Matson(MATX) - 2022 Q4 - Annual Report

PART I Business Matson, Inc, is a leading provider of ocean transportation and logistics services through two primary segments - Matson, Inc, is a holding company with two primary business segments: Ocean Transportation and Logistics[18] - The Ocean Transportation segment (MatNav) provides ocean freight services to Hawaii, Alaska, Guam, Micronesia, and operates an expedited service from China to Long Beach, California[19] - The Logistics segment (Matson Logistics) is an asset-light business offering transportation brokerage, freight forwarding, warehousing, and supply chain management services[21] - Matson holds a 35% ownership interest in SSA Terminals, LLC (SSAT), a key terminal and stevedoring services provider[20] Company Overview Matson, Inc, is a holding company providing ocean transportation and logistics services to U,S, and Pacific economies Business Description The company details its Ocean Transportation and Logistics segments, including routes, fleet, and competitive landscape Employees and Labor Relations The company details its workforce composition, human capital strategies, and significant union relationships - In 2022, Matson had 4,288 employees worldwide, with 2,994 covered by collective bargaining agreements[94] - 70% of Matson's global workforce is unionized, with the key PMA/ILWU agreement for U,S, West Coast longshore labor currently under negotiation after expiring on July 1, 2022[103][104] - The company is focused on Diversity, Equity, and Inclusion (DE&I), with approximately two-thirds of management promotions in 2022 being women and/or minority individuals[96] - Matson contributes to several multi-employer pension and post-retirement plans and has no current intention of withdrawing from them[105] Available Information The company's SEC filings are publicly available on its corporate website and the SEC's website - The company's SEC filings are available free of charge on its website, www,matson,com, and on the SEC's website, www,sec,gov[106][107] Risk Factors The company faces material risks from Jones Act changes, macroeconomic conditions, labor disruptions, and climate change - Repeal, substantial amendment, or waiver of the Jones Act would adversely affect the company's business, as it protects its domestic Hawaii and Alaska services from foreign competition[110] - The business is susceptible to macroeconomic downturns, inflation, and geopolitical tensions that can reduce demand for transportation services[112][113] - Work stoppages or labor disruptions pose a significant risk, especially as the collective bargaining agreement with the ILWU on the U,S, West Coast expired on July 1, 2022, and is under negotiation[148][150] - The company faces physical and transitional risks from climate change, including severe weather events and the costs of complying with new environmental regulations like the IMO's EEXI and CII requirements[134][138] - Cybersecurity risks are a major concern, as the shipping industry is a frequent target, and a breach could impair operations and lead to financial and reputational damage[156] Unresolved Staff Comments The company has no unresolved comments from the Securities and Exchange Commission staff - There are no unresolved staff comments[172][173] Properties Matson leases material terminal, warehouse, and cross-dock facilities in key locations across the U,S, and Guam Leased Terminal Facilities | Terminal Location | Acreage | | :--- | :--- | | Honolulu, Hawaii | 105 | | Anchorage, Alaska | 38 | | Dutch Harbor, Alaska | 18 | | Kodiak, Alaska | 6 | | Tacoma, Washington | 15 | | Polaris Point, Guam | 30 | - Other material facilities include warehouses in Georgia and California, and office/cross-dock facilities in Alaska and Washington[175] Legal Proceedings The company is involved in a non-material legal matter with CARB regarding at-berth emissions regulations - On November 10, 2021, CARB issued a Notice of Violation to Matson for alleged violations of at-berth emissions regulations at the Port of Long Beach in 2020[178] - The alleged violations were incurred by chartered CLX+ service vessels not equipped with alternative maritime power (AMP) capability[178] - Potential penalties for 2020, 2021, and 2022 violations could exceed $1 million in aggregate but are not expected to be material to the company's financial condition or results[178] Mine Safety Disclosures This item is not applicable to the company's business operations - Not Applicable[180] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's stock trades on the NYSE, and it maintains an active dividend and share repurchase program - Matson's common stock is traded on the NYSE under the ticker symbol "MATX"[183] Dividends Declared per Share | Dividends Declared per Share | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | First Quarter | $0,30 | $0,23 | $0,22 | | Second Quarter | $0,30 | $0,23 | $0,22 | | Third Quarter | $0,31 | $0,30 | $0,23 | | Fourth Quarter | $0,31 | $0,30 | $0,23 | | Total | $1,22 | $1,06 | $0,90 | - During Q4 2022, the company repurchased 1,526,361 shares for a total of approximately $101,8 million[188] - As of December 31, 2022, 1,533,371 shares remained authorized for repurchase under the company's share repurchase program[188] Removed and Reserved This item has been removed and is reserved for future use Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses 2022 financial performance, segment results, liquidity, and critical accounting estimates Historical Financial Information The company presents selected financial data for the five years ended December 31, 2022, showing significant growth Five-Year Selected Financial Data | (In millions, except per share amounts) | 2022 | 2021 | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Operating Revenue | $4,343,0 | $3,925,3 | $2,383,3 | $2,203,1 | $2,222,8 | | Total Operating Income | 1,353,6 | 1,187,5 | 280,3 | 129,1 | 163,8 | | Net Income | $1,063,9 | $927,4 | $193,1 | $82,7 | $109,0 | | Diluted EPS | $27,07 | $21,47 | $4,44 | $1,91 | $2,53 | | Total Debt (end of year) | $517,5 | $629,0 | $760,1 | $958,4 | $856,4 | | Total Shareholders' equity (end of year) | $2,296,9 | $1,667,4 | $961,2 | $805,7 | $755,3 | Fourth Quarter 2022 Discussion and Update on Business Conditions Q4 2022 saw volume declines across key services due to lower demand and a challenging Transpacific market - Hawaii service container volume decreased 13,0% YoY in Q4 2022 due to lower retail-related demand and one less week[196] - China service container volume fell 47,2% YoY in Q4 2022, attributed to lower demand for CLX/CLX+ services, the discontinuation of the CCX service, and one less week[197] - The contribution from the SSAT joint venture was $1,0 million in Q4 2022, a decrease of $20,3 million from Q4 2021[200] - Logistics operating income for Q4 2022 was $12,8 million, a $2,0 million decrease from Q4 2021[201] Consolidated Results of Operations For 2022, consolidated revenue and net income grew by 10,6% and 14,7% respectively, driven by both segments Consolidated Results (2022 vs 2021) | (Dollars in millions, except per share) | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Operating revenue | $4,343,0 | $3,925,3 | $417,7 | 10,6% | | Operating income | $1,353,6 | $1,187,5 | $166,1 | 14,0% | | Net income | $1,063,9 | $927,4 | $136,5 | 14,7% | | Diluted earnings per share | $27,07 | $21,47 | $5,60 | 26,1% | Analysis of Operating Revenue and Income by Segment Ocean Transportation income grew on higher rates, while Logistics income rose on improved brokerage performance Ocean Transportation Performance (2022 vs 2021) | Metric | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $3,544,6M | $3,132,8M | 13,1% | | Operating Income | $1,281,2M | $1,137,7M | 12,6% | Logistics Performance (2022 vs 2021) | Metric | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $798,4M | $792,5M | 0,7% | | Operating Income | $72,4M | $49,8M | 45,4% | - The SSAT terminal joint venture contributed $83,1 million in 2022, up from $56,3 million in 2021, an increase of 47,6%[216] Liquidity and Capital Resources The company maintains a strong liquidity position with significant cash from operations and plans for capital expenditures - Net cash provided by operating activities was $1,271,9 million in 2022, an increase from $984,1 million in 2021[223] - Total debt decreased by $111,5 million to $517,5 million at year-end 2022[228] - The company repurchased approximately 5,0 million shares for $397,0 million during 2022[235] Expected Capital Expenditures | (in millions) | 2023 | 2024 | 2025 | | :--- | :--- | :--- | :--- | | New vessel construction & related costs | $55 | $75 | $360 | | LNG installations & reengining | $60 - $65 | $50 - $55 | - | | Maintenance and other | $80 - $90 | $80 - $90 | $80 - $90 | | Total Estimated Capital Expenditures | $195 - $210 | $205 - $220 | $440 - $450 | Commitments, Contingencies and Off-Balance Sheet Arrangements The company has significant commitments for new vessel construction but no material off-balance sheet arrangements Commitments and Contractual Obligations | (in millions) | Total | | :--- | :--- | | Standby letters of credit | $7,9 | | Bonds | $33,3 | | Vessel construction obligations | $949,0 | | Vendor and other obligations | $99,3 | - The company is not party to any material off-balance sheet arrangements[237] Critical Accounting Estimates Management identifies key accounting estimates requiring significant judgment for assets, liabilities, and taxes - The company evaluates long-lived assets, intangible assets, and goodwill for impairment annually or when triggering events occur, with no impairments recorded in 2020, 2021, or 2022[241][242][243] - Estimating reserves for insurance-related liabilities requires judgment based on historical claims and trends; these liabilities were $45,4 million at the end of 2022[244][245][246] - Pension and post-retirement plan expenses and liabilities are estimated using various assumptions, including discount rates, expected return on plan assets, and health care cost trends[248] - Income tax expense calculations involve estimates for deferred tax assets and liabilities and judgments on the ability to realize these assets[250] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is from interest rate fluctuations, managed with a mix of debt types - The primary market risk is from changes in interest rates on the company's debt and investments, which is managed through a mix of fixed and variable-rate debt[252] - The transition from LIBOR to the Secured Overnight Financing Rate (SOFR) for its revolving credit facility is not expected to have a material impact[254] - Foreign currency risk is considered immaterial as transactions are primarily denominated in U,S, dollars[258] Financial Statements and Supplementary Data This section contains the company's audited consolidated financial statements and the independent auditor's report - Includes the Consolidated Statements of Income and Comprehensive Income, Balance Sheets, Cash Flows, and Shareholders' Equity for the three years ended December 31, 2022[260] - Management's report confirms the effectiveness of the company's internal control over financial reporting as of December 31, 2022[261][263] - The independent auditor, Deloitte & Touche LLP, issued an unqualified opinion on both the financial statements and the effectiveness of internal control over financial reporting[265][266] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting or financial disclosure matters - None reported[452] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2022 - The company's disclosure controls and procedures were deemed effective as of the end of the period covered by the report[453] - No material changes were made to the internal control over financial reporting during the fourth quarter of 2022[455] Other Information The company reports no other information under this item - None reported[456] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - None reported[457] PART III Directors, Executive Officers and Corporate Governance Required information is incorporated by reference from the company's 2023 Proxy Statement - Information required for this item is incorporated by reference from the company's 2023 Proxy Statement[460][461][462][463] Executive Compensation Required information on executive compensation is incorporated by reference from the 2023 Proxy Statement - Information required for this item is incorporated by reference from the company's 2023 Proxy Statement[464] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section provides details on equity compensation plans, with other ownership data incorporated by reference Equity Compensation Plan Information | Plan Category | Shares to be issued upon exercise (a) | Shares remaining available for future issuance (c) | | :--- | :--- | :--- | | Equity compensation plans approved by shareholders | 545,953 | 2,117,506 | | Total | 545,953 | 2,117,506 | - Other information on security ownership is incorporated by reference from the company's 2023 Proxy Statement[466] Certain Relationships and Related Transactions, and Director Independence Required information is incorporated by reference from the company's 2023 Proxy Statement - Information required for this item is incorporated by reference from the company's 2023 Proxy Statement[468] Principal Accountant Fees and Services Required information on accountant fees is incorporated by reference from the 2023 Proxy Statement - Information required for this item is incorporated by reference from the company's 2023 Proxy Statement[469] PART IV Exhibits and Financial Statement Schedules This section lists the financial statements and exhibits filed with the report or incorporated by reference - The Consolidated Financial Statements are located in Item 8 of Part II[472] - All financial statement schedules are omitted because they are not required or the information is already included in the financial statements or notes[473] - A detailed list of exhibits required by Item 601 of Regulation S-K is provided, including material contracts and corporate governance documents[474] Form 10-K Summary The company has elected not to provide a summary under this item - None provided[486]