UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 1, 2018
MATSON, INC.
(Exact Name of Registrant as Specified in its Charter)
_____________________
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HAWAII |
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001-34187 |
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99-0032630 |
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(State or Other Jurisdiction of |
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(Commission File Number) |
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(I.R.S. Employer Identification |
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1411 Sand Island Parkway |
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Honolulu, Hawaii |
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96819 |
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(Address of principal executive offices) |
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(zip code) |
Registrant’s telephone number, including area code: (808) 848-1211
(Former Name or former address, if changed since last report)
_____________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02.Results of Operations and Financial Condition.
On May 1, 2018, Matson, Inc. (the “Company”) issued a press release announcing the Company’s earnings for the quarter ended March 31, 2018. A copy of the press release is attached hereto as Exhibit 99.1. In addition, the Company posted an investor presentation to its website. A copy of the investor presentation is attached hereto as Exhibit 99.2.
The information in this report (including Exhibits 99.1 and 99.2) is being furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
Item 9.01.Financial Statements and Exhibits.
(a) - (c) Not applicable.
(d) Exhibits.
The exhibits listed below are being furnished with this Form 8-K.
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99.1 |
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99.2 |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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MATSON, INC. |
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/s/ Joel M. Wine |
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Joel M. Wine |
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Senior Vice President and Chief Financial Officer |
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Dated: May 1, 2018 |
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2
Exhibit 99.1
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Investor Relations inquiries: |
News Media inquiries: |
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Lee Fishman |
Keoni Wagner |
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Matson, Inc. |
Matson, Inc. |
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510.628.4227 |
510.628.4534 |
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lfishman@matson.com |
kwagner@matson.com |
FOR IMMEDIATE RELEASE
MATSON, INC. ANNOUNCES FIRST QUARTER 2018 RESULTS AND RAISES 2018 OUTLOOK
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1Q18 EPS of $0.33 versus $0.16 in 1Q17 |
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· |
Net Income of $14.2 million versus $7.0 million in 1Q17 |
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· |
EBITDA of $62.1 million versus $52.3 million in 1Q17 |
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Raises Full Year 2018 Outlook |
HONOLULU, Hawaii (May 1, 2018) – Matson, Inc. (“Matson” or the “Company”) (NYSE: MATX), a leading U.S. carrier in the Pacific, today reported net income of $14.2 million, or $0.33 per diluted share, for the quarter ended March 31, 2018. Net income for the quarter ended March 31, 2017 was $7.0 million, or $0.16 per diluted share. Consolidated revenue for the first quarter 2018 was $511.4 million compared with $474.4 million reported for the first quarter 2017.
Matt Cox, Matson’s Chairman and Chief Executive Officer, commented, “Matson is off to a good start to this year with both Ocean Transportation and Logistics exceeding expectations for the quarter. Our year-over-year improvement in Ocean Transportation was primarily the result of lower vessel operating costs, a higher contribution from SSAT, higher volume in our Alaska service and the timing of fuel surcharge collections, partially moderated by lower volume in China and continued competitive pressure in Guam. In Logistics we saw improved performance in almost all service lines.”
Mr. Cox added, “For 2018, we continue to expect improvements in each of our core tradelanes with the exception of Guam and China. In Guam, we expect to face continued competitive pressure, and in China we continue to expect modestly lower volume coming off an exceptionally strong 2017. As a result of the first quarter performance, we now expect Matson’s 2018 operating income to be modestly higher than the level achieved in 2017.”
First Quarter 2018 Discussion and Outlook for 2018
Ocean Transportation: The Company’s container volume in the Hawaii service in the first quarter 2018 was 1.9 percent lower year-over-year due primarily to lower eastbound volume as westbound volume was essentially flat. The Hawaii economy continues to be strong, supported primarily by healthy tourism activity and low unemployment. The Company expects flat-to-modest volume growth in 2018, reflecting a solid Hawaii economy and stable market share.
In China, the Company’s container volume in the first quarter 2018 was 22.2 percent lower year-over-year largely due to two fewer sailings and lower volume during the Lunar New Year period. Matson continued to realize a sizeable rate premium in the first quarter 2018 and achieved average freight rates moderately higher than the first quarter 2017. For 2018, the Company expects pricing to remain as favorable and to approximate the average rate achieved in 2017 and volume to be modestly lower compared to the levels achieved in 2017.
In Guam, as expected, the Company’s container volume in the first quarter 2018 was lower on a year-over-year basis, the result of competitive losses. For 2018, the Company expects a heightened competitive environment and lower volume than the levels achieved in 2017.
