UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 23, 2021 (
(Exact Name of Registrant as Specified in its Charter)
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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:
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Securities registered pursuant to Section 12(b) of the Act:
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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 February 23, 2021, Matson, Inc. (the “Company”) issued a press release announcing the Company’s earnings for the quarter and fiscal year ended December 31, 2020. 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 exhibit listed below is being furnished with this Form 8-K.
99.1 | Press Release issued by Matson, Inc., dated February 23, 2021 |
99.2 | |
104 | Cover Page Interactive Data File (formatted in Inline XBRL and included as Exhibit 101). |
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.
MATSON, INC. | |
/s/ Joel M. Wine | |
Joel M. Wine | |
Executive Vice President and Chief Financial Officer | |
Dated: February 23, 2021 |
Exhibit 99.1
Investor Relations inquiries: | News Media inquiries: |
Lee Fishman | Keoni Wagner |
Matson, Inc. | Matson, Inc. |
510.628.4227 | 510.628.4534 |
lfishman@matson.com | kwagner@matson.com |
FOR IMMEDIATE RELEASE
MATSON, INC. ANNOUNCES FOURTH QUARTER AND FULL YEAR 2020 RESULTS
| ● | 4Q20 EPS of $1.96 |
| ● | Full Year 2020 EPS of $4.44 |
| ● | Full Year 2020 Net Income and EBITDA of $193.1 million and $423.7 million, respectively |
| ● | Year-over-year increase in 4Q20 and Full Year 2020 consolidated operating income driven primarily by China service strength |
| ● | Leverage ratio per debt agreements at year end of approximately 1.7x |
HONOLULU, Hawaii (February 23, 2021) – Matson, Inc. (“Matson” or the “Company”) (NYSE: MATX), a leading U.S. carrier in the Pacific, today reported net income of $85.6 million, or $1.96 per diluted share, for the quarter ended December 31, 2020. Net income for the quarter ended December 31, 2019 was $15.6 million, or $0.36 per diluted share. Consolidated revenue for the fourth quarter 2020 was $700.1 million compared with $540.7 million for the fourth quarter 2019.
For the twelve months ended December 31, 2020, Matson reported net income of $193.1 million, or $4.44 per diluted share compared with $82.7 million, or $1.91 per diluted share in 2019. Consolidated revenue for the twelve month period ended December 31, 2020 was $2,383.3 million, compared with $2,203.1 million in 2019.
“Matson capped off a strong year with continued solid performance in the fourth quarter from Ocean Transportation and Logistics despite the ongoing challenges from the COVID-19 pandemic and related economic effects,” said Chairman and Chief Executive Officer Matt Cox. “Within Ocean Transportation, our China service saw significant demand for its CLX and CLX+ expedited ocean services and was the primary driver of the increase in consolidated operating income year-over-year for the quarter and the full year. We continued to see favorable supply and demand dynamics in the transpacific tradelane during the fourth quarter, and we continue to expect largely all of these trends to remain favorable in the first half of 2021 as the pandemic persists. As the pandemic subsides with widespread vaccination, we expect some of the supply and demand factors that we are currently benefitting from to remain and continue to drive demand for our CLX and CLX+ services.”
Mr. Cox added, “In our other core tradelanes for the fourth quarter, we continued to see elevated demand for sustenance and home improvement goods lead to higher year-over-year volume growth in Hawaii, Alaska and Guam. For the full year 2020, Hawaii and Guam volume approached the levels achieved in the year ago period despite the economic challenges from the pandemic, and Alaska volume was modestly higher than the level achieved in the full year 2019. Logistics operating income for the fourth quarter increased year-over-year as a result of elevated goods consumption and inventory restocking and tight supply and demand fundamentals in our core markets. For the full year 2020, Logistics operating income was modestly lower compared to the level achieved in the full year 2019 largely due to the pandemic’s impacts on the business lines in the first half of the year.”
