What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-05-04 compared with 2021-11-04 · 111 added, 178 removed, 89 unchanged (76% 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, business or ESG performance, strategies or expectations.

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 environmental, social and governance 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.

3 unchanged sentences

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide a discussion of the Company’s financial condition, results of operations, liquidity and certain other factors that may affect its future results from the perspective of management.

The discussion that follows is intended to provide information that will assist in understanding the changes in the Company’s financial statements from period to period, the primary factors that accounted for those changes, and how certain accounting principles, policies and estimates affect the Company’s financial statements.

The discussion that follows is intended to provide information that will assist in understanding the changes in the Company’s Condensed Consolidated Financial Statements from period to period, the primary factors that accounted for those changes, and how certain accounting principles, policies and estimates affect the Company’s Condensed Consolidated Financial Statements.

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, 2021 , the Company’s reports on Forms 10-Q and 8-K, and other publicly available information.

THIRD QUARTER 2021 DISCUSSION AND UPDATE ON BUSINESS CONDITIONS

FIRST QUARTER 2022 DISCUSSION AND UPDATE ON BUSINESS CONDITIONS

Ocean Transportation:

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.

The Company’s container volume in the Hawaii service in the first quarter 2022 was 0.6 percent lower year-over-year.

The decrease was primarily due to lower eastbound volume .

During the quarter, we continued to see elevated hospitality-related demand as a result of strong domestic tourist arrivals and modest improvement in international visitor traffic.

In the near-term, we are cautiously optimistic on further economic recovery in Hawaii in 2022.

The positive trends include further improvement in the unemployment rate and increasing tourism traffic, including meaningful international visitor traffic later in the year, but incremental waves of COVID-19 variants present the possibility of further economic slowdowns and the loss of federal stimulus coupled with inflation and higher interest rates may impact discretionary income.

In China, the Company’s container volume in the first quarter 2022 increased 13.4 percent year-over-year.

The increase was a result of five more eastbound voyages than the prior year.

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

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.

Matson continued to realize a significant rate premium over the Shanghai Containerized Freight Index in the first quarter 2022 and achieved average freight rates that were considerably higher

than in the year ago period.

Currently in the Transpacific tradelane, we are seeing supply chain challenges in China, primarily due to actions to mitigate the spread of COVID-19, as well as continued supply chain constraints and congestion on the U.S.

West Coast, elevated consumption trends, and inventory restocking.

Despite the near-term uncertainty presented by the supply chain challenges in China, we expect a combination of the current supply and demand factors to remain largely in place through at least the October peak season and continue to expect elevated demand for our China service for most of this year.

In Guam, the Company’s container volume in the first quarter 2022 increased 10.0 percent year-over-year primarily due to higher retail-related demand.

In the near-term, we are cautiously optimistic on further economic growth in Guam as tourism traffic improves as the year progresses.

In Alaska, the Company’s container volume for the first quarter 2022 increased 20.2 percent year-over-year primarily due to (i) the increase in volume from the Alaska-Asia Express (“AAX”), (ii) higher northbound volume primarily due to higher retail-related demand and volume related to a competitor’s dry-docking and (iii) higher southbound volume primarily due to higher seafood 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 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.

The contribution in the first quarter 2022 from the Company’s SSAT joint venture investment was $34.0 million, or $24.8 million higher than the first quarter 2021.

The increase was primarily driven by higher other terminal revenue.

In the first quarter 2022, operating income for the Company’s Logistics segment was $16.4 million, or $10.3 million higher compared to the level achieved in the first quarter 2021.

The increase was due primarily to higher contributions from all services as we continued to see elevated goods consumption, inventory restocking and favorable supply and demand fundamentals in our core markets.

CONSOLIDATED RESULTS OF OPERATIONS

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

Three Months Ended September 30,

(Dollars in millions, except per share amounts)

Operating revenue

Operating costs and expenses

Operating income

Interest expense

Other income (expense), net

Income before income taxes

Basic earnings per share

Diluted earnings per share

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 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 $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,

Consolidated Results - Three months ended March 31, 2022 compared with 2021:

Three Months Ended March 31,

(Dollars in millions, except per share amounts)

8 unchanged sentences

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 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.