1
In Alaska, the Company’s container volume for the first quarter 2018 was 10.1 percent higher year-over-year, primarily due to an increase in northbound volume mainly related to the dry-docking of a competitor’s vessel and one additional sailing. For 2018, the Company expects volume to be modestly higher than the level achieved in 2017 with improvement in northbound volume, partially offset by lower southbound seafood-related volume due to a moderation from the very strong seafood harvest levels in 2017.
As a result of the first quarter performance and the outlook trends noted above, the Company expects full year 2018 Ocean Transportation operating income to be modestly higher than the $128.8 million achieved in 2017. In the second quarter 2018, the Company expects Ocean Transportation operating income to approach the level achieved in the second quarter 2017.
Logistics: In the first quarter 2018, operating income for the Company’s Logistics segment was $2.3 million higher compared to the operating income achieved in the first quarter 2017 due to improved performance across almost all of the service lines. For 2018, the Company expects Logistics operating income to be moderately higher than the $20.6 million achieved in 2017. In the second quarter 2018, the Company expects operating income to be moderately higher than the level achieved in the second quarter 2017.
Depreciation and Amortization: For the full year 2018, the Company expects depreciation and amortization expense to be approximately $132 million, inclusive of dry-docking amortization of approximately $36 million.
EBITDA: The Company expects full year 2018 EBITDA to be lower than the $296.0 million achieved in 2017.
Interest Expense: The Company expects interest expense for the full year 2018 to be approximately $23 million.
Income Tax Expense: In the first quarter 2018, the Company’s effective tax rate was 42.0 percent, which includes a non-cash tax adjustment of $3.3 million resulting from a reduction in the alternative minimum tax receivable under the Tax Cuts and Jobs Act. For the balance of 2018, the Company expects its effective tax rate to be approximately 28 percent.
Capital and Vessel Dry-docking Expenditures: In the first quarter 2018, the Company made maintenance capital expenditure payments of $13.1 million, capitalized vessel construction expenditures of $57.7 million, and dry-docking payments of $4.6 million. For the full year 2018, the Company expects to make maintenance capital expenditure payments of approximately $68 million, vessel construction expenditures (inclusive of capitalized interest and owner’s items) of approximately $388 million, and dry-docking payments of approximately $18 million.
2
Results By Segment
Ocean Transportation — Three months ended March 31, 2018 compared with 2017
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Three Months Ended March 31, |
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(Dollars in millions) |
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2018 |
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2017 |
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Change |
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Ocean Transportation revenue |
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$ |
379.3 |
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$ |
370.0 |
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$ |
9.3 |
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2.5 |
% |
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Operating costs and expenses |
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(354.8) |
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(354.7) |
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(0.1) |
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0.0 |
% |
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Operating income |
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$ |
24.5 |
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$ |
15.3 |
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$ |
9.2 |
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60.1 |
% |
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Operating income margin |
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6.5 |
% |
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4.1 |
% |
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Volume (Forty-foot equivalent units (FEU), except for automobiles) (1) |
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Hawaii containers |
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35,700 |
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36,400 |
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(700) |
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(1.9) |
% |
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Hawaii automobiles |
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16,800 |
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13,800 |
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3,000 |
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21.7 |
% |
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Alaska containers |
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17,400 |
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15,800 |
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1,600 |
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10.1 |
% |
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China containers |
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11,900 |
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15,300 |
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(3,400) |
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(22.2) |
% |
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Guam containers |
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4,900 |
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5,400 |
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(500) |
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(9.3) |
% |
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Other containers (2) |
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3,100 |
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2,100 |
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1,000 |
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47.6 |
% |
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(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. |
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(2) |
Includes containers from services in various islands in Micronesia and the South Pacific, and in Okinawa, Japan. |
Ocean Transportation revenue increased $9.3 million, or 2.5 percent, during the three months ended March 31, 2018, compared with the three months ended March 31, 2017. This increase was primarily due to higher fuel surcharge revenue and higher volume in Alaska, partially offset by lower volume in China and lower revenue in Guam.
On a year-over-year FEU basis, Hawaii container volume decreased by 1.9 percent primarily due to lower eastbound volume; Alaska volume increased by 10.1 percent primarily due to an increase in northbound volumes mainly related to the dry-docking of a competitor’s vessel and one additional sailing; China volume was 22.2 percent lower primarily due to two fewer sailings and lower volume during the Lunar New Year period; and Guam volume was 9.3 percent lower due to increased competition.
Ocean Transportation operating income increased $9.2 million during the three months ended March 31, 2018, compared with the three months ended March 31, 2017. This increase was primarily due to the favorable timing of fuel surcharge collections, lower vessel operating costs, a higher contribution from SSAT, and higher Alaska volume, partially offset by lower volume in China, lower revenue from Guam and higher terminal handling costs.
