What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-11-04 compared with 2021-07-30 · 123 added, 107 removed, 144 unchanged (61% of the section changed)

4 unchanged sentences

Such forward-looking statements may be contained in, among other things, SEC filings, such as reports on Forms 10-K, 10-Q and 8-K, the Annual Report to Shareholders, press releases made by the Company, the Company’s Internet Websites (including Websites of its subsidiaries), and oral statements made by officers of the Company.

This report, and other statements that the Company may make, may contain forward-looking statements with respect to the Company’s future financial or business performance, strategies or expectations.

Forward-looking statements are typically identified by words or phrases such as “trend,” “potential,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” or similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may” or similar expressions.

This report, and other statements that the Company may make, may contain forward-looking statements with respect to the Company’s future financial, business or ESG performance, strategies or expectations.

Forward-looking statements are typically identified by words or phrases such as “trend,” “potential,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” “design,” “goal,” “plan,” or similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may” or similar expressions.

The Company cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time, including, but not limited to, the risk factors that are described in Part I, Item 1A, “Risk Factors” of Matson’s Annual Report on Form 10-K for the year ended December 31, 2020.

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MD&A is provided as a supplement to the Condensed Consolidated Financial Statements and notes herein, and should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 , the Company’s reports on Forms 10-Q and 8-K, and other publicly available information.

SECOND QUARTER 2021 DISCUSSION AND UPDATE ON BUSINESS CONDITIONS

THIRD QUARTER 2021 DISCUSSION AND UPDATE ON BUSINESS CONDITIONS

Ocean Transportation:

The Company’s container volume in the Hawaii service in the second quarter 2021 was 9.9 percent higher year-over-year.

The increase was primarily due to higher retail and hospitality-related demand due to the reopening of the Hawaii economy compared to the pandemic low in the year ago period, partially offset by volume associated with the dry-docking of a competitor’s vessel in the year ago period.

Domestic visitor travel to the state accelerated since the beginning of the year and the local economy continued to reopen with COVID-19 vaccinations, leading to a sharp rebound in Hawaii’s tourism industry and economy.

The economic recovery in the state is on a cautiously optimistic trajectory due to improving tourism and unemployment trends.

In China, the Company’s container volume in the second quarter 2021 increased 59.1 percent year-over-year.

The increase was primarily due to incremental volume from the CLX+ service in addition to higher volume in the CLX service as a result of our increased capacity in the tradelane.

The total number of eastbound voyages in the China service increased by nine year-over-year of which six were from incremental CLX+ voyages and three from extra loaders.

The Company’s container volume in the Hawaii service in the third quarter 2021 was 11.5 percent higher year-over-year.

The increase was primarily due to higher retail and hospitality-related demand due to the continued rebound in tourism and the Hawaii economy compared to the pandemic-reduced volume in the year ago period.

Volume in the third quarter 2020 was negatively impacted by the state’s COVID-19 mitigation efforts, including restrictions on tourism.

Domestic visitor travel to the state remained strong throughout much of the third quarter 2021 until the end of the quarter when the state’s efforts to address the spread of the COVID-19 Delta variant, including the Governor’s request to defer travel plans, led to a softening in airline passenger traffic.

As a result, we experienced a modest negative impact in freight demand late in the quarter.

In the near-term, the Hawaii economy may experience a brief slowdown as a result of the state’s response to the COVID-19 Delta variant and the related impacts on tourism trends.

In late October, the Governor announced that non-essential travel to the state can resume on November 1, 2021.

In China, the Company’s container volume in the third quarter 2021 increased 21.7 percent year-over-year.

The increase was primarily due to volume from the China-California Express (“CCX”) service and volume from an extra loader.

The total number of eastbound voyages in the China service increased by six year-over-year of which five were from CCX

voyages and one from an extra loader.

Volume demand in the quarter was driven by e-commerce, garments and other goods.

Matson continued to realize a significant rate premium in the second quarter 2021 and achieved average freight rates that were considerably

higher than in the year ago period .

