What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-31 compared with 2024-08-02 · 130 added, 132 removed, 170 unchanged (61% of the section changed)

6 unchanged sentences

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.

These include, for example, all references to 2024 or future years, including such references included under “Third 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.

4 unchanged sentences

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.

SECOND QUARTER 2024 DISCUSSION AND OUTLOOK FOR 2024

THIRD QUARTER 2024 DISCUSSION AND OUTLOOK FOR 2024

Ocean Transportation:

The Company’s container volume in the Hawaii service in the second quarter 2024 was 3.6 percent lower year-over-year.

The Company’s container volume in the Hawaii service in the third quarter 2024 was 2.2 percent lower year-over-year.

The decrease was primarily due to lower general demand .

Tourist arrivals decreased year-over-year primarily due to significantly lower visitor traffic to Maui as a result of the wildfires last year.

The Company expects volume in 2024 to be modestly lower than the level achieved in 2023, primarily due to continued challenges in population growth and lower discretionary income as a result of higher inflation and interest rates.

In China, the Company achieved significantly higher freight rates in the second quarter 2024 compared to the year ago period.

The Company’s container volume in the second quarter 2024 also increased 3.0 percent year-over-year.

The elevated freight rates were primarily due to a supportive economic and consumer demand environment in the U.S.

coupled with tighter supply chain conditions, and were not consistent with a normalized operating environment.

Company expects its China service to continue to see elevated rates during the traditional peak season in the third and early fourth quarters, but the freight rate trajectory after the peak season is uncertain.

In the near term, the Company expects freight rates to remain elevated as long as the underlying economic, supply chain, and geopolitical conditions persist.

The timing of when rates will eventually normalize likely depends on the duration and timing of several factors that influence supply and demand dynamics in the tradelane.

Regardless of this uncertainty , the Company expects the shift from air freight to expedited ocean and the continued growth of e-commerce goods to drive long-term demand for its China service.

In Guam, the Company’s container volume in the second quarter 2024 decreased 6.1 percent year-over-year.

The decrease was primarily due to one less sailing.

In the near term, the Company expects continued improvement in the Guam economy underpinned by a low unemployment rate.

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

In Alaska, the Company’s container volume for the second quarter 2024 increased 4.9 percent year-over-year primarily due to two additional northbound sailings.

Hawaii’s economy continues to grow slowly with stalled growth in statewide tourist arrivals due to declines in Maui tourism following last year’s wildfires and the sluggish pace of recovery in Japanese tourist arrivals which have been impacted by weakness in the yen to the U.S.

dollar exchange rate.

The Company expects volume for the full year 2024 to be modestly lower than the level achieved in 2023, primarily due to low-to-no growth in tourism, continued challenges in population growth and lower discretionary income as a result of higher inflation and interest rates.

In China, the Company achieved significantly higher freight rates in the third quarter 2024 compared to the year ago period.

The Company’s container volume in the third quarter 2024 also increased 2.6 percent year-over-year due to two

additional sailings.

The elevated freight rates were primarily due to a traditional peak season with strong freight demand leading to significantly higher year-over-year freight rates for both the CLX and MAX services.

A resilient U.S.

economy and a stable consumer demand environment coupled with tighter supply chain conditions supported these elevated freight rates.

In the near term, the Company expects its China service freight rates in the fourth quarter to remain elevated and to be significantly higher than the levels achieved in the year ago period as long as the underlying economic, supply chain, and geopolitical conditions persist.

Regardless, the Company remains focused on continuing to deliver a differentiated value proposition as compared to air freight with CLX and MAX services as the two fastest and most reliable expedited ocean services in the Transpacific.

In Guam, the Company’s container volume in the third quarter 2024 decreased 9.4 percent year-over-year.

The decrease was primarily due to lower demand from retail and food and beverage segments.

In the near term, the Company expects the Guam economy to remain stable with a low unemployment rate, but slow growth in tourism.

For the full year 2024, the Company expects volume to be lower than the level achieved last year.

In Alaska, the Company’s container volume for the third quarter 2024 increased 1.4 percent year-over-year primarily due to higher retail-related demand.