The Company’s SSAT terminal joint venture investment contributed $10.5 million during the three months ended March 31, 2018, compared to a $4.9 million contribution during the three months ended March 31, 2017. The increase was nearly equally attributable to improved lift volume and one-time items.
3
Logistics — Three months ended March 31, 2018 compared with 2017
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Three Months Ended March 31, |
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(Dollars in millions) |
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2018 |
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2017 |
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Change |
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Logistics revenue |
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$ |
132.1 |
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$ |
104.4 |
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$ |
27.7 |
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26.5 |
% |
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Operating costs and expenses |
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(127.9) |
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(102.5) |
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(25.4) |
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24.8 |
% |
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Operating income |
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$ |
4.2 |
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$ |
1.9 |
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$ |
2.3 |
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121.1 |
% |
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Operating income margin |
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3.2 |
% |
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1.8 |
% |
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Logistics revenue increased $27.7 million, or 26.5 percent, during the three months ended March 31, 2018, compared with the three months ended March 31, 2017. This increase was primarily due to higher highway and intermodal brokerage revenue.
Logistics operating income increased $2.3 million for the three months ended March 31, 2018 compared with the three months ended March 31, 2017. The increase was due primarily to higher contributions from highway brokerage and freight forwarding.
Liquidity, Cash Flows and Capital Allocation
Matson’s Cash and Cash Equivalents decreased by $6.1 million to $13.7 million during the three months ended March 31, 2018. Matson generated net cash from operating activities of $29.9 million during the three months ended March 31, 2018, compared to $4.0 million in the three months ended March 31, 2017. Capital expenditures, including capitalized vessel construction expenditures, totaled $70.8 million for the three months ended March 31, 2018, compared with $24.2 million in the three months ended March 31, 2017. Total debt increased by $46.5 million during the three months to $903.6 million as of March 31, 2018, of which $867.1 million was long-term debt.
For the twelve months ended March 31, 2018, Matson’s Net Income and EBITDA were $239.2 million and $305.8 million, respectively. The ratio of Matson’s Net Debt to last twelve months EBITDA was 2.9 as of March 31, 2018.
As previously announced, Matson’s Board of Directors declared a cash dividend of $0.20 per share payable on June 7, 2018 to all shareholders of record as of the close of business on May 10, 2018.
Teleconference and Webcast
A conference call is scheduled for 4:30 p.m. EDT when Matt Cox, Chairman and Chief Executive Officer, and Joel Wine, Senior Vice President and Chief Financial Officer, will discuss Matson’s first quarter results.
Date of Conference Call:Tuesday, May 1, 2018
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
The conference call will be broadcast live along with a slide presentation on the Company’s website at www.matson.com, under Investors. A replay of the conference call will be available approximately two hours after the call through May 8, 2018 by dialing 1-855-859-2056 or 1-404-537-3406 and using the conference number 7994169. The slides and audio webcast of the conference call will be archived for one full quarter on the Company's website at www.matson.com, under Investors.
4
About the Company
Founded in 1882, Matson (NYSE: MATX) is a leading provider of ocean transportation and logistics services. Matson provides a vital lifeline to the domestic non-contiguous economies of Hawaii, Alaska, and Guam, and to other island economies in Micronesia. Matson also operates a premium, expedited service from China to Southern California and provides services to Okinawa, Japan and various islands in the South Pacific. The Company's fleet of owned and chartered vessels includes containerships, combination container and roll-on/roll-off ships and custom-designed barges. Matson Logistics, established in 1987, extends the geographic reach of Matson's transportation network throughout the continental U.S. Its integrated, asset-light logistics services include rail intermodal, highway brokerage, warehousing, freight consolidation, Asia supply chain services, and forwarding to Alaska. Additional information about the Company is available at www.matson.com.
GAAP to Non-GAAP Reconciliation
This press release, the Form 8-K and the information to be discussed in the conference call include non-GAAP measures. While 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, Taxes, Depreciation and Amortization (“EBITDA”) and Net Debt-to-EBITDA.
