What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-02 compared with 2022-05-04 · 144 added, 84 removed, 116 unchanged (66% of the section changed)

12 unchanged sentences

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.

FIRST QUARTER 2022 DISCUSSION AND UPDATE ON BUSINESS CONDITIONS

SECOND QUARTER 2022 DISCUSSION AND UPDATE ON BUSINESS CONDITIONS

Ocean Transportation:

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.

The Company’s container volume in the Hawaii service in the second quarter 2022 was 1.5 percent lower year-over-year.

The decrease was primarily due to lower retail-related demand .

During the quarter, we saw continued improvement in the Hawaii economy supported by strong domestic tourist arrivals and a modest improvement in international tourist trends.

In the near-term, we expect continued economic recovery in Hawaii from the pandemic supported by an improving unemployment rate and increasing tourism traffic, but there are negative trends from a combination of economic effects that create uncertainty in the economic growth trajectory.

The negative trends include weakening economic conditions in the U.S.

and global economies and lower household discretionary income as a result of high inflation, higher interest rates and the end of the pandemic-era stimulus helping personal income.

In China, the Company’s container volume in the second quarter 2022 increased 11.7 percent year-over-year.

The increase was a result of four 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 over the Shanghai Containerized Freight Index in the first quarter 2022 and achieved average freight rates that were considerably higher

Matson continued to realize a significant rate premium over the Shanghai Containerized Freight Index in the second 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 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.

Currently in the Transpacific tradelane, we are seeing solid demand for our China service as China’s factory production continues to recover from the COVID-19-related supply chain challenges.

However, in recent weeks we have seen a gradual decline in the Transpacific freight rate environment off the highs experienced earlier this year.

This indicates that rates have likely peaked for now, and, at this time, we expect an orderly marketplace for the remainder of the year with our vessels continuing to operate at or near capacity and earning a significant rate premium to the market because of our differentiated, fast ocean services.

To this end, we continue to expect to operate the CCX service through the October peak season this year.

In Guam, the Company’s container volume in the second quarter 2022 decreased 7.0 percent year-over-year primarily due to lower retail-related demand.

In the near-term, we expect the Guam economy to continue to benefit from a recovery in tourism, but there are negative trends as a result of higher inflation, higher interest rates and the end of the pandemic-era stimulus helping personal income that creates uncertainty in the economic growth trajectory.

In Alaska, the Company’s container volume for the second quarter 2022 increased 12.2 percent year-over-year primarily due to (i) higher northbound volume primarily due to higher retail-related demand and an additional sailing and (ii) higher volume from Alaska-Asia Express (“AAX”).

In the near-term, we expect the Alaska economy to benefit from the resumption of summer tourism and increased energy-related exploration and production activity as a result of elevated oil prices, but there are negative trends as a result of higher inflation, higher interest rates and the end of the pandemic-era stimulus helping personal income that creates uncertainty in the economic growth trajectory.

The contribution in the second quarter 2022 from the Company’s SSAT joint venture investment was $24.7 million, or $11.9 million higher than the second 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.

In the second quarter 2022, operating income for the Company’s Logistics segment was $23.1 million, or $10.2 million higher compared to the level achieved in the second quarter 2021.

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

CONSOLIDATED RESULTS OF OPERATIONS

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

Three Months Ended March 31,

Consolidated Results - Three months ended June 30, 2022 compared with 2021:

Three Months Ended June 30,

(Dollars in millions, except per share amounts)

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Other income (expense), net

Income before income taxes

Income before taxes

Basic earnings per share

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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 March 31, 2022, compared to the three months ended March 31, 2021, was due to lower outstanding debt during the period.

The decrease in interest expense for the three months ended June 30, 2022, compared to the three months ended June 30, 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 $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.

Income tax expense was $109.7 million or 22.4 percent of income before taxes for the three months ended June 30, 2022, compared to $47.4 million or 22.6 percent of income before taxes for the three months ended June 30, 2021.

The effective tax rate for the three months ended June 30, 2022 benefited from a 1.6 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 effective tax rate for the three months ended June 30, 2021 benefited from a 1.8 percent discrete adjustment related to the valuation allowance against the Company’s foreign income tax net operating losses that lowered the effective tax rate for the prior year period.

Consolidated Results - Six months ended June 30, 2022 compared with 2021:

Six Months Ended June 30,

(Dollars in millions, except per share amounts)

Operating revenue

Operating costs and expenses

Operating income

Interest expense

Other income (expense), net

Income before 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 six months ended June 30, 2022, compared to the six months ended June 30, 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 $200.3 million or 21.8 percent of income before taxes for the six months ended June 30, 2022, compared to $74.5 million or 23.0 percent of income before taxes for the six months ended June 30, 2021.

