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
Except for historical information, the statements made in this Quarterly Report
on Form 10-Q are forward-looking statements made pursuant to the safe-harbor
provisions of the Private Security Litigation Reform Act of 1995. Such
forward-looking statements may be contained in, among other things, SEC filings,
such as reports on Forms 10-K, 10-Q and 8-K, the Annual Report to Shareholders,
press releases made by the Company, the Company's Internet Websites (including
Websites of its subsidiaries), and oral statements made by officers of the
Company.
This report, and other statements that the Company may make, may contain
forward-looking statements with respect to the Company's future financial,
business or environmental, social and governance performance, strategies or
expectations. Forward-looking statements are typically identified by words or
phrases such as "trend," "potential," "opportunity," "pipeline," "believe,"
"comfortable," "expect," "anticipate," "current," "intention," "estimate,"
"position," "assume," "outlook," "continue," "remain," "maintain," "sustain,"
"seek," "achieve," "design," "goal," "plan," or similar expressions, or future
or conditional verbs such as "will," "would," "should," "could," "may" or
similar expressions.
The Company cautions that forward-looking statements are subject to numerous
assumptions, risks and uncertainties, which change over time, including, but not
limited to, the risk factors that are described in Part I, Item 1A, "Risk
Factors" of Matson's Annual Report on Form 10-K for the year ended December 31,
2021. Forward-looking statements speak only as of the date they are made, and
the Company assumes no duty to and does not undertake any obligation to update
forward-looking statements. Actual results could differ materially from those
anticipated in forward-looking statements and future results could differ
materially from historical performance.
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 affect
the Company's Condensed Consolidated Financial Statements. MD&A is provided as a
supplement to the Condensed Consolidated Financial Statements and notes herein,
and should be read in conjunction with the Company's Annual Report on
Form 10-K for the year ended December 31, 2021 , the Company's reports on Forms
10-Q and 8-K, and other publicly available information.
FIRST QUARTER 2022 DISCUSSION AND UPDATE ON BUSINESS CONDITIONS
Ocean Transportation: The Company's container volume in the Hawaii service in
the first quarter 2022 was 0.6 percent lower year-over-year. The decrease was
primarily due to lower eastbound volume. During the quarter, we continued to see
elevated hospitality-related demand as a result of strong domestic tourist
arrivals and modest improvement in international visitor traffic. In the
near-term, we are cautiously optimistic on further economic recovery in Hawaii
in 2022. The positive trends include further improvement in the unemployment
rate and increasing tourism traffic, including meaningful international visitor
traffic later in the year, but incremental waves of COVID-19 variants present
the possibility of further economic slowdowns and the loss of federal stimulus
coupled with inflation and higher interest rates may impact discretionary
income.
In China, the Company's container volume in the first quarter 2022 increased
13.4 percent year-over-year. The increase was a result of five more eastbound
voyages than the prior year. Volume demand in the quarter was driven by
e-commerce, garments and other goods. Matson continued to realize a significant
rate premium over the Shanghai Containerized Freight Index in the first quarter
2022 and achieved average freight rates that were considerably higher
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than in the year ago period. Currently in the Transpacific tradelane, we are
seeing supply chain challenges in China, primarily due to actions to mitigate
the spread of COVID-19, as well as continued supply chain constraints and
congestion on the U.S. West Coast, elevated consumption trends, and inventory
restocking. Despite the near-term uncertainty presented by the supply chain
challenges in China, we expect a combination of the current supply and demand
factors to remain largely in place through at least the October peak season and
continue to expect elevated demand for our China service for most of this year.
In Guam, the Company's container volume in the first quarter 2022 increased
10.0 percent year-over-year primarily due to higher retail-related demand. In
the near-term, we are cautiously optimistic on further economic growth in Guam
as tourism traffic improves as the year progresses.
In Alaska, the Company's container volume for the first quarter 2022 increased
20.2 percent year-over-year primarily due to (i) the increase in volume from the
Alaska-Asia Express ("AAX"), (ii) higher northbound volume primarily due to
higher retail-related demand and volume related to a competitor's dry-docking
and (iii) higher southbound volume primarily due to higher seafood volume. In
the near-term, we expect improving economic trends in Alaska, but the recovery's
trajectory continues to remain uncertain.
The contribution in the first quarter 2022 from the Company's SSAT joint venture
investment was $34.0 million, or $24.8 million higher than the first quarter
2021. The increase was primarily driven by higher other terminal revenue.
Logistics: In the first quarter 2022, operating income for the Company's
Logistics segment was $16.4 million, or $10.3 million higher compared to the
level achieved in the first quarter 2021. The increase was due primarily to
higher contributions from all services as we continued to see elevated goods
consumption, inventory restocking and favorable supply and demand fundamentals
in our core markets.
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