5
Forward-Looking Statements
Statements in this news release that are not historical facts are “forward-looking statements,” within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation those statements regarding earnings, operating income, profitability and cash flow expectations, fleet renewal progress, fleet deployments, economic effects of competitors’ services, expenses, rate premiums and market conditions in the China service, trends in volumes, economic growth and construction activity in Hawaii, economic conditions in Alaska, lift volumes at SSAT, vessel deployments and operating efficiencies, and effective tax rates. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement, including but not limited to risks and uncertainties relating to regional, national and international economic conditions; new or increased competition or improvements in competitors’ service levels; fuel prices and our ability to collect fuel surcharges; our relationship with vendors, customers and partners and changes in related agreements; the actions of our competitors; our ability to offer a differentiated service in China for which customers are willing to pay a significant premium; the imposition of tariffs or a change in international trade policies; the ability of the shipyards to construct and deliver the Aloha Class and Kanaloa Class vessels on the contemplated timeframes; any unanticipated dry-dock or repair expenses; any delays or cost overruns related to the modernization of terminals; consummating and integrating acquisitions; changes in general economic and/or industry-specific conditions; competition and growth rates within the logistics industry; freight levels and increasing costs and availability of truck capacity or alternative means of transporting freight; changes in relationships with existing truck, rail, ocean and air carriers; changes in customer base due to possible consolidation among customers; conditions in the financial markets; changes in our credit profile and our future financial performance; our ability to obtain future debt financings; continuation of the Title XI and CCF programs; the impact of future and pending legislation, including environmental legislation; government regulations and investigations; repeal, substantial amendment or waiver of the Jones Act or its application, or our failure to maintain our status as a United States citizen under the Jones Act; relations with our unions; satisfactory negotiation and renewal of expired collective bargaining agreements without significant disruption to Matson’s operations; war, terrorist attacks or other acts of violence; the use of our information technology and communication systems and cybersecurity attacks; and the occurrence of marine accidents, poor weather or natural disasters. These forward-looking statements are not guarantees of future performance. This release should be read in conjunction with our Annual Report on Form 10-K and our other filings with the SEC through the date of this release, which identify important factors that could affect the forward-looking statements in this release. We do not undertake any obligation to update our forward-looking statements.
6
MATSON, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
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Three Months Ended |
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March 31, |
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(In millions, except per-share amounts) |
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2018 |
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2017 |
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Operating Revenue: |
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Ocean Transportation |
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$ |
379.3 |
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$ |
370.0 |
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Logistics |
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132.1 |
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104.4 |
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Total Operating Revenue |
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511.4 |
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474.4 |
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Costs and Expenses: |
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Operating costs |
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(439.3) |
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(411.8) |
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Equity in income of Terminal Joint Venture |
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10.5 |
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4.9 |
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Selling, general and administrative |
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(53.9) |
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(50.3) |
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Total Costs and Expenses |
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(482.7) |
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(457.2) |
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Operating Income |
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28.7 |
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17.2 |
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Interest expense |