Currently in the Transpacific tradelane, supply chain congestion continues, and consumption trends remain elevated.

We expect these conditions to remain in place and lead to a high level of demand at least until Lunar New Year in the first quarter of 2022.

As a result of the exceptional level of demand for our expedited Transpacific services, Matson recently announced the initiation of our CCX service as a seasonal string with Matson-owned vessels from China to the U.S.

West Coast with Oakland as the first call.

Consequently, we expect our vessels in the CLX, CLX+ and CCX services to be operating at capacity at least until Lunar New Year next year.

In Guam, the Company’s container volume in the second quarter 2021 increased 35.7 percent year-over-year primarily due to higher retail-related demand compared to the pandemic low in the year ago period as well as volume attributable to a competitor’s schedule issues.

The economic recovery trajectory in Guam remains uncertain as the economy recovers slowly and tourism remains constrained.

In Alaska, the Company’s container volume for the second quarter 2021 increased 15.2 percent year-over-year due to higher northbound volume primarily due to (i) higher retail-related demand compared to the pandemic low in the year ago period, (ii) higher southbound volume and (iii) the addition of volume from the Alaska-Asia Express service, partially offset by one less northbound sailing.

Matson continued to realize a significant rate premium in the third quarter 2021 and achieved average freight rates that were considerably higher than in the year ago period.

Currently, supply chain congestion continues in the Transpacific tradelane with the combination of ongoing elevated consumption trends, inventory restocking, and bottlenecks at critical points for both ocean and overland transportation .

We expect these conditions to remain largely in place at least through mid-year 2022.

In Guam, the Company’s container volume in the third quarter 2021 increased 14.6 percent year-over-year primarily due to higher retail-related demand compared to the pandemic-reduced volume in the year ago period.

The economic recovery trajectory in Guam continues to remain uncertain as the economy recovers slowly and tourism remains constrained.

In Alaska, the Company’s container volume for the third quarter 2021 increased 10.7 percent year-over-year due to

(i) the addition of volume from the Alaska-Asia Express, (ii) higher northbound volume primarily due to an additional sailing and higher retail-related demand, and (iii) higher southbound volume.

In the near-term, we expect improving economic trends in Alaska, but the recovery’s trajectory continues to remain uncertain.

The contribution in the second quarter 2021 from the Company’s SSAT joint venture investment was $12.8 million, or $9.1 million higher than the second quarter 2020.

The increase was driven by higher lift volume.

In the second quarter 2021, operating income for the Company’s Logistics segment was $12.9 million, or $4.0 million higher compared to the pandemic low operating income achieved in the second quarter 2020.

The increase was due primarily to higher contributions from transportation brokerage, freight forwarding and supply chain management as a result of elevated goods consumption and inventory restocking in addition to favorable supply and demand fundamentals in our core markets.

The contribution in the third quarter 2021 from the Company’s SSAT joint venture investment was $13.0 million, or $5.3 million higher than the third quarter 2020.

The increase was primarily driven by higher lift volume.

In the third quarter 2021, operating income for the Company’s Logistics segment was $16.0 million, or $4.1 million higher compared to the level achieved in the third quarter 2020.

The increase was due primarily to higher contributions from supply chain management and transportation brokerage as a result of elevated goods consumption, inventory restocking and favorable supply and demand fundamentals in our core markets.

CONSOLIDATED RESULTS OF OPERATIONS

Consolidated Results - Three months ended June 30, 2021, compared with 2020:

Three Months Ended June 30,

Consolidated Results - Three months ended September 30, 2021 compared with 2020:

Three Months Ended September 30,

(Dollars in millions, except per share amounts)

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Changes in operating revenue, and operating costs and expenses are further described below in the Analysis of Operating Revenue and Income by Segment.

The decrease in interest expense for the three months ended June 30, 2021, compared to the three months ended June 30, 2020, was due to lower outstanding debt during the period.

The decrease in interest expense for the three months ended September 30, 2021, compared to the three months ended September 30, 2020, was due to lower outstanding debt during the period.

Other income (expense) relates to the amortization of certain components of net periodic benefit costs or gains related to the Company’s pension and post-retirement plans.

Income tax expense was $47.4 million or 22.6 percent of income before income taxes for the three months ended June 30, 2021, compared to $11.7 million or 26.3 percent of income before income taxes for the three months ended June 30, 2020.

The effective tax rate for the three months ended June 30, 2021 was lower than the effective tax rate for the three months ended June 30, 2020 as it benefitted from discrete adjustments related to the valuation allowance

against the Company’s foreign income tax net operating losses and stock compensation that lowered the effective tax rate for that period.

Consolidated Results - Six months ended June 30, 2021, compared with 2020:

Six Months Ended June 30,

Income tax expense was $91.4 million or 24.4 percent of income before income taxes for the three months ended September 30, 2021, compared to $24.2 million or 25.4 percent of income before income taxes for the three months ended September 30, 2020.

The effective tax rate for the three months ended September 30, 2021 was lower than the effective tax rate for the three months ended September 30, 2020 due to the impact of state taxes that lowered the effective tax rate for the current period.

Consolidated Results - Nine months ended September 30, 2021 compared with 2020:

Nine Months Ended September 30,

(Dollars in millions, except per share amounts)

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Changes in operating revenue, and operating costs and expenses are further described below in the Analysis of Operating Revenue and Income by Segment.

The decrease in interest expense for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, was due to a lower outstanding debt during the period.

The decrease in interest expense for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, was due to a lower outstanding debt during the period.

Other income (expense) relates to the amortization of certain components of net periodic benefit costs or gains related to the Company’s pension and post-retirement plans.

The increase in Other income (expense) was due to adjustments related to the Company’s pension and post-retirement plan liabilities during the six months ended June 30, 2021.

Income tax expense was $74.5 million or 23.0 percent of income before income taxes for the six months ended June 30, 2021, compared to $12.9 million or 26.1 percent of income before income taxes for the six months ended June 30, 2020.

The effective tax rate for the six months ended June 30, 2021 was lower than the effective tax rate for the six months ended June 30, 2020 as it benefitted from discrete adjustments related to the valuation allowance against the Company’s foreign income tax net operating losses and stock compensation that lowered the effective tax rate for that period.

Income tax expense was $165.9 million or 23.7 percent of income before income taxes for the nine months ended September 30, 2021, compared to $37.1 million or 25.7 percent of income before income taxes for the nine months ended September 30, 2020.

The effective tax rate for the nine months ended September 30, 2021 was lower than the effective tax rate for the nine months ended September 30, 2020 as it benefitted from discrete adjustments related to the release of the valuation allowance against the Company’s foreign income tax net operating losses and stock compensation that lowered the effective tax rate for the current period.

ANALYSIS OF OPERATING REVENUE AND INCOME BY SEGMENT

Ocean Transportation Operating Results - Three months ended June 30, 2021, compared with 2020:

Three Months Ended June 30,

Ocean Transportation Operating Results - Three months ended September 30, 2021 compared with 2020:

Three Months Ended September 30,

(Dollars in millions)

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(2) Includes containers from services in various islands in Micronesia and the South Pacific, and Okinawa, Japan.

Ocean Transportation revenue increased $272.1 million, or 66.2 percent, during the three months ended June 30, 2021, compared with the three months ended June 30, 2020.

The increase was primarily due to higher revenue in China and Hawaii, higher fuel-related surcharge revenue and higher revenue in Alaska and Guam.

