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Item 2. Management’s Discussion and Analysis

2023-10-31 compared with 2023-08-02 · 113 added, 116 removed, 161 unchanged (59% 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, 2022 , the Company’s reports on Forms 10-Q and 8-K, and other publicly available information.

SECOND QUARTER 2023 DISCUSSION AND UPDATE ON BUSINESS CONDITIONS

THIRD QUARTER 2023 DISCUSSION AND UPDATE ON BUSINESS CONDITIONS

Ocean Transportation:

The Company’s container volume in the Hawaii service in the second quarter 2023 was 7.1 percent lower year-over-year.

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

During the quarter, the Company saw retail customers continue to manage inventories to weaker consumer demand levels despite continued economic growth in Hawaii supported by a low unemployment rate and relatively strong visitor arrivals.

In the second half of 2023, Matson expects continued improvement in the Hawaii economy supported by continued growth in visitor arrivals and a low unemployment rate.

In China, the Company’s container volume in the second quarter 2023 decreased 24.6 percent year-over-year.

The decrease was primarily due to (i) CCX volume in the second quarter 2022 (CCX service was discontinued in the third quarter 2022), (ii) lower capacity in the CLX service due to the dry-docking of Daniel K.

Inouye and (iii) one less CLX+ sailing.

Matson continued to realize a significant rate premium over the Shanghai Containerized Freight Index (“SCFI”) in the second quarter 2023 but achieved average freight rates that were lower than in the year ago period.

Currently in the Transpacific marketplace, the Company is seeing modest reductions in deployed capacity and retail inventories are in

a relatively better position than earlier in the year, but retailers continue to carefully manage inventory levels in the face of lower consumer demand.

The Company further expects the tradelane to experience a muted peak season, but for Matson, the Company expects its China service to be near full during the traditional peak season.

Absent an economic “hard landing” in the U.S., the Company continues to expect trade dynamics to gradually improve for the remainder of the year as the Transpacific marketplace transitions to a more normalized level of consumer demand and retail inventory stocking levels.

Regardless of the economic environment, the Company expects to continue to earn a significant rate premium to the SCFI reflecting its fast and reliable ocean services and unmatched destination services.

In Guam, the Company’s container volume in the second quarter 2023 decreased 7.5 percent year-over-year primarily due to lower general demand.

In the second half of 2023, the Company expects continued improvement in the Guam economy with a low unemployment rate and a modest increase in tourism from low levels.

In Alaska, the Company’s container volume for the second quarter 2023 decreased 7.2 percent year-over-year due to (i) lower export seafood volume from the Alaska-Asia Express service (“AAX”), (ii) lower northbound volume due to one less sailing and (iii) lower southbound volume primarily due to lower household goods and domestic seafood volume.

In the second half of 2023, the Company expects the Alaska economy to continue to benefit from low unemployment and increased energy-related exploration and production activity as a result of elevated oil prices.

The contribution in the second quarter 2023 from the Company’s SSAT joint venture investment was $(1.4) million, or $26.1 million lower than the second quarter 2022.

The Company’s container volume in the Hawaii service in the third quarter 2023 was 1.9 percent lower year-over-year.

The decrease was primarily due to lower general demand .

In August, Maui experienced a significant economic disruption from devastating wildfires.

According to UHERO’s most recent economic report, tourism to the island may not fully recover in the next several years, and the rebuilding of homes and businesses may take many years.

In the near-term, Matson expects economic growth in Hawaii to moderate as tourism and visitor arrivals slowly rebound from the effects of the Maui wildfires.

In China, the Company’s container volume in the third quarter 2023 decreased 1.3 percent year-over-year.

The decrease was primarily due to CCX volume in the third quarter 2022 (the CCX service was discontinued in the third quarter 2022) partially offset by higher volume in the CLX+ service.

Matson continued to realize a significant rate premium over the Shanghai Containerized Freight Index (“SCFI”) in the third quarter 2023 but achieved average freight rates that were lower than in the year ago period.

