10-Q 1 matx-20220930x10q.htm 10-Q
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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 September 30, 2022

OR

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 September 30, 2022: 37,780,685

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

16

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

25

Item 4.

Controls and Procedures

25

Part II—OTHER INFORMATION

25

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

26

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

37

Item 3.

Defaults Upon Senior Securities

37

Item 4.

Mine Safety Disclosures

37

Item 5.

Other Information

37

Item 6.

Exhibits

38

Signatures

39

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MATSON, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income and Comprehensive Income

(Unaudited)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

(In millions, except per share amounts)

    

2022

    

2021

    

2022

    

2021

    

Operating Revenue:

Ocean Transportation

$

918.5

$

863.5

$

2,911.6

$

2,106.9

Logistics

 

196.3

 

208.1

 

629.8

 

551.4

Total Operating Revenue

 

1,114.8

 

1,071.6

 

3,541.4

 

2,658.3

Costs and Expenses:

Operating costs

 

(738.4)

 

(649.3)

 

(2,170.5)

 

(1,809.6)

Income from SSAT

 

23.4

 

13.0

 

82.1

 

35.0

Selling, general and administrative

 

(64.5)

 

(57.4)

 

(192.0)

 

(171.7)

Total Costs and Expenses

 

(779.5)

 

(693.7)

 

(2,280.4)

 

(1,946.3)

Operating Income

 

335.3

 

377.9

 

1,261.0

 

712.0

Interest income

1.3

1.3

Interest expense

 

(5.0)

 

(5.1)

 

(14.3)

 

(17.9)

Other income (expense), net

 

2.5

 

1.8

 

6.3

 

4.7

Income before Taxes

 

334.1

 

374.6

 

1,254.3

 

698.8

Income taxes

 

(68.1)

 

(91.4)

 

(268.4)

 

(165.9)

Net Income

$

266.0

$

283.2

$

985.9

$

532.9

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

Net Income

$

266.0

$

283.2

$

985.9

$

532.9

Other Comprehensive Income (Loss):

Amortization of prior service cost

 

(0.8)

 

(1.1)

 

(2.6)

 

(3.4)

Amortization of net loss (gain)

 

0.1

 

1.0

 

2.9

 

3.5

Other adjustments

 

(1.9)

 

(0.1)

 

(3.5)

 

(0.2)

Total Other Comprehensive Income (Loss)

 

(2.6)

 

(0.2)

 

(3.2)

 

(0.1)

Comprehensive Income

$

263.4

$

283.0

$

982.7

$

532.8

Basic Earnings Per Share

$

6.95

$

6.60

$

24.83

$

12.31

Diluted Earnings Per Share

$

6.89

$

6.53

$

24.65

$

12.19

Weighted Average Number of Shares Outstanding:

Basic

 

38.3

 

42.9

 

39.7

 

43.3

Diluted

 

38.6

 

43.4

 

40.0

 

43.7

See Notes to Condensed Consolidated Financial Statements.

1

MATSON, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

September 30, 

December 31, 

(In millions)

    

2022

    

2021

    

ASSETS

Current Assets:

Cash and cash equivalents

$

242.8

$

282.4

Accounts receivable, net of allowance for credit losses of $11.6 million and $10.1 million, respectively

 

328.5

 

343.7

Prepaid expenses and other assets

 

303.2

 

78.4

Total current assets

 

874.5

 

704.5

Long-term Assets:

Investment in SSAT

 

87.2

 

58.7

Property and equipment, net

 

1,907.4

 

1,878.3

Operating lease right of use assets

421.0

434.6

Goodwill

 

327.8

 

327.8

Intangible assets, net

178.0

181.1

Capital Construction Fund

565.0

Deferred dry-docking costs, net

62.0

68.7

Other long-term assets

 

36.1

 

39.4

Total long-term assets

3,584.5

2,988.6

Total Assets

$

4,459.0

$

3,693.1

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities:

Current portion of debt

$

57.3

$

65.0

Accounts payable and accruals

 

293.1

 

308.4

Operating lease liabilities

147.1

137.6

Other liabilities

 

102.4

 

101.4

Total current liabilities

 

599.9

 

612.4

Long-term Liabilities:

Long-term debt, net of deferred loan fees

 

461.3

 

549.7

Long-term operating lease liabilities

284.3

307.4

Deferred income taxes

 

687.8

 

425.2

Other long-term liabilities

127.1

131.0

Total long-term liabilities

 

1,560.5

 

1,413.3

Commitments and Contingencies (see Note 13)

Shareholders’ Equity:

Common stock

 

28.3

 

30.7

Additional paid in capital

 

290.4

 

314.1

Accumulated other comprehensive loss, net

 

(34.1)

 

(30.9)

Retained earnings

 

2,014.0

 

1,353.5

Total shareholders’ equity

 

2,298.6

 

1,667.4

Total Liabilities and Shareholders’ Equity

$

4,459.0

$

3,693.1

See Notes to Condensed Consolidated Financial Statements.

