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Item 2. Management’s Discussion and Analysis

2024-05-01 compared with 2023-10-31 · 142 added, 177 removed, 97 unchanged (77% of the section changed)

2 unchanged sentences

FORWARD-LOOKING STATEMENTS

Except for historical information, the statements made in this Quarterly Report on Form 10-Q are forward-looking statements made pursuant to the safe-harbor provisions of the Private Security Litigation Reform Act of 1995.

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 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.

The Company cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time, including, but not limited to, the risk factors that are described in Part I, Item 1A, “Risk Factors” of Matson’s Annual Report on Form 10-K for the year ended December 31, 2022.

Forward-looking statements speak only as of the date they are made, and the Company assumes no duty to and does not undertake any obligation to update forward-looking statements.

Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.

The Company, from time to time, may make or may have made certain forward-looking statements, whether orally or in writing, such as, among others, forecasts or projections of the Company’s future performance or statements of management’s plans and objectives.

These statements are considered “forward-looking” statements as that term is defined in the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements may be contained in, among other things, SEC filings such as Forms 10-K, 10-Q and 8-K, the Company’s Annual Report to Shareholders, the Company’s Sustainability Report, 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.

Except for historical information contained in these written or oral communications, all other statements are forward-looking statements.

These include, for example, all references to 2024 or future years, including such references included under “First Quarter 2024 Discussion and Outlook for 2024,” as well as statements generally identified through the inclusion of words such as “anticipate,” “believe,” “can,” “commit,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “target,” “seek,” “should,” and “will,” or similar statements or variations of such terms and other similar expressions.

New risks or uncertainties may emerge from time to time, risks that the Company currently does not consider to be material could become material, and it is not possible for the Company to predict all such risks, nor can it assess the impact of all such risks on the Company’s business or the extent to which any factor, or combination of factors, may cause actual results or outcomes, or the timing of results or outcomes, to differ materially from those contained in any forward-looking statements.

Accordingly, forward-looking statements cannot be relied upon as a guarantee of future results or outcomes and involve a number of risks and uncertainties that could cause actual results or outcomes to differ materially from those projected in the statements, including but not limited to the factors that are described in Part I, Item 1A under the caption “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 .

Except as required by law, the Company undertakes no obligation to revise or update publicly forward-looking statements or any factors that may affect actual results, whether as a result of new information, future events, circumstances occurring after the date of this report, or otherwise.

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 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, 2022 , the Company’s reports on Forms 10-Q and 8-K, and other publicly available information.

THIRD QUARTER 2023 DISCUSSION AND UPDATE ON BUSINESS CONDITIONS

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 affected the Company’s Condensed Consolidated Financial Statements.

The 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, 2023 , the Company’s reports on Forms 10-Q and 8-K, and other publicly available information.

FIRST QUARTER 2024 DISCUSSION AND OUTLOOK FOR 2024

Ocean Transportation:

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

The Company’s container volume in the Hawaii service in the first quarter 2024 was 1.7 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 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 September 30, 2023 compared with 2022:

Three Months Ended September 30,

(Dollars in millions, except per share amounts)

Operating revenue

Operating costs and expenses

Operating income

According to UHERO’s most recent forecast report, the Hawaii economy is projected to grow modestly supported by low unemployment and an increase in construction activity and jobs for large federal and state projects as well as home building on Oahu.

Visitor arrivals are projected to increase modestly as the tourism industry continues to recover from the Maui wildfires last year in addition to the continued gradual return of international visitors.

The Company expects volume in 2024 to approach the level achieved in 2023, reflecting modest economic growth in Hawaii and stable market share.

In China, the Company’s container volume in the first quarter 2024 decreased 4.0 percent year-over-year.

The decrease was primarily due to a more traditional post-Lunar New Year period with a gradual recovery of volume after factories

reopened and workers returned compared to a more accelerated increase in volume experienced post-Lunar New Year last year.

The Company achieved higher freight rates in the first quarter 2024 as compared to the year ago period.

Currently in the Transpacific marketplace, the Company continues to see steady U.S.

consumer demand, which it expects to lead to improving demand for its CLX and MAX services in 2024 as compared to 2023 .

The Company also expects average freight rates in 2024 to be higher than the levels achieved in 2023.

In Guam, the Company’s container volume in the first quarter 2024 was flat year-over-year.

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

For 2024, the Company expects volume to approximate the level achieved last year.

In Alaska, the Company’s container volume for the first quarter 2024 decreased 5.1 percent year-over-year primarily due to one less northbound sailing.

In the near-term, the Company expects continued economic growth in Alaska supported by a low unemployment rate, jobs growth and lower levels of inflation.

