ 79.3 million of customer relationships which are being amortized over 20 years , and $ 27.3 million of an indefinite life trade name, both acquired as part of the Span Alaska acquisition.

The remaining Logistics customer relationships of $ 16.0 million are being amortized over a period of 3 to 13 years .

Intangible assets related amortization expense for 2022, 2021 and 2020, are as follows:

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

Ocean Transportation intangible assets of $ 140.6 million relate to customer relationships acquired as part of the acquisition of Horizon, and are being amortized over 21 years .

Logistics intangible assets include $ 79.3 million of customer relationships which are being amortized over 20 years , and $ 27.3 million of an indefinite life trade name, both

acquired as part of the Span Alaska acquisition.

The remaining Logistics customer relationships relate to various acquisitions and are being amortized over a period of 3 to 13 years .

Intangible assets related amortization expense for the years ended December 31, 2023, 2022 and 2021, are as follows:

Years Ended December 31,

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The Company is party to an agreement with the U.S.

Department of Transportation, Maritime Administration (“MARAD”) that established a Capital Construction Fund (“CCF”) program under provisions of the Merchant Marine

Act of 1936, as amended (the “Merchant Marine Act”).

Department of Transportation, Maritime Administration (“MARAD”) that established a Capital Construction Fund (“CCF”) program under provisions of the Merchant Marine Act of 1936, as amended (the “Merchant Marine Act”).

The CCF program was created to assist owners and operators of U.S.

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Such accrued deposits to, and withdrawals from, the CCF are reflected in the Consolidated Balance Sheets either as obligations of the Company’s current assets or as receivables from the CCF.

As of December 31, 2022 and 2021, $ 9.9 million and $ 9.8 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 Consolidated Balance Sheets.

At December 31, 2022, the Company had $ 518.2 million on deposit in the CCF invested in U.S.

Treasury Obligation Funds, which are classified as long-term assets in the Company’s Consolidated Balance Sheets.

Amount on deposit in the CCF as of December 31, 2021 was nominal.

During the year ended December 31, 2022, the Company earned $ 4.9 million of interest from deposits in the CCF.

No interest was earned during the year ended December 31, 2021.

On February 17, 2023, the Company pledged an additional $ 200.0 million of eligible accounts receivables to the CCF, and deposited an additional $ 100.0 million of cash into the CCF.

The Company may invest funds on deposit in the CCF in money market funds, U.S.

Treasury Obligation Funds or other eligible credit-based investments for maturities of up to 3 years.

A summary of the activities within the CCF cash account for the years ended December 31, 2023 and 2022 consists of the following:

(In millions)

CCF balance at beginning of period

Cash deposits into CCF

Interest earned on deposits

Qualifying withdrawal payments

CCF balance at end of period

Cash on deposit and assigned accounts receivables in the CCF as of December 31, 2023 and 2022 are as follows:

As of December 31,

(In millions)

Capital Construction Fund:

Cash on deposit

Assigned accounts receivables

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

Treasury obligations fund with daily liquidity.

At December 31, 2023, securities held within the U.S.

Treasury obligations fund had a weighted average life of 68 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.

In February 2024, the Company purchased approximately $ 450 million of fixed-rate U.S.

Treasuries with CCF cash deposits.

The fixed-rate investments have various maturity dates up to 3 years .

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

The Company’s debt consists of the following as of December 31, 2023 and 2022:

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3.14 %, payable through 2031

4.31 %, payable through 2032

Title XI Debt:

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Private Placement Term Loans :

During 2012, the Company issued $ 170.0 million of unsecured notes, which were funded in three tranches, $ 77.5 million at an interest rate of 3.66 percent, $ 55.0 million at an interest rate of 4.16 percent, and $ 37.5 million at an interest rate of 4.31 percent (the “2012 Notes”).

Principal and interest are payable semi-annually.

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

During 2012, the Company issued $ 170.0 million of unsecured notes, which were funded in three tranches.