The effective tax rate for the six months ended June 30, 2022 benefited from a 2.3 percent deduction related to FDII under Section 250 of the Internal Revenue Code that lowered the effective tax rate for the current period.

The effective tax rate for the six months ended June 30, 2021 benefited from a 1.1 percent discrete adjustment related to the valuation allowance against the Company’s foreign income tax net operating losses that lowered the effective tax rate for the prior year period.

ANALYSIS OF OPERATING REVENUE AND INCOME BY SEGMENT

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

Three Months Ended March 31,

Ocean Transportation Operating Results - Three months ended June 30, 2022 compared with 2021:

Three Months Ended June 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 $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.

Ocean Transportation revenue increased $366.3 million, or 53.6 percent, during the three months ended June 30, 2022, compared with the three months ended June 30, 2021.

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

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

On a year-over-year FEU basis, Hawaii container volume decreased 1.5 percent primarily due to lower retail-related volume;

Alaska volume increased 12.2 percent primarily due to (i) higher northbound volume primarily due to higher retail-related demand and an additional sailing and (ii) higher volume from AAX;

China volume was 11.7 percent higher as a result of four more eastbound voyages than the prior year;

Guam volume was 7.0 percent lower primarily due to lower retail-related demand;

and Other containers volume increased 19.2 percent primarily due to the addition of China-Auckland Express volume in the South Pacific.

Ocean Transportation operating income increased $269.0 million during the three months ended June 30, 2022, compared with the three months ended June 30, 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 fuel-related expenses, net of fuel-related surcharge recovery, and higher operating costs and expenses primarily due to the CLX+ and CCX services.

The Company’s SSAT terminal joint venture investment contributed $24.7 million during the three months ended June 30, 2022, compared to a contribution of $12.8 million during the three months ended June 30, 2021.

The increase was primarily driven by higher other terminal revenue.

Ocean Transportation Operating Results - Six months ended June 30, 2022 compared with 2021:

Six Months Ended June 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 $749.7 million, or 60.3 percent, during the six months ended June 30, 2022, compared with the six months ended June 30, 2021.

The increase was primarily due to higher revenue in China, higher fuel-related surcharge revenue primarily due to higher energy prices, 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;

On a year-over-year FEU basis, Hawaii container volume decreased 1.1 percent primarily due to lower retail-related demand;

Alaska volume increased 15.9 percent primarily due to (i) higher northbound volume primarily due to higher retail-related demand and volume related to a competitor’s dry-docking, (ii) higher volume from AAX and (iii) higher southbound volume primarily due to higher seafood volume;

China volume was 12.5 percent higher as a result of nine more eastbound voyages than the prior year;

Guam volume was 0.9 percent higher primarily due to higher retail-related demand;

and Other containers volume increased 25.0 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.

Ocean Transportation operating income increased $571.1 million during the six months ended June 30, 2022, compared with the six months ended June 30, 2021.

The Company’s SSAT terminal joint venture investment contributed $58.7 million during the six months ended June 30, 2022, compared to a contribution of $22.0 million during the six months ended June 30, 2021.

The increase was primarily driven by higher other terminal revenue.

Logistics Operating Results:

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

Three Months Ended March 31,

Three months ended June 30, 2022 compared with 2021:

Three Months Ended June 30,

(Dollars in millions)

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Operating income margin

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

Logistics revenue increased $19.9 million, or 10.4 percent, during the three months ended June 30, 2022, compared with the three months ended June 30, 2021.

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

Logistics operating income increased $10.2 million, or 79.1 percent, during the three months ended June 30, 2022, compared with the three months ended June 30, 2021.

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

Logistics Operating Results:

Six months ended June 30, 2022 compared with 2021:

Six Months Ended June 30,

(Dollars in millions)

Logistics revenue

Operating costs and expenses

Operating income

Operating income margin

Logistics revenue increased $90.2 million, or 26.3 percent, during the six months ended June 30, 2022, compared with the six months ended June 30, 2021.

The increase was primarily due to higher transportation brokerage revenue.

