February 7, 2013

Matson, Inc. Announces Fourth Quarter 2012 EPS Of $0.36, Full Year EPS Of $1.08 And Comments On 2013 Outlook

- Increased Guam volume sustained amid an improved China rate environment during quarter
- Diluted EPS from Continuing Operations of $1.22 in 2012, up 11.9% versus $1.09 in 2011
- Ocean transportation operating income up 31.1% for the full year, 113.6% for the quarter
- 2012 EBITDA of $168.8 million; operating income of $96.7 million
- Further operating margin improvements expected in 2013

HONOLULU, Feb. 7, 2013 /PRNewswire/ -- Matson, Inc. ("Matson" or the "Company") (NYSE: MATX), a leading U.S. carrier in the Pacific, today reported net income of $15.6 million, or $0.36 per diluted share for the fourth quarter ended December 31, 2012[1]. Net income for the fourth quarter ended December 31, 2011 was $1.6 million, or $0.04 per diluted share. Consolidated revenue for the fourth quarter 2012 was $398.3 million compared with $374.9 million reported for the fourth quarter 2011.

(Logo: http://photos.prnewswire.com/prnh/20120605/SF19690LOGO)

For the full year 2012, Matson reported net income of $45.9 million, or $1.08 per diluted share compared with $34.2 million or $0.81 per diluted share in 2011. Consolidated revenue for the full year 2012 was $1,560.0 million, compared with $1,462.6 million in 2011.  

Matt Cox, Matson's President and Chief Executive Officer commented, "Continued strong Guam volume and an improved rate environment in our expedited China service led to a solid fourth quarter.  For the year, these same factors, and continuing volume strength out of China resulted in a satisfactory performance. Yet we believe we can do better."

Cox continued, "Looking into 2013, we expect mixed results in our ocean transportation trade lanes as compared to 2012, but on balance we expect to improve operating margins. Likewise, we expect margins in our logistics group to improve. These gains, and the cash flow generated, will allow us to support a strong dividend, maintain an investment grade credit standing and provide capacity for future vessel replacement and growth investments."

Operating income was $23.9 million for the fourth quarter 2012, compared to $11.8 million for fourth quarter 2011. Operating income for the full year 2012 was $96.7 million compared with $78.6 million in 2011. Earnings per diluted share from Continuing Operations were $0.36 and $0.16 for the fourth quarters of 2012 and 2011, respectively.

2012 Discussion and 2013 Business Outlook

Ocean Transportation: In the fourth quarter and throughout 2012, Hawaii container and auto volume was adversely impacted by subdued construction activity, competitive rate pressures, a modest market contraction resulting from direct foreign sourcing of cargo and the timing of automobile rental fleet replacements. However, there have been encouraging indications that the Hawaii economy is reviving, evidenced by strong fourth quarter 2012 consumer spending and a marginal uptick in construction activity late in the year. Therefore, modest volume gains are expected in the Hawaii trade in 2013.

In the China trade, freight rates in the fourth quarter of 2012 continued to be higher than year earlier periods, reflecting an improved general rate environment. However, additional capacity is expected to enter this market in 2013 that will outstrip demand. While continued carrier restraint is expected to some degree, average annual freight rates are expected to erode modestly for Matson. Further, the Company expects to run its ships at less than full capacity during the traditional slack season but return to historical high utilization levels for the balance of 2013.

During the fourth quarter and throughout 2012, the Company benefitted significantly from strong volume in its Guam trade, which resulted from the departure of a major competitor the prior year. The timing and probability of a new competitor entering this market is unknown; however, overall market volume growth and economic growth in Guam during 2012 was muted.   Slow, if any, overall growth in Guam is expected to continue in 2013; and therefore, Matson's volumes in 2013 are expected to be relatively flat compared to 2012 levels.

Results for SSAT, the Company's terminal operations joint venture, were negatively affected throughout 2012 by significantly reduced lift volume due to customer losses. This customer attrition is expected to negatively impact results throughout 2013 and it is therefore expected that SSAT will operate at a breakeven level.