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 second quarter 2024 from the Company’s SSAT joint venture investment was $1.2 million, or $2.6 million higher than the second quarter 2023.

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

The contribution in the third quarter 2024 from the Company’s SSAT joint venture investment was $6.9 million, or $5.6 million higher than the third quarter 2023.

The increase was primarily due to higher lift volume.

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

As a result of the outlook trends noted above, the Company expects third quarter 2024 operating income for Ocean Transportation to be meaningfully higher than the $118.2 million achieved last year, and in the fourth quarter 2024, the Company expects Ocean Transportation operating income to be moderately higher than the $66.4 million achieved in the fourth quarter 2023.

In the second quarter 2024, operating income for the Company’s Logistics segment was $15.6 million, or $1.3 million higher compared to the level achieved in the second quarter 2023.

The increase was primarily due to the strength of supply chain management.

The Company expects operating income in both the third and fourth quarters of 2024 to approximate the levels achieved last year.

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 volume.

As a result of the outlook trends noted above, the Company expects fourth quarter 2024 operating income for Ocean Transportation to be meaningfully higher than the $66.4 million achieved in the fourth quarter 2023.

In the third quarter 2024, operating income for the Company’s Logistics segment was $15.4 million, or $1.5 million higher compared to the level achieved in the third quarter 2023.

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

The Company expects operating income in the fourth quarter of 2024 to be modestly higher than the level achieved last year.

Consolidated Operating Income:

The Company expects Matson’s third quarter 2024 consolidated operating income to be meaningfully higher than the $132.1 million achieved in the third quarter 2023, and fourth quarter 2024 consolidated operating income to be moderately higher than the $75.3 million achieved in the fourth quarter 2023.

The Company expects Matson’s fourth quarter 2024 consolidated operating income to be meaningfully higher than the $75.3 million achieved in the fourth quarter 2023.

Depreciation and Amortization:

8 unchanged sentences

Income Taxes:

In the second quarter 2024, the Company’s effective tax rate was 20.9 percent.

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

In the third quarter 2024, the Company’s effective tax rate was 21.2 percent.

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

Capital and Vessel Dry-docking Expenditures:

In the second quarter 2024, the Company made capital expenditure payments excluding vessel construction expenditures of $32.7 million, capitalized vessel construction expenditures of $37.1 million, and dry-docking payments of $12.1 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, expenditures for LNG installations and reengining on existing vessels of approximately $85 to $95 million, and dry-docking payments of approximately $35 million.

In the third quarter 2024, the Company made capital expenditure payments excluding vessel construction expenditures of $58.0 million, capitalized vessel construction expenditures of $1.6 million, and dry-docking payments of $2.9 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 $77 million,

expenditures for LNG installations and reengining on existing vessels of approximately $85 to $90 million, and dry-docking payments of approximately $35 million.

CONSOLIDATED RESULTS OF OPERATIONS

Consolidated Results – Three months ended June 30, 2024 compared with 2023:

Three Months Ended June 30,

Consolidated Results – Three months ended September 30, 2024 compared with 2023:

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, 2024, compared to the three months ended June 30, 2023, was due to interest of $10.2 million related to a federal income tax refund received during the three months ended June 30, 2024.

The decrease in interest expense for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, was due to lower outstanding debt during the period, and a higher offset of capitalized interest related to the construction of new vessels.

The increase in interest income for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, was due to increased amounts of cash and cash equivalent, and CCF funds that were invested in interest bearing accounts during the three months ended September 30, 2024.

The decrease in interest expense for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, was due to lower outstanding debt during the period, and a higher offset of capitalized interest related to the construction of new vessels.

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 $29.9 million or 20.9 percent of income before taxes for the three months ended June 30, 2024, compared to $23.5 million or 22.5 percent of income before taxes for the three months ended June 30, 2023.

The effective tax rate for the three months ended June 30, 2024 benefited from a 2.5 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 1.7 percent FDII deduction for the three months ended June 30, 2023.

The FDII deduction for the three months ended June 30, 2024 was higher primarily due to higher projected income generated from the Company’s China service.

