SEC Filing | MATSON

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-34187

Matson, Inc.

(Exact name of registrant as specified in its charter)


Hawaii	99-0032630
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1411 Sand Island Parkway Honolulu, HI (Address of principal executive offices)	96819 (Zip Code)

(808) 848-1211

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, without par value	MATX	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☒	Accelerated filer ☐

Non-accelerated filer ☐	Smaller reporting company ☐

	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of common stock outstanding as of March 31, 2023: 35,856,547

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MATSON, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

		Page
Part I—FINANCIAL INFORMATION		1

Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Statements of Income and Comprehensive Income	1
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Cash Flows	3
	Condensed Consolidated Statements of Shareholders’ Equity	4
	Notes to the Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	21
Item 4.	Controls and Procedures	22

Part II—OTHER INFORMATION		22

Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	23
Item 4.	Mine Safety Disclosures	23
Item 5.	Other Information	23
Item 6.	Exhibits	24
	Signatures	25

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MATSON, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income and Comprehensive Income

(Unaudited)


	Three Months Ended
	March 31,
(In millions, except per share amounts)	2023		2022
Operating Revenue:
Ocean Transportation	$	551.0	$	943.9
Logistics		153.8		221.6
Total Operating Revenue		704.8		1,165.5

Costs and Expenses:
Operating costs		(597.5)		(703.7)
(Loss) Income from SSAT		(1.8)		34.0
Selling, general and administrative		(66.8)		(63.2)
Total Costs and Expenses		(666.1)		(732.9)

Operating Income		38.7		432.6
Interest income		8.2		—
Interest expense		(4.5)		(4.8)
Other income (expense), net		1.8		2.0
Income before Taxes		44.2		429.8
Income taxes		(10.2)		(90.6)
Net Income	$	34.0	$	339.2

Other Comprehensive Income (Loss), Net of Income Taxes:
Net Income	$	34.0	$	339.2
Other Comprehensive Income (Loss):
Amortization of prior service cost		(0.7)		(0.9)
Amortization of net loss		(0.1)		0.8
Other		1.4		0.3
Total Other Comprehensive Income (Loss), Net of Income Taxes		0.6		0.2
Comprehensive Income	$	34.6	$	339.4

Basic Earnings Per Share	$	0.94	$	8.29
Diluted Earnings Per Share	$	0.94	$	8.23

Weighted Average Number of Shares Outstanding:
Basic		36.1		40.9
Diluted		36.3		41.2

See Notes to Condensed Consolidated Financial Statements.

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MATSON, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)


	March 31,		December 31,
(In millions)	2023		2022
ASSETS
Current Assets:
Cash and cash equivalents	$	88.5	$	249.8
Accounts receivable, net of allowance for credit losses of $12.2 million and $13.0 million, respectively		283.0		268.5
Prepaid expenses and other assets		195.2		241.3
Total current assets		566.7		759.6
Long-term Assets:
Investment in SSAT		81.5		81.2
Property and equipment, net		1,967.1		1,962.5
Operating lease right of use assets		366.4		396.9
Goodwill		327.8		327.8
Intangible assets, net		188.1		174.9
Capital Construction Fund		623.7		518.2
Deferred dry-docking costs, net		51.9		55.3
Other long-term assets		54.1		53.6
Total long-term assets		3,660.6		3,570.4
Total Assets	$	4,227.3	$	4,330.0

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Current portion of debt	$	46.3	$	76.9
Accounts payable and accruals		268.4		255.6
Operating lease liabilities		134.0		143.6
Other liabilities		87.1		105.5
Total current liabilities		535.8		581.6
Long-term Liabilities:
Long-term debt, net of deferred loan fees		417.9		427.7
Long-term operating lease liabilities		241.8		262.5
Deferred income taxes		645.5		646.5
Other long-term liabilities		116.0		114.8
Total long-term liabilities		1,421.2		1,451.5
Commitments and Contingencies (see Note 13)
Shareholders’ Equity:
Common stock		26.9		27.2
Additional paid in capital		279.7		290.4
Accumulated other comprehensive loss, net		(6.3)		(6.9)
Retained earnings		1,970.0		1,986.2
Total shareholders’ equity		2,270.3		2,296.9
Total Liabilities and Shareholders’ Equity	$	4,227.3	$	4,330.0

See Notes to Condensed Consolidated Financial Statements.