2

MATSON, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended September 30, 

(In millions)

    

2022

    

2021

    

Cash Flows From Operating Activities:

Net income

$

985.9

$

532.9

Reconciling adjustments:

Depreciation and amortization

 

105.6

 

100.9

Amortization of operating lease right of use assets

113.9

73.9

Deferred income taxes

 

146.3

 

30.3

Share-based compensation expense

 

15.5

 

14.2

Income from SSAT

 

(82.1)

 

(35.0)

Distributions from SSAT

40.3

46.9

Other

(0.2)

(1.1)

Changes in assets and liabilities:

Accounts receivable, net

 

13.9

 

(75.2)

Deferred dry-docking payments

 

(16.7)

 

(25.8)

Deferred dry-docking amortization

 

18.6

 

18.0

Prepaid expenses and other assets

 

(110.2)

 

(46.7)

Accounts payable, accruals and other liabilities

 

(5.0)

 

30.2

Operating lease liabilities

(113.8)

(72.1)

Other long-term liabilities

 

(9.5)

 

(8.1)

Net cash provided by operating activities

 

1,102.5

 

583.3

Cash Flows From Investing Activities:

Capitalized vessel construction expenditures

(11.9)

Other capital expenditures

 

(113.4)

 

(244.7)

Cash deposits into Capital Construction Fund

 

(579.7)

 

(31.2)

Withdrawals from Capital Construction Fund

14.7

31.2

Other

(2.6)

2.2

Net cash used in investing activities

 

(692.9)

 

(242.5)

Cash Flows From Financing Activities:

Repayments of debt

 

(97.2)

 

(41.1)

Proceeds from revolving credit facility

304.3

Repayments of revolving credit facility

 

 

(376.1)

Payment of financing costs

(3.0)

Dividends paid

(36.9)

 

(33.3)

Repurchase of Matson common stock

(296.9)

 

(115.7)

Tax withholding related to net share settlements of restricted stock units

(19.6)

(14.4)

Net cash used in financing activities

 

(450.6)

 

(279.3)

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

 

(41.0)

 

61.5

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

 

287.7

 

19.7

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

$

246.7

$

81.2

Reconciliation of Cash, Cash Equivalents and Restricted Cash, End of the Period:

Cash and Cash Equivalents

$

242.8

$

75.9

Restricted Cash

3.9

5.3

Total Cash, Cash Equivalents and Restricted Cash, End of the Period

$

246.7

$

81.2

Supplemental Cash Flow Information:

Interest paid, net of capitalized interest

$

13.6

$

15.3

Income tax payments, net of refunds

$

212.4

$

162.1

Non-cash Information:

Capital expenditures included in accounts payable, accruals and other liabilities

$

3.9

$

5.6

See Notes to Condensed Consolidated Financial Statements.

3

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, 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

Net income

 

 

 

 

 

 

380.7

 

380.7

Other comprehensive income (loss), net of tax

 

 

 

 

(0.8)

 

 

(0.8)

Share-based compensation

 

 

 

 

5.7

 

 

 

5.7

Shares issued, net of shares withheld for employee taxes

 

0.1

 

 

 

(0.2)

 

 

 

(0.2)

Shares repurchased

 

(1.6)

(1.2)

(7.0)

(129.9)

(138.1)

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

 

 

 

 

 

(24.4)

 

(24.4)

Balance at June 30, 2022

 

39.0

29.2

 

294.7

(31.5)

1,841.2

2,133.6

Net income

 

 

 

 

 

 

266.0

 

266.0

Other comprehensive income (loss), net of tax

 

 

 

 

 

(2.6)

 

 

(2.6)

Share-based compensation

 

 

 

 

5.1

 

 

 

5.1

Equity interest in SSAT

 

 

 

 

(15.5)

 

(15.5)

Shares repurchased

 

(1.2)

(0.9)

(9.4)

(77.7)

(88.0)

Balance at September 30, 2022

 

37.8

$

28.3

 

$

290.4

$

(34.1)

$

2,014.0

$

2,298.6

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, 2020

 

43.2

$

32.4

 

$

321.5

$

(50.8)

$

658.1

$

961.2

Net income

 

 

 

 

 

 

87.2

 

87.2

Other comprehensive income (loss), net of tax

 

 

 

 

 

(0.1)

 

 

(0.1)

Share-based compensation

 

 

 

 

4.8

 

 

 

4.8

Shares issued, net of shares withheld for employee taxes

 

0.2

 

0.2

 

 

(14.3)

 

 

 

(14.1)

Dividends ($0.23 per share)

 

 

 

 

 

 

(10.1)

 

(10.1)

Balance at March 31, 2021

 

43.4

32.6

 

312.0

(50.9)

735.2

1,028.9

Net income

 

 

 

 

 

 

162.5

 

162.5

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

 

0.1

 

 

 

(0.2)

 

 

 

(0.2)

Dividends ($0.23 per share and $0.30 per share)

 

 

 

 

 

(23.3)

(23.3)

Balance at June 30, 2021

 

43.5

32.6

 

316.5

(50.7)

874.4

1,172.8

Net income

 

 

 

 

 

 

283.2

 

283.2

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

 

 

(0.1)

 

 

0.1

0.0

Shares repurchased

 

(1.5)

(1.1)

(7.2)

(107.4)

 

(115.7)

Balance at September 30, 2021

42.0

$

31.5

 

$

313.9

$

(50.9)

$

1,050.3

$

1,344.8

See Notes to Condensed Consolidated Financial Statements.