Currently in the Transpacific marketplace, the Company continues to see a reduction of deployed capacity in light of lower volumes as a result of lower consumer demand for retail goods.

economic ‘hard landing’ in the U.S., the Company expects trade dynamics in 2024 to be comparable to 2023 as consumer-related spending activity is expected to remain stable.

Regardless of the economic backdrop, Matson expects to continue to earn a significant rate premium to the SCFI reflecting its fast and reliable ocean services and unmatched destination services.

In Guam, the Company’s container volume in the third quarter 2023 decreased 1.9 percent year-over-year primarily due to lower general demand.

In the near-term, the Company expects continued improvement in the Guam economy with a low unemployment rate and a modest increase in tourism from low levels.

In Alaska, the Company’s container volume for the third quarter 2023 decreased 9.1 percent year-over-year due to (i) lower export seafood volume from the Alaska-Asia Express service (“AAX”), (ii) lower northbound volume due to lower retail-related demand and (iii) lower southbound volume due to lower domestic seafood volume.

In the near-term, the Company expects the Alaska economy to continue to benefit from low unemployment and increased energy-related exploration and production activity as a result of elevated oil prices.

The contribution in the third quarter 2023 from the Company’s SSAT joint venture investment was $1.3 million, or $22.1 million lower than the third quarter 2022.

The decrease was primarily driven by lower demurrage revenue and lower lift volume.

In the second quarter 2023, operating income for the Company’s Logistics segment was $14.3 million, or $8.8 million lower compared to the level achieved in the second quarter 2022.

The decrease was primarily due to lower contributions from transportation brokerage and supply chain management.

In the third quarter 2023, operating income for the Company’s Logistics segment was $13.9 million, or $6.2 million lower compared to the level achieved in the third quarter 2022.

The decrease was primarily due to a lower contribution from transportation brokerage.

CONSOLIDATED RESULTS OF OPERATIONS

Consolidated Results – Three months ended June 30, 2023 compared with 2022:

Three Months Ended June 30,

Consolidated Results – Three months ended September 30, 2023 compared with 2022:

Three Months Ended September 30,

(Dollars in millions, except per share amounts)

9 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 increase in interest income for the three months ended June 30, 2023, compared to the three months ended June 30, 2022, was due to increased amounts of cash and CCF funds that are invested in interest bearing accounts, and higher interest rates during the period.

The decrease in interest expense for the three months ended June 30, 2023, compared to the three months ended June 30, 2022, was due to lower outstanding debt during the period, and a higher offset of capitalized interest associated with new vessels construction.

The increase in interest income for the three months ended September 30, 2023, compared to the three months ended September 30, 2022, was due to increased amounts of cash and CCF funds that are invested in interest bearing accounts, and higher interest rates during the period.

The decrease in interest expense for the three months ended September 30, 2023, compared to the three months ended September 30, 2022, was due to lower outstanding debt during the period, and a higher offset of capitalized interest associated with new vessels construction.

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 $23.5 million or 22.5 percent of income before taxes for the three months ended June 30, 2023, compared to $109.7 million or 22.4 percent of income before taxes for the three months ended June 30, 2022.

The effective tax rate for the three months ended June 30, 2023 benefited from a 1.7 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, compared to a 1.6 percent deduction related to FDII for the three months ended June 30, 2022.

Consolidated Results – Six months ended June 30, 2023 compared with 2022:

Six Months Ended June 30,

Income tax expense was $20.3 million or 14.5 percent of income before taxes for the three months ended September 30, 2023, compared to $68.1 million or 20.4 percent of income before taxes for the three months ended September 30, 2022.

The effective tax rate for the three months ended September 30, 2023 benefited from a 7.8 percent deduction related to return-to-provision true-ups recorded during the three months ended September 30, 2023, primarily due to foreign-derived intangible income (“FDII”) under Section 250 of the Internal Revenue Code that lowered the effective tax rate for the current period, compared to a 0.2 percent deduction related to return-to-provision true-ups recorded during the three months ended September 30, 2022.