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MATSON, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended March 31,
(In millions)	2023		2022
Cash Flows From Operating Activities:
Net income	$	34.0	$	339.2
Reconciling adjustments:
Depreciation and amortization		35.8		35.6
Amortization of operating lease right of use assets		39.6		36.2
Deferred income taxes		(1.4)		6.6
Share-based compensation expense		4.6		4.7
Loss (income) from SSAT		1.8		(34.0)
Other		(0.1)		(0.2)
Changes in assets and liabilities:
Accounts receivable, net		(14.5)		(27.7)
Deferred dry-docking payments		(2.4)		(8.6)
Deferred dry-docking amortization		6.2		6.7
Prepaid expenses and other assets		45.7		(31.5)
Accounts payable, accruals and other liabilities		(8.4)		(16.2)
Operating lease liabilities		(39.4)		(35.4)
Other long-term liabilities		(4.8)		(1.5)
Net cash provided by operating activities		96.7		273.9

Cash Flows From Investing Activities:
Capitalized vessel construction expenditures		(0.4)		(9.4)
Other capital expenditures		(35.5)		(37.4)
Proceeds from disposal of property and equipment		0.3		0.4
Payment for asset acquisition		(12.4)		—
Cash deposits and interest into the Capital Construction Fund		(105.5)		(10.7)
Withdrawals from Capital Construction Fund		—		10.7
Net cash used in investing activities		(153.5)		(46.4)

Cash Flows From Financing Activities:
Repayments of debt		(40.8)		(14.4)
Dividends paid		(11.3)		(12.9)
Repurchase of Matson common stock		(40.0)		(70.4)
Tax withholding related to net share settlements of restricted stock units		(12.4)		(19.4)
Net cash used in financing activities		(104.5)		(117.1)

Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash		(161.3)		110.4
Cash, Cash Equivalents and Restricted Cash, Beginning of the Period		253.7		287.7
Cash, Cash Equivalents and Restricted Cash, End of the Period	$	92.4	$	398.1

Reconciliation of Cash, Cash Equivalents and Restricted Cash, End of the Period:
Cash and Cash Equivalents	$	88.5	$	392.8
Restricted Cash		3.9		5.3
Total Cash, Cash Equivalents and Restricted Cash, End of the Period	$	92.4	$	398.1

Supplemental Cash Flow Information:
Interest paid, net of capitalized interest (including debt prepaid fees)	$	5.0	$	4.5
Income tax payments (refunds), net	$	(30.3)	$	103.1

Non-cash Information:
Capital expenditures included in accounts payable, accruals and other liabilities	$	5.1	$	7.1
Non-cash payment for asset acquisition	$	4.1	$	—

See Notes to Condensed Consolidated Financial Statements.

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MATSON, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Shareholders’ Equity

(Unaudited)


						Accumulated
	Common Stock			Additional		Other
		Stated		Paid In		Comprehensive		Retained
(In millions, except per share amounts)	Shares	Value		Capital		Income (Loss)		Earnings		Total
Balance at December 31, 2022	36.3	$	27.2	$	290.4	$	(6.9)	$	1,986.2	$	2,296.9
Net income	—		—		—		—		34.0		34.0
Other comprehensive income (loss), net of tax	—		—		—		0.6		—		0.6
Share-based compensation	—		—		4.6		—		—		4.6
Shares issued, net of shares withheld for employee taxes	0.3		0.2		(12.6)		—		—		(12.4)
Shares repurchased	(0.7)		(0.5)		(2.7)		—		(38.9)		(42.1)
Dividends ($0.31 per share)	—		—		—		—		(11.3)		(11.3)
Balance at March 31, 2023	35.9	$	26.9	$	279.7	$	(6.3)	$	1,970.0	$	2,270.3


						Accumulated
	Common Stock			Additional		Other
		Stated		Paid In		Comprehensive		Retained
(In millions, except per share amounts)	Shares	Value		Capital		Income (Loss)		Earnings		Total
Balance at December 31, 2021	41.0	$	30.7	$	314.1	$	(30.9)	$	1,353.5	$	1,667.4
Net income	—		—		—		—		339.2		339.2
Other comprehensive income (loss), net of tax	—		—		—		0.2		—		0.2
Share-based compensation	—		—		4.7		—		—		4.7
Shares issued, net of shares withheld for employee taxes	0.2		0.2		(19.5)		—		—		(19.3)
Shares repurchased	(0.7)		(0.5)		(3.1)		—		(65.0)		(68.6)
Dividends ($0.30 per share)	—		—		—		—		(12.9)		(12.9)
Balance at March 31, 2022	40.5	$	30.4	$	296.2	$	(30.7)	$	1,614.8	$	1,910.7

See Notes to Condensed Consolidated Financial Statements.