On a year-over-year FEU basis, Hawaii container volume increased 9.9 percent primarily due to higher retail and hospitality-related demand due to the reopening of the Hawaii economy compared to the pandemic low in the year ago period as a result of the state’s COVID-19 mitigation efforts, including restrictions on tourism, partially offset by volume associated with the dry-docking of a competitor’s vessel in the year ago period;

Alaska volume increased 15.2 percent due to higher northbound volume primarily due to higher retail-related demand compared to the pandemic low in the year ago period as a result of the state’s COVID-19 mitigation efforts, higher southbound volume and the addition of volume from the Alaska-Asia Express service, partially offset by one less northbound sailing;

China volume was 59.1 percent higher primarily due to incremental volume from the CLX+ service in addition to higher volume in the CLX service as a result of our increased capacity in the tradelane;

Guam volume was 35.7 percent higher primarily due to higher retail-related demand compared to the pandemic low in the year ago period as a result of the island’s COVID-19 mitigation measures as well as volume attributable to a competitor’s schedule issues;

Ocean Transportation revenue increased $365.2 million, or 73.3 percent, during the three months ended September 30, 2021, compared with the three months ended September 30, 2020.

The increase was primarily due to higher revenue in China, higher fuel-related surcharge revenue, and higher revenue in Hawaii and Alaska.

On a year-over-year FEU basis, Hawaii container volume increased 11.5 percent primarily due to higher retail and hospitality-related demand due to the continued rebound in tourism and the Hawaii economy compared to the volume in the year ago period, which was negatively impacted by the state’s COVID-19 mitigation efforts, including restrictions on tourism;

Alaska volume increased 10.7 percent due to the addition of volume from the Alaska-Asia Express, higher northbound volume primarily due to an additional sailing and higher retail-related demand, and higher southbound volume;

China volume was 21.7 percent higher primarily due to CCX volume and volume from an extra loader;

Guam volume was 14.6 percent higher primarily due to higher retail-related demand;

and Other containers volume increased 17.4 percent primarily due to higher volume in Okinawa.

Ocean Transportation operating income increased $158.7 million during the three months ended June 30, 2021, compared with the three months ended June 30, 2020.

The increase was primarily due to higher contributions from the China and Hawaii services and SSAT, partially offset by higher vessel operating costs, higher terminal handling costs and higher depreciation.

The Company’s SSAT terminal joint venture investment contributed $12.8 million during the three months ended June 30, 2021, compared to a contribution of $3.7 million during the three months ended June 30, 2020.

The increase was driven by higher lift volume.

Ocean Transportation Operating Results - Six months ended June 30, 2021, compared with 2020:

Six Months Ended June 30,

Ocean Transportation operating income increased $275.4 million during the three months ended September 30, 2021, compared with the three months ended September 30, 2020.

The increase was primarily due to a higher contribution from China.

The Company’s SSAT terminal joint venture investment contributed $13.0 million during the three months ended September 30, 2021, compared to a contribution of $7.7 million during the three months ended September 30, 2020.

The increase was primarily driven by higher lift volume.

Ocean Transportation Operating Results - Nine months ended September 30, 2021 compared with 2020:

Nine Months Ended September 30,

(Dollars in millions)

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(2) Includes containers from services in various islands in Micronesia and the South Pacific, and Okinawa, Japan.

Ocean Transportation revenue increased $431.7 million, or 53.2 percent, during the six months ended June 30, 2021, compared with the six months ended June 30, 2020.

The increase was primarily due to higher revenue in China, Hawaii and Guam.

Ocean Transportation revenue increased $796.9 million, or 60.8 percent, during the nine months ended September 30, 2021, compared with the nine months ended September 30, 2020.

The increase was primarily due to higher revenue in China and Hawaii, higher fuel-related surcharge revenue and higher revenue in Alaska.

On a year-over-year FEU basis, Hawaii container volume increased 7.4 percent primarily due to higher retail and hospitality-related demand due to the reopening of the Hawaii economy compared to the negatively impacted volume in the year ago period as a result of the pandemic and the state’s COVID-19 mitigation efforts, partially offset by volume associated with the dry-docking of a competitor’s vessel in the second quarter of last year;

Alaska volume increased by 4.8 percent due to higher northbound volume primarily due to higher retail-related demand compared to the negatively impacted volume in the year ago period as a result of the pandemic and the state’s COVID-19 mitigation efforts, higher southbound volume and the addition of volume from the Alaska-Asia Express service, partially offset by two less northbound sailings;