Consolidated Results – Nine months ended September 30, 2023 compared with 2022:

Nine Months Ended September 30,

(Dollars in millions, except per share amounts)

9 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 increase in interest income for the six months ended June 30, 2023, compared to the six months ended June 30, 2022, was due to increased amounts of cash and CCF funds that are invested in interest bearing accounts, and higher interest rates during the period.

The decrease in interest expense for the six months ended June 30, 2023, compared to the six months ended June 30, 2022, was due to lower outstanding debt during the period, and a higher offset of capitalized interest associated with new vessels construction.

The increase in interest income for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, was due to increased amounts of cash and CCF funds that are invested in interest bearing accounts, and higher interest rates during the period.

The decrease in interest expense for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, was due to lower outstanding debt during the period, and a higher offset of capitalized interest associated with new vessels construction.

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 $33.7 million or 22.7 percent of income before taxes for the six months ended June 30, 2023, compared to $200.3 million or 21.8 percent of income before taxes for the six months ended June 30, 2022.

The effective tax rate for the six months ended June 30, 2023 benefited from a 1.8 percent deduction related to FDII that lowered the effective tax rate for the current period, compared to a 2.3 percent deduction related to FDII for the six months ended June 30, 2022.

The reduction in the FDII for the six months ended June 30, 2023 was primarily due to lower income generated from the Company’s China service.

Income tax expense was $54.0 million or 18.7 percent of income before taxes for the nine months ended September 30, 2023, compared to $268.4 million or 21.4 percent of income before taxes for the nine months ended September 30, 2022.

The effective tax rate for the nine months ended September 30, 2023 benefited from a 3.8 percent deduction related to return-to-provision true-ups recorded during the nine-months ended September 30, 2023, primarily due to FDII 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, 2023 compared with 2022:

Three Months Ended June 30,

Ocean Transportation Operating Results – Three months ended September 30, 2023 compared with 2022:

Three Months Ended September 30,

(Dollars in millions)

12 unchanged sentences

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

Ocean Transportation revenue decreased $432.3 million, or 41.2 percent, during the three months ended June 30, 2023, compared with the three months ended June 30, 2022.

The decrease was primarily due to lower average freight rates and volume in China.

On a year-over-year FEU basis, Hawaii container volume decreased 7.1 percent primarily due to lower retail-related volume;

Alaska volume decreased 7.2 percent due to (i) lower export seafood volume from the AAX, (ii) lower northbound volume due to one less sailing and (iii) lower southbound volume primarily due to lower household goods and domestic seafood volume;

China volume was 24.6 percent lower primarily due to (a) CCX volume in the second quarter 2022 (CCX service was discontinued in the third quarter 2022), (b) lower capacity in the CLX service due to the dry-docking of Daniel K.

Inouye and (c) one less CLX+ sailing;

Ocean Transportation revenue decreased $249.1 million, or 27.1 percent, during the three months ended September 30, 2023, compared with the three months ended September 30, 2022.

The decrease was primarily due to lower average freight rates in China.

On a year-over-year FEU basis, Hawaii container volume decreased 1.9 percent primarily due to lower general demand;

Alaska volume decreased 9.1 percent due to (i) lower export seafood volume from the AAX, (ii) lower northbound volume due to lower retail-related demand and (iii) lower southbound volume due to lower domestic seafood volume;

China volume was 1.3 percent lower primarily due to CCX volume in 3Q22 (the CCX service was discontinued in 3Q22) partially offset by higher volume in the CLX+ service;

Guam volume was 1.9 percent lower primarily due to lower general demand;

and Other containers volume decreased 28.3 percent.

Ocean Transportation operating income decreased $387.6 million during the three months ended June 30, 2023, compared with the three months ended June 30, 2022.