The remaining tranche, at an interest rate of 3.66 percent, was fully repaid during 2023.

In September 2016, the Company issued $ 200.0 million of 15 -year senior unsecured notes (the “Series D Notes”) at an interest rate of 3.14 percent, payable semi-annually.

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government guaranteed ship financing bonds (“Title XI”) to finance the delivery of Manukai (the “Manukai Title XI Bonds”).

The Manukai Title XI Bonds have a final maturity in September 2028 with a coupon rate of 5.34 percent.

The Manukai Title XI Bonds are amortized by semi-annual payments of $ 1.1 million plus interest.

In August 2004, MatNav issued $ 55.0 million of U.S.

Government guaranteed ship financing bonds (Title XI) to finance the delivery of Maunawili (the “Maunawili Title XI Bonds”, and together with the Manukai Title XI Bonds, the “Existing Title XI Bonds”).

The Maunawili Title XI Bonds have a final maturity in July 2029 with a coupon rate of 5.27 percent.

The Maunawili Title XI Bonds are amortized by semi-annual payments of $ 1.1 million plus interest.

On January 27, 2023, the Company prepaid $ 14.3 million of outstanding principal on the Maunawili Title XI Bonds representing all of the remaining outstanding principal for this bond.

The Company is also expecting to prepay the outstanding principal of approximately $ 12.1 million on the Manukai Title XI Bonds in March 2023, representing all of the estimated outstanding principal for this bond.

On April 27, 2020, MatNav issued $ 185.9 million in U.S.

government guaranteed ship financing bonds (Title XI) to finance the delivery of Maunawili (the “Maunawili Title XI Bonds”).

In January 2023, the Company prepaid $ 14.3 million of outstanding principal on the Maunawili Title XI Bonds representing all of the remaining outstanding principal for this bond.

In March 2023, the Company also prepaid the outstanding principal of approximately $ 12.1 million on the Manukai Title XI Bonds, representing all of the remaining outstanding principal for this bond.

In April 2020, MatNav issued $ 185.9 million in U.S.

government guaranteed vessel financing bonds to partially refinance debt incurred in connection with the construction of Daniel K.

Inouye (the “DKI Title XI Debt”).

The secured DKI Title XI Debt matures on October 15, 2043 and has a cash interest rate of 1.22 percent, payable semi-annually in arrears.

On June 22, 2020, MatNav issued $ 139.6 million in U.S.

The secured DKI Title XI Debt matures in October 2043 and has a cash interest rate of 1.22 percent, payable semi-annually in arrears.

In June 2020, MatNav issued $ 139.6 million in U.S.

government guaranteed vessel financing bonds to partially refinance debt incurred in connection with the construction of Kaimana Hila (the “KMH Title XI Debt”, and together with the DKI Title XI Debt, the “2020 Title XI Debt”).

The secured KMH Title XI Debt matures on March 15, 2044 and has a cash interest rate of 1.35 percent, payable semi-annually in arrears.

The secured KMH Title XI Debt matures in March 2044 and has a cash interest rate of 1.35 percent, payable semi-annually in arrears.

MatNav may prepay any amounts outstanding under the 2020 Title XI Debt agreements subject to a potential prepayment premium or other adjustment, in accordance with the 2020 Title XI Debt agreements.

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Revolving Credit Facility:

On March 31, 2021, the Company entered into the Second Amended and Restated Credit Agreement (the “Credit Agreement”), which extended the maturity date to March 31, 2026, and retained the committed aggregate borrowings of up to $ 650 million.

In March 2021, the Company entered into the Second Amended and Restated Credit Agreement (the “Credit Agreement”), which extended the maturity date to March 31, 2026, and retained the committed aggregate borrowings of up to $ 650 million.

The Credit Agreement amended certain covenants and other terms including (i) amending the pricing grid to provide for pricing ranging from, at the Company’s election, LIBOR plus a margin between 1.00 percent and 1.75 percent depending on the Company’s consolidated net leverage ratio, or base rate plus a margin between 0.00 percent and 0.75 percent depending on the Company’s consolidated net leverage ratio;

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The Credit Agreement also contains customary events of default.

The Company paid fees of approximately $ 2.2 million in connection with the closing of the Credit Agreement which is included in other long-term assets in the Company’s Consolidated Balance Sheets.

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

In February 2023, the Company further amended the Credit Agreement to replace LIBOR with a new benchmark interest rate, the Secured Overnight Financing Rate (“SOFR”).

There were no other significant changes to the Credit Agreement as a result of this amendment.

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Amendments to Existing Private Placement Term Loan Facilities and New Shelf Facilities (“Private Loan Facilities”):

On March 31, 2021, the Company and the holders of the notes party thereto entered into amendments (collectively, the “2021 Note Amendments”) to each of (i) the Third Amended and Restated Note Purchase Agreement and Private Shelf Agreement dated as of September 14, 2016, among the Company and the holders of the notes issued thereunder, as amended;

In March 2021, the Company and the holders of the notes party thereto entered into amendments (collectively, the “2021 Note Amendments”) to each of (i) the Third Amended and Restated Note Purchase Agreement and Private Shelf Agreement dated as of September 14, 2016, among the Company and the holders of the notes issued thereunder, as amended;

and (ii) the Note Purchase Agreement dated December 21, 2016 among the Company and the holders of the notes issued thereunder, in each case as amended prior to such date.

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Deferred Loan Fees (in millions)

Deferred financing costs related to Title XI bonds and private placement debt amendments

Deferred fees expensed related to the redemption of private placement debt

Balance at December 31, 2022

Amortization expense for the year ended December 31, 2023

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Total amortization expense of deferred loan fees

Debt Covenants in Existing Title XI Bonds and 2020 Title XI Debt Agreements:

The Existing Title XI Bonds contain customary representations and warranties as well as affirmative and negative covenants, defaults and other provisions typical for MARAD-guaranteed financings of this type, with definitions and limitations as defined within the Existing Title XI Bonds.

These covenants include, among other things, minimum working capital and net worth requirements, limitations on certain other indebtedness, loans and investments, liens, mergers, asset sales, sale and leaseback transactions, and transactions with affiliates as defined within the Existing Title XI Bonds.

Certain of the covenants in the Existing Title XI Bonds are applicable only upon and during the continuance of either (i) an event of default or (ii) the failure of MatNav to meet certain financial requirements.

Debt Covenants in 2020 Title XI Debt Agreements:

The 2020 Title XI Debt agreements contain customary representations and warranties as well as affirmative and negative covenants, defaults and other provisions typical for MARAD-guaranteed financings of this type, with definitions, limitations and financial tests all as negotiated between MatNav and MARAD.

As part of the 2020 Title XI Debt agreements, certain covenants contained in the Existing Title XI Bonds were eliminated.

The covenants in the 2020 Title XI Debt agreements include, among other things, limitations on certain other indebtedness, loans and investments, liens, mergers, asset sales, sale and leasebacks, and transactions with affiliates as defined within the 2020 Title XI Debt agreements.

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Debt Security and Guarantees:

All of the debt of the Company and MatNav, including related guarantees, as of December 31, 2022 was unsecured, except for the Existing Title XI Bonds and the 2020 Title XI Debt.

All of the debt of the Company and MatNav, including related guarantees, as of December 31, 2023 was unsecured, except for the 2020 Title XI Debt.

Under the 2020 Title XI Debt agreements, MARAD has guaranteed certain obligations of MatNav.

MatNav has agreed to reimburse MARAD for any payments it makes under the MARAD guaranty, and MatNav’s obligations to MARAD with respect to the 2020 Title XI Debt are secured by a mortgage on the Vessels and certain other related assets (the “Collateral”), as well as the Existing Vessels (as defined below).

MatNav has agreed to reimburse MARAD for any payments it makes under the MARAD guaranty, and MatNav’s obligations to MARAD

with respect to the 2020 Title XI Debt are secured by a mortgage on the Vessels and certain other related assets (the “Collateral”).

In addition, MatNav’s obligations to MARAD with respect to the 2020 Title XI Debt are guaranteed by the Company under an Affiliate Guaranty.

The 2020 Title XI Debt agreements also provide that the two vessels securing the Existing Title XI Bonds – Manukai and Maunawili (the “Existing Vessels”) – also secure the 2020 Title XI Debt until the Existing Title XI Bonds are retired in 2028 and 2029, respectively, subject to certain exceptions.

Description of Operating Leases:

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Long-term operating lease liabilities

Sale and Leaseback of Equipment:

On March 25, 2020, the Company entered into an agreement for the sale and leaseback of multiple tranches of chassis and container equipment.

The net proceeds from the sales were $ 14.3 million, and the gain on the disposal of the equipment was not material to the Company’s Consolidated Financial Statements.

The Company subsequently leased back the equipment under a five-year operating lease agreement, and the obligations under the lease are included in the maturities of operating lease liabilities table above.

There were no sale and leaseback transactions during 2022 and 2021.

Termination of Vessel Charter:

On July 7, 2021, MatNav entered into an agreement to acquire Maunalei which was previously operated under a vessel charter lease agreement for $ 95.8 million, thereby acquiring the vessel.

The Company derecognized the related right-of-use (“ROU”) asset of $ 27.4 million and ROU liability of $ 28.5 million, and increased property and equipment by $ 94.7 million, net, during the year ended December 31, 2021.

Income Taxes:

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(In millions)

Deferred tax expense

Total current tax expense

Total deferred tax expense

Total income taxes

Income taxes for the years ended December 31, 2022, 2021 and 2020 differ from amounts computed by applying the statutory federal rate to income before income taxes for the following reasons:

Income taxes for the years ended December 31, 2023, 2022 and 2021 differ from amounts computed by applying the statutory federal rate to income before income taxes as follows:

Years Ended December 31,

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Share-based payments

Return to provision true-ups

Effective income tax rate

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state alternative minimum tax credits

Pension and post-retirement plans

Insurance reserves

Total deferred tax assets

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Operating lease right of use assets

Investment in SSAT

Total deferred tax liabilities

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Valuation Allowance:

Valuation allowances are recorded against the Company’s foreign income tax net operating losses (“NOLs”), unusable state income tax NOLs and alternative minimum tax credits, and were $ 7.4 million and $ 5.3 million as of December 31, 2022 and 2021, respectively.

Valuation allowances are recorded against the Company’s unusable state income tax net operating losses (“NOLs”) and alternative minimum tax credits, and were $ 5.3 million and $ 7.4 million as of December 31, 2023 and 2022, respectively.

The Company believes that it is more likely than not that the benefit from these deferred assets will not be realized.

Income Tax Receivables:

The Company has income tax receivables, net of income tax payables, of approximately $ 125.2 million and $ 170.8 million at December 31, 2023 and 2022, respectively, related to a 2021 federal income tax refund of approximately $ 118.6 million, overpayments of federal and state taxes paid during the year ended December 31, 2023, and other income tax receivables.

These income tax receivable amounts have been included in prepaid expenses and other assets in the Company’s Consolidated Balance Sheets (see Note 2).

Net Operating Losses and Tax Credit Carryforwards:

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No expiration date

Foreign income tax NOLs

No expiration date

State income tax NOLs are presented on a gross tax basis.

The Company does not expect to benefit from $ 152.3 million of U.S.

State income tax NOLs as of December 31, 2022 and 2021.

state income tax NOLs as of December 31, 2023.

federal and state income tax NOLs in the Company’s filed income tax returns include unrecognized tax benefits.

