Matson(MATX) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This part provides detailed unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) This section presents the unaudited condensed consolidated financial statements, including statements of income and comprehensive income, balance sheets, cash flows, and shareholders' equity, along with detailed notes explaining the company's business, accounting policies, segment information, and other financial disclosures Condensed Consolidated Statements of Income and Comprehensive Income This section presents the unaudited condensed consolidated statements of income and comprehensive income for the three and nine months ended September 30, 2021 and 2020 Three Months Ended September 30, 2021 vs. 2020 | Metric | 2021 (Millions) | 2020 (Millions) | Change (Millions) | Change (%) | | :---------------------- | :-------------- | :-------------- | :---------------- | :--------- | | Operating Revenue | $1,071.6 | $645.2 | $426.4 | 66.1% | | Operating Income | $377.9 | $98.4 | $279.5 | 284.0% | | Net Income | $283.2 | $70.9 | $212.3 | 299.4% | | Basic Earnings Per Share| $6.60 | $1.65 | $4.95 | 300.0% | | Diluted Earnings Per Share| $6.53 | $1.63 | $4.90 | 300.6% | Nine Months Ended September 30, 2021 vs. 2020 | Metric | 2021 (Millions) | 2020 (Millions) | Change (Millions) | Change (%) | | :---------------------- | :-------------- | :-------------- | :---------------- | :--------- | | Operating Revenue | $2,658.3 | $1,683.2 | $975.1 | 57.9% | | Operating Income | $712.0 | $162.6 | $549.4 | 337.9% | | Net Income | $532.9 | $107.5 | $425.4 | 395.7% | | Basic Earnings Per Share| $12.31 | $2.50 | $9.81 | 392.4% | | Diluted Earnings Per Share| $12.19 | $2.48 | $9.71 | 391.5% | Condensed Consolidated Balance Sheets This section presents the unaudited condensed consolidated balance sheets as of September 30, 2021, and December 31, 2020 As of September 30, 2021 vs. December 31, 2020 | Metric | Sep 30, 2021 (Millions) | Dec 31, 2020 (Millions) | Change (Millions) | | :-------------------------- | :---------------------- | :---------------------- | :---------------- | | Total Assets | $3,222.8 | $2,900.6 | $322.2 | | Total Current Assets | $481.7 | $305.9 | $175.8 | | Cash and cash equivalents | $75.9 | $14.4 | $61.5 | | Accounts receivable, net | $328.6 | $253.4 | $75.2 | | Total Liabilities | $1,878.0 | $1,939.4 | $(61.4) | | Total Current Liabilities | $547.3 | $511.5 | $35.8 | | Total Shareholders' Equity | $1,344.8 | $961.2 | $383.6 | Condensed Consolidated Statements of Cash Flows This section presents the unaudited condensed consolidated statements of cash flows for the nine months ended September 30, 2021 and 2020 Nine Months Ended September 30, 2021 vs. 2020 | Cash Flow Activity | 2021 (Millions) | 2020 (Millions) | Change (Millions) | | :----------------------------------- | :-------------- | :-------------- | :---------------- | | Net cash provided by operating activities | $583.3 | $270.8 | $312.5 | | Net cash used in investing activities | $(242.5) | $(95.6) | $(146.9) | | Net cash used in financing activities | $(279.3) | $(187.9) | $(91.4) | | Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | $61.5 | $(12.7) | $74.2 | | Cash, Cash Equivalents and Restricted Cash, End of the Period | $81.2 | $15.7 | $65.5 | Condensed Consolidated Statements of Shareholders' Equity This section presents the unaudited condensed consolidated statements of shareholders' equity for the nine months ended September 30, 2021 Shareholders' Equity Changes (Nine Months Ended September 30, 2021) | Component | Balance Dec 31, 2020 (Millions) | Net Income (Millions) | Other Comprehensive Income (Loss) (Millions) | Share-based Compensation (Millions) | Shares Issued/Withheld (Millions) | Dividends (Millions) | Shares Repurchased (Millions) | Balance Sep 30, 2021 (Millions) | | :-------------------------- | :------------------------------ | :-------------------- | :------------------------------------------- | :---------------------------------- | :-------------------------------- | :------------------- | :---------------------------- | :------------------------------ | | Common Stock (Shares) | 43.2 | — | — | — | 0.3 | — | (1.5) | 42.0 | | Stated Value | $32.4 | — | — | — | $0.2 | — | $(1.1) | $31.5 | | Additional Paid In Capital | $321.5 | — | — | $14.2 | $(14.6) | — | $(7.2) | $313.9 | | Accumulated Other Comprehensive Loss, net | $(50.8) | — | $(0.1) | — | — | — | — | $(50.9) | | Retained