4

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 primarily from China to Long Beach, California, and provides services to Okinawa, Japan and various islands in the South Pacific, and operates an international export service from Dutch Harbor, Alaska to Asia. In addition, subsidiaries of MatNav provide stevedoring, refrigerated cargo services, inland transportation and other terminal services for MatNav and other ocean carriers on the Hawaiian islands of Oahu, Hawaii, Maui and Kauai, and in the Alaska locations of Anchorage, Kodiak and Dutch Harbor.

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, 2021, filed with the Securities and Exchange Commission (“SEC”) on February 25, 2022.

5

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

Significant Accounting Policies: 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, 2021.

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 September 30, 2022 and December 31, 2021:

September 30, 

December 31, 

Prepaid Expenses and Other Assets (in millions)

    

2022

    

2021

Income tax receivables

$

232.9

$

23.1

Prepaid fuel

 

32.4

 

22.6

Prepaid insurance and insurance related receivables

 

13.8

 

10.1

Restricted cash - vessel construction obligations

3.9

5.3

Other

 

20.2

 

17.3

Total

$

303.2

$

78.4

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

Recognition of Revenues and Expenses: 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:

Three Months Ended

 

Nine Months Ended

September 30, 

 

September 30, 

Ocean Transportation (in millions) (1)

2022

    

2021

 

2022

    

2021

Ocean Transportation services

$

908.4

$

855.2

$

2,885.3

$

2,083.8

Terminal and other related services

5.4

4.8

13.8

12.5

Fuel sales

3.2

1.9

7.9

5.1

Vessel management and related services

1.5

1.6

4.6

5.5

Total

$

918.5

$

863.5

$

2,911.6

$

2,106.9

(1)Ocean Transportation revenue transactions are primarily denominated in U.S. dollars except for less than 3 percent of Ocean Transportation services revenue and fuel sales revenue categories 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.

6

Three Months Ended

 

Nine Months Ended

September 30, 

 

September 30, 

Logistics (in millions) (1)

2022

2021

2022

2021

Transportation Brokerage and Freight Forwarding services

$

169.2

$

186.1

$

548.5

$

495.9

Warehousing and distribution services

15.5

12.2

41.4

31.8

Supply chain management and other services

 

11.6

 

9.8

 

39.9

 

23.7

Total

$

196.3

$

208.1

$

629.8

$

551.4

(1)Logistics revenue transactions are primarily denominated in U.S. dollars except for approximately 6.5 percent of transportation brokerage and freight forwarding services revenue, and supply chain management and other services revenue categories 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, 2021. As of September 30, 2022 and December 31, 2021, $9.8 million of eligible accounts receivable was assigned to the CCF. Due to the nature of the assignment of eligible accounts receivable into the CCF, such assigned amounts are classified as part of accounts receivable in the Condensed Consolidated Balance Sheets.

Cash on deposit in the CCF is held in short term U.S. Treasury Obligation Funds and classified as a long-term asset in the Company’s Condensed Consolidated Balance Sheets, as the Company intends to use qualified cash withdrawals to fund long-term investment in the construction of new vessels. During the three months ended September 30, 2022, the Company deposited $569.0 million into the CCF and made qualifying cash withdrawals of $4.0 million from the CCF. No CCF deposits or withdrawals were made during the three months ended September 30, 2021. During the nine months ended September 30, 2022 and 2021, the Company deposited $579.7 million and $31.2 million into the CCF and made qualifying cash withdrawals of $14.7 million and $31.2 million from the CCF, respectively. The balance of cash on deposit at September 30, 2022 was $565.0 million and was nominal at December 31, 2021.

7

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

Three Months Ended

 

Nine Months Ended

 

September 30, 

 

September 30, 

 

(In millions)

2022

    

2021

 

2022

    

2021

 

Operating revenue

$

369.8

$

316.3

$

1,191.3

$

944.6

Operating costs and expenses

(286.9)

(274.2)

(894.3)

(831.3)

Operating income

82.9

42.1

297.0

113.3

Net Income (1)

$

68.9

$

37.3

$

247.0

$

100.5

Company Share of SSAT’s Net Income (2)

$

23.4

$

13.0

$

82.1

$

35.0

(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 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 $87.2 million and $