The decrease was primarily due to lower freight rates and volume in China and a lower contribution from SSAT, partially offset by (i) lower operating costs and expenses (including fuel-related expenses) primarily related to the discontinuation of the CCX service and (ii) lower fuel costs and the timing of fuel-related surcharge collections.

The Company’s SSAT terminal joint venture investment contributed $(1.4) million during the three months ended June 30, 2023, compared to a contribution of $24.7 million during the three months ended June 30, 2022.

Ocean Transportation operating income decreased $197.0 million during the three months ended September 30, 2023, compared with the three months ended September 30, 2022.

The decrease was primarily due to lower freight rates in China and a lower contribution from SSAT, partially offset by (i) higher volume in the CLX+ service and (ii) lower operating costs and expenses (including fuel-related expenses) primarily related to the discontinuation of the CCX service.

The Company’s SSAT terminal joint venture investment contributed $1.3 million during the three months ended September 30, 2023, compared to a contribution of $23.4 million during the three months ended September 30, 2022.

The decrease was primarily driven by lower demurrage revenue and lower lift volume.

Ocean Transportation Operating Results – Six months ended June 30, 2023 compared with 2022:

Six Months Ended June 30,

Ocean Transportation Operating Results – Nine months ended September 30, 2023 compared with 2022:

Nine Months Ended September 30,

(Dollars in millions)

12 unchanged sentences

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

Ocean Transportation revenue decreased $825.2 million, or 41.4 percent, during the six months ended June 30, 2023, compared with the six months ended June 30, 2022.

Ocean Transportation revenue decreased $1,074.3 million, or 36.9 percent, during the nine months ended September 30, 2023, compared with the nine months ended September 30, 2022.

The decrease was primarily due to lower average freight rates and volume in China.

On a year-over-year FEU basis, Hawaii container volume decreased 4.1 percent primarily due to lower eastbound and retail-related volume;

Alaska volume decreased 6.1 percent due to (i) lower export seafood volume from the AAX including the impact of three less sailings and (ii) lower southbound volume primarily due to lower household goods and domestic seafood volume, partially offset by higher northbound volume primarily due to an additional sailing;

China volume was 29.9 percent lower primarily due to (a) CCX volume in the first half of 2022 (CCX service was discontinued in the third quarter 2022), (b) lower demand for the CLX and CLX+ services including one less CLX+ sailing and (c) lower capacity in the CLX service due to the dry-docking of Daniel K.

Guam volume was 9.3 percent lower primarily due to lower retail-related demand;

On a year-over-year FEU basis, Hawaii container volume decreased 3.4 percent primarily due to lower general westbound demand and lower eastbound volume;

Alaska volume decreased 7.2 percent due to (i) lower export seafood volume from the AAX and (ii) lower southbound volume primarily due to lower domestic seafood volume;

China volume was 21.5 percent lower primarily due to (a) CCX volume in the first nine months of 2022 (the CCX service was discontinued in the third quarter 2022) and (b) lower demand for the CLX and CLX+ services including three less CLX+ sailings;

Guam volume was 6.8 percent lower primarily due to lower general demand;

and Other containers volume decreased 26.9 percent.

Ocean Transportation operating income decreased $776.0 million during the six months ended June 30, 2023, compared with the six months ended June 30, 2022.

Ocean Transportation operating income decreased $973.0 million during the nine months ended September 30, 2023, compared with the nine months ended September 30, 2022.

The Company’s SSAT terminal joint venture investment contributed $(3.2) million during the six months ended June 30, 2023, compared to a contribution of $58.7 million during the six months ended June 30, 2022.

The Company’s SSAT terminal joint venture investment contributed $(1.9) million during the nine months ended September 30, 2023, compared to a contribution of $82.1 million during the nine months ended September 30, 2022.

The decrease was primarily driven by lower demurrage revenue and lower lift volume.