China volume was 110.2 percent higher primarily due to incremental volume from the CLX+

service in addition to higher volume on the CLX service as a result of increased capacity in the tradelane;

Guam volume was 17.6 percent higher primarily due to higher retail-related demand compared to the negatively impacted volume in the year ago period as a result of the pandemic and the island’s COVID-19 mitigation measures as well as volume attributable to a competitor’s schedule issues;

Alaska volume increased by 6.9 percent due to higher northbound volume primarily due to higher retail-related demand compared to the negatively impacted volume in the year ago period as a result of the pandemic and the state’s COVID-19 mitigation efforts, higher southbound volume, and the addition of volume from the Alaska-Asia Express service;

China volume was 67.1 percent higher primarily due to incremental volume from the CLX+ service, higher volume on the CLX service as a result of increased capacity in the tradelane, and the addition of volume from the CCX service;

Guam volume was 16.5 percent higher primarily due to higher retail-related demand compared to the negatively impacted volume in the year ago period as a result of the pandemic and the island’s COVID-19 mitigation measures;

and Other container volume increased 15.9 percent primarily due to higher volume in Okinawa.

Ocean Transportation operating income increased $264.9 million during the six months ended June 30, 2021, compared with the six months ended June 30, 2020.

The Company’s SSAT terminal joint venture investment contributed $22.0 million during the six months ended June 30, 2021, compared to a contribution of $7.7 million during the six months ended June 30, 2020.

The increase was largely attributable to higher lift volume.

Ocean Transportation operating income increased $540.3 million during the nine months ended September 30, 2021, compared with the nine months ended September 30, 2020.

The increase was primarily due to a higher contribution from China.

The Company’s SSAT terminal joint venture investment contributed $35.0 million during the nine months ended September 30, 2021, compared to a contribution of $15.4 million during the nine months ended September 30, 2020.

The increase was primarily driven by higher lift volume.

Logistics Operating Results:

Three months ended June 30, 2021, compared with 2020:

Three Months Ended June 30,

Three months ended September 30, 2021, compared with 2020:

Three Months Ended September 30,

(Dollars in millions)

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Operating income margin

Logistics revenue increased $78.7 million, or 69.5 percent, during the three months ended June 30, 2021, compared with the three months ended June 30, 2020.

The increase was primarily due to higher transportation brokerage revenue.

Logistics operating income increased $4.0 million, or 44.9 percent, for the three months ended June 30, 2021, compared with the three months ended June 30, 2020.

The increase was primarily due to higher contributions from transportation brokerage, freight forwarding and supply chain management.

Logistics revenue increased $61.2 million, or 41.7 percent, during the three months ended September 30, 2021, compared with the three months ended September 30, 2020.

The increase was primarily due to higher transportation brokerage and supply chain management revenue.

Logistics operating income increased $4.1 million, or 34.5 percent, for the three months ended September 30, 2021, compared with the three months ended September 30, 2020.

The increase was primarily due to higher contributions from supply chain management and transportation brokerage.

Logistics Operating Results:

Six months ended June 30, 2021, compared with 2020:

Six Months Ended June 30,

Nine months ended September 30, 2021, compared with 2020:

Nine Months Ended September 30,

(Dollars in millions)

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Operating income margin

Logistics revenue increased $117.0 million, or 51.7 percent, during the six months ended June 30, 2021, compared with the six months ended June 30, 2020.

The increase was primarily due to higher transportation brokerage revenue.

Logistics operating income increased $5.0 million, or 35.7 percent, for the six months ended June 30, 2021, compared with the six months ended June 30, 2020.

The increase was due primarily to higher contributions from transportation brokerage, freight forwarding and supply chain management.

Logistics revenue increased $178.2 million, or 47.7 percent, during the nine months ended September 30, 2021, compared with the nine months ended September 30, 2020.

The increase was primarily due to higher transportation brokerage and supply chain management revenue.

Logistics operating income increased $9.1 million, or 35.1 percent, for the nine months ended September 30, 2021, compared with the nine months ended September 30, 2020.