Logistics operating income increased $20.5 million, or 107.9 percent, during the six months ended June 30, 2022, compared with the six months ended June 30, 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 March 31, 2022, compared to December 31, 2021 were as follows:

Sources of liquidity available to the Company as of June 30, 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 March 31, 2022, compared to December 31, 2021 were as follows:

Cash and cash equivalents, restricted cash and accounts receivable as of June 30, 2022, compared to December 31, 2021 were as follows:

(In millions)

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Accounts receivable, net (1)

(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,

(1) As of June 30, 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 six months ended June 30, 2022, compared to the six months ended June 30, 2021 were as follows:

Six Months Ended June 30,

(In millions)

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Net cash used in by financing activities (3)

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

Net increase in cash, cash equivalents and restricted cash

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

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(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:

Changes in net cash provided by operating activities for the six months ended June 30, 2022, compared to the six months ended June 30, 2021, were due to the following:

(In millions)

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Other long-term liabilities

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.

Net income was $719.9 million for the six months ended June 30, 2022, compared to $249.7 million for the six months ended June 30, 2021, as described above.

Income from SSAT was $58.7 million for the six months ended June 30, 2022, compared to $22.0 million for the six months ended June 30, 2021.

The increase in income from SSAT was due to higher operating profits generated by SSAT during the six months ended June 30, 2022 as compared to the same prior year period.

Cash distributions received from SSAT were $26.3 million during the six months ended June 30, 2022, compared to $21.0 million for the six months ended June 30, 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, 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.

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 six months ended June 30, 2022 as compared to the same prior year period.

Changes in accounts payable, accruals and other liabilities were due to 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 six months ended June 30, 2022, compared to the same prior year period.

Deferred dry-docking payments for the six months ended June 30, 2022 were $14.7 million, compared to $17.4 million for the six months ended June 30, 2021.

The decrease in deferred dry-docking payments was due to less dry-dock related activity during the six months ended June 30, 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:

Changes in net cash used in investing activities for the six months ended June 30, 2022, compared to the six months ended June 30, 2021, 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 $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.

Capitalized vessel construction expenditures (including capitalized interest) were $11.4 million for the six months ended June 30, 2022 and related to the construction of a new flat-deck barge.

There were no capitalized vessel construction expenditures during the six months ended June 30, 2021.

Other capital expenditures payments were $68.4 million for the six months ended June 30, 2022, compared to $101.3 million for the six months ended June 30, 2021.

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

1 unchanged sentence

and expenditures on other capital related projects.

The Company purchased fewer containers, chassis and other equipment during the six months ended June 30, 2022 as compared to the same prior year period.

(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:

Changes in net cash used in financing activities for the six months ended June 30, 2022, compared to the six months ended June 30, 2021, were due to the following:

(In millions)

Repurchase of Matson common stock

Repayments of fixed interest debt

Repayments and borrowings under revolving credit facility, net

2 unchanged sentences

Dividends paid

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

During the six months ended June 30, 2022, the Company paid $208.5 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.

During the six months ended June 30, 2022, the Company paid $32.5 million in scheduled fixed debt payments, compared to $26.8 million in scheduled fixed debt payments during the six months ended June 30, 2021.

During the six months ended June 30, 2021, the Company decreased net borrowings under the revolving credit facility by $71.8 million.

There were no borrowings under the revolving credit facility during the six months ended June 30, 2022.

During the six months ended June 30, 2021, the Company paid $3.0 million in financing costs.

No financing costs were paid during the six months ended June 30, 2022.

During the six months ended June 30, 2022, the Company paid $19.5 million in payroll taxes related to vested restricted stock units, compared to $14.4 million for the six months ended June 30, 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.

During the six months ended June 30, 2022, the Company paid $25.0 million in dividends, compared to $20.2 million during the six months ended June 30, 2021.

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

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

Total Debt as of June 30, 2022 and December 31, 2021 is as follows:

(In millions)

Fixed interest debt

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.

Total Debt decreased by $32.4 million during the six months ended June 30, 2022.

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, 2022.

As of June 30, 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 surplus of $264.6 million and $92.1 million at March 31, 2022 and December 31, 2021, respectively.

The Company had a working capital surplus of $480.6 million and $92.1 million at June 30, 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.

The increase in working capital surplus at June 30, 2022 is primarily due to the increase in cash generated from operating activities during the six months ended June 30, 2022.

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 .

There were no material changes during the quarter ended June 30, 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.

During the six months ended June 30, 2022, the Company repurchased approximately 2.3 million shares for a total cost of $206.7 million.

The maximum number of remaining shares that may be purchased under the Company’s stock repurchase program was approximately 1.2 million shares at June 30, 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 .

Except as described above, there were no other material changes during the quarter ended June 30, 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

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OTHER MATTERS

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.

The Company’s second quarter 2022 cash dividend of $0.30 per share was paid on June 2, 2022.

On June 22, 2022, the Company’s Board of Directors declared a cash dividend of $0.31 per share payable on September 1, 2022 to shareholders of record on August 4, 2022.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis