CAPITAL CONSTRUCTION FUND

12 Months Ended

Dec. 31, 2025

CAPITAL CONSTRUCTION FUND

CAPITAL CONSTRUCTION FUND

7. CAPITAL CONSTRUCTION FUND

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”). The CCF program was created to assist owners and operators of U.S. flagged vessels in raising capital necessary for the modernization and expansion of the U.S. merchant marine fleet. CCF funds may be used for the acquisition, construction, or reconstruction of vessels, and for repayment of existing vessel indebtedness through the deferment of federal income taxes on certain deposits of monies and other property placed into the CCF. Qualified withdrawals from the CCF must be used for investment in vessels built in the U.S. and used between covered U.S. ports as described by the Merchant Marine Act, and for other qualifying expenditures (see Item 1 of Part 1 for additional information on Maritime Laws and the Jones Act). Participants of the CCF must also meet certain U.S. citizenship requirements.

Cash deposits into the CCF are limited by certain applicable earnings and other conditions. Such cash deposits, once made, are available as tax deductions in the Company’s income tax provision. Qualified withdrawals from the CCF do not give rise to a current income tax liability, but reduce the depreciable basis of the vessels or certain related equipment for income tax purposes. However, if withdrawals are made from the CCF for general corporate purposes or other non-qualified purposes, or upon termination of the agreement, they are taxable with interest payable from the year of deposit.

Deposits not committed for qualified purposes within 25 years from the date of deposit will be treated as non-qualified withdrawals over the subsequent five years. Under the terms of the CCF agreement, the Company may designate certain qualified earnings as “accrued deposits” or may designate, as obligations of the CCF, qualified withdrawals to reimburse qualified expenditures initially made with operating funds. 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. 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.

Assigned receivables in the CCF represent non-cash pledged deposits made by the Company into the CCF that are supported by qualifying assets such as accounts receivable. Such assigned receivables in the CCF qualify as deposits for tax deduction purposes. Assigned receivables in the CCF accrue interest based upon terms as defined within the CCF agreement with MARAD. Assigned account receivables can be repurchased by the Company by making cash deposits into the CCF.

A summary of the activities within the CCF cash and cash equivalents, and investment accounts for the years ended December 31, 2025 and 2024 consists of the following:

	Years Ended
	December 31,
(In millions)	2025		2024
CCF Cash and Cash Equivalents:
CCF cash and cash equivalents balance at beginning of period	$	230.7	$	599.4
Cash deposits into the CCF		—		50.0
Cash withdrawal for the purchase of U.S. Treasury debt securities and accrued interest		—		(449.8)
Proceeds from U.S. Treasury debt securities at maturity		195.4		48.1
Interest income on cash and cash equivalents, and CCF investments		17.7		18.8
Repurchase of assigned accounts receivable		100.7		53.8
Qualifying withdrawal payments for vessel construction expenditures		(237.3)		(89.6)
Total CCF cash and cash equivalents balance at end of period	$	307.2	$	230.7
CCF Investments:
CCF investments balance at beginning of period	$	411.9	$	—
Purchase of U.S. Treasury debt securities		—		448.1
Sale of U.S. Treasury debt securities at maturity		(195.4)		(48.1)
Accretion of CCF investments		9.0		11.9
Total CCF investments balance at end of period		225.5		411.9
Total CCF cash and cash equivalents, and investments balance at end of period	$	532.7	$	642.6

CCF Cash and Equivalents: Cash on deposit in the CCF is invested in short-term U.S. Treasury obligations fund with daily liquidity. At December 31, 2025, these short-term securities had a weighted average life of 95 days.

CCF Investments: In February 2024, the Company purchased $448.1 million of fixed-rate U.S. Treasuries debt securities with accrued interest of $1.7 million using CCF cash. These securities were purchased at a discount and have various maturity dates of less than 2 years. The value of these investments accretes to the face value of the securities on a straight-line basis until maturity. Such accretion is included in interest income in the Company’s Consolidated Statement of Income and Comprehensive Income.

As of December 31, 2025, CCF investment maturities are as follows:

	As of
	December 31, 2025
Year (in millions)	Cost		Fair Value
2026	$	173.1	$	173.6
2027		52.4		52.8
Total CCF investments	$	225.5	$	226.4

Cash on deposit and investment in the CCF are classified as a long-term asset on the Company’s 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.

CCF Assigned Accounts Receivables: Assigned accounts receivable in the CCF was $82.3 million and $178.1 million as of December 31, 2025 and 2024, respectively. During the year ended December 31, 2025 and 2024, the Company deposited cash into the CCF and repurchased assigned accounts receivables of $100.7 million and $53.8 million, respectively. 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.