The increase was due primarily to higher contributions from transportation brokerage, supply chain management, and freight forwarding.

LIQUIDITY AND CAPITAL RESOURCES

Sources of liquidity available to the Company as of June 30, 2021, compared to December 31, 2020 were as follows:

Sources of liquidity available to the Company as of September 30, 2021, compared to December 31, 2020 were as follows:

Cash, Cash Equivalents, Restricted Cash and Accounts Receivable:

Cash and cash equivalents, restricted cash and accounts receivable as of June 30, 2021, compared to December 31, 2020 were as follows:

Cash and cash equivalents, restricted cash and accounts receivable as of September 30, 2021, compared to December 31, 2020 were as follows:

September 30,

(In millions)

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Accounts receivable, net (1)

(1) As of June 30, 2021 and December 31, 2020, $1.7 million of eligible accounts receivable were assigned to the CCF.

Changes in the Company’s cash, cash equivalents and restricted cash for the six months ended June 30, 2021, compared to the six months ended June 30, 2020 were as follows:

Six Months Ended June 30,

(1) As of September 30, 2021 and December 31, 2020, $1.8 million and $1.7 million of eligible accounts receivable were assigned to the CCF, respectively.

Changes in the Company’s cash, cash equivalents and restricted cash for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020 were as follows:

Nine Months Ended September 30,

(In millions)

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(1) Change in net cash provided by operating activities:

Changes in net cash provided by operating activities for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, were due to the following:

Changes in net cash provided by operating activities for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, were due to the following:

(In millions)

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Other long-term liabilities

Income and cash distributions from SSAT was $22.0 million and $21.0 million for the six months ended June 30, 2021, respectively, compared to $7.7 million and $7.8 million for the six months ended June 30, 2020.

The change in income and cash distributions was due to greater levels of operating profits generated by SSAT during the six months ended June 30, 2021 as compared to the same prior year period.

Income and cash distributions from SSAT was $35.0 million and $46.9 million for the nine months ended September 30, 2021, respectively, compared to $15.4 million and $37.9 million for the nine months ended September 30, 2020.

The change in income and cash distributions was due to greater levels of operating profits generated by SSAT during the nine months ended September 30, 2021 as compared to the same prior year period.

Changes in accounts receivable were primarily due to increased levels of revenues, and the timing of collections associated with those receivables.

Changes in prepaid expenses and other assets were primarily due to increased prepaid fuel and other operating related costs, and prepaid income taxes, primarily due to increased levels of operations for the six months ended June 30, 2021, as compared to the same prior year period.

Changes in accounts payable, accruals and other liabilities were primarily due to increased level of operating costs and the timing of payments associated with those liabilities.

Deferred dry-docking payments for the six months ended June 30, 2021 were $17.4 million, compared to $7.6 million for the six months ended June 30, 2020.

The increase in deferred dry-docking payments was due to an increase in dry-dock related activity during the six months ended June 30, 2021 as compared to the same prior year period.

Changes in prepaid expenses and other assets were primarily due to increased prepaid fuel and other operating related costs, primarily due to increased levels of operations, and prepaid income taxes, primarily due to increased levels of earnings for the nine months ended September 30, 2021, as compared to the same prior year period.

Changes in accounts payable, accruals and other liabilities were primarily due to increased levels of operating costs and the timing of

payments associated with those liabilities.

Deferred dry-docking payments for the nine months ended September 30, 2021 were $25.8 million, compared to $11.1 million for the nine months ended September 30, 2020.

The increase in deferred dry-docking payments was due to an increase in dry-dock related activity during the nine months ended September 30, 2021 as compared to the same prior year period.

(2) Change in net cash used in investing activities:

Changes in net cash used in investing activities for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, were due to the following:

Changes in net cash used in investing activities for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, were due to the following:

(In millions)

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Proceeds from disposal of property and equipment, net

Capitalized vessel construction expenditures (including capitalized interest) were $16.5 million for the six months ended June 30, 2020.