Logistics Operating Results:

Three months ended June 30, 2023 compared with 2022:

Three Months Ended June 30,

Three months ended September 30, 2023 compared with 2022:

Three Months Ended September 30,

(Dollars in millions)

3 unchanged sentences

Operating income margin

Logistics revenue decreased $55.4 million, or 26.1 percent, during the three months ended June 30, 2023, compared with the three months ended June 30, 2022.

The decrease was primarily due to lower revenue in transportation brokerage and supply chain management.

Logistics operating income decreased $8.8 million, or 38.1 percent, during the three months ended June 30, 2023, compared with the three months ended June 30, 2022.

The decrease was primarily due to lower contributions from transportation brokerage and supply chain management.

Logistics revenue decreased $38.2 million, or 19.5 percent, during the three months ended September 30, 2023, compared with the three months ended September 30, 2022.

The decrease was primarily due to lower revenue in transportation brokerage.

Logistics operating income decreased $6.2 million, or 30.8 percent, during the three months ended September 30, 2023, compared with the three months ended September 30, 2022.

The decrease was primarily due to a lower contribution from transportation brokerage.

Logistics Operating Results:

Six months ended June 30, 2023 compared with 2022:

Six Months Ended June 30,

Nine months ended September 30, 2023 compared with 2022:

Nine Months Ended September 30,

(Dollars in millions)

3 unchanged sentences

Operating income margin

Logistics revenue decreased $123.2 million, or 28.4 percent, during the six months ended June 30, 2023, compared with the six months ended June 30, 2022.

Logistics revenue decreased $161.4 million, or 25.6 percent, during the nine months ended September 30, 2023, compared with the nine months ended September 30, 2022.

The decrease was primarily due to lower revenue in transportation brokerage and supply chain management.

Logistics operating income decreased $14.3 million, or 36.2 percent, during the six months ended June 30, 2023, compared with the six months ended June 30, 2022.

Logistics operating income decreased $20.5 million, or 34.4 percent, during the nine months ended September 30, 2023, compared with the nine months ended September 30, 2022.

The decrease was primarily due to lower contributions from transportation brokerage and supply chain management.

LIQUIDITY AND CAPITAL RESOURCES

Sources of liquidity available to the Company as of June 30, 2023, compared to December 31, 2022 were as follows:

Sources of liquidity available to the Company as of September 30, 2023, compared to December 31, 2022 were as follows:

Cash, Cash Equivalents, Restricted Cash and Accounts Receivable:

Cash and cash equivalents, restricted cash and accounts receivable as of June 30, 2023, compared to December 31, 2022 were as follows:

Cash and cash equivalents, restricted cash and accounts receivable as of September 30, 2023, compared to December 31, 2022 were as follows:

September 30,

(In millions)

2 unchanged sentences

Accounts receivable, net (1)

(1) As of June 30, 2023 and December 31, 2022, $210.0 million and $9.9 million of eligible accounts receivable were assigned to the CCF, respectively.

Changes in the Company’s cash, cash equivalents and restricted cash for the six months ended June 30, 2023, compared to the six months ended June 30, 2022 were as follows:

Six Months Ended June 30,

(1) As of September 30, 2023 and December 31, 2022, $213.2 million and $9.9 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, 2023, compared to the nine months ended September 30, 2022 were as follows:

Nine Months Ended September 30,

(In millions)

2 unchanged sentences

Net cash used in financing activities (3)

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

Net decrease in cash, cash equivalents and restricted cash

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

1 unchanged sentence

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

Changes in net cash provided by operating activities for the six months ended June 30, 2023, compared to the six months ended June 30, 2022, were due to the following:

Changes in net cash provided by operating activities for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, were due to the following:

(In millions)

2 unchanged sentences

Other non-cash related changes, net

Income and distributions from SSAT, net

Income (loss) from SSAT

Distributions from SSAT

Accounts receivable, net

4 unchanged sentences

Deferred dry-docking payments

Non-cash deferred dry-docking amortization

Other long-term liabilities

Net income was $114.8 million for the six months ended June 30, 2023, compared to $719.9 million for the six months ended June 30, 2022.

