HAWAII

001-34187

99-0032630

(State or Other Jurisdiction of
Incorporation)

(Commission File Number)

(I.R.S. Employer Identification
No.)

1411 Sand Island Parkway

Honolulu, Hawaii

96819

(Address of principal executive offices)

(zip code)

99.1

Press Release issued by Matson, Inc., dated May 3, 2017

99.2

Investor Presentation, dated May 3, 2017

MATSON, INC.

/s/ Joel M. Wine

Joel M. Wine

Senior Vice President and Chief Financial Officer

Dated: May 3, 2017

Investor Relations inquiries:

Media inquiries:

Jerome Holland

Keoni Wagner

Matson, Inc.

Matson, Inc.

510.628.4021

510.628.4534

jholland@matson.com

kwagner@matson.com

·

EPS of $0.16 versus $0.41 in 1Q16

·

Net Income of $7.0 million versus $18.1 million in 1Q16

·

EBITDA of $52.3 million versus $66.4 million in 1Q16 

·

Affirms Full Year 2017 Operating Income Outlook

Three Months Ended March 31, 

(Dollars in millions)

2017

2016

Change

Ocean Transportation revenue

$

370.0

$

366.1

$

3.9

1.1

%

Operating costs and expenses

(355.5)

(333.1)

(22.4)

6.7

%

Operating income

$

14.5

$

33.0

$

(18.5)

(56.1)

%

Operating income margin

3.9

%  

9.0

%  

Volume (Forty-foot equivalent units (FEU) except for automobiles) (1)

Hawaii containers

36,400

38,500

(2,100)

(5.5)

%

Hawaii automobiles

13,800

17,300

(3,500)

(20.2)

%

Alaska containers

15,800

16,500

(700)

(4.2)

%

China containers

15,300

12,400

2,900

23.4

%

Guam containers

5,400

5,800

(400)

(6.9)

%

Micronesia/South Pacific containers

2,100

2,100

 —

 —

%

(1)

Approximate volumes included for the period are based on the voyage departure date, but revenue and operating income are adjusted to reflect the percentage of revenue and operating income earned during the reporting period for voyages in transit at the end of each reporting period.

Three Months Ended March 31, 

(Dollars in millions)

2017

2016

Change

Logistics Revenue (1)

$

104.4

$

88.1

$

16.3

18.5

%

Operating costs and expenses (1)

(102.5)

(86.5)

(16.0)

18.5

%

Operating income (1)

$

1.9

$

1.6

$

0.3

18.8

%

Operating income margin (1)

1.8

%

1.8

%

(1)

Logistics operating results include Span Alaska operating results from the date of acquisition on August 4, 2016.

Date of Conference Call:  

Wednesday, May 3, 2017

Scheduled Time:

4:30 p.m. EDT / 1:30 p.m. PDT / 10:30 a.m. HST

Participant Toll Free Dial In #:  

1-877-312-5524

International Dial In #:

1-253-237-1144

Three Months Ended

March 31, 

(In millions, except per-share amounts)

2017

2016

Operating Revenue:

Ocean Transportation

$

370.0

$

366.1

Logistics

104.4

88.1

Total Operating Revenue

474.4

454.2

Costs and Expenses:

Operating costs

(412.2)

(376.4)

Equity in income of related party Terminal Joint Venture

4.9

2.6

Selling, general and administrative

(50.7)

(45.8)

Total Costs and Expenses

(458.0)

(419.6)

Operating Income

16.4

34.6

Interest expense

(6.3)

(4.9)

Income before Income Taxes

10.1

29.7

Income tax expense

(3.1)

(11.6)

Net Income

$

7.0

$

18.1

Basic Earnings Per-Share:

$

0.16

$

0.42

Diluted Earnings Per-Share:

$

0.16

$

0.41

Weighted Average Number of Shares Outstanding:

Basic

43.0

43.4

Diluted

43.4

43.8

Cash Dividends Per-Share

$

0.19

$

0.18

March 31, 

December 31, 

(In millions)

2017

2016

ASSETS

Current Assets:

Cash and cash equivalents

$

19.5

$

13.9

Other current assets

268.0

260.3

Total current assets

287.5

274.2

Long-term Assets:

