Item 2. Management’s Discussion and Analysis
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the Condensed Consolidated Financial Statements and related notes, and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q.
FORWARD-LOOKING STATEMENTS
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 2025 or future years, including such references included under “First Quarter 2025 Discussion and Outlook for 2025,” as well as statements generally identified through the inclusion of words such as “anticipate,” “believe,” “can,” “commit,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “seek,” “should,” “target,” 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 II, Item 1A under the caption “Risk Factors” below. 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.
OVERVIEW
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 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, 2024 , the Company’s reports on Forms 10-Q and 8-K, and other publicly available information.
FIRST QUARTER 2025 DISCUSSION AND OUTLOOK FOR 2025
Ocean Transportation: The Company’s container volume in the Hawaii service in the first quarter 2025 was 3.2 percent higher year-over-year. The increase was primarily due to the dry-docking of a competitor’s vessel . The Hawaii economy remains stable with low unemployment, strong construction activity, and stable tourism, offset by challeng ing population growth and high inflation and interest rates. The Company expects volume in 2025 to be comparable to the level achieved in 2024, reflecting modest economic growth in Hawaii and stable market share.
In China, the Company achieved significantly higher freight rates in the first quarter 2025 compared to the year ago period. The year-over-year increase benefitted from the carryover of elevated freight rates from the fourth quarter of 2024. Container volume in the first quarter 2025 decreased 1.4 percent year-over-year. Currently, there is significant uncertainty regarding tariffs and global trade, regulatory measures, the trajectory o f the U.S. economy and other geopolitical factors. Since the tariffs were implemented in April, the Company’s container volume has declined
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approximately 30 percent year-over-year. Given the pronounced market decline in demand in the Transpacific in April, coupled with limited visibility to the Company’s container demand, the Company expects container volume and average freight rates in the second quarter to be lower year-over-year. For full year 2025, the Company also expects container volume and average freight rates to be lower year-over-year.
In Guam, the Company’s container volume in the first quarter 2025 decreased 14.3 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 Guam’s economy to remain stable with a slow recovery in tourism , a low unemployment rate, and some increase in construction activity . For 2025, the Company expects volume to approach the level achieved last year.
In Alaska, the Company’s container volume for the first quarter 2025 increased 4.8 percent year-over-year. The increase was primarily due to higher northbound volume, partially offset by an additional sailing in the year ago period. In the near term, the Company expects continued economic growth in Alaska supported by a low unemployment rate, jobs growth and continued oil and gas exploration and production activity. For 2025, the Company expects volume to be comparable to the level achieved last year.
The contribution in the first quarter 2025 from the Company’s SSAT joint venture investment was $6.6 million, or $6.2 million higher than first quarter 2024. The increase was primarily due to higher lift volume. For 2025, the Company expects the contribution from SSAT to be lower than the $17.4 million achieved last year without taking into account the $18.4 million impairment charge at SSAT during the fourth quarter 2024.
Based on the outlook trends noted above, along with significant uncertainty regarding tariffs and global trade, regulatory measures, the trajectory of the U.S. economy and other geopolitical factors, the Company expects Ocean Transportation operating income for the second quarter 2025 to be meaningfully lower than the level achieved in the same period last year. For full year 2025, the Company expects Ocean Transportation operating income to be lower than the level achieved in the prior year, with the amount dependent on the impact and timing of the global trade and macroeconomic uncertainties described above.
Logistics: In the first quarter 2025, operating income for the Company’s Logistics segment was $8.5 million, or $0.8 million lower compared to the level achieved in the first quarter 2024. The decrease was primarily due to a lower contribution from freight forwarding and transportation brokerage, partially offset by a higher contribution from supply chain management. For the second quarter 2025, the Company expects Logistics operating income to be lower than the $15.6 million achieved in the second quarter 2024. For full year 2025, the Company expects Logistics operating income to be lower than the level achieved in the prior year due to a challenging environment for all the business lines .
Consolidated Operating Income: For the second quarter 2025, the Company expects consolidated operating income to be meaningfully lower than the $124.6 million achieved in the second quarter 2024. For full year 2025, the Company expects consolidated operating income to be lower than the $551.3 million achieved in 2024 due to the uncertain global trade and macroeconomic environment.
Depreciation and Amortization: For full year 2025, the Company expects depreciation and amortization expense to be approximately $200 million, inclusive of dry-docking amortization of approximately $26 million.
Interest Income: The Company expects interest income for the full year 2025 to be approximately $31 million.
Interest Expense: The Company expects interest expense for the full year 2025 to be approximately $7 million.