Loss from SSAT was $(3.2) million for the six months ended June 30, 2023, compared to income of $58.7 million for the six months ended June 30, 2022.

The decrease in income from SSAT was due to lower operating profits generated by SSAT during the six months ended June 30, 2023 as compared to the same prior year period.

There were no distributions from SSAT during the six months ended June 30, 2023, compared to $26.3 million

of cash distributions received from SSAT during the six months ended June 30, 2022.

Cash distributions from SSAT are dependent on the level of cash available for distribution after SSAT’s operational and capital needs.

Changes in accounts receivable were primarily due to lower accounts receivable outstanding as of June 30, 2023, as compared to the same prior year period, and also due to the timing of collections associated with those receivables.

Changes in prepaid expenses and other assets were primarily due to a decrease in prepaid income taxes for the six months ended June 30, 2023 as compared to the same prior year period.

Net income was $234.7 million for the nine months ended September 30, 2023, compared to $985.9 million for the nine months ended September 30, 2022.

Loss from SSAT was $1.9 million for the nine months ended September 30, 2023, compared to income of $82.1 million for the nine months ended September 30, 2022.

The decrease in income from SSAT was due to lower operating profits generated by SSAT during the nine months ended September 30, 2023 as compared to the same prior year period.

There were no distributions from SSAT during the nine months ended September 30, 2023, compared to $40.3 million of cash distributions received from SSAT during the nine months ended September 30, 2022.

Cash distributions from SSAT are dependent on the level of cash available for distribution after

SSAT’s operational and capital needs.

Changes in accounts receivable were primarily due to lower accounts receivable outstanding as of September 30, 2023, as compared to the same prior year period, and also due to the timing of collections associated with those receivables.

Changes in prepaid expenses and other assets were primarily due to a decrease in prepaid income taxes for the nine months ended September 30, 2023 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, offset by operating lease payments and terminations during the six months ended June 30, 2023, compared to the same prior year period.

Deferred dry-docking payments for the six months ended June 30, 2023 were $8.9 million, compared to $14.7 million for the six months ended June 30, 2022.

The decrease in deferred dry-docking payments was due to less dry-dock related activity during the six months ended June 30, 2023 as compared to the same prior year period.

Changes in operating lease liabilities were primarily due to new operating lease additions and renewals, offset by operating lease payments and terminations during the nine months ended September 30, 2023, compared to the same prior year period.

Deferred dry-docking payments for the nine months ended September 30, 2023 were $17.3 million, compared to $16.7 million for the nine months ended September 30, 2022.

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

Changes in net cash used in investing activities for the six months ended June 30, 2023, compared to the six months ended June 30, 2022, were due to the following:

Changes in net cash used in investing activities for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, were due to the following:

(In millions)

5 unchanged sentences

Proceeds from disposal of property and equipment, net, and other

The Company deposited $100.0 million of cash and received $13.1 million of interest in the CCF, and made $49.9 million of qualifying withdrawals from the CCF during the six months ended June 30, 2023, compared to $10.7 million of cash deposited into the CCF and $10.7 million of qualifying withdrawals from the CCF during the six months ended June 30, 2022.

There was no interest deposited into the CCF during the six months ended June 30, 2022.

The Company deposited $100.0 million of cash and received $20.8 million of interest in the CCF, and made $49.9 million of qualifying withdrawals from the CCF during the nine months ended September 30, 2023, compared to $579.7 million of cash deposited into the CCF and $14.7 million of qualifying withdrawals from the CCF during the nine months ended September 30, 2022.

There was no interest deposited into the CCF during the nine months ended September 30, 2022.

Cash and interest deposits into the CCF are intended to fund milestone payments for the construction of three new Jones Act vessels.

During the six months ended June 30, 2023, the Company paid $12.4 million related to an intangible asset acquisition.

There were no acquisitions during the six months ended June 30, 2022.