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Unrecognized Tax Benefits:

Total unrecognized benefits represent the amount that, if recognized, would favorably affect the Company’s incomes taxes and effective tax rate in future periods.

Total unrecognized benefits represent the amount that, if recognized, would favorably affect the Company’s income taxes and effective tax rate in future periods.

The Company does not expect a material

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Balance at December 31, 2020

Changes in tax positions of prior years, net

Tax position changes in current year

Tax position changes in prior years

Reductions for lapse of statute of limitations

Balance at December 31, 2021

Changes in tax positions of prior years, net

Tax position changes in current year

Tax position changes in prior years

Reductions for lapse of statute of limitations

Balance at December 31, 2022

Changes in tax positions of prior years, net

Tax position changes in current year

Tax position changes in prior years

Reductions for lapse of statute of limitations

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To the extent interest and penalties are not ultimately assessed with respect to the settlement of uncertain tax positions, amounts accrued will be reduced and reflected as a reduction of the Company’s income taxes.

Interest accrued related to the balance of unrecognized tax benefits were nominal as of December 31, 2022 and 2021.

Interest and penalties accrued related to the balance of unrecognized tax benefits were $ 0.9 million and $ 1.5 million as of December 31, 2023, and $ 0.2 million and $ 1.2 million as of December 31, 2022, respectively.

During the years ended December 31, 2023 and 2022, the Company recognized $ 0.7 million and $ 0.8 million, respectively, in income taxes related to interest and penalties.

The Company is no longer subject to U.S.

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The Company is routinely involved in federal, state, local income and excise tax audits, and foreign tax audits.

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 Company does not expect the one percent excise tax to have a material impact on the Company’s financial statements in future periods.

Because the excise tax is not an income tax, any amount paid by the Company will be recorded as a component of shareholders’ equity.

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

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

The Company continues to review the provisions of the IRA and monitor the issuance of any guidance related to these provisions.

However, based upon its preliminary assessment, the Company does not expect these provisions to have a material impact on the Company’s tax provision in future periods.

PENSION AND POST-RETIREMENT PLANS

The Company had two funded qualified single-employer defined benefit pension plans that cover certain non- bargaining unit employees and bargaining unit employees.

Effective December 31, 2022, the plans were merged into a single pension plan.

In addition, the Company has plans that provide certain retiree health care and life insurance benefits to substantially all salaried, non-bargaining employees hired before 2008 and to certain bargaining unit employees.

Qualified Pension and Post-retirement Benefits Plans:

The Company provides a funded qualified single-employer defined benefit pension plan that covers most non-bargaining employees and certain clerical bargaining unit employees.

The Company also provides a post-retirement benefit plan that provides health and life insurance benefits, and covers substantially all salaried, non-bargaining employees hired before 2008, and certain bargaining unit employees.

Employees are generally eligible for such benefits upon retirement and completion of a specified number of years of service.

The Company does not pre-fund these health care and life insurance benefits, and has the right to modify or terminate certain of these plans in the future.

Most non-bargaining retirees pay a portion of the benefit costs.

The Company does not pre-fund the post-retirement benefit plan and has the right to modify or terminate the plan in the future, with the exception of the benefits pertaining to the bargaining unit employees.

Most non-bargaining retirees pay a portion of these post-retirement benefit costs.

Plan Administration, Investments and Asset Allocations:

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government agency and corporate asset-backed securities may utilize models, such as a matrix pricing model, that incorporate other observable inputs when broker/dealer quotes are not available, such as cash flow, security structure, or market information.

Real Estate and Private Equity Funds:

The fair value of real estate and private equity funds is determined by the issuer based on their net asset value (“NAV”).

Real Estate and Certain International Equity Funds:

The fair value of real estate and certain developed and emerging market equity funds is determined by the issuer based on their net asset value (“NAV”).

NAV is determined by dividing the fund’s net assets, as recorded in the fund’s audited financial statements, by the number of units outstanding at the valuation date.

Fair value for underlying investments in real estate is determined through independent property appraisals.