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(5.0) |
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(6.3) |
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Other income (expense), net |
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0.8 |
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(0.8) |
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Income before Income Taxes |
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24.5 |
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10.1 |
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Income taxes |
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(10.3) |
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(3.1) |
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Net Income |
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$ |
14.2 |
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$ |
7.0 |
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Basic Earnings Per-Share: |
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$ |
0.33 |
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$ |
0.16 |
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Diluted Earnings Per-Share: |
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$ |
0.33 |
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$ |
0.16 |
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Weighted Average Number of Shares Outstanding: |
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Basic |
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42.6 |
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43.0 |
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Diluted |
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42.9 |
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43.4 |
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Cash Dividends Per-Share |
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$ |
0.20 |
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$ |
0.19 |
7
MATSON, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
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March 31, |
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December 31, |
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(In millions) |
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2018 |
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2017 |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
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$ |
13.7 |
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$ |
19.8 |
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Other current assets |
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255.1 |
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246.2 |
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Total current assets |
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268.8 |
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266.0 |
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Long-term Assets: |
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Investment in Terminal Joint Venture |
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96.7 |
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93.2 |
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Property and equipment, net |
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1,215.0 |
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1,165.7 |
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Goodwill |
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323.7 |
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323.7 |
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Intangible assets, net |
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222.4 |
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225.2 |
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Other long-term assets |
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161.3 |
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173.7 |
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Total long-term assets |
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2,019.1 |
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1,981.5 |
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Total assets |
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$ |
2,287.9 |
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$ |
2,247.5 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current Liabilities: |
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Current portion of debt |
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$ |
36.5 |
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$ |
30.8 |
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Other current liabilities |
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239.1 |
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255.5 |
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Total current liabilities |
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275.6 |
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286.3 |
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Long-term Liabilities: |
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Long-term debt |
|
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867.1 |
|
|
826.3 |
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Deferred income taxes |
|
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291.6 |