The effective tax rate for the three months ended June 30, 2024 also benefited from certain discrete tax adjustments that lowered the effective tax rate in the current period.

Consolidated Results – Six months ended June 30, 2024 compared with 2023:

Six Months Ended June 30,

Income tax expense was $53.7 million, or 21.2 percent of income before taxes, for the three months ended September 30, 2024, compared to $20.3 million, or 14.5 percent of income before taxes, for the three months ended September 30, 2023.

The effective tax rate for the three months ended September 30, 2023 benefited from a 7.8 percent deduction primarily related to foreign-derived intangible income (“FDII”) under Section 250 of the Internal Revenue Code that lowered the effective tax rate as a result of the return-to-provision process.

The effective tax rate for the three months ended September 30, 2024 benefited from a 0.6 percent deduction related to return-to-provision true-ups primarily due to FDII that lowered the effective tax rate.

Consolidated Results – Nine months ended September 30, 2024 compared with 2023:

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, 2024, compared to the six months ended June 30, 2023, was due to interest of $10.2 million related to a federal income tax refund received during the six months ended June 30, 2024.

The increase in interest income was also due to increased amounts of cash and cash equivalent, and CCF funds that are invested in interest bearing accounts during the six months ended June 30, 2024, compared to the same prior year period.

The decrease in interest expense for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, was due to lower outstanding debt during the period, and a higher offset of capitalized interest related to the construction of new vessels.

The increase in interest income for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, was due to interest of $10.2 million earned on a federal income tax refund received during the nine months ended September 30, 2024.

The increase in interest income was also due to increased amounts of cash and cash equivalents, and CCF funds that are invested in interest bearing accounts during the nine months ended September 30, 2024, compared to the same prior year period.

The decrease in interest expense for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, was due to lower outstanding debt during the period, and a higher offset of capitalized interest related to the construction of new vessels.

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 $39.1 million or 20.8 percent of income before taxes for the six months ended June 30, 2024, compared to $33.7 million or 22.7 percent of income before taxes for the six months ended June 30, 2023.

The effective tax rate for the six months ended June 30, 2024 benefited from a 2.4 percent deduction related to FDII under Section 250 of the Internal Revenue Code that lowered the effective tax rate for the current period, compared to a 1.8 percent FDII deduction for the six months ended June 30, 2023.

The FDII deduction for the six months ended June 30, 2024 was higher primarily due to higher projected income generated from the Company’s China service.

The effective tax rate for the six months ended June 30, 2024 also benefited from certain discrete tax adjustments that lowered the effective tax rate in the current period.

Income tax expense was $92.8 million, or 21.0 percent of income before taxes, for the nine months ended September 30, 2024, compared to $54.0 million, or 18.7 percent of income before taxes, for the nine months ended September 30, 2023.

The effective tax rate for the nine months ended September 30, 2023 benefited from a 3.8 percent deduction primarily related to FDII that lowered the effective tax rate as a result of the return-to-provision process.

The effective tax rate for the nine months ended September 30, 2024 benefited from a 0.8 percent deduction related to return-to-provision true-ups primarily due to FDII that lowered the effective tax rate.

ANALYSIS OF OPERATING REVENUE AND INCOME BY SEGMENT

Ocean Transportation Operating Results – Three months ended June 30, 2024 compared with 2023:

Three Months Ended June 30,

Ocean Transportation Operating Results – Three months ended September 30, 2024 compared with 2023:

Three Months Ended September 30,

(Dollars in millions)

10 unchanged sentences

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.

(1) Approximate volume 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 $73.0 million, or 11.8 percent, during the three months ended June 30, 2024, compared with the three months ended June 30, 2023.

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

Ocean Transportation revenue increased $129.3 million, or 19.3 percent, during the three months ended September 30, 2024, compared with the three months ended September 30, 2023.

The increase was primarily due to significantly higher freight rates in China, higher freight rates in the domestic tradelanes and higher volume in China.