There were no capitalized vessel construction expenditures during the six months ended June 30, 2021 due to the completion of the Company’s fleet renewal program in 2020.

Capitalized vessel construction expenditures (including capitalized interest) were $57.8 million for the nine months ended September 30, 2020.

There were no capitalized vessel construction expenditures during the nine months ended September 30, 2021 due to the completion of the Company’s fleet renewal program in 2020.

Changes in cash deposits into CCF and withdrawals from CCF primarily relate to the timing of when deposits are made into the CCF, and when the subsequent withdrawals are made out of the CCF for the purposes of vessel construction progress payments.

Other capital expenditures payments were $101.3 million for the six months ended June 30, 2021, compared to $34.0 million for the six months ended June 30, 2020.

During the six months ended June 30, 2021, the Company increased its acquisition of containers, chassis and other terminal equipment, as compared to the same prior year period.

The increase in capital expenditure payments was also due to the timing of certain capital project activities incurred during 2021 as compared to 2020.

The decrease in proceeds from disposal of property and equipment was primarily due to the sale and leaseback of chassis and container equipment for net proceeds of $14.3 million during the six months ended June 30, 2020.

There were no sale and leaseback transactions during the six months ended June 30, 2021.

Other capital expenditures payments were $244.7 million for the nine months ended September 30, 2021, compared to $53.5 million for the nine months ended September 30, 2020.

During the nine months ended September 30, 2021, the Company increased its acquisition of containers, chassis and other terminal equipment, as compared to the same prior year period, primarily driven by the increased level of operating activities.

The increase in other capital expenditure payments was also due to the repurchase of Maunalei for $95.8 million, repurchase of other leased equipment, installation of scrubbers on certain vessels, and the timing of certain capital project activities incurred during 2021 as compared to 2020.

There were no sale and leaseback transactions during the nine months ended September 30, 2021.

(3) Change in net cash used in financing activities:

Changes in net cash used in financing activities for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, were due to the following:

Changes in net cash used in financing activities for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, were due to the following:

(In millions)

2 unchanged sentences

Repayments and borrowings under revolving credit facility, net

Repurchase of Matson common stock

Payment of financing costs

2 unchanged sentences

Change in other payments, net

During the six months ended June 30, 2021, the Company paid $26.8 million in fixed debt payments, compared to $192.8 million during the six months ended June 30, 2020.

During the six months ended June 30, 2021, the Company decreased net borrowings under the revolving credit facility by $71.8 million, compared to a $201.1 million decrease during the six months ended June 30, 2020.

During the six months ended June 30, 2021, the Company paid $3.0 million in financing costs, compared to $18.5 million paid during the six months ended June 30, 2020, related to amendments of its revolving credit facility, private placement term loans and Title XI debt.

During the six months ended June 30, 2021, the Company paid $14.4 million in taxes related to vested restricted stock units, compared to $5.5 million for the six months ended June 30, 2020.

The increase in taxes was primarily due to the increase of the Company’s stock price as of the vesting date of the restricted stock units.

During the six months ended June 30, 2021, the Company paid $20.2 million in dividends, compared to $19.1 million during the six months ended June 30, 2020.

During the nine months ended September 30, 2021, the Company paid $41.1 million in scheduled fixed debt payments, compared to $34.7 million in scheduled fixed debt payments and redeemed debt at par of $169.5 million during the nine months ended September 30, 2020.

During the nine months ended September 30, 2021, the Company decreased net borrowings under the revolving credit facility by $71.8 million, compared to a $256.1 million decrease during the nine months ended September 30, 2020.

During the nine months ended September 30, 2021, the Company paid $3.0 million in financing costs, compared to $18.5 million paid during the nine months ended September 30, 2020, related to amendments of its revolving credit facility, private placement term loans and Title XI debt.

During the nine months ended September 30, 2021, the Company paid $14.4 million in taxes related to vested restricted stock units, compared to $5.6 million for the nine months ended September 30, 2020.

The increase in taxes was primarily due to the increase of

the Company’s stock price as of the vesting date of the restricted stock units.