|
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285.2 |
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Other long-term liabilities |
|
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171.2 |
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171.5 |
|
Total long-term liabilities |
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1,329.9 |
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1,283.0 |
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|
|
|
|
|
|
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Total shareholders’ equity |
|
|
682.4 |
|
|
678.2 |
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Total liabilities and shareholders’ equity |
|
$ |
2,287.9 |
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$ |
2,247.5 |
8
MATSON, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
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Three Months Ended March 31, |
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(In millions) |
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2018 |
|
2017 |
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||
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Cash Flows From Operating Activities: |
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|
|
|
|
|
|
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Net income |
|
$ |
14.2 |
|
$ |
7.0 |
|
|
Reconciling adjustments: |
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|
|
|
|
|
|
|
Depreciation and amortization |
|
|
23.6 |
|
|
24.6 |
|
|
Deferred income taxes |
|
|
6.4 |
|
|
2.9 |
|
|
Share-based compensation expense |
|
|
2.7 |
|
|
2.6 |
|
|
Equity in income of Terminal Joint Venture |
|
|
(10.5) |
|
|
(4.9) |
|
|
Distribution from Terminal Joint Venture |
|
|
7.0 |
|
|
— |
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Other |
|
|
(0.6) |
|
|
(2.6) |
|
|
Changes in assets and liabilities: |
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|
|
|
|
|
|
|
Accounts receivable, net |
|
|
(14.5) |
|
|
(8.4) |
|
|
Deferred dry-docking payments |
|
|
(4.6) |
|
|
(15.1) |
|
|
Deferred dry-docking amortization |
|
|
9.2 |
|
|
11.5 |
|
|
Prepaid expenses and other assets |
|
|
8.2 |
|
|
(1.1) |
|
|
Accounts payable, accruals and other liabilities |
|
|
(11.0) |
|
|
(13.3) |
|
|
Other long-term liabilities |
|
|
(0.2) |
|
|
0.8 |
|
|
Net cash provided by operating activities |
|
|
29.9 |
|
|
4.0 |
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities: |
|
|
|
|
|
|
|
|
Capitalized vessel construction expenditures |
|
|
(57.7) |
|
|
(1.3) |
|
|
Other capital expenditures |
|
|
(13.1) |
|
|
(22.9) |
|
|
Proceeds from disposal of property and equipment |
|
|
1.0 |
|
|
— |
|
|
Cash deposits into Capital Construction Fund |
|
|
(53.5) |
|
|
— |
|
|
Withdrawals from Capital Construction Fund |
|
|
53.5 |
|
|
— |
|
|
Net cash used in investing activities |
|
|
(69.8) |
|
|
(24.2) |
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
|
|
|
|
|
Repayments of debt and capital leases |
|
|
(2.5) |
|
|
(2.6) |
|
|
Proceeds from revolving credit facility |
|
|
117.4 |
|
|
100.0 |
|
|
Repayments of revolving credit facility |
|
|
(68.4) |
|
|
(56.0) |
|
|
Proceeds from issuance of capital stock |
|
|
0.2 |
|
|
0.4 |
|
|
Dividends paid |
|
|
(8.7) |
|
|
(8.3) |
|
|
Repurchase of Matson common stock |
|
|
— |
|
|
(0.7) |
|
|
Tax withholding related to net share settlements of restricted stock units |
|
|
(4.2) |
|
|
(7.1) |
|
|
Other |
|
|
— |
|
|
0.1 |
|
|
Net cash provided by financing activities |
|
|
33.8 |
|
|
25.8 |
|
|
|
|
|
|
|
|
|
|
|
Net (Decrease) Increase in Cash and Cash Equivalents |
|
|
(6.1) |
|
|
5.6 |
|
|
Cash and Cash Equivalents, Beginning of the Period |
|
|
19.8 |
|
|
13.9 |
|
|
Cash and Cash Equivalents, End of the Period |
|
$ |
13.7 |
|
$ |
19.5 |
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information: |
|
|
|
|
|
|
|
|
Interest paid, net of capitalized interest |
|
$ |
5.3 |
|
$ |
6.5 |
|
|
Income tax paid, net of income tax refunds |
|
$ |
0.2 |
|
$ |
0.4 |
|
|
|
|
|
|
|
|
|
|
|
Non-cash Information: |
|
|
|
|
|
|
|
|
Capital expenditures included in accounts payable, accruals and other liabilities |
|
$ |
0.7 |
|
$ |
2.4 |
|
9
MATSON, INC. AND SUBSIDIARIES
Net Debt to EBITDA and EBITDA Reconciliations
(Unaudited)
NET DEBT RECONCILIATION
|
|
|
March 31, |
|
|
(In millions) |
|
2018 |
|
|
Total Debt: |
|
$ |
903.6 |
|
Less: Cash and cash equivalents |
|
|
(13.7) |
|
Capital Construction Fund - cash on deposit |
|
|
(0.9) |
|
Net Debt |
|
$ |
889.0 |
EBITDA RECONCILIATION
|
|
|
Three Months Ended |
|
|
|
|
|||||||
|
|
|
March 31, |
|
Last Twelve |
|
||||||||
|
(In millions) |
|
2018 |
|
2017 |
|
Change |
|
Months |
|
||||
|
Net Income |
|
$ |
14.2 |
|
$ |
7.0 |
|
$ |
7.2 |
|
$ |
239.2 |
|
|
Add: Income taxes |
|
|
10.3 |
|
|
3.1 |
|
|
7.2 |
|
|
(99.6) |
|
|
Add: Interest expense |
|
|
5.0 |
|
|
6.3 |
|
|
(1.3) |
|
|
22.9 |
|
|
Add: Depreciation and amortization |
|
|
23.4 |
|
|
24.4 |
|
|
(1.0) |
|
|
99.4 |
|
|
Add: Dry-dock amortization |
|
|
9.2 |
|
|
11.5 |
|
|
(2.3) |
|
|
43.9 |
|
|
EBITDA (1) |
|
$ |
62.1 |
|
$ |
52.3 |
|
$ |
9.8 |
|
$ |
305.8 |
|
|
(1) |
EBITDA is defined as the sum of net income plus income taxes, 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. |
10
Exhibit 99.2
|
|
Matson First Quarter 2018 Earnings Conference Call May 1, 2018 |
|
|
First Quarter 2018 Earnings Conference Call Matson. |
|
|