Capitalized vessel construction expenditures (including capitalized interest) were $50.8 million for the six months ended June 30, 2023, compared to $11.4 million for the six months ended June 30, 2022.

During the nine months ended September 30, 2023, the Company paid $12.4 million related to an intangible asset acquisition, compared to $3.0 million paid for intangible asset acquisition during the nine months ended September 30, 2022.

Capitalized vessel construction expenditures (including capitalized interest) were $52.1 million for the nine months ended September 30, 2023, compared to $11.9 million for the nine months ended September 30, 2022.

Capitalized vessel construction expenditures relate to milestone payments for the construction of three new Jones Act vessels.

Other capital expenditures payments were $75.5 million for the six months ended June 30, 2023, compared to $68.4 million for the six months ended June 30, 2022.

Other capital expenditures payments were $135.4 million for the nine months ended September 30, 2023, compared to $113.4 million for the nine months ended September 30, 2022.

Other capital expenditures primarily relate to vessel related expenditures, the acquisition of containers, chassis and other equipment, and expenditures on other capital related projects.

Vessel related expenditures includes payments for the installation of tanks, piping and cryogenic equipment on Daniel K.

Inouye during the six months ended June 30, 2023.

Inouye during the nine months ended September 30, 2023.

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

Changes in net cash used in financing activities for the six months ended June 30, 2023, compared to the six months ended June 30, 2022, were due to the following:

Changes in net cash used in financing activities for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, were due to the following:

(In millions)

3 unchanged sentences

Dividends paid

During the six months ended June 30, 2023, the Company paid $82.5 million to repurchase Matson common stock, compared to $208.5 million during the six months ended June 30, 2022.

During the six months ended June 30, 2023, the Company prepaid $26.4 million of Title XI debt and paid $28.7 million in scheduled fixed debt payments, compared to $32.5 million in scheduled fixed debt payments during the six months ended June 30, 2022.

During the six months ended June 30, 2023, the Company paid $12.5 million in payroll taxes related to vested restricted stock units, compared

to $19.5 million for the six months ended June 30, 2022.

During the nine months ended September 30, 2023, the Company paid $108.2 million to repurchase Matson common stock, compared to $296.9 million during the nine months ended September 30, 2022.

During the nine months ended September 30, 2023, the Company prepaid $26.4 million of Title XI debt and paid $40.8 million in scheduled fixed debt payments, compared to $50.4 million of prepaid Private Placement Term Loans and $46.8 million in scheduled fixed debt payments during the nine months ended September 30, 2022.

During the nine months ended September 30, 2023, the Company paid $12.5 million in payroll taxes related to vested restricted stock units, compared to $19.6 million

during the nine months ended September 30, 2022.

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

During the six months ended June 30, 2023, the Company paid $22.4 million in dividends, compared to $25.0 million during the six months ended June 30, 2022.

During the nine months ended September 30, 2023, the Company paid $33.8 million in dividends, compared to $36.9 million during the nine months ended September 30, 2022.

The decrease in dividend payments was due to the reduction in common stock outstanding, offset by an increase in dividends declared per share of common stock by the Company.

Capital Construction Fund:

Cash on deposit and assigned accounts receivables in the Capital Construction Fund as of June 30, 2023 and December 31, 2022 was as follows:

Cash on deposit and assigned accounts receivables in the Capital Construction Fund as of September 30, 2023 and December 31, 2022 was as follows:

September 30,

(In millions)

2 unchanged sentences

Assigned accounts receivables

During the six months ended June 30, 2023, the Company deposited $100.0 million of cash and accumulated $15.6 million of interest into the CCF.

During the nine months ended September 30, 2023, the Company deposited $100.0 million of cash and accumulated $23.3 million of interest into the CCF.

Cash on deposit in the CCF is invested in a U.S.

Treasury obligations fund with daily liquidity.

At June 30, 2023, securities held within this fund had a weighted average life of 41 days.