Fair value for the underlying investments in real estate is determined through independent property appraisals.

The fair values of the Company’s pension plan assets at December 31, 2023 and 2022 by asset category were as follows:

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Convertible bonds

International Fixed Income

International fixed income securities

Investment measured at NAV (1)

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Fixed income securities:

Municipal bonds

Investment grade U.S.

corporate bonds

High-yield U.S.

corporate bonds / Non-U.S.

Convertible bonds

International fixed income securities

Investment measured at NAV (1)

Total plan assets

(1) Real estate and private equity funds for which fair value is measured using the NAV per share as a practical expedient are not leveled within the fair value hierarchy and are included as a reconciling item to total plan assets.

Contributions to the qualified single-employer defined benefit pension plans are determined annually by the Company’s pension administrative committee, based upon the actuarially determined minimum required contribution under the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended, the Pension Protection Act of 2006, and the maximum deductible contribution allowed for tax purposes.

The Company’s funding policy is to contribute cash so that it meets at least the minimum contribution requirements, with an allowance for discretionary contributions.

In 2022, 2021 and 2020, the Company contributed $ 9.0 million, $ 9.0 million and $ 9.0 million, respectively, in pension contributions to these plans.

The benefit formulas for employees who are members of collective bargaining units are determined according to the collective bargaining agreements, either using final average pay as the base or a flat dollar amount per year of service.

Effective December 31, 2011, the Company froze benefit accruals under the final average pay formula for salaried, non-bargaining unit employees hired before January 1, 2008 and transitioned them to the same cash balance formula for employees hired on or after January 1, 2008.

(1) Certain funds for which fair value is measured using the NAV per share as a practical expedient are not leveled within the fair value hierarchy and are included as a reconciling item to total plan assets.

These investments include real estate and certain developed and emerging market equity funds.

Contributions to the qualified single-employer defined benefit pension plan are determined annually by the Company, taking into consideration recommendations from the actuary based upon the actuarially determined minimum required contributions under the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended, the Pension Protection Act of 2006, and the maximum deductible contribution allowed for tax purposes.

The Company’s funding policy is to contribute cash so that it meets at least the minimum required contributions, with an allowance for discretionary contributions.

In 2023, 2022 and 2021, the Company contributed $ 9.0 million, $ 9.0 million and $ 9.0 million, respectively, in pension contributions to this plan, which were in excess of the minimum required contributions.

employees hired on or after January 1, 2008.

Retirement benefits under the cash balance formula are based on a fixed percentage of employee eligible compensation, plus interest.

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Treasury rate.

Effective December 31, 2022, the Matson Pension Plan for Clerical Bargaining Unit Employees was merged into the Retirement Plan for Employees of Matson.

Benefit Plan Assets and Obligations:

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Participant contributions

Actuarial (gain) loss

Actuarial loss (gain)

Benefits paid, net of subsidies received

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Fair value of plan assets at end of year

Funded Status and Recognized Liability

Qualified pension and post-retirement benefit plans liabilities recognized in the Consolidated Balance Sheets and expenses recognized in accumulated other comprehensive income (loss) at December 31, 2022 and 2021 were as follows:

Funded Status and Recognized Plan Assets and Benefit Obligations

Qualified pension and post-retirement benefit plan assets and liabilities recognized in the Consolidated Balance Sheets and expenses recognized in accumulated other comprehensive income (loss) at December 31, 2023 and 2022 were as follows:

Post-retirement

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Prior service credit, net of taxes

The information for qualified defined benefit pension plans with an accumulated benefit obligation in excess of plan assets at December 31, 2022 and 2021 are shown below:

(In millions)

Projected benefit obligation

Accumulated benefit obligation

Fair value of plan assets

Unrecognized gains and losses of the post-retirement benefit plans are amortized over five years .