For 2024, the Company expects volume to approximate the level achieved last year.

The contribution in the first quarter 2024 from the Company’s SSAT joint venture investment was $0.4 million, or $2.2 million higher than the first quarter 2023.

The increase was primarily due to higher lift volume.

For 2024, the Company expects the contribution from SSAT to be higher than the levels achieved in 2023 due to an expected increase in lift volumes.

As a result of first quarter performance and the outlook trends noted above, the Company expects full year 2024 Ocean Transportation operating income to be higher than the $294.8 million achieved in 2023 and higher than the previous outlook.

In the second quarter 2024, the Company expects Ocean Transportation operating income to be moderately higher than the level achieved in the second quarter 2023.

In the first quarter 2024, operating income for the Company’s Logistics segment was $9.3 million, or $1.6 million lower compared to the level achieved in the first quarter 2023.

The decrease was primarily due to continued market softness in transportation brokerage.

For 2024, the Company expects challenging business conditions for transportation brokerage and expects operating income to be lower than the $48.0 million achieved in 2023.

In the second quarter 2024, the Company expects operating income to be lower than the level achieved in the second quarter 2023.

Consolidated Operating Income:

For full year 2024, the Company expects consolidated operating income to be modestly higher than the $342.8 million achieved in 2023 and expects comparable seasonality to the prior year.

For the second quarter 2024, the Company expects consolidated operating income to be modestly higher than the $96.7 million achieved in the second quarter 2023.

Depreciation and Amortization:

For the full year 2024, the Company expects depreciation and amortization expense to be approximately $180 million, inclusive of dry-docking amortization of approximately $27 million.

Interest Income:

The Company expects interest income for the full year 2024 to be approximately $45 million.

The increase in expected interest income from the prior outlook is due to the receipt on April 19, 2024 of $10.2 million in interest income earned on the federal tax refund related to the Company’s 2021 federal tax return.

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 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 $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,

The Company expects interest expense for the full year 2024 to be approximately $8 million.

Other Income (Expense):

The Company expects full year 2024 other income (expense) to be approximately $7 million in income, which is attributable to the amortization of certain components of net periodic benefit costs or gains related to the Company’s pension and post-retirement plans.

Income Taxes:

In the first quarter 2024, the Company’s effective tax rate was 20.3 percent.

For the full year 2024, the Company expects its effective tax rate to be approximately 22.0 percent.

Capital and Vessel Dry-docking Expenditures:

For the first quarter 2024, the Company made capital expenditure payments excluding vessel construction expenditures of $54.2 million, capitalized vessel construction expenditures of $1.1 million, and dry-docking payments of $5.2 million.

For the full year 2024, the Company expects to make other capital expenditure payments, including maintenance capital expenditures, of approximately $110 to $120 million, new

vessel construction expenditures (including capitalized interest and owner’s items) of approximately $75 million, LNG installations and reengining on existing vessels of approximately $70 to $80 million, and dry-docking payments of approximately $35 million.

CONSOLIDATED RESULTS OF OPERATIONS

Consolidated Results – Three months ended March 31, 2024 compared with 2023:

Three Months Ended March 31,

(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 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.

The increase in interest income for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, 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 March 31, 2024, compared to the three months ended March 31, 2023, 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 $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.

Income tax expense was $9.2 million or 20.3 percent of income before taxes for the three months ended March 31, 2024, compared to $10.2 million or 23.1 percent of income before taxes for the three months ended March 31, 2023.

The effective tax rate for the three months ended March 31, 2024 benefited from a 2.0 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 0.8 percent FDII deduction for the three months ended March 31, 2023.

The FDII deduction for the three months ended March 31, 2023 was lower primarily due to lower projected income generated from the Company’s China service.

The effective tax rate for the three months ended March 31, 2024 also benefited from certain discrete tax adjustments that lowered the effective tax rate in the current period.

ANALYSIS OF OPERATING REVENUE AND INCOME BY SEGMENT

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

Three Months Ended September 30,

Ocean Transportation Operating Results – Three months ended March 31, 2024 compared with 2023:

Three Months Ended March 31,

(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 $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.

Ocean Transportation revenue increased $28.0 million, or 5.1 percent, during the three months ended March 31, 2024, compared with the three months ended March 31, 2023.

The increase was primarily due to higher freight rates in China and the domestic tradelanes, partially offset by lower volume in China, Hawaii, and Alaska, and lower fuel-related surcharge revenue.