On a year-over-year FEU basis, Hawaii container volume decreased 2.2 percent primarily due to lower general demand;

Alaska volume increased 4.9 percent primarily due to two additional northbound sailings;

China volume was 3.0 percent higher;

Guam volume decreased 6.1 percent primarily due to one less sailing;

and Other containers volume was flat.

Ocean Transportation operating income increased $26.6 million, or 32.3 percent, during the three months ended June 30, 2024, compared with the three months ended June 30, 2023.

The increase was primarily due to significantly higher freight rates in China, partially offset by higher vessel operating costs (including fuel-related expenses) and higher selling, general and administrative costs.

The Company’s SSAT terminal joint venture investment contributed $1.2 million during the three months ended June 30, 2024, compared to a loss of $1.4 million during the three months ended June 30, 2023.

Alaska volume increased 1.4 percent primarily due to higher retail-related demand;

China volume was 2.6 percent higher due to two additional sailings;

Guam volume decreased 9.4 percent primarily due to lower demand from retail and food and beverage segments;

and Other containers volume increased 9.3 percent.

Ocean Transportation operating income increased $108.7 million, or 92.0 percent, during the three months ended September 30, 2024, compared with the three months ended September 30, 2023.

The increase was primarily due to significantly higher freight rates in China and higher freight rates in the domestic tradelanes, partially offset by higher vessel operating costs.

The Company’s SSAT terminal joint venture investment contributed $6.9 million during the three months ended September 30, 2024, compared to a contribution of $1.3 million during the three months ended September 30, 2023.

The increase was primarily driven by higher lift volume.

Ocean Transportation Operating Results – Six months ended June 30, 2024 compared with 2023:

Six Months Ended June 30,

Ocean Transportation Operating Results – Nine months ended September 30, 2024 compared with 2023:

Nine Months Ended September 30,

(Dollars in millions)

10 unchanged sentences

Other containers (2)

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

Ocean Transportation revenue increased $101.0 million, or 8.6 percent, during the six months ended June 30, 2024, compared with the six months ended June 30, 2023.

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

Ocean Transportation revenue increased $230.3 million, or 12.5 percent, during the nine months ended September 30, 2024, compared with the nine months ended September 30, 2023.

The increase was primarily due to significantly higher freight rates in China and higher freight rates in the domestic tradelanes, partially offset by lower volume in Hawaii.

On a year-over-year FEU basis, Hawaii container volume decreased 2.5 percent primarily due to lower general demand;

Alaska volume was flat;

China volume decreased 0.1 percent;

Guam volume decreased 3.1 percent primarily due to one less sailing;

Alaska volume increased 0.5 percent;

China volume increased 0.9 percent primarily due to one additional sailing;

Guam volume decreased 5.3 percent primarily due to lower general demand and one less sailing;

and Other containers volume decreased 0.8 percent.

Ocean Transportation operating income increased $26.4 million, or 24.0 percent, during the six months ended June 30, 2024, compared with the six months ended June 30, 2023.

The increase was primarily due to significantly higher freight rates in China, primarily offset by higher vessel operating costs (including fuel-related expenses) and higher selling, general and administrative costs.

The Company’s SSAT terminal joint venture investment contributed $1.6 million during the six months ended June 30, 2024, compared to a loss of $3.2 million during the six months ended June 30, 2023.

Ocean Transportation operating income increased $135.1 million, or 59.2 percent, during the nine months ended September 30, 2024, compared with the nine months ended September 30, 2023.

The increase was primarily due to significantly higher freight rates in China and higher freight rates in the domestic tradelanes, partially offset by higher vessel operating costs.

The Company’s SSAT terminal joint venture investment contributed $8.5 million during the nine months ended September 30, 2024, compared to a loss of $1.9 million during the nine months ended September 30, 2023.

The increase was primarily driven by higher lift volume.

Logistics Operating Results – Three months ended June 30, 2024 compared with 2023:

Three Months Ended June 30,

Logistics Operating Results – Three months ended September 30, 2024 compared with 2023:

Three Months Ended September 30,

(Dollars in millions)

3 unchanged sentences

Operating income margin

Logistics revenue increased $1.0 million, or 0.6 percent, during the three months ended June 30, 2024, compared with the three months ended June 30, 2023.