Earnings | $658.1 | $532.9 | — | — | $0.1 | $(33.4) | $(107.4) | $1,050.3 | | Total Shareholders' Equity| $961.2 | $532.9 | $(0.1) | $14.2 | $(14.3) | $(33.4) | $(115.7) | $1,344.8 | Notes to the Condensed Consolidated Financial Statements This section provides detailed explanatory notes to the condensed consolidated financial statements, covering business description, accounting policies, and specific financial disclosures 1. DESCRIPTION OF THE BUSINESS This note describes Matson, Inc.'s primary operating segments: Ocean Transportation and Logistics - Matson, Inc. operates two primary segments: Ocean Transportation and Logistics[18] - The Ocean Transportation segment provides ocean freight services to Hawaii, Alaska, Guam, Micronesia, China, and Japan, and includes a 35% ownership interest in SSA Terminals, LLC (SSAT)[19] - The Logistics segment offers asset-light services such as multimodal transportation brokerage, freight forwarding, warehousing, and supply chain management across North America[20] 2. SIGNIFICANT ACCOUNTING POLICIES This note outlines the company's significant accounting policies, including consolidation, equity method investments, and revenue recognition for various services - The condensed consolidated financial statements are unaudited and include wholly-owned subsidiaries, with significant investments like SSAT accounted for using the equity method[21][22] - Revenue recognition policies vary by service: Ocean Transportation services are recognized ratably over voyage duration, Terminal and other services as performed, Fuel sales upon delivery, and Logistics services (Transportation Brokerage, Freight Forwarding, Warehousing, Supply Chain Management) over transit time or as services are performed[29][38] Ocean Transportation Revenue (Millions) | Service Category | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Ocean Transportation services | $855.2 | $490.8 | $2,083.8 | $1,284.5 | | Terminal and other related services | $4.8 | $5.1 | $12.5 | $15.5 | | Fuel sales | $1.9 | $1.3 | $5.1 | $6.0 | | Vessel management and related services | $1.6 | $1.1 | $5.5 | $4.0 | | Total | $863.5 | $498.3 | $2,106.9 | $1,310.0 | Logistics Revenue (Millions) | Service Category | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Transportation Brokerage and Freight Forwarding services | $186.1 | $133.0 | $495.9 | $337.0 | | Warehouse and distribution services | $12.2 | $9.5 | $31.8 | $25.9 | | Supply chain management and other services | $9.8 | $4.4 | $23.7 | $10.3 | | Total | $208.1 | $146.9 | $551.4 | $373.2 | 3. REPORTABLE SEGMENTS This note details the financial performance of the Ocean Transportation and Logistics reportable segments - The Company's two reportable segments, Ocean Transportation and Logistics, are measured based on operating income[40] - Inter-segment revenues are eliminated, and the SSAT joint venture is aggregated into the Ocean Transportation segment[41][42] Reportable Segment Financial Information (Millions) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :---------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Operating Revenue: | | | | | | Ocean Transportation | $863.5 | $498.3 | $2,106.9 | $1,310.0 | | Logistics | $208.1 | $146.9 | $551.4 | $373.2 | | Total Operating Revenue | $1,071.6 | $645.2 | $2,658.3 | $1,683.2 | | Operating Income: | | | | | | Ocean Transportation | $361.9 | $86.5 | $677.0 | $136.7 | | Logistics | $16.0 | $11.9 | $35.0 | $25.9 | | Total Operating Income | $377.9 | $98.4 | $712.0 | $162.6 | 4. PROPERTY AND EQUIPMENT This note provides a breakdown of property and equipment, net, including vessels, containers, and terminal facilities Property and Equipment, Net (Millions) | Category | Sep 30, 2021 | Dec 31, 2020 | | :-------------------------- | :----------- | :----------- | | Vessels | $2,323.8 | $2,191.6 | | Containers and equipment | $611.7 | $572.3 | | Terminal facilities and other property | $120.2 | $119.8 | | Construction in progress | $52.7 | $28.6 | | Total Property and Equipment| $3,108.4 | $2,912.3 | | Less: Accumulated Depreciation | $(1,281.6) | $(1,222.4) | | Total Property and Equipment, net | $1,826.8 | $1,689.9 | 5. GOODWILL AND INTANGIBLES This note presents goodwill by segment and intangible assets, net, along with impairment considerations Goodwill by Segment (Millions) | Segment | Goodwill | | :------------------ | :------- | | Ocean Transportation| $222.6 | | Logistics | $105.2 | | Total | $327.8 | Intangible Assets, Net (Millions) | Category | Sep 30, 2021 | Dec 31, 2020 | | :-------------------------- | :----------- | :----------- | | Customer Relationships: | | | | Ocean Transportation | $140.6 | $140.6 | | Logistics | $90.1 | $90.1 | | Total | $230.7 | $230.7 | | Less: Accumulated Amortization | $(74.2) | $(66.0) | | Total Customer Relationships, net | $156.5 | $164.7 | | Trade name – Logistics | $27.3 | $27.3 | | Total Intangible Assets, net | $183.8 | $192.0 | - The Company concluded that an impairment triggering event for goodwill and intangible assets did not occur during the quarter ended September 30, 2021, based on market capitalization, future forecasts, and excess fair value over carrying value from 2020 annual tests[48] - However, future changes in economic conditions or assumptions could lead to impairment charges[49] 6. DEBT This note details the company's debt structure, including private placement term loans, Title XI debt, and revolving credit facility Total Debt (Millions) | Debt Type | Sep 30, 2021 | Dec 31, 2020 | | :-------------------------- | :----------- | :----------- | | Private Placement Term Loans| $302.3 | $309.3 | | Title XI Debt | $344.7 | $359.4 | | Revolving credit facility | $— | $71.8 | | Total Debt | $647.2 | $760.1 | | Less: Current portion | $(65.0) | $(59.2) | | Total Long-term Debt, net of deferred loan fees | $567.5 | $685.6 | - As of September 30, 2021, the Company had $641.9 million of remaining borrowing availability under its revolving credit facility, which matures on March 31, 2026[51][52] - All debt, except Title XI debt, was unsecured[52] Debt Maturities (Millions) as of September 30, 2021 | Year | Amount | | :---------------- | :----- | | Remainder of 2021 | $18.1 | | 2022 | $65.0 | | 2023 | $60.4 | | 2024 | $51.7 | | 2025 | $51.7 | | Thereafter | $400.3 | | Total Debt | $647.2 | 7. LEASES This note outlines lease costs and significant lease-related transactions, including the acquisition of a vessel Components of Lease Cost (Millions) | Lease Type | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Operating lease cost| $26.7 | $20.0 | $79.4 | $60.5 | | Short-term lease cost | $0.1 | $4.4 | $2.9 | $6.9 | | Variable lease cost | $0.1 | $0.2 | $0.5 | $0.6 | | Total lease cost| $26.9 | $24.6 | $82.8 | $68.0 | - On July 7, 2021, the Company terminated a Bareboat Charter Agreement for the vessel Maunalei for $95.8 million, acquiring the vessel and derecognizing related ROU assets and liabilities[54] - This was funded by cash on hand and revolving credit facility borrowings[54] 8. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) This note details changes in accumulated other comprehensive income (loss) components, including pension and post-retirement benefits Changes in Accumulated Other Comprehensive Income (Loss) (Millions) - Nine Months Ended September 30, 2021 | Component | Balance Dec 31, 2020 | Amortization of prior service cost | Amortization of net loss | Foreign currency exchange | Other adjustments | Balance Sep 30, 2021 | | :-------------------------- | :------------------- | :------------------------------- | :----------------------- | :------------------------ | :---------------- | :------------------- | | Pension Benefits | $(61.7) | $(1.3) | $2.9 | — | — | $(60.1) | | Post-retirement Benefits | $12.2 | $(2.0) | $0.5 | — | — | $10.7 | | Non-Qualified Plans | $(0.6) | $(0.1) | $0.1 | — | — | $(0.6) | | Other | $(0.7) | — | — | $(0.4) | $0.2 | $(0.9) | | Total | $(50.8) | $(3.4) | $3.5 | $(0.4) | $0.2 | $(50.9) | 9. FAIR VALUE OF FINANCIAL INSTRUMENTS This note describes the fair value measurements of financial instruments, categorized by Level 1 and Level 2 inputs - The Company values financial instruments using a fair value hierarchy: Level 1 for cash, cash equivalents, and restricted cash (unadjusted quoted prices in active markets); Level 2 for variable and fixed rate debt (quoted prices for similar assets/liabilities or observable inputs)[58][59] Fair Value Measurements (Millions) as of September 30, 2021 | Instrument | Carrying Value | Total Fair Value | Level 1 (Active Markets) | Level 2 (Observable Inputs) | Level 3 (Unobservable Inputs) | | :---------------------- | :------------- | :--------------- | :----------------------- | :-------------------------- | :---------------------------- | | Cash and cash equivalents | $75.9 | $75.9 | $75.9 | $— | $— | | Restricted cash | $5.3 | $5.3 | $5.3 | $— | $— | | Variable rate debt | $— | $— | $— | $— | $— | | Fixed rate debt | $647.2 | $636.0 | $— | $636.0 | $— | Fair Value Measurements (Millions) as of December 31, 2020 | Instrument | Carrying Value | Total Fair Value | Level 1 (Active Markets) | Level 2 (Observable Inputs) | Level 3 (Unobservable Inputs) | | :---------------------- | :------------- | :--------------- | :----------------------- | :-------------------------- | :---------------------------- | | Cash and cash equivalents | $14.4 | $14.4 | $14.4 | $— | $— | | Restricted cash | $5.3 | $5.3 | $5.3 | $— | $— | | Variable rate debt | $71.8 | $71.8 | $— | $71.8 | $— | | Fixed rate debt | $688.3 | $686.7 | $— | $686.7 | $— | 10. EARNINGS PER SHARE This note provides basic and diluted earnings per share calculations for the reported periods Earnings Per Share (EPS) (Millions, except per share amounts) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Income | $283.2 | $70.9 | $532.9 | $107.5 | | Basic Weighted Average Common Shares Outstanding | 42.9 | 43.1 | 43.3 | 43.0 | | Basic EPS | $6.60 | $1.65 | $12.31 | $2.50 | | Diluted Weighted Average Common Shares Outstanding | 43.4 | 43.5 | 43.7 | 43.4 | | Diluted EPS | $6.53 | $1.63 | $12.19 | $2.48 | 11. SHARE-BASED COMPENSATION This note details share-based compensation costs and unrecognized compensation expenses Share-Based Compensation Cost (Millions) | Period | 2021 | 2020 | | :-------------------------- | :----- | :----- | | Three Months Ended Sep 30 | $4.7 | $5.9 | | Nine Months Ended Sep 30 | $14.2 | $12.0 | Unrecognized Compensation Cost | As of Sep 30, 2021 | Amount (Millions) | Weighted Average Period (Years) | | :----------------- | :---------------- | :------------------------------ | | Total | $25.8 | 1.7 | 12. PENSION AND POST-RETIREMENT PLANS This note presents the net periodic benefit cost for pension and post-retirement plans Net Periodic Benefit Cost (Benefit) (Millions) | Component | Pension Benefits (3 Months Ended Sep 30, 2021) | Pension Benefits (3 Months Ended Sep 30, 2020) | Post-retirement Benefits (3 Months Ended Sep 30, 2021) | Post-retirement Benefits (3 Months Ended Sep 30, 2020) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | :----------------------------------------------------- | :----------------------------------------------------- | | Service cost | $1.3 | $1.3 | $0.2 | $0.1 | | Interest cost | $1.4 | $2.1 | $0.1 | $0.2 | | Expected return on plan assets | $(3.5) | $(3.9) | $— | $— | | Amortization of net loss | $1.3 | $0.5 | $0.1 | $0.1 | | Amortization of prior service credit | $(0.6) | $(0.6) | $(0.9) | $(1.0) | | Net periodic benefit cost (benefit) | $(0.1) | $(0.6) | $(0.5) | $(0.6) | | Component | Pension Benefits (9 Months Ended Sep 30, 2021) | Pension Benefits (9 Months Ended Sep 30, 2020) | Post-retirement Benefits (9 Months Ended Sep 30, 2021) | Post-retirement Benefits (9 Months Ended Sep 30, 2020) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | :----------------------------------------------------- | :----------------------------------------------------- | | Service cost | $3.6 | $3.8 | $0.5 | $0.4 | | Interest cost | $4.6 | $5.9 | $0.5 | $0.6 | | Expected return on plan assets | $(10.8) | $(10.4) | $— | $— | | Amortization of net loss | $3.8 | $3.4 | $0.7 | $0.4 | | Amortization of prior service credit | $(1.7) | $(1.8) | $(2.7) | $(2.8) | | Net periodic benefit cost (benefit) | $(0.5) | $0.9 | $(1.0) | $(1.4) | ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the Company's financial condition, results of operations, and liquidity, offering insights into period-over-period changes, key drivers, and the impact of accounting principles. It also includes forward-looking statements, an overview of business conditions, and details on consolidated and segment-specific financial performance FORWARD-LOOKING STATEMENTS This section highlights the inherent uncertainties and risks associated with forward-looking statements in the report - The report contains forward-looking statements subject to numerous assumptions, risks, and uncertainties, including those described in the Company's Annual Report on Form 10-K[69][71] - The Company does not undertake any obligation to update these statements, and actual results may differ materially from expectations[71] OVERVIEW This section provides an overview of the Management's Discussion and Analysis, emphasizing its purpose and context - Management's Discussion and