Other Income (Expense): The Company expects full year 2025 other income (expense) to be approximately $9 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 2025, the Company’s effective tax rate was 21.6 percent. For the full year 2025, the Company expects its effective tax rate to be approximately 23.0 percent.
Capital and Vessel Dry-docking Expenditures: For the first quarter 2025, the Company made capital expenditure payments excluding new vessel construction expenditures of $22.5 million, new vessel construction expenditures (including capitalized interest and owner’s items) of $66.7 million, and dry-docking payments of $10.4 million. For the
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full year 2025, the Company expects to make other capital expenditure payments, including maintenance capital expenditures, of approximately $100 to $120 million, new vessel construction expenditures (including capitalized interest and owner’s items) of approximately $305 million, and dry-docking payments of approximately $40 million.
CONSOLIDATED RESULTS OF OPERATIONS
Consolidated Results – Three months ended March 31, 2025 compared with 2024:
Three Months Ended March 31,
(Dollars in millions, except per share amounts)
2025
2024
Change
Operating revenue
$
782.0
$
722.1
$
59.9
8.3
%
Operating costs and expenses
(699.9)
(685.2)
(14.7)
2.1
%
Operating income
82.1
36.9
45.2
122.5
%
Interest income
9.4
8.8
0.6
6.8
%
Interest expense
(1.7)
(2.2)
0.5
(22.7)
%
Other income (expense), net
2.4
1.8
0.6
33.3
%
Income before taxes
92.2
45.3
46.9
103.5
%
Income taxes
(19.9)
(9.2)
(10.7)
116.3
%
Net income
$
72.3
$
36.1
$
36.2
100.3
%
Basic earnings per share
$
2.20
$
1.05
$
1.15
109.5
%
Diluted earnings per share
$
2.18
$
1.04
$
1.14
109.6
%
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 March 31, 2025, compared to the three months ended March 31, 2024, 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 March 31, 2025.
The decrease in interest expense for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, 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 $19.9 million, or 21.6 percent of income before taxes, for the three months ended March 31, 2025, compared to $9.2 million, or 20.3 percent of income before taxes, for the three months ended March 31, 2024. The increase in the effective tax rate for the three months ended March 31, 2025 was due to higher discrete tax adjustments recorded during that period.
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ANALYSIS OF OPERATING REVENUE AND INCOME BY SEGMENT
Ocean Transportation Operating Results – Three months ended March 31, 2025 compared with 2024:
Three Months Ended March 31,
(Dollars in millions)
2025
2024
Change
Ocean Transportation revenue
$
637.4
$
579.0
$
58.4
10.1
%
Operating costs and expenses
(563.8)
(551.4)
(12.4)
2.2
%
Operating income
$
73.6
$
27.6
$
46.0
166.7
%
Operating income margin
11.5
%
4.8
%
Volume (Forty-foot equivalent units (FEU)) (1)
Hawaii containers
35,700
34,600
1,100
3.2
%
Alaska containers
19,700
18,800
900
4.8
%
China containers (2)
28,500
28,900
(400)
(1.4)
%
Guam containers
4,200
4,900
(700)
(14.3)
%
Other containers (3)
3,400
3,600
(200)
(5.6)
%
(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 transshipped in China from other Asian ports.
(3) Includes containers from services in various islands in Micronesia and the South Pacific, and Okinawa, Japan.
Ocean Transportation revenue increased $58.4 million, or 10.1 percent, during the three months ended March 31, 2025, compared with the three months ended March 31, 2024. The increase was primarily due to significantly higher freight rates in China.
On a year-over-year FEU basis, Hawaii container volume increased 3.2 percent primarily due to the dry-docking of a competitor’s vessel; Alaska volume increased 4.8 percent primarily due to higher northbound volume, partially offset by an additional sailing in the year ago period; China volume was 1.4 percent lower; Guam volume decreased 14.3 percent primarily due to lower demand from retail and food and beverage segments; and Other containers volume decreased 5.6 percent.
Ocean Transportation operating income increased $46.0 million, or 166.7 percent, during the three months ended March 31, 2025, compared with the three months ended March 31, 2024. The increase was primarily due to significantly higher freight rates in China and a higher contribution from SSAT, partially offset by higher direct cargo expense and operating overhead costs.
The Company’s SSAT terminal joint venture investment had an income of $6.6 million during the three months ended March 31, 2025, compared to income of $0.4 million during the three months ended March 31, 2024. The increase was primarily driven by higher lift volume.
