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Item 2. Management’s Discussion and Analysis

2025-08-01 compared with 2025-05-06 · 173 added, 112 removed, 126 unchanged (69% 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 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.

These include, for example, all references to 2025 or future years, including such references included under “Second 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.

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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

SECOND 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

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.

The Company’s container volume in the Hawaii service in the second quarter 2025 was 2.6 percent higher year-over-year.

The increase was primarily due to higher general demand .

The Hawaii economy remains stable supported by strong construction activity, but faces potential headwinds from slowing tourism, increasing unemployment, and high inflation and interest rates.

The Company expects volume in 2025 to be modestly higher than the level achieved in 2024, reflecting modest economic growth in Hawaii and stable market share.

In China, the Company’s container volume in the second quarter 2025 decreased 14.6 percent year-over-year primarily due to the challenges of market uncertainty and volatility from tariffs and global trade.

Freight rates in the second quarter 2025 were modestly higher than the levels achieved in the same period last year.

At the onset of tariffs in April, the Company experienced significantly lower year-over-year freight demand, but starting in mid-May saw a rebound in

demand after the U.S.

and China agreed to a temporary reduced level of tariffs.

During the second quarter, the Company also moved with its customers as they shifted production throughout Asia in response to the tariffs, which resulted in higher container volume levels outside of China than the levels achieved in the first quarter.

For the third quarter 2025, the Company expects lower year-over-year freight rates and volume compared to the elevated demand levels achieved in the third quarter last year and the Company’s expectation of a muted peak season this year.

Assuming tariffs and global trade, regulatory measures, the trajectory of the U.S.

economy and other geopolitical factors do not materially change from current conditions, the Company expects, for full year 2025, average freight rates and volume to be lower year-over-year.

In Guam, the Company’s container volume in the second quarter 2025 decreased 2.2 percent year-over-year.

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.

For 2025, the Company expects volume to be modestly lower than the level achieved last year.

In Alaska, the Company’s container volume for the second quarter 2025 increased 0.9 percent year-over-year.

The increase was primarily due to higher AAX volume, partially offset by two fewer northbound sailings compared to 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.

For 2025, the Company expects volume to be modestly higher than the level achieved last year.

The contribution in the second quarter 2025 from the Company’s SSAT joint venture investment was $7.3 million, or $6.1 million higher than second 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.

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 .

For 2025, the Company expects the contribution from SSAT to be modestly higher 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.

In addition to the outlook trends noted above, the Company expects uncertainty regarding tariffs and global trade, regulatory measures, the trajectory of the U.S.

economy and other geopolitical factors to continue.

Assuming these factors do not materially change from current conditions, the Company expects Ocean Transportation operating income for the full year to be higher than the guidance provided in early May, but moderately lower than the level achieved in the prior year.

For the third quarter 2025, the Company expects Ocean Transportation operating income to be meaningfully lower than the level achieved in the same period last year primarily due to lower year-over-year freight rates and volume in the China service compared to the elevated demand levels achieved in the third quarter last year and the Company’s expectation of a muted peak season this year.

In the second quarter 2025, operating income for the Company’s Logistics segment was $14.4 million, or $1.2 million lower compared to the level achieved in the second quarter 2024.

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

For the third quarter 2025, the Company expects Logistics operating income to be comparable to the $15.4 million achieved in the third quarter 2024.

For full year 2025, the Company expects Logistics operating income to be comparable to the level achieved in the prior year.

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.

For the third quarter 2025, the Company expects consolidated operating income to be meaningfully lower than the $242.3 million achieved in the third quarter 2024.

For full year 2025, the Company expects consolidated operating income to be higher than the guidance provided in early May, but moderately lower than the $551.3 million achieved in 2024.

Depreciation and Amortization:

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The Company expects interest income for the full year 2025 to be approximately $31 million.

In the second quarter 2024, the Company’s interest income of $18.8 million included $10.2 million in interest income earned on the federal tax refund related to the Company’s 2021 federal tax return.

Interest Expense:

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Income Taxes:

In the first quarter 2025, the Company’s effective tax rate was 21.6 percent.

In the second quarter 2025, the Company’s effective tax rate was 22.2 percent.