On a year-over-year FEU basis, Hawaii container volume decreased 1.7 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 $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 – Nine months ended September 30, 2023 compared with 2022:

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 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 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;

Alaska volume decreased 5.1 percent primarily due to one less northbound sailing;

China volume was 4.0 percent lower primarily due to a more traditional post-Lunar New Year period with a gradual recovery of volume after factories reopened and workers returned compared to a more accelerated increase in volume experienced post-Lunar New Year last year;

Guam volume was flat;

and Other containers volume decreased 12.2 percent.

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 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 $(1.9) 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.

Ocean Transportation operating income decreased $0.2 million, or 0.7 percent, during the three months ended March 31, 2024, compared with the three months ended March 31, 2023.

The decrease was primarily due to higher vessel operating costs, including fuel-related expenses, and the timing of fuel-related surcharge collections, partially offset by higher freight rates in China.

The Company’s SSAT terminal joint venture investment contributed $0.4 million during the three months ended March 31, 2024, compared to a loss of $1.8 million during the three months ended March 31, 2023.

The increase was primarily driven by higher lift volume.

Logistics Operating Results:

Three months ended September 30, 2023 compared with 2022:

Three Months Ended September 30,

Three months ended March 31, 2024 compared with 2023:

Three Months Ended March 31,

(Dollars in millions)

3 unchanged sentences

Operating income margin

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.

Logistics revenue decreased $10.7 million, or 7.0 percent, during the three months ended March 31, 2024, compared with the three months ended March 31, 2023.

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.

Logistics operating income decreased $1.6 million, or 14.7 percent, during the three months ended March 31, 2024, compared with the three months ended March 31, 2023.

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

Logistics Operating Results:

Nine months ended September 30, 2023 compared with 2022:

Nine Months Ended September 30,

(Dollars in millions)

Logistics revenue

Operating costs and expenses

Operating income

Operating income margin

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 $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 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 September 30, 2023, compared to December 31, 2022 were as follows:

September 30,

Sources of liquidity available to the Company as of March 31, 2024, compared to December 31, 2023 were as follows:

Cash and Cash Equivalents, Restricted Cash and Accounts Receivable:

Cash and cash equivalents, restricted cash and accounts receivable as of March 31, 2024, compared to December 31, 2023 were as follows:

(In millions)

2 unchanged sentences

Accounts receivable, net (1)

(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,

CCF - cash and cash equivalents, and investments account

(1) As of March 31, 2024 and December 31, 2023, $221.3 million and $218.1 million of eligible accounts receivable were assigned to the CCF, respectively.

Changes in the Company’s cash and cash equivalents, and restricted cash for the three months ended March 31, 2024, compared to the three months ended March 31, 2023 were as follows:

Three Months Ended March 31,

(In millions)

2 unchanged sentences

Net cash used in financing activities (3)

Net decrease in cash, cash equivalents and restricted cash

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

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

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

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

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

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

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:

Changes in net cash provided by operating activities for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, were due to the following:

(In millions)

2 unchanged sentences

Other non-cash related changes, net

Income (loss) from SSAT

Distributions from SSAT

Income and distribution from SSAT, net

Accounts receivable, net

4 unchanged sentences

Deferred dry-docking payments

Non-cash deferred dry-docking amortization

Other long-term liabilities

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.

Net income was $36.1 million for the three months ended March 31, 2024, compared to $34.0 million for the three months ended March 31, 2023.

Income from SSAT was $0.4 million for the three months ended March 31, 2024, compared to a loss of $1.8 million for the three months ended March 31, 2023.

The increase in income from SSAT was due to higher lift volume during the three months ended March 31, 2024, compared to the same prior year period.

The Company received $14.0 million of cash distributions from SSAT during the three months ended March 31, 2024, compared to no cash distributions received from SSAT during the three months ended March 31, 2023.

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 higher accounts receivable outstanding as of March 31, 2024, compared to the same prior year period, and also due to the timing of collections associated with those

Changes in prepaid expenses and other assets were primarily due to a decrease in prepaid income taxes for the three months ended March 31, 2024, 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 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.

Changes in operating lease liabilities were primarily due to new operating lease additions and renewals, offset by operating lease payments and terminations during the three months ended March 31, 2024, compared to the same prior year period.

Deferred dry-docking payments for the three months ended March 31, 2024 were $5.2 million, compared to $2.4 million for the three months ended March 31, 2023.

Changes in deferred dry-docking is primarily due to the timing of when the dry-docking of vessels occurs.

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

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:

Changes in net cash used in investing activities for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, were due to the following:

(In millions)

Cash deposits and interest into the CCF

Withdrawals from CCF

Payment for intangible asset acquisition

Capitalized vessel construction expenditures

Other capital expenditures

Capital expenditures (excluding vessel construction expenditures)

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

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 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 $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 nine months ended September 30, 2023.