Logistics Operating Results – Three months ended March 31, 2025 compared with 2024:
Three Months Ended March 31,
(Dollars in millions)
2025
2024
Change
Logistics revenue
$
144.6
$
143.1
$
1.5
1.0
%
Operating costs and expenses
(136.1)
(133.8)
(2.3)
1.7
%
Operating income
$
8.5
$
9.3
$
(0.8)
(8.6)
%
Operating income margin
5.9
%
6.5
%
Logistics revenue increased $1.5 million, or 1.0 percent, during the three months ended March 31, 2025, compared with the three months ended March 31, 2024. The increase was primarily due to higher revenue in freight forwarding and supply chain management, partially offset by lower revenue from transportation brokerage.
Logistics operating income decreased $0.8 million, or 8.6 percent, during the three months ended March 31, 2025, compared with the three months ended March 31, 2024. The decrease was primarily due to a lower contribution from freight forwarding and transportation brokerage, partially offset by a higher contribution from supply chain management.
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LIQUIDITY AND CAPITAL RESOURCES
Sources of liquidity available to the Company as of March 31, 2025 compared to December 31, 2024 were as follows:
Cash and Cash Equivalents, Accounts Receivable and CCF: Cash and cash equivalents, accounts receivable and CCF as of March 31, 2025 compared to December 31, 2024 were as follows:
March 31,
December 31,
(In millions)
2025
2024
Change
Cash and cash equivalents
$
122.0
$
266.8
$
(144.8)
Accounts receivable, net (1)
$
270.7
$
268.9
$
1.8
CCF - cash and cash equivalents, and investments account
$
685.4
$
642.6
$
42.8
(1) As of March 31, 2025 and December 31, 2024, $79.2 million and $178.1 million of eligible accounts receivable were assigned to the CCF, respectively.
Changes in the Company’s cash and cash equivalents for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, were as follows:
Three Months Ended March 31,
(In millions)
2025
2024
Change
Net cash provided by operating activities (1)
$
89.0
$
36.6
$
52.4
Net cash used in investing activities (2)
(129.4)
(59.0)
(70.4)
Net cash used in financing activities (3)
(104.4)
(85.7)
(18.7)
Net decrease in cash, cash equivalents and restricted cash
(144.8)
(108.1)
(36.7)
Cash and cash equivalents, and restricted cash, beginning of the period
266.8
136.3
130.5
Cash and cash equivalents, and restricted cash, end of the period
$
122.0
$
28.2
$
93.8
(1) Changes in net cash provided by operating activities:
Changes in net cash provided by operating activities for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, were due to the following:
(In millions)
Change
Net income
$
36.2
Non-cash depreciation and amortization
3.4
Deferred income taxes
(1.9)
Other non-cash related changes, net
(0.3)
Income and distribution from SSAT, net
(20.2)
Accounts receivable, net
22.1
Prepaid expenses and other assets
(9.3)
Accounts payable, accruals and other liabilities
29.0
Operating lease assets and liabilities, net
(0.5)
Non-cash amortization of operating lease right of use assets
0.6
Deferred dry-docking payments
(5.2)
Other long-term liabilities
(1.5)
Total
$
52.4
Net income was $72.3 million for the three months ended March 31, 2025, compared to $36.1 million for the three months ended March 31, 2024. Income from SSAT was $6.6 million for the three months ended March 31, 2025, compared to $0.4 million for the three months ended March 31, 2024. The increase in income from SSAT was primarily due to higher lift volume during the three months ended March 31, 2025, 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. No cash distributions were received from SSAT during the three months ended March 31, 2025. 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 the timing of collections associated with those receivables. Changes in prepaid expenses and other assets were primarily due to an increase in vessel fuel. Changes in accounts payable, accruals and other liabilities were due to the timing of payments associated with those liabilities. Changes in operating lease assets and liabilities were primarily due to new operating lease additions and renewals, offset by operating lease
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payments and terminations during the three months ended March 31, 2025, compared to the same prior year period. Deferred dry-docking payments for the three months ended March 31, 2025 were $10.4 million, compared to $5.2 million for the three months ended March 31, 2024. Changes in deferred dry-docking is primarily due to the timing of vessel dry-dock related activities and the payments associated with those activities.