The decrease in interest expense for the three months ended March 31, 2022, compared to the three months ended March 31, 2021, 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 $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.

Income tax expense was $90.6 million or 21.1 percent of income before income taxes for the three months ended March 31, 2022, compared to $27.1 million or 23.7 percent of income before income taxes for the three months ended March 31, 2021.

The effective tax rate for the three months ended March 31, 2022 benefited from a 2.6 percent deduction related to foreign-derived intangible income (“FDII”) under Section 250 of the Internal Revenue Code that lowered the effective tax rate for the current period.

The Company benefits from a FDII deduction as it relates to a U.S.

corporation that generates income from services provided to or from foreign countries.

ANALYSIS OF OPERATING REVENUE AND INCOME BY SEGMENT

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

Three Months Ended September 30,

Ocean Transportation Operating Results - Three months ended March 31, 2022 compared with 2021:

Three Months Ended March 31,

(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 $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;

Ocean Transportation revenue increased $383.4 million, or 68.4 percent, during the three months ended March 31, 2022, compared with the three months ended March 31, 2021.

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

The higher revenue in China was primarily due to considerably higher average freight rates and higher volume.

The higher revenue in Alaska was primarily the result of higher volume.

On a year-over-year FEU basis, Hawaii container volume decreased 0.6 percent primarily due to lower eastbound volume;

Alaska volume increased 20.2 percent primarily due to (i) the increase in volume from AAX, (ii) higher northbound volume primarily due to higher retail-related demand and volume related to a competitor’s dry-docking, and (iii) higher southbound volume primarily due to higher seafood volume;

China volume was 13.4 percent higher as a result of five more eastbound voyages than the prior year;

Guam volume was 10.0 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 $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)

Ocean Transportation revenue

Operating costs and expenses

Operating income

Operating income margin

Volume (Forty-foot equivalent units (FEU), except for automobiles) (1)

Hawaii containers

Hawaii automobiles

Alaska containers

China containers

Guam containers

Other containers (2)

(1) Approximate volumes included for the period are based on the voyage departure date, but revenue and operating income are adjusted to reflect the percentage of revenue and operating income earned during the reporting period for voyages in transit at the end of each reporting period.

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

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 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 $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 September 30, 2021, compared with 2020:

Three Months Ended September 30,

(Dollars in millions)

Logistics revenue

Operating costs and expenses

Operating income

Operating income margin

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.

and Other containers volume increased 32.5 percent primarily due to the addition of China-Auckland Express volume in the South Pacific.

Ocean Transportation operating income increased $302.1 million during the three months ended March 31, 2022, compared with the three months ended March 31, 2021.

The increase was primarily due to considerably higher average freight rates and higher volume in China and a higher contribution from SSAT, partially offset by higher operating costs and expenses primarily due to the CCX and CLX+ services and the timing of fuel-related surcharge recovery.

The Company’s SSAT terminal joint venture investment contributed $34.0 million during the three months ended March 31, 2022, compared to a contribution of $9.2 million during the three months ended March 31, 2021.

The increase was primarily driven by higher other terminal revenue.

Logistics Operating Results:

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

Nine Months Ended September 30,

Three months ended March 31, 2022, compared with 2021:

Three Months Ended March 31,

(Dollars in millions)

3 unchanged sentences

Operating income margin

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.

Logistics revenue increased $70.3 million, or 46.5 percent, during the three months ended March 31, 2022, compared with the three months ended March 31, 2021.

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.

Logistics operating income increased $10.3 million, or 168.9 percent, for the three months ended March 31, 2022, compared with the three months ended March 31, 2021.

The increase was primarily due to higher contributions from all services.