The Company received $6.0 million of interest and accretion in the CCF during the three months ended March 31, 2024, compared to $5.5 million of interest and $100.0 million of cash deposits in the CCF during the three months ended March 31, 2023.

Cash and cash equivalents, and investments in the CCF are intended to fund milestone payments for the construction of three new Jones Act vessels.

During the three months ended March 31, 2023, the Company paid $12.4 million related to an intangible asset acquisition.

There were no acquisition related payments made during the three months ended March 31, 2024.

Capitalized vessel construction expenditures (including capitalized interest) were $1.1 million for the three months ended March 31, 2024, compared to $0.4 million for the three months ended March 31, 2023.

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

Maintenance and other capital expenditures payments were $54.2 million for the three months ended March 31, 2024, compared to $35.5 million for the three months ended March 31, 2023.

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

The increase in maintenance and other capital expenditure for the three months ended March 31, 2024, compared to the same prior year period primarily related to the timing of when vessel maintenance activities are performed and when other capital related projects are incurred.

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

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:

Changes in net cash used in financing activities for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, were due to the following:

(In millions)

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Dividends paid

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 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.

During the three months ended March 31, 2024, the Company paid $47.3 million to repurchase Matson common stock, compared to $40.0 million during the three months ended March 31, 2023.

During the three months ended March 31, 2024, the Company paid $10.1 million in scheduled fixed debt payments, compared to $26.4 million of prepaid Title XI debt and $14.4 million in scheduled fixed debt payments during the three months ended March 31, 2023.

During the three months ended March 31, 2024, the Company paid $17.2 million in withholding taxes related to vested restricted stock units, compared to $12.4 million during the three months ended March 31, 2023.

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, 2024, the Company paid $11.1 million in dividends, compared to $11.3 million during the three months ended March 31, 2023.

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 September 30, 2023 and December 31, 2022 was as follows:

September 30,

The Company’s CCF is described in Note 7 of Part I, Item 1 above.

CCF cash and cash equivalents, investments and assigned accounts receivables as of March 31, 2024 and December 31, 2023 is as follows:

(In millions)

Capital Construction Fund:

Cash on deposit

Cash and cash equivalents, and investments account

Assigned accounts receivables

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

September 30,

The Company intends to use withdrawals from the CCF cash and cash equivalents, and investments account to fund qualified milestone progress payments for the construction of three new Jones Act vessels.

The Company’s debt is described in Note 8 of Part I, Item 1 above.

The Company utilizes a mix of fixed and variable debt for liquidity and to fund the Company’s operations.

Total Debt as of March 31, 2024 and December 31, 2023 is as follows:

(In millions)

Fixed interest debt

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

Total Debt decreased by $10.1 million during the three months ended March 31, 2024, compared to December 31, 2023, primarily due to scheduled repayments of private placement term loans.

As of March 31, 2024, the Company had $644.2 million of remaining borrowing availability under the revolving credit facility, with a maturity date of March 31, 2026.

Working Capital:

The Company had a working capital surplus of $65.2 million and $178.0 million at September 30, 2023 and December 31, 2022, respectively.

The Company had a working capital deficit of $18.5 million and a working capital surplus of $40.0 million at March 31, 2024 and December 31, 2023, 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 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.

The decrease in the Company’s working capital at March 31, 2024, compared to December 31, 2023 is primarily due to the decrease in cash provided by operating activities and higher capital expenditure during the three months ended March 31, 2024.

Capital Expenditures:

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

During the three months ended March 31, 2024, there were no material changes to the Company’s expected capital expenditures for the years ending December 31, 2024, 2025 and 2026 that are described in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 .

The following represents the estimated timing of future milestone payments under the vessel construction agreements as of March 31, 2024, as described in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 :

Future Milestone Payments

Vessel Construction Obligations

(in millions)

September 30, 2023

Remainder of 2023

March 31, 2024

Three Aloha Class Containerships

The Company intends to use the CCF cash and cash equivalents, and investments account to fund future milestone progress payments.

Repurchase of Shares:

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.

During the three months ended March 31, 2024, the Company repurchased approximately 0.4 million shares for a total cost of $48.9 million.

The maximum number of remaining shares that may be purchased under the Company’s share repurchase program was approximately 2.0 million shares at March 31, 2024.

Other Material Cash Requirements:

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 .

There were no other material changes during the quarter ended March 31, 2024 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, 2023 .

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

1 unchanged sentence

OTHER MATTERS

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.

The Company’s first quarter 2023 cash dividend of $0.32 per share was paid on March 7, 2024.

On April 25, 2024, the Company’s Board of Directors declared a cash dividend of $0.32 per share payable on June 6, 2024 to shareholders of record on May 9, 2024.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

1 unchanged sentence

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