1
Fourth Quarter 2020 Discussion and Update on Business Conditions
Ocean Transportation: The Company’s container volume in the Hawaii service in the fourth quarter 2020 was 0.8 percent higher year-over-year primarily due to an additional westbound sailing and higher demand for sustenance and home improvement goods, partially offset by lower tourism activity as a result of the pandemic. The State of Hawaii eased visitor travel restrictions to the islands in October and saw an improvement in the daily passenger counts, but tourism activity remained significantly below the levels achieved in the prior year period. Tourism levels are expected to remain low until the pandemic subsides and to have a meaningfully negative impact on Hawaii’s economy.
In China, the Company’s container volume in the fourth quarter 2020 was 139.1 percent higher year-over-year due to volume from the CLX+ service in addition to higher volume on the CLX service as a result of our increased capacity in the tradelane. Matson continued to realize a rate premium in the fourth quarter 2020 and achieved average freight rates that were higher than in the year ago period. The Company expects elevated consumption of e-commerce and other commodities coupled with other supply and demand factors in the tradelane to largely remain favorable in the first half of 2021 as the pandemic persists. As the pandemic subsides with widespread vaccination, we expect some of the supply and demand factors that we are currently benefitting from to remain and continue to drive demand for our CLX and CLX+ services.
In Guam, the Company’s container volume in the fourth quarter 2020 increased 4.2 percent year-over-year primarily due to higher demand for sustenance and home improvement goods, partially offset by lower tourism activity as a result of the pandemic. In the near-term, we expect depressed tourism levels to have a negative impact on the Guam economy.
In Alaska, the Company’s container volume for the fourth quarter 2020 increased 18.9 percent year-over-year as a result of higher northbound volume primarily due to two additional sailings and higher demand for sustenance and home improvement goods, and modestly higher southbound volume. The Alaska economy continues to be negatively impacted by the economic effects from the COVID-19 pandemic and a low oil price environment. In the near-term, we expect the economy to slowly recover, but remain challenged until the pandemic subsides.
The contribution in the fourth quarter 2020 from the Company’s SSAT joint venture investment was $10.9 million, or $7.9 million higher than the fourth quarter 2019. The increase was driven by higher lift volume.
Logistics: In the fourth quarter 2020, operating income for the Company’s Logistics segment was $9.6 million, or $2.0 million higher compared to the operating income achieved in the fourth quarter 2019. The increase was due primarily to a higher contribution from transportation brokerage as a result of elevated goods consumption and inventory restocking and tight supply and demand fundamentals in our core markets.
2
Results By Segment
Ocean Transportation — Three months ended December 31, 2020 compared with 2019
| | Three Months Ended December 31, |
| |||||||||
(Dollars in millions) |
| 2020 |
| 2019 |
| Change |
| |||||
Ocean Transportation revenue | | $ | 543.9 | | $ | 416.1 | | $ | 127.8 | | 30.7 | % |
Operating costs and expenses | |
| (435.8) | |
| (398.3) | |
| (37.5) | | 9.4 | % |
Operating income | | $ | 108.1 | | $ | 17.8 | | $ | 90.3 | | 507.3 | % |
Operating income margin | |
| 19.9 | % |
| 4.3 | % |
| | | | |
| | | | | | | | | | | | |
Volume (Forty-foot equivalent units (FEU), except for automobiles) (1) | | | | | | | | | | | | |
Hawaii containers | |
| 37,600 | |
| 37,300 | |
| 300 | | 0.8 | % |
Hawaii automobiles | |
| 12,200 | |
| 13,500 | |
| (1,300) | | (9.6) | % |
Alaska containers | |
| 17,600 | |
| 14,800 | |
| 2,800 | | 18.9 | % |
China containers | |
| 40,400 | |
| 16,900 | |
| 23,500 | | 139.1 | % |
Guam containers | |
| 5,000 | |
| 4,800 | |
| 200 | | 4.2 | % |
Other containers (2) | |
| 4,900 | |
| 4,200 | |
| 700 | | 16.7 | % |
| (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. |
| (2) | Includes containers from services in various islands in Micronesia and the South Pacific, and Okinawa, Japan. |
Ocean Transportation revenue increased $127.8 million during the three months ended December 31, 2020, compared with the three months ended December 31, 2019. The increase was primarily due to higher freight revenue in the China service, including revenue associated with the CLX+ service, and higher service revenue in Alaska, partially offset by lower fuel-related surcharge revenue.