At September 30, 2023, securities held within this fund had a weighted average life of 44 days.

Cash on deposit in the CCF is classified as a long-term asset on the Company’s Condensed Consolidated Balance Sheets, as the Company intends to use withdrawals to fund qualified milestone progress payments for the construction of three new Jones Act vessels.

During the six months ended June 30, 2023, the Company pledged $200.0 million of accounts receivable into the CCF.

During the nine months ended September 30, 2023, the Company pledged $200.0 million of accounts receivable into the CCF.

Assigned accounts receivable in the CCF are classified as part of accounts receivable on the Company’s Condensed Consolidated Balance sheets due to the nature of the assignment.

Total Debt as of June 30, 2023 and December 31, 2022 is as follows:

Total Debt as of September 30, 2023 and December 31, 2022 is as follows:

September 30,

(In millions)

Fixed interest debt

Total Debt decreased by $55.1 million during the six months ended June 30, 2023.

The decrease in fixed interest debt was due to prepayments of $26.4 million of outstanding principal of Title XI debt, and scheduled repayments of private placement term loans and Title XI debt during the six months ended June 30, 2023.

As of June 30, 2023, the Company had $642.5 million of remaining borrowing availability under the revolving credit facility, with a maturity date of March 31, 2026.

Total Debt decreased by $67.2 million during the nine months ended September 30, 2023.

As of September 30, 2023, the Company had $642.6 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 $28.8 million and $178.0 million at June 30, 2023 and December 31, 2022, respectively.

The Company had a working capital surplus of $65.2 million and $178.0 million at September 30, 2023 and December 31, 2022, 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 decrease in working capital surplus at June 30, 2023 compared to December 31, 2022 is primarily due to the decrease in cash generated from operating activities, and cash deposited into the CCF during the six months ended June 30, 2023.

The decrease in working capital surplus at September 30, 2023 compared to December 31, 2022 is primarily due to the decrease in cash generated from operating activities, and cash deposited into the CCF during the nine months ended September 30, 2023.

Capital Expenditures:

There were no material changes during the quarter ended June 30, 2023 to the Company’s expected capital expenditures for the years ending December 31, 2023 and 2024 that are described in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 .

The following represents the estimated timing of future milestone payments under the vessel construction agreements as of June 30, 2023, as described in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 :

There were no material changes during the quarter ended September 30, 2023 to the Company’s expected capital expenditures for the years ending December 31, 2023 and 2024 that are described in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 .

The following represents the estimated timing of future milestone payments under the vessel construction agreements as of September 30, 2023, as described in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 :

Future Milestone Payments By Period

(in millions)

June 30, 2023

September 30, 2023

Remainder of 2023

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Repurchase of Shares:

During the three months ended June 30, 2023, the Company repurchased approximately 0.6 million shares for a total cost of $42.4 million.

The maximum number of remaining shares that may be purchased under the Company’s share repurchase program was approximately 3.3 million shares at June 30, 2023.

During the three months ended September 30, 2023, the Company repurchased approximately 0.3 million shares for a total cost of $25.8 million.

The maximum number of remaining shares that may be purchased under the Company’s share repurchase program was approximately 3.0 million shares at September 30, 2023.

Other Material Cash Requirements:

There were no other material changes during the quarter ended June 30, 2023 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, 2022 .

There were no other material changes during the quarter ended September 30, 2023 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, 2022 .

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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OTHER MATTERS

The Company’s second quarter 2023 cash dividend of $0.31 per share was paid on June 1, 2023.

On June 22, 2023, the Company’s Board of Directors declared a cash dividend of $0.32 per share payable on September 7, 2023 to shareholders of record on August 3, 2023.

The Company’s third quarter 2023 cash dividend of $0.32 per share was paid on September 7, 2023.

On October 26, 2023, the Company’s Board of Directors declared a cash dividend of $0.32 per share payable on December 7, 2023 to shareholders of record on November 9, 2023.

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