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MATSON, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANICAL STATEMENTS

(Unaudited)

1. DESCRIPTION OF THE BUSINESS

Matson, Inc., a holding company incorporated in the State of Hawaii, and its subsidiaries (“Matson” or the “Company”), is a leading provider of ocean transportation and logistics services. The Company consists of two segments, Ocean Transportation and Logistics:

Ocean Transportation: Matson’s Ocean Transportation business is conducted through Matson Navigation Company, Inc. (“MatNav”), a wholly-owned subsidiary of Matson, Inc. Founded in 1882, MatNav provides a vital lifeline of ocean freight transportation services to the domestic non-contiguous economies of Hawaii, Alaska and Guam, and to other island economies in Micronesia. MatNav also operates premium, expedited services from China to Long Beach, California, provides services to Okinawa, Japan and various islands in the South Pacific, and operates an international export service from ports in Alaska to Asia. In addition, subsidiaries of MatNav provide stevedoring, refrigerated cargo services, inland transportation and other terminal services for MatNav on the Hawaiian islands of Oahu, Hawaii, Maui and Kauai, and for MatNav and other ocean carriers in Alaska.

Matson has a 35 percent ownership interest in SSA Terminals, LLC, a joint venture between Matson Ventures, Inc., a wholly-owned subsidiary of MatNav, and SSA Ventures, Inc., a subsidiary of Carrix, Inc. (“SSAT”). SSAT currently provides terminal and stevedoring services to various carriers at eight terminal facilities on the U.S. West Coast, including three facilities dedicated for MatNav’s use. Matson records its share of income from SSAT in costs and expenses in the Condensed Consolidated Statements of Income and Comprehensive Income, and within the Ocean Transportation segment due to the nature of SSAT’s operations.

Logistics: Matson’s logistics business is conducted through Matson Logistics, Inc. (“Matson Logistics”), a wholly-owned subsidiary of MatNav. Established in 1987, Matson Logistics extends the geographic reach of Matson’s transportation network throughout North America and Asia, and is an asset-light business that provides a variety of logistics services to its customers including: (i) multimodal transportation brokerage of domestic and international rail intermodal services, long-haul and regional highway trucking services, specialized hauling, flat-bed and project services, less-than-truckload services, and expedited freight services (collectively, “Transportation Brokerage” services); (ii) less-than-container load (“LCL”) consolidation and freight forwarding services (collectively, “Freight Forwarding” services); (iii) warehousing, trans-loading, value-added packaging and distribution services (collectively, “Warehousing” services); and (iv) supply chain management, non-vessel operating common carrier (“NVOCC”) freight forwarding and other services.

2. GENERAL AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: The Condensed Consolidated Financial Statements are unaudited, and include the accounts of Matson, Inc. and all wholly-owned subsidiaries, after elimination of intercompany amounts and transactions. Significant investments in businesses, partnerships, and limited liability companies in which the Company does not have a controlling financial interest, but has the ability to exercise significant influence, are accounted for under the equity method. The Company accounts for its investment in SSAT using the equity method of accounting.

Due to the nature of the Company’s operations, the results for interim periods are not necessarily indicative of results to be expected for the year. These Condensed Consolidated Financial Statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for fair presentation of the results of the interim periods, and do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete consolidated financial statements.

The Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (“SEC”) on February 24, 2023.

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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.

Significant Accounting Policies: The Company’s significant accounting policies are described in Note 2 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.

Use of Estimates: The preparation of the interim Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts reported. Estimates and assumptions are used for, but not limited to: impairment of investments; impairment of long-lived assets, intangible assets and goodwill; capitalized interest; allowance for doubtful accounts and other receivables; legal contingencies; insurance reserves and other related liabilities; accrual estimates; pension and post-retirement estimates; multi-employer withdrawal liabilities; operating lease assets and liabilities; income from SSAT; and income taxes. Future results could be materially affected if actual results differ from these estimates and assumptions.

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


	March 31,		December 31,
Prepaid Expenses and Other Assets (in millions)	2023		2022
Income tax receivables	$	128.9	$	170.8
Prepaid fuel		21.6		26.3
Prepaid insurance and insurance related receivables		17.6		17.4
Restricted cash - vessel construction obligations		3.9		3.9
Other		23.2		22.9
Total	$	195.2	$	241.3

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

Recognition of Revenues and Expenses: Revenue in the Company’s Condensed Consolidated Financial Statements is presented net of elimination of intercompany transactions. 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:


	March 31,
Ocean Transportation (in millions) (1)	2023		2022
Ocean Transportation services	$	539.5	$	936.7
Terminal and other related services		6.9		3.7
Fuel sales		2.9		1.9
Vessel management and related services		1.7		1.6
Total	$	551.0	$	943.9

(1)	Ocean Transportation revenue transactions are primarily denominated in U.S. dollars except for less than 3 percent of Ocean Transportation revenues which are denominated in foreign currencies.

◾

Ocean Transportation services revenue is recognized ratably over the duration of a voyage based on the relative transit time completed in each reporting period. Vessel operating costs and other ocean transportation operating costs, such as terminal operating overhead and selling, general and administrative expenses, are charged to operating costs as incurred.

◾	Terminal and other related services revenue is recognized as the services are performed. Related costs are recognized as incurred.

◾	Fuel sales revenue and related costs are recognized when the Company has completed delivery of the product to the customer in accordance with the terms and conditions of the contract.

◾	Vessel management and related services revenue is recognized in proportion to the services completed. Related costs are recognized as incurred.

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	March 31,
Logistics (in millions) (1)	2023		2022
Transportation Brokerage and Freight Forwarding services	$	137.7	$	194.9
Warehousing and distribution services		9.6		12.1
Supply chain management and other services		6.5		14.6
Total	$	153.8	$	221.6

(1)	Logistics revenue transactions are primarily denominated in U.S. dollars except for less than 3 percent of Logistics revenues which are denominated in foreign currencies.

◾

Transportation Brokerage and Freight Forwarding services revenue consists of amounts billed to customers for services provided. The primary costs include third-party purchased transportation services, agent commissions, labor and equipment. Revenue and the related purchased third-party transportation costs are recognized over the duration of a delivery based upon the relative transit time completed in each reporting period. Labor, agent commissions, and other operating costs are expensed as incurred. The Company reports revenue on a gross basis as the Company serves as the principal in these transactions because it is responsible for fulfilling the contractual arrangements with the customer and has latitude in establishing prices.

◾

Warehousing and distribution services revenue consist of amounts billed to customers for storage, handling, and value-added packaging of customer merchandise. Storage revenue is recognized in the month the service is provided to the customer. Storage related costs are recognized as incurred. Other Warehousing and distribution services revenue and related costs are recognized in proportion to the services performed.

◾	Supply chain management and other services revenue, and related costs are recognized in proportion to the services performed.

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 customer. The Company’s receivables are classified as short-term as collection terms are for periods of less than one year. The Company expenses sales commissions and contract acquisition costs as incurred because the amounts are generally immaterial. These expenses are included in selling, general and administrative expenses in the Condensed Consolidated Statements of Income and Comprehensive Income.

Capital Construction Fund: The Company’s Capital Construction Fund (“CCF”) is described in Note 7 to the Consolidated Financial Statements included in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. A summary of the CCF cash account for the three months ended March 31, 2023 and 2022 is as follows:


	Three Months Ended
	March 31,
(In millions)	2023		2022
CCF balance at beginning of period	$	518.2	$	—
Cash deposits		100.0		10.7
Interest earned		5.5		—
Qualifying cash withdrawal payments		—		(10.7)
CCF balance at end of period	$	623.7	$	—

Cash on deposit in the CCF is currently held 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. 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.

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


	Three Months Ended
	March 31,
(In millions)	2023		2022
Operating revenue	$	230.8	$	430.4
Operating costs and expenses		(235.9)		(306.9)
Operating (loss) income		(5.1)		123.5
Net (Loss) Income (1)	$	(4.8)	$	100.1
Company Share of SSAT’s Net (Loss) Income (2)	$	(1.8)	$	34.0

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

(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.

Dividends: 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.

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.

3. REPORTABLE SEGMENTS

Reportable segments are components of an enterprise that engage in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. The Company’s chief operating decision maker is its Chief Executive Officer.

The Company consists of two reportable segments, Ocean Transportation and Logistics, which are further described in Note 1. Reportable segments are measured based on operating income. In arrangements where the customer purchases ocean transportation and logistics services, the revenues are allocated to each reportable segment based upon the contractual amounts for each type of service. The Company’s SSAT segment has been aggregated into the Company’s Ocean Transportation segment due to the operations of SSAT being an integral part of the Company’s Ocean Transportation business.

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.

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


	Three Months Ended
	March 31,
(In millions)	2023		2022
Operating Revenue:
Ocean Transportation (1)	$	551.0	$	943.9
Logistics (2)		153.8		221.6
Total Operating Revenue	$	704.8	$	1,165.5
Operating Income:
Ocean Transportation (3)	$	27.8	$	416.2
Logistics		10.9		16.4
Total Operating Income		38.7		432.6
Interest income		8.2		—
Interest expense		(4.5)		(4.8)
Other income (expense), net		1.8		2.0
Income before Taxes		44.2		429.8
Income taxes		(10.2)		(90.6)
Net Income	$	34.0	$	339.2

(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.