Analysis (MD&A) aims to explain the Company's financial condition, results of operations, and liquidity, and should be read in conjunction with the Condensed Consolidated Financial Statements and the Annual Report on Form 10-K[72] THIRD QUARTER 2021 DISCUSSION AND UPDATE ON BUSINESS CONDITIONS This section discusses business conditions and performance updates for the third quarter of 2021, including segment-specific volume and income changes - Ocean Transportation saw significant volume increases in Q3 2021: Hawaii container volume rose 11.5% due to tourism rebound, China container volume increased 21.7% driven by CCX service and an extra loader, Guam container volume grew 14.6% from higher retail demand, and Alaska container volume was up 10.7% due to the Alaska-Asia Express and higher northbound volume[73][74][75][76] - Supply chain congestion in the Transpacific tradelane is expected to continue through mid-2022[76] - The SSAT joint venture contributed $13.0 million in Q3 2021, a $5.3 million increase year-over-year, primarily due to higher lift volume[77] - The Logistics segment's operating income increased by $4.1 million to $16.0 million, driven by higher contributions from supply chain management and transportation brokerage[78] CONSOLIDATED RESULTS OF OPERATIONS This section analyzes the company's consolidated financial performance, including revenue, operating income, and net income for the reported periods Three months ended September 30, 2021 compared with 2020 This section compares consolidated financial results for the three months ended September 30, 2021, against the prior year Consolidated Results (Millions, except per share amounts) - Three Months Ended September 30 | Metric | 2021 | 2020 | Change | Change % | | :-------------------------- | :----- | :----- | :----- | :------- | | Operating revenue | $1,071.6 | $645.2 | $426.4 | 66.1% | | Operating costs and expenses| $(693.7) | $(546.8) | $(146.9) | 26.9% | | Operating income | $377.9 | $98.4 | $279.5 | 284.0% | | Interest expense | $(5.1) | $(5.7) | $0.6 | (10.5)% | | Income before income taxes | $374.6 | $95.1 | $279.5 | 293.9% | | Income taxes | $(91.4) | $(24.2) | $(67.2) | 277.7% | | Net income | $283.2 | $70.9 | $212.3 | 299.4% | | Basic earnings per share | $6.60 | $1.65 | $4.95 | 300.0% | | Diluted earnings per share | $6.53 | $1.63 | $4.90 | 300.6% | - Interest expense decreased due to lower outstanding debt[80] - The effective tax rate for Q3 2021 was 24.4%, lower than 25.4% in Q3 2020, primarily due to the impact of state taxes[81] Nine months ended September 30, 2021 compared with 2020 This section compares consolidated financial results for the nine months ended September 30, 2021, against the prior year Consolidated Results (Millions, except per share amounts) - Nine Months Ended September 30 | Metric | 2021 | 2020 | Change | Change % | | :-------------------------- | :------- | :------- | :------- | :------- | | Operating revenue | $2,658.3 | $1,683.2 | $975.1 | 57.9% | | Operating costs and expenses| $(1,946.3) | $(1,520.6) | $(425.7) | 28.0% | | Operating income | $712.0 | $162.6 | $549.4 | 337.9% | | Interest expense | $(17.9) | $(22.5) | $4.6 | (20.4)% | | Income before income taxes | $698.8 | $144.6 | $554.2 | 383.3% | | Income taxes | $(165.9) | $(37.1) | $(128.8) | 347.2% | | Net income | $532.9 | $107.5 | $425.4 | 395.7% | | Basic earnings per share | $12.31 | $2.50 | $9.81 | 392.4% | | Diluted earnings per share | $12.19 | $2.48 | $9.71 | 391.5% | - Interest expense decreased due to lower outstanding debt[84] - The effective tax rate for the nine months ended September 30, 2021, was 23.7%, lower than 25.7% in the prior year, benefiting from discrete adjustments related to the release of valuation allowance against foreign income tax net operating losses and stock compensation[85] ANALYSIS OF OPERATING REVENUE AND INCOME BY SEGMENT This section provides a detailed analysis of operating revenue and income for the Ocean Transportation and Logistics segments Ocean Transportation Operating Results - Three months ended September 30, 2021 compared with 2020 This section compares Ocean Transportation segment operating results for the three months ended September 30, 2021, against the prior year Ocean Transportation Operating Results (Millions, except FEU) - Three Months Ended September 30 | Metric | 2021 | 2020 | Change | Change % | | :-------------------------- | :----- | :----- | :----- | :------- | | Ocean