Although current health care costs are expected to increase, the Company attempts to mitigate these increases by maintaining caps on certain of its benefit plans, using lower cost health care plan options where possible, requiring that certain groups of employees pay a portion of their benefit costs, self-insuring for certain insurance plans, encouraging wellness programs for employees, and implementing measures to mitigate future benefit cost increases.

Components of the net periodic benefit cost and other amounts recognized in other comprehensive income (loss) for the qualified pension plans and the post-retirement benefit plans during 2022, 2021 and 2020 were as follows:

Components of the net periodic benefit cost and other amounts recognized in other comprehensive income (loss) for the qualified pension plan and the post-retirement benefit plan during 2023, 2022 and 2021 were as follows:

Pension Benefits

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(In millions)

Components of Net Periodic Benefit Cost (Benefit):

Components of Net Periodic Benefit Cost (Credit):

Interest cost

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Amortization of prior service credit

Net periodic benefit cost

Net periodic benefit cost (credit)

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income, net of tax:

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Year ultimate health care cost trend rate is reached

Post-65 group

(1) The Company derives a single equivalent rate utilizing a yield curve constructed from a portfolio of high-quality corporate bonds with various maturities.

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For the year ended December 31, 2023, the Company provided discretionary matching contributions of up to 4 percent of eligible employee compensation.

The Company’s matching contributions expensed in 2022, 2021 and 2020 were $ 3.6 million, $ 3.2 million and $ 3.0 million, respectively.

The Company may also provide a discretionary profit sharing contribution under the qualified defined contribution plans, to salaried, non-bargaining unit employees, if both a minimum threshold of Company performance is achieved and the Board has approved the profit sharing contribution.

The Company’s matching contributions and other contributions expensed in 2023, 2022 and 2021 were $ 4.2 million, $ 3.6 million and $ 3.2 million, respectively.

The Company may also provide a discretionary profit sharing contribution under the qualified defined contribution plans to non-bargaining unit employees, if both a minimum threshold of Company performance is achieved and the Board has approved the profit sharing contribution.

For certain eligible employees, supplemental profit sharing contributions are credited under a non-qualified plan to be paid after separation from service from the Company’s general funds so that total profit sharing contributions would be substantially equal to amounts that would have been contributed to the Company’s qualified defined contribution plans if it were not for limitations imposed by income tax law.

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Contributions are generally based on amounts paid for union labor or cargo volume.

The risks of participating in multi-employer plans are different from single-employer plans because assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other

participating employers.

Additionally, if one employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

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Among other factors, plans in the red zone are generally less than 65 percent funded;

plans in the orange zone are both a) less than 80 percent funded and b) have an accumulated/expected funding deficiency in any of the next six plan years, net of any amortization extensions;

plans in the orange zone are both a) less than 80 percent funded and

b) have an accumulated/expected funding deficiency in any of the next six plan years, net of any amortization extensions;

plans in the yellow zone meet either one of the criteria mentioned in the orange zone;

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99-0314293-001

Hawaii Terminals Multiemployer Pension Plan

20-0389370-001

Hawaii Stevedoring Multiemployer Retirement Plan

99-0314293-001

Master, Mates and Pilots Pension Plan

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13-6100329-001

(1) The Hawaii Terminals Multiemployer Pension Plan merged into the Hawaii Stevedoring Multiemployer Retirement Plan effective January 1, 2021 and is formally known as the Hawaii Longshore Pension Plan.

(1) Represents the expiration date of the collective bargaining agreement.

Certain collective bargaining agreements have expired and are currently being renegotiated.

(2) The Company does not make contributions directly to the Seafarers Pension Plan.

Instead, contributions are made to the Seafarers Health and Benefits Plan, and are subsequently re-allocated to the Seafarers Pension Plan at the discretion of the plan Trustee.

Instead, contributions are made to the Seafarers Health and Benefits Plan, and are subsequently re-allocated to the Seafarers Pension Plan at the discretion of the plan Trustees.

The Company also contributes to multi-employer plans that provide post-retirement health and other benefits other than pensions under the terms of collective-bargaining agreements.