For the full year 2025, the Company expects its effective tax rate to be approximately 22.0 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.

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.

For the second quarter 2025, the Company made capital expenditure payments excluding new vessel construction expenditures of $48.9 million, new vessel construction expenditures (including capitalized interest and owner’s items) of $37.4 million, and dry-docking payments of $13.4 million.

For the 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,

Consolidated Results – Three months ended June 30, 2025 compared with 2024:

Three Months Ended June 30,

(Dollars in millions, except per share amounts)

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Changes in operating revenue, and operating costs and expenses are further described below in the Analysis of Operating Revenue and Income by Segment.

The 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.

The decrease in interest income for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, was due to interest of $10.2 million related to a federal income tax refund received during the three months ended June 30, 2024, and lower amounts of cash and cash equivalent, and CCF funds that were invested in interest bearing accounts during the three months ended June 30, 2025.

The decrease in interest expense for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, was due to lower outstanding debt during the period.

Other income (expense) relates to the amortization of certain components of net periodic benefit costs or gains related to the Company’s pension and post-retirement plans.

Income tax expense was $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.

Income tax expense was $27.0 million, or 22.2 percent of income before taxes, for the three months ended June 30, 2025, compared to $29.9 million, or 20.9 percent of income before taxes, for the three months ended June 30, 2024.

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

Consolidated Results – Six months ended June 30, 2025 compared with 2024:

Six Months Ended June 30,

(Dollars in millions, except per share amounts)

Operating revenue

Operating costs and expenses

Operating income

Interest income

Interest expense

Other income (expense), net

Income before taxes

Basic earnings per share

Diluted earnings per share

Changes in operating revenue, and operating costs and expenses are further described below in the Analysis of Operating Revenue and Income by Segment.

The decrease in interest income for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, 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 decrease in interest expense for the six months ended June 30, 2025, compared to the six months ended June 30, 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 $46.9 million, or 21.9 percent of income before taxes, for the six months ended June 30, 2025, compared to $39.1 million, or 20.8 percent of income before taxes, for the six months ended June 30, 2024.

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

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,

Ocean Transportation Operating Results – Three months ended June 30, 2025 compared with 2024:

Three Months Ended June 30,

(Dollars in millions)

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(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.

(2) Includes containers transshipped from other Asia origins.

(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;

Ocean Transportation revenue decreased $14.3 million, or 2.1 percent, during the three months ended June 30, 2025, compared with the three months ended June 30, 2024.

The decrease was primarily due to lower volume in China, partially offset by higher freight rates in China.

On a year-over-year FEU basis, Hawaii container volume increased 2.6 percent primarily due to higher general demand;

Alaska volume increased 0.9 percent primarily due to higher AAX volume, partially offset by two fewer northbound sailings compared to the year ago period;

China volume was 14.6 percent lower primarily due to the challenges of market uncertainty and volatility from tariffs and global trade;

Guam volume decreased 2.2 percent;

and Other containers volume was flat.

Ocean Transportation operating income decreased $10.4 million, or 9.5 percent, during the three months ended June 30, 2025, compared with the three months ended June 30, 2024.

The decrease was primarily due to lower volume in China, partially offset by higher freight rates in China and the timing of fuel-related surcharge collections.

The Company’s SSAT terminal joint venture investment contributed $7.3 million during the three months ended June 30, 2025, compared to a contribution of $1.2 million during the three months ended June 30, 2024.

The increase was primarily driven by higher lift volume.

Ocean Transportation Operating Results – Six months ended June 30, 2025 compared with 2024:

Six Months Ended June 30,

(Dollars in millions)

Ocean Transportation revenue

Operating costs and expenses

Operating income

Operating income margin

Volume (Forty-foot equivalent units (FEU)) (1)

Hawaii containers

Alaska containers

China containers (2)

Guam containers

Other containers (3)

(2) Includes containers transshipped from other Asia origins.

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

Ocean Transportation revenue increased $44.1 million, or 3.5 percent, during the six months ended June 30, 2025, compared with the six months ended June 30, 2024.