Investment in related party Terminal Joint Venture

87.3

82.4

Property and equipment, net

950.8

949.2

Goodwill

323.7

323.7

Intangible assets, net

233.7

236.6

Capital Construction Fund - cash on deposit

31.2

31.2

Other long-term assets

120.2

118.2

Total long-term assets

1,746.9

1,741.3

Total assets

$

2,034.4

$

2,015.5

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities:

Current portion of debt

$

31.6

$

31.8

Other current liabilities

229.7

247.4

Total current liabilities

261.3

279.2

Long-term Liabilities:

Long-term debt

748.7

707.1

Deferred income taxes

352.2

348.8

Other long-term liabilities

206.1

208.9

Total long-term liabilities

1,307.0

1,264.8

Total shareholders’ equity

466.1

471.5

Total liabilities and shareholders’ equity

$

2,034.4

$

2,015.5

Three Months Ended March 31, 

2017

2016

Cash Flows From Operating Activities:

Net income

$

7.0

$

18.1

Reconciling adjustments:

Depreciation and amortization

24.6

23.8

Deferred income taxes

2.9

3.0

Share-based compensation expense

2.6

2.8

Equity in income of related party Terminal Joint Venture

(4.9)

(2.6)

Other

(2.6)

(1.6)

Changes in assets and liabilities:

Accounts receivable, net

(8.4)

2.6

Deferred dry-docking payments

(15.1)

(13.2)

Deferred dry-docking amortization

11.5

8.1

Prepaid expenses and other assets

(1.1)

7.7

Accounts payable, accruals and other liabilities

(13.3)

(29.3)

Other long-term liabilities

0.8

0.4

Net cash provided by operating activities

4.0

19.8

Cash Flows From Investing Activities:

Capital expenditures

(22.9)

(30.6)

Capitalized vessel construction expenditures

(1.3)

 —

Proceeds from disposal of property and equipment

 —

0.5

Cash deposits into Capital Construction Fund

 —

(12.5)

Net cash used in investing activities

(24.2)

(42.6)

Cash Flows From Financing Activities:

Repayments of debt and capital leases

(2.6)

(2.7)

Proceeds from revolving credit facility

100.0

97.0

Repayments of revolving credit facility

(56.0)

(43.0)

Proceeds from issuance of capital stock

0.4

0.8

Dividends paid

(8.3)

(7.9)

Repurchase of Matson common stock

(0.7)

(20.8)

Tax withholding related to net share settlements of restricted stock units

(7.1)

(6.1)

Other

0.1

0.1

Net cash provided by financing activities

25.8

17.4

Net Increase (Decrease) in Cash and Cash Equivalents

5.6

(5.4)

Cash and Cash Equivalents, Beginning of the Period

13.9

25.5

Cash and Cash Equivalents, End of the Period

$

19.5

$

20.1

Supplemental Cash Flow Information:

Interest paid, net of capitalized interest

$

6.5

$

4.2

Income tax paid (refund)

$

0.4

$

(0.1)

Non-cash Information:

Capital expenditures included in accounts payable, accruals and other liabilities

$

2.4

$

2.1

March 31, 

(In millions)

2017

Total Debt:

$

780.3

Less:   Cash and cash equivalents

(19.5)

Capital Construction Fund - cash on deposit

(31.2)

Net Debt

$

729.6

Three Months Ended

March 31, 

Last Twelve

(In millions)

2017

2016

Change

Months

Net Income

$

7.0

$

18.1

$

(11.1)

$

69.4

Add:    Income tax expense

3.1

11.6

(8.5)

40.1

Add:    Interest expense

6.3

4.9

1.4

25.5

Add:    Depreciation and amortization

24.4

23.7

0.7

97.2

Add:    Dry-dock amortization

11.5

8.1

3.4

42.3

EBITDA (1)

$

52.3

$

66.4

$

(14.1)

$

274.5

(1)

EBITDA is defined as the sum of net income, less income or loss from discontinued operations, plus income tax expense, interest expense and depreciation and amortization (including deferred dry-docking amortization).  EBITDA should not be considered as an alternative to net income (as determined in accordance with GAAP), as an indicator of our operating performance, or to cash flows from operating activities (as determined in accordance with GAAP) as a measure of liquidity.  Our calculation of EBITDA may not be comparable to EBITDA as calculated by other companies, nor is this calculation identical to the EBITDA used by our lenders to determine financial covenant compliance.