The increase was primarily due to higher revenue in supply chain management.

Logistics operating income increased $1.3 million, or 9.1 percent, during the three months ended June 30, 2024, compared with the three months ended June 30, 2023.

The increase was primarily due to a higher contribution from supply chain management.

Logistics Operating Results – Six months ended June 30, 2024 compared with 2023:

Six Months Ended June 30,

Logistics revenue increased $5.2 million, or 3.3 percent, during the three months ended September 30, 2024, compared with the three months ended September 30, 2023.

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

Logistics operating income increased $1.5 million, or 10.8 percent, during the three months ended September 30, 2024, compared with the three months ended September 30, 2023.

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

Logistics Operating Results – Nine months ended September 30, 2024 compared with 2023:

Nine Months Ended September 30,

(Dollars in millions)

3 unchanged sentences

Operating income margin

Logistics revenue decreased $9.7 million, or 3.1 percent, during the six months ended June 30, 2024, compared with the six months ended June 30, 2023.

Logistics revenue decreased $4.5 million, or 1.0 percent, during the nine months ended September 30, 2024, compared with the nine months ended September 30, 2023.

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

Logistics operating income decreased $0.3 million, or 1.2 percent, during the six months ended June 30, 2024, compared with the six months ended June 30, 2023.

The decrease was primarily due to a lower contribution from transportation brokerage, partially offset by a higher contribution from supply chain management.

Logistics operating income increased $1.2 million, or 3.1 percent, during the nine months ended September 30, 2024, compared with the nine months ended September 30, 2023.

The increase was primarily due to a higher contribution from supply chain management.

LIQUIDITY AND CAPITAL RESOURCES

Sources of liquidity available to the Company as of June 30, 2024, compared to December 31, 2023 were as follows:

Sources of liquidity available to the Company as of September 30, 2024 compared to December 31, 2023 were as follows:

Cash and Cash Equivalents, Restricted Cash, Accounts Receivable and CCF:

Cash and cash equivalents, restricted cash, accounts receivable and CCF as of June 30, 2024 compared to December 31, 2023 were as follows:

Cash and cash equivalents, restricted cash, accounts receivable and CCF as of September 30, 2024 compared to December 31, 2023 were as follows:

September 30,

(In millions)

3 unchanged sentences

CCF - cash and cash equivalents, and investments account

(1) As of June 30, 2024 and December 31, 2023, $185.9 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 six months ended June 30, 2024, compared to the six months ended June 30, 2023 were as follows:

Six Months Ended June 30,

(1) As of September 30, 2024 and December 31, 2023, $228.3 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 nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, were as follows:

Nine Months Ended September 30,

(In millions)

6 unchanged sentences

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

Changes in net cash provided by operating activities for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, were due to the following:

Changes in net cash provided by operating activities for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, were due to the following:

(In millions)

11 unchanged sentences

Other long-term liabilities

Net income was $149.3 million for the six months ended June 30, 2024, compared to $114.8 million for the six months ended June 30, 2023.

Income from SSAT was $1.6 million for the six months ended June 30, 2024, compared to a loss of $3.2 million for the six months ended June 30, 2023.

The increase in income from SSAT was due to higher lift volume during the six months ended June 30, 2024, compared to the same prior year period.

The Company received $14.0 million of cash distributions from SSAT during the six months ended June 30, 2024, compared to no cash distributions received from SSAT during the six months ended June 30, 2023.

Net income was $348.4 million for the nine months ended September 30, 2024, compared to $234.7 million for the nine months ended September 30, 2023.

Income from SSAT was $8.5 million for the nine months ended September 30, 2024, compared to a loss of $1.9 million for the nine months ended September 30, 2023.

The increase in income from SSAT was primarily due to higher lift volume during the nine months ended September 30, 2024, compared to the same prior year period.

The Company received $14.0 million of cash distributions from SSAT during the nine months ended September 30, 2024, compared to no cash distributions received from SSAT during the nine months ended September 30, 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 June 30, 2024, 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 as the Company received the 2021 federal income tax refund of $118.6 million during the six months ended June 30, 2024.