LIQUIDITY AND CAPITAL RESOURCES

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

Sources of liquidity available to the Company as of March 31, 2022, compared to December 31, 2021 were as follows:

Cash, Cash Equivalents, Restricted Cash and Accounts Receivable:

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

September 30,

Cash and cash equivalents, restricted cash and accounts receivable as of March 31, 2022, compared to December 31, 2021 were as follows:

(In millions)

2 unchanged sentences

Accounts receivable, net (1)

(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,

(1) As of March 31, 2022 and December 31, 2021, $9.8 million of eligible accounts receivable were assigned to the CCF.

Changes in the Company’s cash, cash equivalents and restricted cash for the three months ended March 31, 2022, compared to the three months ended March 31, 2021 were as follows:

Three Months Ended March 31,

(In millions)

1 unchanged sentence

Net cash used in investing activities (2)

Net cash used in financing activities (3)

Net cash used in by financing activities (3)

Net increase (decrease) in cash, cash equivalents and restricted cash

1 unchanged sentence

Cash, cash equivalents and restricted cash, end of the period

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

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:

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

Changes in net cash provided by operating activities for the three months ended March 31, 2022, compared to the three months ended March 31, 2021, were due to the following:

(In millions)

Amortization of operating lease right of use assets

Depreciation and amortization

Non-cash depreciation and amortization

Non-cash deferred income taxes

5 unchanged sentences

Operating lease liabilities

Non-cash amortization of operating lease right of use assets

Deferred dry-docking payments

Deferred dry-docking amortization

Non-cash deferred dry-docking amortization

Other long-term liabilities

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.

Net income was $339.2 million for the three months ended March 31, 2022, compared to $87.2 million for the three months ended March 31, 2021, as described above.

Income from SSAT was $34.0 million for the three months ended March 31, 2022, compared to $9.2 million for the three months ended March 31, 2021.

The increase in income from SSAT was due to higher operating profits generated by SSAT during the three months ended March 31, 2022 as compared to the same prior year period.

There were no cash distributions from SSAT during the three months ended March 31, 2022, compared to $10.5 million for the three months ended March 31, 2021.

Cash distributions from SSAT are dependent on the level of cash available for distribution after operational and future capital needs of SSAT, and the timing of when such dividends are declared and paid.

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, 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 nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, were due to the following:

Changes in prepaid expenses and other assets were primarily due to increased prepaid fuel and other operating related costs, and the timing and amount of prepaid income taxes for the three months ended March 31, 2022 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.

Changes in operating lease liabilities were primarily due to new operating lease additions and renewals, partially offset by operating lease terminations during the three months ended March 31, 2022, compared to the same prior year period.

Deferred dry-docking payments for the three months ended March 31, 2022 were $8.6 million, compared to $9.5 million for the three months ended March 31, 2021.

The decrease in deferred dry-docking payments was due to less dry-dock related activity during the three months ended March 31, 2022 as compared to the same prior year period.

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

Changes in net cash used in investing activities for the three months ended March 31, 2022, compared to the three months ended March 31, 2021, were due to the following:

(In millions)

1 unchanged sentence

Withdrawals from CCF

Other capital expenditures

Capitalized vessel construction expenditures

Other capital expenditures

Proceeds from disposal of property and equipment, net

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 $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.

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 nine months ended September 30, 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 nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, were due to the following:

Capitalized vessel construction expenditures (including capitalized interest) were $9.4 million for the three months ended March 31, 2022 and related to the construction of a new flat-deck barge.

There were no capitalized vessel construction expenditures during the three months ended March 31, 2021.

Other capital expenditures payments were $37.4 million for the three months ended March 31, 2022, compared to $38.5 million for the three months ended March 31, 2021.

Other capital expenditures primarily relates to the acquisition of containers, chassis and other equipment;

vessel related expenditures;

and expenditures on other capital related projects.