Transportation revenue| $863.5 | $498.3 | $365.2 | 73.3% | | Operating costs and expenses| $(501.6) | $(411.8) | $(89.8) | 21.8% | | Operating income | $361.9 | $86.5 | $275.4 | 318.4% | | Operating income margin | 41.9% | 17.4% | | | | Hawaii containers (FEU) | 40,600 | 36,400 | 4,200 | 11.5% | | Alaska containers (FEU) | 21,800 | 19,700 | 2,100 | 10.7% | | China containers (FEU) | 46,500 | 38,200 | 8,300 | 21.7% | | Guam containers (FEU) | 5,500 | 4,800 | 700 | 14.6% | | Other containers (FEU) | 5,400 | 4,600 | 800 | 17.4% | - Ocean Transportation revenue increased primarily due to higher revenue in China, increased fuel-related surcharge revenue, and higher revenue in Hawaii and Alaska[88] - Operating income growth was mainly driven by a higher contribution from China[90] - The SSAT joint venture contributed $13.0 million, up from $7.7 million, due to higher lift volume[91][92] Ocean Transportation Operating Results - Nine months ended September 30, 2021 compared with 2020 This section compares Ocean Transportation segment operating results for the nine months ended September 30, 2021, against the prior year Ocean Transportation Operating Results (Millions, except FEU) - Nine Months Ended September 30 | Metric | 2021 | 2020 | Change | Change % | | :-------------------------- | :------- | :------- | :------- | :------- | | Ocean Transportation revenue| $2,106.9 | $1,310.0 | $796.9 | 60.8% | | Operating costs and expenses| $(1,429.9) | $(1,173.3) | $(256.6) | 21.9% | | Operating income | $677.0 | $136.7 | $540.3 | 395.2% | | Operating income margin | 32.1% | 10.4% | | | | Hawaii containers (FEU) | 116,100 | 108,100 | 8,000 | 7.4% | | Alaska containers (FEU) | 58,800 | 55,000 | 3,800 | 6.9% | | China containers (FEU) | 131,200 | 78,500 | 52,700 | 67.1% | | Guam containers (FEU) | 16,200 | 13,900 | 2,300 | 16.5% | | Other containers (FEU) | 14,600 | 12,600 | 2,000 | 15.9% | - Ocean Transportation revenue increased significantly due to higher revenue in China and Hawaii, increased fuel-related surcharge revenue, and higher revenue in Alaska[94] - China volume was 67.1% higher due to incremental CLX+ service, increased CLX capacity, and the addition of CCX service[95] - Operating income growth was primarily driven by the strong contribution from China[98] - The SSAT joint venture contributed $35.0 million, up from $15.4 million, due to higher lift volume[99] Logistics Operating Results: Three months ended September 30, 2021, compared with 2020 This section compares Logistics segment operating results for the three months ended September 30, 2021, against the prior year Logistics Operating Results (Millions) - Three Months Ended September 30 | Metric | 2021 | 2020 | Change | Change % | | :-------------------------- | :----- | :----- | :----- | :------- | | Logistics revenue | $208.1 | $146.9 | $61.2 | 41.7% | | Operating costs and expenses| $(192.1) | $(135.0) | $(57.1) | 42.3% | | Operating income | $16.0 | $11.9 | $4.1 | 34.5% | | Operating income margin | 7.7% | 8.1% | | | - Logistics revenue and operating income increased primarily due to higher transportation brokerage and supply chain management revenue and contributions[100][101] Logistics Operating Results: Nine months ended September 30, 2021, compared with 2020 This section compares Logistics segment operating results for the nine months ended September 30, 2021, against the prior year Logistics Operating Results (Millions) - Nine Months Ended September 30 | Metric | 2021 | 2020 | Change | Change % | | :-------------------------- | :----- | :----- | :----- | :------- | | Logistics revenue | $551.4 | $373.2 | $178.2 | 47.7% | | Operating costs and expenses| $(516.4) | $(347.3) | $(169.1) | 48.7% | | Operating income | $35.0 | $25.9 | $9.1 | 35.1% | | Operating income margin | 6.3% | 6.9% | | | - Logistics revenue and operating income increased significantly, driven by higher transportation brokerage, supply chain management, and freight forwarding revenue and contributions[102][103] LIQUIDITY AND CAPITAL RESOURCES This section discusses the company's liquidity position, capital resources, and cash flow activities Sources of liquidity This section identifies the primary sources of the company's liquidity, including cash and accounts receivable Sources of Liquidity (Millions) | Metric | Sep 30, 2021 | Dec 31, 2020 | Change | | :-------------------------- | :----------- | :----------- | :----- | | Cash and cash equivalents | $75.9 | $14.4 | $61.5 | | Restricted cash | $5.3 | $5.3 | $— | | Accounts receivable, net | $328.6 | $253.4 | $75.2 | Cash Flows From Operating, Investing, and Financing Activities This section analyzes the cash flows generated from or used in operating, investing, and financing activities Cash Flows (Millions) - Nine Months Ended September 30 | Activity | 2021 | 2020 | Change | | :----------------------------------- | :----- | :----- | :----- | | Net cash provided by operating activities | $583.3 | $270.8 | $312.5 | | Net cash used in investing activities | $(242.5) | $(95.6) | $(146.9) | | Net cash used in financing activities | $(279.3) | $(187.9) | $(91.4) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $61.5 | $(12.7) | $74.2 | - Operating cash flow increased significantly due to higher net income, partially offset by changes in working capital[107] - Investing activities used more cash primarily due to increased capital expenditures for containers, chassis, other terminal equipment, and the repurchase of the Maunalei vessel[109][110][111] - Financing activities used more cash due to common stock repurchases and higher tax withholding related to restricted stock units, despite lower net debt repayments[113] Debt This section provides details on the company's debt structure and changes in total debt Total Debt (Millions) | Debt Type | Sep 30, 2021 | Dec 31, 2020 | Change | | :-------------------------- | :----------- | :----------- | :------- | | Revolving credit facility | $— | $71.8 | $(71.8) | | Fixed interest debt | $647.2 | $688.3 | $(41.1) | | Total Debt | $647.2 | $760.1 | $(112.9) | - Total debt decreased by $112.9 million during the nine months ended September 30, 2021, driven by increased operating cash flow reducing revolving credit borrowings and scheduled repayments of fixed interest debt[114] - The Company had $641.9 million of remaining borrowing availability under its revolving credit facility[115] Working Capital This section discusses the company's working capital position and its management Working Capital Deficit (Millions) | As of | Amount | | :---------------- | :----- | | September 30, 2021| $(65.6) | | December 31, 2020 | $(205.6) | - The working capital deficit decreased from $205.6 million at December 31, 2020, to $65.6 million at September 30, 2021, primarily due to increased cash flow from operating activities[116] - The Company manages its working capital needs using its revolving credit facility[116] CONTRACTUAL OBLIGATIONS, COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET ARRANGEMENTS This section addresses contractual obligations, commitments, contingencies, and off-balance sheet arrangements - There were no material changes to contractual obligations, commitments, contingencies, and off-balance sheet arrangements during the quarter, except for the termination of a Bareboat Charter Operating Lease agreement for the vessel Maunalei on July 7, 2021[117][118] CRITICAL ACCOUNTING ESTIMATES This section confirms no changes to the company's critical accounting estimates during the quarter - There have been no changes to the Company's critical accounting estimates during this quarter, as discussed in its Annual Report on Form 10-K for the year ended December 31, 2020[119] OTHER MATTERS This section covers other significant matters, including dividends, share repurchases, and environmental goals - The Company paid a cash dividend of $0.30 per share on September 2, 2021, and declared another $0.30 per share payable on December 2, 2021[121] - From October 1 to November 2, 2021, Matson repurchased 0.4 million shares for $33.1 million, with approximately 1.1 million shares remaining on its repurchase program[122] - Matson announced short, medium, and long-term goals to significantly reduce greenhouse gas emissions[123] - Plans include installing LNG conversion equipment on the Daniel K. Inouye vessel (estimated $35 million, Q1 2023 start) and potentially on other vessels, and re-engining Manukai for dual-fuel operation (estimated $60 million)[123] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section states that there have been no material changes to the Company's market risk position since the information provided in its Annual Report on Form 10-K for the year ended December 31, 2020 - No material changes to the Company's market risk position were reported from the information provided in the Annual Report on Form 10-K for the year ended December 