First Quarter 2017 Earnings Conference Call

Forward Looking Statements Statements made during this call and presentation that set forth expectations, predictions, projections or are about future events are based on facts and situations that are known to us as of today, May 3, 2017. We believe that our expectations and assumptions are reasonable. Actual results may differ materially, due to risks and uncertainties, such as those described on pages 11-18 of our 2016 Form 10-K filed on February 24, 2017, and other subsequent filings by Matson with the SEC. Statements made during this call and presentation are not guarantees of future performance. We do not undertake any obligation to update our forward-looking statements.

Opening Remarks Matson’s core Ocean Transportation businesses performed largely as expected in 1Q2017, declining YOY Timing of fuel surcharge collections Lower volume in Hawaii, Alaska and Guam Higher vessel operating expenses related to the deployment of additional vessel in Hawaii Matson’s Logistics business came in lower than expected in 1Q2017 Market softness in both transportation brokerage and freight forwarding Affirming full year 2017 outlook Expect modest improvement in our core tradelanes with the exception of Guam Expect 2017 EBITDA to approximate the $288.6 million generated in 2016 Expect Matson’s 2017 operating income to be lower than 2016

Net Income, EBITDA, EPS – 1Q 2017 See the Addendum for a reconciliation of GAAP to non-GAAP for Financial Metrics

Hawaii Service First Quarter 2017 Performance Modest westbound market growth Container volume declined YOY 1Q16 benefitted from volume gains related to competitor fleet deployment changes and service issues 2017 Outlook Expect modest market growth, a stable market position, and volume to approximate 2016 level Expect higher than normal operating costs related to the once every five-years dry-docking of neighbor island barges Competitor Service Issues

Hawaii Economic Indicators Indicator (% Change YOY) 2014 2015 2016 2017F 2018F Real Gross Domestic Product 1.1 3.9 2.5 2.0 1.7 Visitor Arrivals 2.4 4.5 3.1 2.2 1.1 Construction Jobs 3.5 9.0 7.3 2.0 1.6 Unemployment Rate (%) 4.4 3.6 3.2 2.9 3.0 Residential Building Permits (9.8) 59.3 (13.9) 3.7 8.4 Non-Residential Building Permits 28.8 (5.6) (23.9) 29.9 3.8 Source: UHERO: University of Hawaii Economic Research Organization; STATE FORECAST UPDATE, March 3, 2017, http://www.uhero.hawaii.edu Hawaii economy continues to perform well: visitor arrivals are up, unemployment is down, and construction is steady The multi-year construction ramp-up has eased, but remains active with a pipeline to support employment near current levels for the next several years As condo development ebbs, new home building on Oahu expected to begin to shift to single-family developments in West Oahu, Ho’opili and Koa Ridge Building on the Neighbor Islands has picked up recently, and while further growth is expected, it is anticipated to be well below the mid-2000s boom

China Expedited Service (CLX) First Quarter 2017 Performance Container volume up 23.4 percent YOY Increased demand for Matson’s expedited service Additional sailing due to vessel return to service from dry-docking 2017 Outlook Expect continued strong demand for Matson’s highly differentiated expedited service Expect modest average rate improvement YOY Source: Shanghai Shipping Exchange Hanjin files for bankruptcy

Guam Service 2017 Outlook Expect heightened competitive environment and lower volume Matson’s significant service advantage expected to remain at 5 days from Oakland and 8 days from LA/Long Beach First Quarter 2017 Performance Modestly lower volume due to competitive losses associated with APL’s U.S. flagged containership service Competitor improved service frequency to weekly in December 2016

Alaska Service 2017 Outlook Lower northbound freight volume due to ongoing economic contraction, partially offset by improved southbound seafood volume With scrubber installation complete, expect lower vessel operating and dry-dock relief expenses Overall, expect modest improvement in our Alaska trade First Quarter 2017 Performance Volume 4.2% lower YOY due to overall market weakness Continued economic contraction of Alaska’s energy-based economy Partially offset by more normal seafood harvest