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

On a year-over-year FEU basis, Hawaii container volume increased 2.9 percent primarily due to the dry-docking of a competitor’s vessel in the first half of 2025;

Alaska volume increased 2.7 percent due to higher AAX volume and retail-related demand, partially offset by three fewer northbound sailings compared to the year ago period;

China volume decreased 8.8 percent due to the challenges of market uncertainty and volatility from tariffs and global trade;

Guam volume decreased 8.4 percent primarily due to lower demand from retail and food and beverage segments;

and Other containers volume decreased 2.5 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.

Ocean Transportation operating income increased $35.6 million, or 26.1 percent, during the six months ended June 30, 2025, compared with the six months ended June 30, 2024.

The increase was primarily due to higher freight rates in China and the domestic tradelanes, the timing of fuel-related surcharge collections, and a higher contribution from SSAT, primarily offset by lower volume in China and higher operating overhead costs and direct cargo expense.

The Company’s SSAT terminal joint venture investment contributed $13.9 million during the six months ended June 30, 2025, compared to a contribution of $1.6 million during the six months ended June 30, 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,

Logistics Operating Results – Three months ended June 30, 2025 compared with 2024:

Three Months Ended June 30,

(Dollars in millions)

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Operating income margin

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.

Logistics revenue decreased $2.6 million, or 1.7 percent, during the three months ended June 30, 2025, compared with the three months ended June 30, 2024.

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

Logistics operating income decreased $1.2 million, or 7.7 percent, during the three months ended June 30, 2025, compared with the three months ended June 30, 2024.

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

Logistics Operating Results – Six months ended June 30, 2025 compared with 2024:

Six Months Ended June 30,

(Dollars in millions)

Logistics revenue

Operating costs and expenses

Operating income

Operating income margin

Logistics revenue decreased $1.1 million, or 0.4 percent, during the six months ended June 30, 2025, compared with the six months ended June 30, 2024.

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

Logistics operating income decreased $2.0 million, or 8.0 percent, during the six months ended June 30, 2025, compared with the six months ended June 30, 2024.

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

LIQUIDITY AND CAPITAL RESOURCES

Sources of liquidity available to the Company as of March 31, 2025 compared to December 31, 2024 were as follows:

Sources of liquidity available to the Company as of June 30, 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:

Cash and cash equivalents, accounts receivable and CCF as of June 30, 2025 compared to December 31, 2024 were as follows:

(In millions)

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CCF - cash and cash equivalents, and investments account

(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,

(1) As of June 30, 2025 and December 31, 2024, $80.2 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 six months ended June 30, 2025, compared to the six months ended June 30, 2024, were as follows:

Six Months Ended June 30,

(In millions)

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Net cash used in financing activities (3)

Net decrease in cash, cash equivalents and restricted cash

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

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

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

Changes in net cash provided by operating activities for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, were due to the following:

Changes in net cash provided by operating activities for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, were due to the following:

(In millions)

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Other long-term liabilities

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.

Net income was $167.0 million for the six months ended June 30, 2025, compared to $149.3 million for the six months ended June 30, 2024.

Income from SSAT was $13.9 million for the six months ended June 30, 2025, compared to $1.6 million for the six months ended June 30, 2024.

The increase in income from SSAT was primarily due to higher lift volume during the six months ended June 30, 2025, 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.

No cash distributions were received from SSAT during the six months ended June 30, 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 prepaid expenses and other assets were primarily due to a 2021 federal income tax refund of $118.6 million that was received by the Company during the six months ended June 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 assets and 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, 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.

Changes in operating lease assets and liabilities were primarily due to new operating lease additions and renewals, offset by operating lease payments and terminations.

Deferred dry-docking payments for the six months ended June 30, 2025 were $23.8 million, compared to $17.3 million for the six months ended June 30, 2024.

Changes in deferred dry-docking are 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:

Changes in net cash used in investing activities for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, were due to the following:

(In millions)

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

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.

The Company deposited $109.1 million of cash and interest into the CCF and made $100.7 million of qualifying withdrawal payments out of the CCF during the six months ended June 30, 2025.

The Company deposited $45.0 million into the CCF and made $35.8 million of qualifying withdrawal payments out of the CCF during the six months ended June 30, 2024.

Qualifying withdrawal payments relate to milestone payments for the construction of three new Aloha Class vessels.