In addition to the trade lane outlook, the Company expects to benefit from operating a nine-ship fleet for most of 2013 and lower outside transportation costs, both of which result from a lighter dry-dock schedule. Overall, operating income in the Ocean Transportation segment is therefore expected to improve modestly from 2012 levels. 

Logistics: In the fourth quarter and throughout 2012, volume and pricing in Logistics' intermodal and highway businesses were mixed. In the fourth quarter, the segment incurred significant one-time, non-cash losses associated with its Northern California warehousing operation, which resulted from consolidating warehouse space and recognizing the impairment of an intangible asset. As a result, Logistics performance was below long-term expectations. In response, the Company has taken cost-cutting measures to lower Logistics' general and corporate overhead and initiated the roll-out of a domestic 53-foot container pilot program to improve profitability. Warehouse operations are expected to improve as a result of the consolidation. Therefore, Logistics is expected to improve its operating income margins to 1-2 percent of revenues in 2013 and overall operating income is expected to return to a level similar to 2011.

Other: The Company expects capital expenditures for 2013 to be $40-$50 million, excluding vessel replacement capital expenditures. Further, the Company may elect to make deposits to the Capital Construction Fund if it is able to finalize its vessel replacement plan. These deposits could be significant and will have the effect of reducing the Company's current cash tax liabilities.

By Segment

Ocean Transportation — Three months ended December 31, 2012 compared with 2011






Three Months Ended December 31

(Dollars in millions)


2012



2011


Change

Revenue


$

303.7



$

282.1


7.7%


Operating income1


$

26.7



$

12.5


113.6%


Operating income margin



8.8%




4.4%




Volume (units)2











Hawaii containers



35,100




35,000


0.3%


Hawaii automobiles



18,800




19,700


(4.6%)


China containers



14,000




15,800


(11.4%)


Guam containers



6,500




5,100


27.5%


 

1.

The Company incurred additional costs related to the shutdown of CLX2 that did not meet the criteria to be classified as discontinued operations of approximately $1.0 million for the three months ended December 31, 2011 and therefore reduced operating income by that amount. Costs related to the shutdown of CLX2 included in Income from Continuing Operations during the three months ended December 31, 2012 were immaterial.

 

2.

Approximate container 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 that straddle the beginning or end of each reporting period.

 

Ocean transportation revenue increased $21.6 million, or 7.7 percent, during the three months ended December 31, 2012 compared with the three months ended December 31, 2011. The increase was due principally to significantly higher volume in the Guam trade and an increase in China trade freight rates, partially offset by lower volume in the China trade.

Container volume increased in the Hawaii and Guam trade lanes in the three months ended December 31, 2012 compared with the three months ended December 31, 2011: Hawaii container volume increased 0.3 percent due principally to a modest increase in demand; Guam volume increased by 27.5 percent due to gains related to the departure of a major competitor from the trade in mid-November 2011. Hawaii automobile volume decreased 4.6 percent due primarily to the timing of automobile rental fleet replacement. China container volume decreased 11.4 percent due primarily to a sailing scheduled for 2012 that was delayed and fell into early January 2013.

Ocean transportation operating income increased $14.2 million, or 113.6 percent, during the three months ended December 31, 2012 compared with the three months ended December 31, 2011. The significant increase in operating income was principally due to increased freight rates in the China trade, significantly higher volume in the Guam trade and improvements in vessel operating expenses and overhead, partially offset by higher outside transportation costs, higher general and administrative expenses and increased costs related to vessel and barge dry-docking. 

The Company's SSAT joint venture contributed $0.1 million to operating income during the fourth quarter ended December 31, 2012 compared with $1.8 million during the fourth quarter ended December 31, 2011. The decline was primarily due to the loss of volume from several major customers.

Ocean Transportation — Twelve months ended December 31, 2012 compared with 2011




Twelve Months Ended December 31

(Dollars in millions)


2012



2011


Change

Revenue


$

1,189.8



$

1,076.2


10.6%


Operating income1


$

96.6



$

73.7


31.1%


Operating income margin



8.1%




6.8%




Volume (units)2











Hawaii containers



137,200




140,000


(2.0%)


Hawaii automobiles



78,800




81,000


(2.7%)


China containers



60,000




59,000


1.7%


Guam containers



25,500




15,200


67.8%


 

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