Opening Remarks Matson’s results were higher YoY in 1Q18 Favorable contributors include: Lower vessel operating costs Higher contribution from SSAT Higher volume in Alaska Timing of fuel surcharge collections Higher contribution from Logistics Unfavorable trends include: Lower volume in China Lower contribution from Guam New vessel build program on track Raising full year 2018 outlook Expect improvements across core tradelanes except Guam and China Expect 2018 operating income to be modestly higher than level achieved in FY 2017 See the Addendum for a reconciliation of GAAP to non-GAAP Financial Metrics. $ 52.3 $ 62.1 1Q 2017 1Q 2018 EBITDA ($ in millions) $ 7.0 $ 14.2 1Q 2017 1Q 2018 Net Income ($ in millions) 3 Matson First Quarter 2018 Earnings Conference Call Matson. |
|
|
Hawaii Service First Quarter 2018 Performance Container volume decreased 1.9% YoY Primarily due to lower eastbound volume 1 sailing at end of 1Q18 pushed into Q2 Stable market share Modest uptick in economic conditions in Hawaii Core westbound volume essentially flat YoY Construction-related volumes were relatively flat YoY Container Volume (FEU Basis) Full Year 2018 Outlook Expect flat-to-modest volume growth as Hawaii economy remains strong Expect stable market share Note: Competitor service issues from 3Q 2015 through 2Q 2016 positively impacted container volume. 4Q 2016 volume includes the benefit of a 53rd week. 44,000 42,000 40,000 38,000 36,000 34,000 32,000 30,000 Q1 Q2 Q3 Q4 2016 2017 2018 4 First Quarter 2018 Earnings Conference Call Matson. |
|
Hawaii Economic Indicators Real GDP Growth Construction Jobs Growth Real Building Permits Growth “We continue to have a fairly sanguine view of [construction] industry prospects, given the substantial number of residential projects still in the pipeline and ongoing public infrastructure work. Our outlook for the industry remains largely unchanged, with essentially the current level of employment continuing through the end of the decade.” – UHERO, March 2, 2018 Latest UHERO projections indicate a modest pickup in economic activity in the short-term, but construction cycle over the medium-term looks positive. Source: http://www.uhero.hawaii.edu/assets/18Q1_StateUpdate_Public.pdf real GDP Growth Construction jobs growth real building permits growth 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 2017 2018 2019 2020 Sep. ’17 Proj. Dec. ’17 Proj. Mar. ’18 Proj. 2.0% 0.0% -2.0% -4.0% -6.0% 10.0% 5.0% 0.0% -5.0% Yoy Growth 5 First Quarter 2018 Earnings Conference Call Matson. |
|
China Expedited Service (CLX) First Quarter 2018 Performance Container volume decreased 22.2% YoY Nearly 2/3 of decline due to two fewer sailings: 1 sailing at end of 1Q18 pushed into Q2 1 dry-dock return voyage in 1Q17 Lower volume during Lunar New Year period Continued to realize a sizeable rate premium Container Volume (FEU Basis) Full Year 2018 Outlook Transpacific capacity increases in excess of demand growth Expect continued strong demand for Matson’s highly differentiated expedited service Expect average rate to approximate the favorable level achieved in 2017 Expect volume to be modestly lower than 2017 level, which included dry-dock return volume Note: Hanjin bankruptcy positively impacted 4Q 2016 volume. Additionally, 4Q 2016 volume includes the benefit of a 53rd week. 6 Matson. 20,000 18,000 16,000 14,000 12,000 10,000 8,000 Q1 Q2 Q3 Q4 2016 2017 2018 First Quarter 2018 Earnings Conference Call Matson. |
|
Guam Service First Quarter 2018 Performance Container volume decreased 9.3% YoY Continued competitive pressure from APL Market was essentially flat YoY Container Volume (FEU Basis) Full Year 2018 Outlook Expect heightened competitive environment and lower volume Matson’s significant transit advantage expected to remain with superior on-time performance Note: 4Q 2016 volume includes the benefit of a 53rd week. APL increased service frequency to weekly in December 2016. 7,000 6,500 6,000 5,500 5,000 4,500 4,000 3,500 3,000 Q1 Q2 Q3 Q4 2016 2017 2018 7 First Quarter 2018 Earnings Conference Call Matson. |
|
Alaska Service First Quarter 2018 Performance Container volume increased 10.1% YoY primarily due to higher NB volume TOTE dry-dock volume 1 sailing at end of 4Q17 pushed into January Early signs of Alaska economy beginning to stabilize Container Volume (FEU Basis) Full Year 2018 Outlook Expect FY 2018 volume to be modestly higher than the level achieved in 2017 Increase in NB volume, partially offset by lower SB seafood volume Note: 4Q 2016 volume includes the benefit of a 53rd week. 1Q 2018 and 4Q 2017 volume figures include volume related to a competitor’s vessel dry-docking. 22,000 20,000 18,000 16,000 14,000 12,000 10,000 Q1 Q2 Q3 Q4 2016 2017 2018 8 First Quarter 2018 Earnings Conference Call Matson. |
|
SSAT Joint Venture First Quarter 2018 Performance Terminal joint venture contribution was $10.5 million, $5.6 million higher than last year Nearly half of increase related to increased lift volume Balance of YoY increase related to one-time items Equity in Income of Joint Venture Full Year 2018 Outlook Expect FY 2018 terminal joint venture contribution to be higher than the 2017 level Expect to continue to benefit from launch of new global shipping alliances 9 First Quarter 2018 Earnings Conference Call Matson. $12.0 $10.0 $8.0 $6.0 $4.0 $2.0 $0.0 Q1 Q2 Q3 Q4 2016 2017 2018 Matson. |
|