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

Changes in net cash used in financing activities for the three months ended March 31, 2022, compared to the three months ended March 31, 2021, were due to the following:

(In millions)

Proceeds received from issuance of fixed interest debt

Repayments of fixed interest debt

Repayments and borrowings under revolving credit facility, net

Repurchase of Matson common stock

Repayments and borrowings under revolving credit facility, net

Withholding tax related to net share settlements of restricted stock units

Payment of financing costs

Tax withholding related to net share settlements of restricted stock units

Dividends paid

Change in other payments, net

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.

During the three months ended March 31, 2022, the Company paid $70.4 million for the repurchase of Matson common stock.

There was no stock repurchase activity during the same prior year period.

During the three months ended March 31, 2022, the Company paid $14.4 million in scheduled fixed debt payments, compared to $14.4 million in scheduled fixed debt payments during the three months ended March 31, 2021.

During the three months ended March 31, 2021, the Company decreased net borrowings under the revolving credit facility by $46.8 million.

There were no borrowing under the revolving credit facility during the three months ended March 31, 2022.

During the three months ended March 31, 2021, the Company paid $3.0 million in financing costs.

No financing costs were paid during

the three months ended March 31, 2022.

During the three months ended March 31, 2022, the Company paid $19.4 million in payroll taxes related to vested restricted stock units, compared to $14.1 million for the three months ended March 31, 2021.

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

During the three months ended March 31, 2022, the Company paid $12.9 million in dividends, compared to $10.1 million during the three months ended March 31, 2021.

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

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,

Total Debt as of March 31, 2022 and December 31, 2021 is as follows:

(In millions)

Revolving credit facility

Fixed interest debt

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 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.

Total Debt decreased by $14.3 million during the three months ended March 31, 2022.

The decrease in fixed interest debt was due to the scheduled repayments of private placement term loans and Title XI debt during the three months ended March 31, 2022.

As of March 31, 2022, the Company had $642.0 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 $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 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.

CONTRACTUAL OBLIGATIONS, COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET ARRANGEMENTS

Except as described below, there were no material changes during this quarter to the Company’s contractual obligations, commitments, contingencies and off-balance sheet arrangements that are described in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 , which is incorporated herein by reference.

The Company’s debt is described in Note 6 to the Condensed Consolidated Financial Statements included in the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2021 , which is incorporated herein by reference.

On July 7, 2021, the Company terminated a Bareboat Charter Operating Lease agreement as described in Note 7 of Part I, Item 1 above.

CRITICAL ACCOUNTING ESTIMATES

There have been no changes during this quarter to the Company’s critical accounting estimates as discussed in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

The Company had a working capital surplus of $264.6 million and $92.1 million at March 31, 2022 and December 31, 2021, respectively.

Working capital is primarily impacted by the amount of net cash provided by operating activities, the amount of capital expenditures, the timing of collections associated with accounts receivable, prepaid expenses and other assets, and by the amount and timing of payments associated with accounts payable, accruals, income taxes and other liabilities.

The increase in working capital surplus at March 31, 2022 is primarily due to the increase in cash generated from operating activities during the three months ended March 31, 2022, compared to the three months ended December 31, 2021.

Capital Expenditures:

There were no material changes during the quarter ended March 31, 2022 to the Company’s expected capital expenditures for the years ending December 31, 2022 and 2023 that are described in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 .

Repurchase of Shares:

During the quarter ended March 31, 2022, the Company repurchased approximately 0.7 million shares for a total cost of $68.6 million.

The maximum number of shares that may be purchased under the Company’s stock repurchase program was approximately 2.8 million shares at March 31, 2022.

Other Material Cash Requirements:

Except as described above, there were no other material changes during the quarter ended March 31, 2022 to the Company’s other cash requirements that are described in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 .

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no changes during this quarter to the Company’s critical accounting policies and estimates as discussed in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

OTHER MATTERS

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.

The Company’s first quarter 2022 cash dividend of $0.30 per share was paid on March 3, 2022.

On April 28, 2022, the Company’s Board of Directors declared a cash dividend of $0.30 per share payable on June 2, 2022 to shareholders of record on May 12, 2022.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Item 2. Management’s Discussion and Analysis