Capital expenditures (excluding vessel construction expenditures) were $71.4 million for the six months ended June 30, 2025, compared to $86.9 million for the six months ended June 30, 2024.

Capital expenditures (excluding vessel construction 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 capital expenditure for the six months ended June 30, 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:

Changes in net cash used in financing activities for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, were due to the following:

(In millions)

2 unchanged sentences

Dividends paid

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.

During the six months ended June 30, 2025, the Company paid $160.4 million to repurchase Matson common stock, compared to $120.1 million during the six months ended June 30, 2024.

During the six months ended June 30, 2025, the Company paid $19.9 million in scheduled fixed interest debt payments, compared to $19.9 million during the six months ended June 30, 2024.

During the six months ended June 30, 2025, the Company paid $ 16.3 million in withholding taxes related to vested restricted stock units, compared to $17.0 million during the six months ended June 30, 2024.

During the six months ended June 30, 2025, the Company paid $22.3 million in dividends, compared to $22.1 million during the six months ended June 30, 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.

Working Capital:

The Company had a working capital deficit of $122.4 million at June 30, 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 June 30, 2025, compared to December 31, 2024 is primarily due to $100.7 million of cash withdrawn from cash and cash equivalent and deposited into the CCF during the six months ended June 30, 2025, compared to $35.8 million for the six months ended June 30, 2024.

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:

CCF cash and cash equivalents, and CCF investments as of June 30, 2025 and December 31, 2024 are as follows:

(In millions)

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CCF Investments

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

CCF cash and cash equivalents, and CCF investments are intended to fund milestone payments for the construction of three new Aloha Class 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, 2025 and December 31, 2024 is as follows:

Total Debt as of June 30, 2025 and December 31, 2024 is as follows:

(In millions)

Variable interest debt

Fixed interest debt

Variable interest debt - Revolving credit facility

Fixed interest debt - Title XI debt and private placement term loans

Total Debt (excluding deferred loan fees)

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.

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.

Total Debt decreased by $19.9 million during the six months ended June 30, 2025, compared to December 31, 2024, due to scheduled fixed interest debt repayments.

As described in Note 8 of Part 1, Item 1 above, on July 23, 2025, the Company entered into a Third Amended and Restated Credit Agreement which provides for a five-year revolving credit facility and $550 million in loan commitments, with an uncommitted $300 million increase option.

The Company reduced the size of its credit facility from $650 million to $550 million due to:

(i) the nearly fully-funded status of the new Aloha Class vessel build program;

and (ii) the Company’s expected lower level of capital needs for the remainder of the decade due in part to its next Jones Act build cycle which is not anticipated until the mid-2030s.

As of June 30, 2025, the Company had $643.9 million of remaining borrowing availability under the revolving credit facility .

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 :

Except as described below, during the six months ended June 30, 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 six months ended June 30, 2025, the Company paid $100.7 million in milestone payments under the vessel construction agreements, compared to $35.8 million for the six months ended June 30, 2024.

The following represents the estimated timing of future milestone payments under the vessel construction agreements as of June 30, 2025 :

Future Milestone Payments

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(in millions)

March 31, 2025

June 30, 2025

Three Aloha Class Containerships

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

The Company intends to use the CCF cash and cash equivalents, and CCF investments to fund future milestone progress payments for the construction of three new Aloha Class vessels.

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

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.

During the three and six months ended June 30, 2025, the Company repurchased approximately 0.9 million and 1.4 million shares for a total cost of $93.7 million and $162.9 million, respectively.

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 amount of shares repurchased by the Company during any period is dependent on the amount of available cash and cash equivalents, the Company’s stock price and other factors.

The maximum number of remaining shares that may be repurchased under the Company’s share repurchase program was approximately 2.5 million shares at June 30, 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 .

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

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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.

The Company’s second quarter 2025 cash dividend of $0.34 per share was paid on June 5, 2025.

On June 26, 2025, the Company’s Board of Directors declared a cash dividend of $0.36 per share payable on September 4, 2025 to shareholders of record on August 7, 2025.

New Accounting Pronouncements:

See Note 2 of Part I, Item 1 above for information on new accounting pronouncements.

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