Matson Logistics First Quarter 2018 Performance Operating income increased $2.3 million YoY to $4.2 million Improved performance across most service lines Tight truck market plays to Matson Logistics’ strengths in customer service Span Alaska marked improvement YoY as economy is showing signs of stabilizing Operating Income 2018 Outlook Expect FY 2018 operating income to moderately increase over 2017 level of $20.6 million Expect 2Q 2018 operating income to increase from the level achieved in the prior year period of $6.9 million Note: Acquired Span Alaska in 3Q 2016. 10 First Quarter 2018 Earnings Conference Call Matson. $8.0 $7.0 $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $0.0 Q1 Q2 Q3 Q4 2016 2017 2018 |
|
|
Financial Results – Summary Income Statement See the Addendum for a reconciliation of GAAP to non-GAAP Financial Metrics. (1) Includes a non-cash tax adjustment of $3.3 million resulting from a reduction in the alternative minimum tax receivable under the Tax Cuts and Jobs Act. Quarters Ended 3/31 D ($ in millions, except per share data) 2018 2017 $ % Revenue Ocean Transportation $ 379.3 $ 370.0 $ 9.3 2.5% Logistics 132.1 104.4 27.7 26.5% Total Revenue $ 511.4 $ 474.4 $ 37.0 7.8% Operating Income Ocean Transportation $ 24.5 $ 15.3 $ 9.2 60.1% Logistics 4.2 1.9 2.3 121.1% Total Operating Income $ 28.7 $ 17.2 $ 11.5 66.9% $ 32.6 $ 35.9 ($ 3.3) -9.2% Interest Expense $ 5.0 $ 6.3 ($ 1.3) Income Tax Rate 42.0% 30.7% Net Income $ 14.2 $ 7.0 $ 7.2 EPS, diluted $ 0.33 $ 0.16 $ 0.17 EBITDA $ 62.1 $ 52.3 $ 9.8 18.7% Depreciation and Amortization (incl. dry-dock amortization) (1) 11 Matson. First Quarter 2018 Earnings Conference Call |
|
Financial Results – Summary Balance Sheet Total debt of $903.6 million Net debt of $889.0 million Net debt-to-LTM EBITDA of 2.9x See the Addendum for a reconciliation of GAAP to non-GAAP Financial Metrics. Debt Levels ($ in millions) ASSETS Cash and cash equivalents $ 13.7 $ 19.8 Other current assets 255.1 246.2 Total current assets 268.8 266.0 Investment in Terminal Joint Venture 96.7 93.2 Property and equipment, net 1,215.0 1,165.7 Intangible assets, net 222.4 225.2 Goodwill 323.7 323.7 Other long-term assets 161.3 173.7 Total assets $ 2,287.9 $ 2,247.5 LIABILITIES AND SHAREHOLDERS’ EQUITY Current portion of debt $ 36.5 $ 30.8 Other current liabilities 239.1 255.5 Total current liabilities 275.6 286.3 Long-term debt 867.1 826.3 Other long-term liabilities 462.8 456.7 Total long-term liabilities 1,329.9 1,283.0 Total shareholders’ equity 682.4 678.2 Total liabilities and shareholders’ equity $ 2,287.9 $ 2,247.5 March 31, December 31, 2018 2017 12 First Quarter 2018 Earnings Conference Call Matson. |
|
Cash Generation and Uses of Cash (1) Includes capitalized interest and owner’s items. ($ 50.0) $ 0.0 $ 50.0 $ 100.0 $ 150.0 $ 200.0 $ 250.0 $ 300.0 $ 350.0 $ 400.0 $ 450.0 Cash Flow from Operations Net Borrowings CCF Withdrawal Maint. Capex New Vessel Capex (1) Dividends Share Repurchase Other Net decrease in cash $ in millions Last Twelve Months Ended March 31, 2018 $ 250.8 $ 123.3 $ 30.3 ($ 45.2) ($ 308.4) ($34.2) ($18.6) ($ 3.8) ($ 5.8) 13 First Quarter 2018 Earnings Conference Call Matson. |
|
New Vessel Payments and Percent of Completion Vessel Construction Expenditures Actual and Estimated Vessel Progress Payments FY 2018 ($ in millions) 1Q Cash Capital Expenditures $ 54.0 Capitalized Interest 3.7 Capitalized Vessel Construction Expenditures $ 57.7 Cumulative through 12/31/17 Fiscal Year Ending December 31, ($ in millions) 2018 2019 2020 Total Two Aloha Class Containerships $ 253.8 $ 137.7 $ 19.4 $ 0.0 $ 410.9 Two Kanaloa Class Con-Ro Vessels 111.2 207.6 174.5 23.3 516.6 Total New Vessel Actual and Progress Payments $ 365.0 $ 345.3 $ 193.9 $ 23.3 $ 927.5 First block in the dock on the Kaimana Hila. Percent of Completion (as of April 30, 2018) 91% 53% 15% 0% Daniel K. Inouye Kaimana Hila Lurline Matsonia 14 First Quarter 2018 Earnings Conference Call Matson. |
|
2018 Outlook Outlook Items FY 2018 2Q 2018 Operating income: Ocean Transportation Modestly higher than $128.8 million achieved in FY 2017 To approach 2Q17 level of $39.0 million Logistics Moderately higher than $20.6 million achieved in FY 2017 Moderately higher than 2Q17 level of $6.9 million Depreciation and Amortization Approximately $132 million, including $36 million in dry-dock amortization - EBITDA Lower than FY 2017 level of $296.0 million - Interest Expense Approximately $23 million - GAAP Effective Tax Rate Approximately 28% for remaining 3 quarters; 42% in 1Q due to adjustment under Tax Cuts and Jobs Act(1) - (1) Includes a non-cash tax adjustment of $3.3 million resulting from a reduction in the alternative minimum tax receivable under the Tax Cuts and Jobs Act. 15 First Quarter 2018 Earnings Conference Call Matson. |
|
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, Income Taxes, Depreciation and Amortization (“EBITDA”), and Net Debt/EBITDA. Net debt reconciliation (in millions) total debt: Less: Cash and cash equivalents capital construction fund – cash on deposit march 31, 2018 $903.6 (13.7) (0.9) $889.0 Net income Add: Income taxes Add: Interest expense Add: Depreciation and amortization Add: Dry-dock amortization EBITDA (1) Three months ended March 31, 2018 2017 Change Last Twelve Months $14.2 10.3 5.0 23.4 9.2 $62.1 $7.0 3.1 6.3 24.4 11.5 $52.3 $7.2 7.2 (1.3) (1.0) (2.3) $9.8 $239.2 (99.6) 22.9 99.4 43.9 $305.8 (1) Ebitda is defined as the sum of net income plus income taxes, interest 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. 17 First Quarter 2018 Earnings Conference Call Matson. |