During the nine months ended September 30, 2021, the Company paid $33.3 million in dividends, compared to $29.1 million during the nine months ended September 30, 2020.

The increase in dividend payments resulted from an increase in dividends declared per share of common stock by the Company.

Total Debt as of June 30, 2021 and December 31, 2020 is as follows:

During the nine months ended September 30, 2021, the Company paid $115.7 million for the repurchase of Matson common stock.

There was no stock repurchase activity during the prior year.

Total Debt as of September 30, 2021 and December 31, 2020 is as follows:

September 30,

(In millions)

1 unchanged sentence

Fixed interest debt

Total Debt decreased by $98.6 million during the six months ended June 30, 2021.

Total Debt decreased by $112.9 million during the nine months ended September 30, 2021.

The decrease in the Company’s outstanding revolving credit borrowings was primarily due to the increase in net cash provided by operating activities during that same period.

The decrease in fixed interest debt was due to the scheduled repayments of private placement term loans and Title XI debt during the six months ended June 30, 2021.

As of June 30, 2021, the Company had $641.9 million of remaining borrowing availability under the revolving credit facility, with a maturity date of March 31, 2026.

The decrease in fixed interest debt was due to the scheduled repayments of private placement term loans and Title XI debt during the nine months ended September 30, 2021.

As of September 30, 2021, the Company had $641.9 million of remaining borrowing availability under the revolving credit facility, with a maturity date of March 31, 2026.

The Company’s debt is described in Note 6 of Part I, Item 1 above.

Working Capital:

The Company had a working capital deficit of $129.6 million and $205.6 million at June 30, 2021 and December 31, 2020, respectively.

The Company had a working capital deficit of $65.6 million and $205.6 million at September 30, 2021 and December 31, 2020, respectively.

The Company manages its working capital needs through the use of borrowings on its revolving credit facility which can be received on short notice.

The decrease in working capital deficit at June 30, 2021 is primarily due to the increase in revenues generated during the six months ended June 30, 2021, compared to the six months ended June 30, 2020.

The decrease in working capital deficit at September 30, 2021 is primarily due to the increase in cash flow generated from operating activities during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020.

Working capital is also impacted by the timing of collections associated with accounts receivable and other assets, and the timing of payments associated with accounts payable, accruals, income taxes and other liabilities.

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OTHER MATTERS

The Company’s second quarter 2021 cash dividend of $0.23 per share was paid on June 3, 2021.

On June 24, 2021, the Company’s Board of Directors declared a cash dividend of $0.30 per share payable on September 2, 2021.

The Company’s third quarter 2021 cash dividend of $0.30 per share was paid on September 2, 2021.

On October 28, 2021, the Company’s Board of Directors declared a cash dividend of $0.30 per share payable on December 2, 2021.

From October 1, 2021 through November 2, 2021, Matson repurchased an additional 0.4 million shares for a total cost of $33.1 million.

As of November 2, 2021, the Company had approximately 1.1 million shares remaining on its share repurchase program.

In early November, the Company announced short, medium and long-term goals designed to significantly reduce its impact on climate change by lowering the Company’s greenhouse gas emissions.

To help meet these goals, the Company plans to install tanks, piping and other equipment on Daniel K.

Inouye , its first Aloha Class vessel, to operate its dual fuel engine on liquefied natural gas (“LNG”) as originally designed .

The installation is expected to take approximately five months to complete and is scheduled to begin during the first quarter of 2023, at an estimated cost of approximately $35 million.

The Company is actively considering further LNG installations on Kaimana Hila and the two Kanaloa Class vessels ( Lurline and Matsonia ).

In addition, the Company plans to re-engine Manukai to operate on both LNG and conventional fuels at an estimated cost of approximately $60 million.

The Company is continuing to evaluate different initiatives to increase efficiency and lower emissions.

For more information about risks and uncertainties associated with the Company’s greenhouse gas emissions reduction goals, please see Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations – Forward-Looking Statements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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What changed 10-Q

Item 2. Management’s Discussion and Analysis