Changes in accounts receivable were primarily 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 as the Company received the 2021 federal income tax refund of $118.6 million during the nine months ended September 30, 2024.

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, 2024, compared to the same prior year period.

Deferred dry-docking payments for the six months ended June 30, 2024 were $17.3 million, compared to $8.9 million for the six months ended June 30, 2023.

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

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, 2024, compared to the same prior year period.

Deferred dry-docking payments for the nine months ended September 30, 2024 were $20.2 million, compared to $17.3 million for the nine months ended September 30, 2023.

Changes in deferred dry-docking is primarily due to the timing of payments associated with dry-docking related expenditures.

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

Changes in net cash used in investing activities for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, were due to the following:

Changes in net cash used in investing activities for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, were due to the following:

(In millions)

1 unchanged sentence

Withdrawals from CCF

Payment for intangible asset acquisition

Payments for asset acquisitions

Capitalized vessel construction expenditures

1 unchanged sentence

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

The Company deposited $35.8 million into the CCF to repurchase assigned accounts receivable and made $35.8 million of qualifying withdrawal payments out of the CCF during the six months ended June 30, 2024.

The Company deposited $100.0 million of cash deposits into the CCF and made $49.9 million of qualifying withdrawal payments out of the CCF during the six months ended June 30, 2023.

The Company received $16.2 million of interest and accretion in the CCF during the six months ended June 30, 2024, compared to $13.1 million of interest received during the six months ended June 30, 2023.

The Company deposited $50.0 million of cash deposits into the CCF and made $35.8 million of qualifying withdrawal payments out of the CCF during the nine months ended September 30, 2024.

The Company deposited $100.0 million of cash deposits into the CCF and made $49.9 million of qualifying withdrawal payments out of the CCF during the nine months ended September 30, 2023.

The Company received $24.0 million of interest and discount accretion in the CCF during the nine months ended September 30, 2024, compared to $20.8 million of interest received during the nine months ended September 30, 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 six months ended June 30, 2023, the Company paid $12.4 million related to an intangible asset acquisition.

There were no acquisition related payments made during the six months ended June 30, 2024.

Capitalized vessel construction expenditures (including capitalized interest) were $38.2 million for the six months ended June 30, 2024, compared to $50.8 million for the six months ended June 30, 2023.

During the nine months ended September 30, 2024, the Company paid $0.7 million related to asset acquisitions, compared to $12.4 million of payments made during the nine months ended September 30, 2023.

Capitalized vessel construction expenditures (including capitalized interest) were $39.8 million for the nine months ended September 30, 2024, compared to $52.1 million for the nine months ended September 30, 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 $86.9 million for the six months ended June 30, 2024, compared to $75.5 million for the six months ended June 30, 2023.

Maintenance and other capital expenditures payments were $144.9 million for the nine months ended September 30, 2024, compared to $135.4 million for the nine months ended September 30, 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 six months ended June 30, 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.

The increase in maintenance and other capital expenditure for the nine months ended September 30, 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 six months ended June 30, 2024, compared to the six months ended June 30, 2023, were due to the following:

Changes in net cash used in financing activities for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, were due to the following:

(In millions)

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Dividends paid

During the six months ended June 30, 2024, the Company paid $120.1 million to repurchase Matson common stock, compared to $82.5 million during the six months ended June 30, 2023.

During the six months ended June 30, 2024, the Company paid $19.

9 million in scheduled fixed interest debt payments, compared to $26.4 million of prepaid Title XI debt and $28.7 million in scheduled fixed interest debt payments during the six months ended June 30, 2023.

During the six months ended June 30, 2024, the Company paid $17.0 million in withholding taxes related to vested restricted stock units, compared to $12.5 million during the six months ended June 30, 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 six months ended June 30, 2024, the Company paid $22.1 million in dividends, compared to $22.4 million during the six months ended June 30, 2023.

During the nine months ended September 30, 2024, the Company paid $167.4 million to repurchase Matson common stock, compared to $108.2 million during the nine months ended September 30, 2023.