SSAT Joint Venture First Quarter 2017 Performance Terminal joint venture contribution was $2.3 million higher YOY Primarily attributable to improved lift volume 2017 Outlook Expect FY2017 operating income contribution to approximate FY2016 Expect the launch of new global shipping alliances to create some adjustments between West Coast terminals Matson replacing APMT with SSAT as its Tacoma terminal operator by year end

Matson Logistics First Quarter 2017 Performance Included freight forwarding operations of Span Alaska for full quarter Impacted by economic contraction in Alaska Lower domestic intermodal and highway brokerage yields 2017 Outlook Expect full year 2017 operating income to be approximately $20 million Inclusion of Span Alaska for full year; business expected to be negatively impacted by ongoing recession in Alaska

1Q2017 Operating Income SSAT had a $4.9 million contribution in 1Q17 compared to a $2.6 million contribution in 1Q16 1Q16 1Q17 Change Revenue $366.1 $370.0 $3.9 Operating Income $33.0 $14.5 ($18.5) Oper. Income Margin 9.0% 3.9% 1Q16 1Q17 Change Revenue $88.1 $104.4 $16.3 Operating Income $1.6 $1.9 $0.3 Oper. Income Margin 1.8% 1.8% 1Q17 Consolidated Operating Income of $16.4 million versus $34.6 million in 1Q16

Cash Generation and Uses of Cash Does not include $3.8 million in other uses of cash Net of cash acquired (2) (1)

2017 Outlook Ocean Transportation operating income for 2017 is expected to be lower than the $141.3 million achieved in 2016 Primarily due to heightened competitive environment in Guam Logistics operating income for full year 2017 expected to be approximately $20 million Depreciation and amortization expense expected to be approximately $150 million (including approximately $50 million of dry-docking amortization) Approximately $15 million higher than 2016 primarily due to higher levels of maintenance capital and vessel dry-docking expenditures in 2016 and expected in 2017 As a result, expect 2017 EBITDA to approximate the $288.6 million achieved in 2016 Interest expense for full year 2017 expected to be approximately $25 million Effective tax rate for full year 2017 expected to be approximately 39 percent Second quarter 2017 Outlook: Ocean Transportation operating income expected to approximate the $33.9 million achieved in the second quarter 2016 Logistics operating income expected to approximately double the $2.2 million achieved in the second quarter 2016

Addendum

Addendum – Non-GAAP Measures Matson reports financial results in accordance with U.S. generally accepted accounting principles (“GAAP”). The Company also considers other non-GAAP measures to evaluate performance, make day-to-day operating decisions, help investors understand our ability to incur and service debt and to make capital expenditures, and to understand period-over-period operating results separate and apart from items that may, or could, have a disproportional positive or negative impact on results in any particular period. These non-GAAP measures include, but are not limited to, Earnings Before Interest, Depreciation and Amortization (“EBITDA”), and Net Debt/EBITDA. NET DEBT RECONCILIATION March 31, (In millions) 2017 Total Debt: $ 780.3 Less: Cash and cash equivalents (19.5) Capital Construction Fund - cash on deposit (31.2) Net Debt $ 729.6 EBITDA RECONCILIATION Three Months Ended March 31, Last Twelve (In millions) 2017 2016 Change Months Net Income $ 7.0 $ 18.1 $ (11.1) $ 69.4 Add: Income tax expense 3.1 11.6 (8.5) 40.1 Add: Interest expense 6.3 4.9 1.4 25.5 Add: Depreciation and amortization 24.4 23.7 0.7 97.2 Add: Dry - dock amortization 11.5 8.1 3.4 42.3 EBITDA (1) $ 52.3 $ 66.4 $ (14.1) $ 274.5 (1) EBITDA is defined as the sum of net income, less income or loss from discontinued operations, plus income tax expense, interest expense and depreciation and amortization (including deferred dry - docking amortization). EBITDA should not be considered as an alternative to net income (as determined in accordance with GAAP), as an indicator of our operating performance, or to cash flows from operating activities (as determined in accordance with GAAP) as a measure of liquidity. Our calculation of EBITDA may not be comparable to EBITDA as calculated by other companies, nor is this calculation identical to the EBITDA used by our lenders to determine financial covenant compliance .