31, 2020[124] ITEM 4. CONTROLS AND PROCEDURES This section details the evaluation of the Company's disclosure controls and procedures, concluding their effectiveness, and discusses changes in internal control over financial reporting, specifically the implementation of new ERP financial modules Evaluation of Disclosure Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures - The Company's management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of September 30, 2021[125] Changes in Internal Control Over Financial Reporting This section discusses changes in internal control over financial reporting due to the implementation of new ERP financial modules - During Q2 2021, the Company implemented financial modules of a new ERP system, leading to automated, modified, or new internal controls over financial reporting[126] - Post-implementation monitoring is ongoing to ensure continued effectiveness[127] PART II. OTHER INFORMATION This part includes disclosures on legal proceedings, risk factors, equity security sales, defaults, mine safety, other information, exhibits, and signatures ITEM 1. LEGAL PROCEEDINGS This section addresses legal proceedings, including environmental matters and other legal actions, stating the Company's compliance and management's opinion on their immaterial effect on financial condition Environmental Matters This section discusses the company's compliance with environmental laws and disclosure thresholds for environmental proceedings - The Company believes it is in material compliance with applicable environmental laws and regulations and will disclose environmental proceedings resulting in monetary sanctions exceeding $1 million[129][130] Other Matters This section addresses other legal actions and management's assessment of their financial impact - Management believes other legal actions arising in the normal course of business would not materially affect the Company's financial condition, results of operations, or cash flows[131] ITEM 1A. RISK FACTORS This section states that there were no material changes to the Company's risk factors as described in its Annual Report on Form 10-K for the year ended December 31, 2020 - No material changes to the Company's risk factors were reported from the Annual Report on Form 10-K for the year ended December 31, 2020[132] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section provides a summary of common stock repurchases made under the Company's share repurchase program during the third quarter of 2021 Summary of Matson Shares Repurchased (Three Months Ended September 30, 2021) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Be Purchased Under the Plans or Programs | | :------------------ | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------- | :----------------------------------------------------------------------- | | July 1 – 31, 2021 | — | $— | — | — | | August 1 – 31, 2021 | 964,446 | $75.08 | 964,446 | 2,035,554 | | September 1 – 30, 2021 | 514,978 | $83.94 | 514,978 | 1,520,576 | | Total | 1,479,424 | $78.16 | 1,479,424 | | - On June 24, 2021, Matson's Board of Directors approved a share repurchase program of up to 3.0 million shares of common stock from August 3, 2021, through August 2, 2024[133] ITEM 3. DEFAULTS UPON SENIOR SECURITIES This section reports that there were no defaults upon senior securities during the period - No defaults upon senior securities were reported[134] ITEM 4. MINE SAFETY DISCLOSURES This section states that there are no mine safety disclosures to report - No mine safety disclosures were reported[135] ITEM 5. OTHER INFORMATION This section indicates that there is no other information to report - No other information was reported[136] ITEM 6. EXHIBITS This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including certifications and XBRL-related documents - Exhibits filed include the Amended and Restated Matson, Inc. 2016 Incentive Compensation Plan, CEO and CFO certifications (pursuant to Rule 13a-14(a) or 15d-14(a) and 18 U.S.C. Section 1350), and various XBRL documents[138] SIGNATURES This section contains the signatures of the authorized officers, Joel M. Wine (Executive Vice President and Chief Financial Officer) and Kevin L. Stuck (Vice President and Controller), certifying the report - The report is signed by Joel M. Wine, Executive Vice President and Chief Financial Officer, and Kevin L. Stuck, Vice President and Controller, on November 4, 2021[140][141]