4. PROPERTY AND EQUIPMENT

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


	March 31,		December 31,
(In millions)	2023		2022
Cost:
Vessels	$	2,263.4	$	2,278.6
Containers and equipment		778.6		762.7
Terminal facilities and other property		133.1		131.5
New vessel construction in progress		50.6		50.2
Other construction in progress		80.8		65.7
Total Property and Equipment		3,306.5		3,288.7
Less: Accumulated Depreciation		(1,339.4)		(1,326.2)
Total Property and Equipment, net	$	1,967.1	$	1,962.5

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.

5. GOODWILL AND INTANGIBLES

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


	Ocean
(In millions)	Transportation		Logistics		Total
Goodwill	$	222.6	$	105.2	$	327.8

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


	March 31,		December 31,
(In millions)	2023		2022
Customer Relationships:
Ocean Transportation	$	140.6	$	140.6
Logistics		111.8		95.3
Total		252.4		235.9
Less: Accumulated Amortization		(91.6)		(88.3)
Total Customer Relationships, net		160.8		147.6
Trade name – Logistics		27.3		27.3
Total Intangible Assets, net	$	188.1	$	174.9

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.

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

6. DEBT

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


	March 31,		December 31,
(In millions)	2023		2022
Private Placement Term Loans:
3.66 %, payable through 2023	$	4.5	$	4.5
3.37 %, payable through 2027		57.7		57.7
3.14 %, payable through 2031		123.6		132.8
Title XI Debt:
5.34 %, payable through 2028		—		13.2
5.27 %, payable through 2029		—		15.4
1.22 %, payable through 2043		166.2		166.2
1.35 %, payable through 2044		124.7		127.7
Total Debt		476.7		517.5
Less: Current portion		(46.3)		(76.9)
Total Long-term Debt		430.4		440.6
Less: Deferred loan fees		(12.5)		(12.9)
Total Long-term Debt, net of deferred loan fees	$	417.9	$	427.7

Except as described below, the Company’s debt is described in Note 8 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Revolving Credit Facility: 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. The Company used $7.9 million of the revolving credit facility

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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.

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”). There were no other significant changes to the revolving credit facility as a result of this amendment.

Title XI Bonds: On January 27, 2023, the Company prepaid $14.3 million of outstanding principal on the 5.27 percent Title XI Bond representing all of the remaining outstanding principal for this bond. On March 3, 2023, the Company also prepaid $12.1 million of outstanding principal on the 5.34 percent Title XI Bond representing all of the outstanding principal for this bond.

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.

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


	As of
Year (in millions)	March 31, 2023
Remainder of 2023	$	36.1
2024		39.7
2025		39.7
2026		39.7
2027		39.7
Thereafter		281.8
Total Debt	$	476.7

7. LEASES

The Company’s leases are described in Note 9 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 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:


	Three Months Ended
	March 31,
(In millions)	2023		2022
Operating lease cost	$	41.8	$	38.4
Short-term lease cost		0.2		0.1
Variable lease cost		0.2		0.2
Total lease cost	$	42.2	$	38.7

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


	As of
Year (in millions)	March 31, 2023
Remainder of 2023	$	109.5
2024		124.8
2025		73.8
2026		31.3
2027		15.6
Thereafter		57.6
Total lease payments		412.6
Less: Interest		(36.8)
Present value of operating lease liabilities		375.8
Less: Short-term portion		(134.0)
Long-term operating lease liabilities	$	241.8

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8. 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:


									Accumulated
			Post-		Non-				Other
	Pension		Retirement		Qualified				Comprehensive
(In millions)	Benefits		Benefits		Plans		Other		Income (Loss)
Balance at December 31, 2022	$	(25.8)	$	18.7	$	0.1	$	0.1	$	(6.9)
Amortization of prior service cost		—		(0.7)		—		—		(0.7)
Amortization of net loss (gain)		0.3		(0.4)		—		—		(0.1)
Foreign currency exchange		—		—		—		(0.3)		(0.3)
Other		—		—		—		1.7		1.7
Balance at March 31, 2023	$	(25.5)	$	17.6	$	0.1	$	1.5	$	(6.3)

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


									Accumulated
			Post-		Non-				Other
	Pension		Retirement		Qualified				Comprehensive
(In millions)	Benefits		Benefits		Plans		Other		Income (Loss)
Balance at December 31, 2021	$	(39.1)	$	10.1	$	(0.7)	$	(1.2)	$	(30.9)
Amortization of prior service cost		(0.2)		(0.7)		—		—		(0.9)
Amortization of net loss		0.6