During the nine months ended September 30, 2024, the Company paid $30.0 million in scheduled fixed interest debt payments, compared to $26.4 million of prepaid Title XI debt and $40.8 million in scheduled fixed interest debt payments during the nine months ended September 30, 2023.

During the nine months ended September 30, 2024, the Company paid $17.0 million in withholding taxes related to vested restricted stock units, compared to $12.5 million during the nine months ended September 30, 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 nine months ended September 30, 2024, the Company paid $33.5 million in dividends, compared to $33.8 million during the nine months ended September 30, 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.

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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 June 30, 2024 and December 31, 2023 is as follows:

CCF cash and cash equivalents, investments and assigned accounts receivables as of September 30, 2024 and December 31, 2023 is as follows:

September 30,

(In millions)

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

Total Debt as of June 30, 2024 and December 31, 2023 is as follows:

Total Debt as of September 30, 2024 and December 31, 2023 is as follows:

September 30,

(In millions)

Variable interest debt

Fixed interest debt

Total Debt decreased by $19.9 million during the six months ended June 30, 2024, compared to December 31, 2023, primarily due to scheduled fixed interest debt repayments.

As of June 30, 2024, the Company had $644.2 million of remaining borrowing availability under the revolving credit facility, with a maturity date of March 31, 2026.

Total Debt decreased by $30.0 million during the nine months ended September 30, 2024, compared to December 31, 2023, due to scheduled fixed interest debt repayments.

As of September 30, 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 deficit of $38.3 million at June 30, 2024, compared to a working capital surplus of $40.0 million at December 31, 2023.

The Company had a working capital surplus of $74.1 million at September 30, 2024, compared to a working capital surplus of $40.0 million at December 31, 2023.

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 the Company’s working capital at June 30, 2024, compared to December 31, 2023 is primarily due to higher capitalized vessel construction expenditures and capital expenditures during the six months ended June 30, 2024.

The increase in the Company’s working capital at September 30, 2024, compared to December 31, 2023 is primarily due to higher cash provided by operating activities during the nine months ended September 30, 2024.

Capital Expenditures:

Except as described below, during the quarter ended June 30, 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 .

During the three and six months ended June 30, 2024, the Company paid $35.8 million in milestone payments under the vessel construction agreements.

The following represents the estimated timing of future milestone payments under the vessel construction agreements as of June 30, 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 :

Except as described below, during the nine months ended September 30, 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 , and the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024.

During the nine months ended September 30, 2024, the Company paid $35.8 million in milestone payments under the vessel construction agreements.

The following represents the estimated timing of future milestone payments under the vessel construction agreements as of September 30, 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

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(in millions)

June 30, 2024

September 30, 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.

For the year ending December 31, 2024, the Company expects to make other capital expenditure payments, including maintenance capital expenditures, of approximately $110 to $120 million, and expenditures for LNG installations and reengining on existing vessels of approximately $85 to $95 million, and dry-docking payments of approximately $35 million.

Repurchase of Shares:

During the three and six months ended June 30, 2024, the Company repurchased approximately 0.6 million and 1.0 million shares for a total cost of $72.2 million and $121.1 million, respectively.

The maximum number of remaining shares that may be purchased under the Company’s share repurchase program was approximately 1.4 million shares at June 30, 2024.

During the three and nine months ended September 30, 2024, the Company repurchased approximately 0.4 million and 1.4 million shares for a total cost of $48.1 million and $169.2 million, respectively.

The maximum number of remaining shares that may be purchased under the Company’s share repurchase program was approximately 1.0 million shares at September 30, 2024.

Other Material Cash Requirements:

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

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

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OTHER MATTERS

The Company’s second quarter 2024 cash dividend of $0.32 per share was paid on June 6, 2024.

On June 27, 2024, the Company’s Board of Directors declared a cash dividend of $0.34 per share payable on September 5, 2024 to shareholders of record on August 1, 2024.

The Company’s third quarter 2024 cash dividend of $0.34 per share was paid on September 5 , 2024.

On October 24, 2024, the Company’s Board of Directors declared a cash dividend of $0.34 per share payable on December 5, 2024 to shareholders of record on November 7, 2024.

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