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These plans are not subject to the PBGC plan termination and withdrawal liability provisions of ERISA applicable to multi-employer defined benefit pension plans.

Contributions for these multi-employer postretirement health and other benefits were $ 37.7 million, $ 34.7 million and $ 32.5 million in 2022, 2021 and 2020, respectively.

Contributions made to these plans were $ 37.7 million, $ 37.7 million and $ 34.7 million in 2023, 2022 and 2021, respectively.

Multi-employer Defined Contribution Plans:

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Long-term portion of multi-employer withdrawal liability (see Note 2)

Furthermore, the Company assumed a partial withdrawal liability related to the Local 153 Fund of the OPEIU.

The partial withdrawal liability resulted from a decline in the number of contribution base units related to the Local 153 Fund caused by Horizon terminating all of its operations in Puerto Rico during the first quarter of 2015.

The Company paid off this partial withdrawal liability of $ 6.5 million during 2021.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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Amortization of prior service cost

Amortization of net loss (gain)

Amortization of net gain (loss)

Foreign currency exchange

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Amortization of prior service cost

Amortization of net loss (gain)

Amortization of net gain (loss)

Foreign currency exchange

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2016 Incentive Compensation Plan (the “2016 Plan”) serves as a successor to the 2007 Incentive Compensation Plan and all other predecessor plans.

No further grants will be made under the predecessor stock option plans.

No further grants were made under the predecessor stock option plans.

Under the 2016 Plan, 4.35 million shares of common stock were reserved for issuance.

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Share-based compensation expense

Intrinsic value of options exercised

Tax benefit realized upon stock vesting

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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, restricted cash and Capital Construction Fund, and Level 2 inputs for its variable and fixed rate debt.

The fair values of cash, cash equivalents and restricted cash, Capital Construction Fund 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 and cash equivalents, restricted cash and cash on deposit in the CCF, and Level 2 inputs for its fixed rate debt.

The fair values of cash and cash equivalents, restricted cash and cash on deposit in the CCF 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.

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Restricted cash

Capital Construction Fund

Fixed rate debt

COMMITMENTS AND CONTINGENCIES

Commitments and contractual obligations, excluding debt obligations (see Note 8), lease commitments (see Note 9), pension and post-retirement plan commitments, and multi-employer bargaining plan withdrawal obligations (see Note 11 and 12), are as follows as of December 31, 2022:

Commitments and contractual obligations, excluding debt obligations (see Note 8), lease commitments (see Note 9), pension and post-retirement plan obligations (see Note 11), and multi-employer withdrawal liabilities (see Note 12), are as follows as of December 31, 2023:

Commitments and Contractual Obligations (in millions)

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and (iii) other contractual obligations.

Amounts are considered obligations if a contract has been agreed to specifying significant terms of the contract, and the amounts are not reflected in the Consolidated Balance Sheets.

These amounts are not recorded on the Company’s Consolidated Balance Sheet and it is not expected that the Company or its subsidiaries will be called upon to advance funds under these commitments.

Amounts are considered obligations if a contract has been agreed to specifying significant terms of the contract, and the amounts are not reflected in the Consolidated Balance Sheets as of December 31, 2023.

These amounts are not recorded on the Company’s Consolidated Balance Sheets as of December 31, 2023 and it is not expected that the Company or its subsidiaries will be called upon to advance funds under these commitments and contractual obligations.

Contingencies:

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Environmental Matters:

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

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.

The Company has presented mitigating factors for consideration in settlement discussions with CARB as well as plans to achieve compliance.

Although potential penalties for 2020, 2021 and 2022 violations could, in the aggregate, reasonably be expected to exceed $1 million, they are not expected to be material to the Company’s financial condition, results of operations, or cash flows.

The Company faces certain risks that could result in material expenditures related to environmental remediation.

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

Other Matters:

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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 8. Financial Statements and Supplementary Data