(2) Changes in net cash used in investing activities:
Changes in net cash used in investing activities for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, were due to the following:
(In millions)
Change
Cash deposits and interest into the CCF
$
(99.4)
Withdrawals from CCF
65.0
Vessel construction expenditures
(65.6)
Capital expenditures (excluding vessel construction expenditures)
31.7
Proceeds from disposal of property and equipment, net, and other
(2.1)
Total
$
(70.4)
The Company deposited $105.4 million of cash and interest into the CCF and made $65.0 million of qualifying withdrawal payments out of the CCF during the three months ended March 31, 2025. The Company deposited $6.0 million of interest into the CCF, and did not make any qualifying withdrawal payments out of the CCF during the three months ended March 31, 2024. Cash and cash equivalents, and investments in the CCF are intended to fund milestone payments for the construction of three new Jones Act vessels. Vessel construction expenditures (including capitalized interest) were $66.7 million for the three months ended March 31, 2025, compared to $1.1 million for the three months ended March 31, 2024. 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 $22.5 million for the three months ended March 31, 2025, compared to $54.2 million for the three months ended March 31, 2024. 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 decrease in maintenance and other capital expenditure for the three months ended March 31, 2025, 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 three months ended March 31, 2025, compared to the three months ended March 31, 2024, were due to the following:
(In millions)
Change
Repurchase of Matson common stock
$
(19.6)
Shares withheld for taxes related to settlement of restricted stock units
1.1
Dividends paid
(0.2)
Total
$
(18.7)
During the three months ended March 31, 2025, the Company paid $66.9 million to repurchase Matson common stock, compared to $47.3 million during the three months ended March 31, 2024. During the three months ended March 31, 2025, the Company paid $10.1 million in scheduled fixed interest debt payments, compared to $10.1 million during the three months ended March 31, 2024. During the three months ended March 31, 2025, the Company paid $16.1 million in withholding taxes related to vested restricted stock units, compared to $17.2 million during the three months ended March 31, 2024. During the three months ended March 31, 2025, the Company paid $11.3 million in dividends, compared to $11.1 million during the three months ended March 31, 2024. The increase in dividend payments was due to an increase in dividends declared per share of common stock by the Company, offset by a reduction in common stock outstanding.
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Capital Construction Fund: The Company’s CCF is described in Note 7 of Part I, Item 1 above. CCF cash and cash equivalents, and CCF investments as of March 31, 2025 and December 31, 2024 are as follows:
March 31,
December 31,
(In millions)
2025
2024
CCF Cash and cash equivalents
$
290.8
$
230.7
CCF Investments
394.6
411.9
Total
$
685.4
$
642.6
CCF cash and cash equivalents, and CCF investments are intended to fund milestone payments for the construction of three new Jones Act vessels.
Debt: 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, 2025 and December 31, 2024 is as follows:
March 31,
December 31,
(In millions)
2025
2024
Change
Variable interest debt
$
—
$
—
$
—
Fixed interest debt
390.8
400.9
(10.1)
Total Debt (excluding deferred loan fees)
$
390.8
$
400.9
$
(10.1)
Total Debt decreased by $10.1 million during the three months ended March 31, 2025, compared to December 31, 2024, due to scheduled fixed interest debt repayments.
As of March 31, 2025, the Company had $643.9 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 $78.4 million at March 31, 2025, compared to a working capital surplus of $49.2 million at December 31, 2024. 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 March 31, 2025, compared to December 31, 2024 is primarily due to cash deposited into the CCF during the three months ended March 31, 2025.
Capital Expenditures: Except as described below, during the three months ended March 31, 2025, there were no material changes to the Company’s expected capital expenditures for the years ending December 31, 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, 2024 .
During the three months ended March 31, 2025, the Company paid $65.0 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 March 31, 2025, as described in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 :
Paid
Future Milestone Payments
Vessel Construction Obligations
(in millions)
As of
March 31, 2025
Remainder of
2025
2026
2027
2028
Thereafter
Total
Three Aloha Class Containerships
$
254.5
$
225.4
$
313.6
$
185.0
$
22.2
$
2.9
$
1,003.6
The Company intends to use the CCF cash and cash equivalents, and CCF investments to fund future milestone progress payments.
For the full year 2025, the Company expects to make other capital expenditure payments, including maintenance capital expenditures, of approximately $100 to $120 million, and dry-docking payments of approximately $40 million.
Repurchase of Shares: During the three months ended March 31, 2025, the Company repurchased approximately 0.5 million shares for a total cost of $69.2 million, compared to 0.4 million shares for a total cost of $48.9 million for the
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three months ended March 31, 2024. The maximum number of remaining shares that may be repurchased under the Company’s share repurchase program was approximately 3.3 million shares at March 31, 2025.
Other Material Cash Requirements: There were no other material changes during the quarter ended March 31, 2025 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, 2024 .
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
There have been no changes during this quarter to the Company’s critical accounting policies and estimates as discussed in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 .
OTHER MATTERS
The Company’s first quarter 2025 cash dividend of $0.34 per share was paid on March 6, 2025. On April 24, 2025, the Company’s Board of Directors declared a cash dividend of $0.34 per share payable on June 5, 2025 to shareholders of record on May 8, 2025.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to the Company’s market risk position from the information provided under Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of its Annual Report on Form 10-K for the year ended December 31, 2024 .
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