On a year-over-year FEU basis, Hawaii container volume increased 0.8 percent primarily due to an additional westbound sailing and higher demand for sustenance and home improvement goods, partially offset by lower tourism activity as a result of the pandemic; Alaska volume increased 18.9 percent as a result of higher northbound volume primarily due to two additional sailings and higher demand for sustenance and home improvement goods, and modestly higher southbound volume; China volume was 139.1 percent higher primarily due to volume from the CLX+ service in addition to higher volume on the CLX service as a result of our increased capacity in the tradelane; Guam volume was 4.2 percent higher primarily due to higher demand for sustenance and home improvement goods, partially offset by lower tourism activity as a result of the pandemic; and Other containers volume increased 16.7 percent.
Ocean Transportation operating income increased $90.3 million, or 507.3 percent, during the three months ended December 31, 2020, compared with the three months ended December 31, 2019. The increase was primarily due to a higher contribution from the China service, including the contribution from the CLX+ service, the timing of fuel-related surcharge collections, a higher contribution from SSAT and a higher contribution from the Alaska service, partially offset by higher selling, general and administrative expenses.
The Company’s SSAT terminal joint venture investment contributed $10.9 million during the three months ended December 31, 2020, compared to a contribution of $3.0 million during the three months ended December 31, 2019. The increase was driven by higher lift volume.
3
Ocean Transportation — Year ended December 31 2020 compared with 2019
| | Years Ended December 31, |
| |||||||||
(Dollars in millions) |
| 2020 |
| 2019 |
| Change |
| |||||
Ocean Transportation revenue | | $ | 1,853.9 | | $ | 1,666.6 | | $ | 187.3 | | 11.2 | % |
Operating costs and expenses | |
| (1,609.1) | |
| (1,575.8) | |
| (33.3) | | 2.1 | % |
Operating income | | $ | 244.8 | | $ | 90.8 | | $ | 154.0 | | 169.6 | % |
Operating income margin | |
| 13.2 | % |
| 5.4 | % | | | | | |
| | | | | | | | | | | | |
Volume (Forty-foot equivalent units (FEU), except for automobiles) (1) | | | | | | | | | | | | |
Hawaii containers | |
| 145,700 | |
| 146,600 | | | (900) | | (0.6) | % |
Hawaii automobiles | |
| 46,600 | |
| 62,900 | | | (16,300) | | (25.9) | % |
Alaska containers | |
| 72,600 | |
| 69,400 | | | 3,200 | | 4.6 | % |
China containers | |
| 118,900 | |
| 64,000 | | | 54,900 | | 85.8 | % |
Guam containers | |
| 18,900 | |
| 19,400 | | | (500) | | (2.6) | % |
Other containers (2) | |
| 17,500 | |
| 16,900 | | | 600 | | 3.6 | % |
| (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. |
| (2) | Includes containers from services in various islands in Micronesia and the South Pacific, and Okinawa, Japan. |
Ocean Transportation revenue increased $187.3 million, or 11.2 percent, during the year ended December 31, 2020, compared with the year ended December 31, 2019. The increase was primarily due to higher freight revenue in the China service, including revenue associated with the CLX+ service, partially offset by lower fuel-related surcharge revenue and lower revenue in Hawaii.
On a year-over-year FEU basis, Hawaii container volume decreased 0.6 percent primarily due to lower volume as a result of the pandemic and its effects on tourism, partially offset by volume associated with the dry-docking of one of Pasha’s vessels in the second quarter and higher demand for sustenance and home improvement goods; Alaska volume increased by 4.6 percent primarily due to higher northbound volume, including volume associated with the dry-docking of a competitor’s vessel and one additional sailing, partially offset by modestly lower southbound volume; China volume was 85.8 percent higher primarily due to volume from the CLX+ service in addition to higher volume on the CLX service as a result of our increased capacity in the tradelane; Guam volume was 2.6 percent lower primarily due to lower demand for retail-related goods resulting from the pandemic and its related effects; and Other container volume increased 3.6 percent.
Ocean Transportation operating income increased $154.0 million, or 169.6 percent, during the year ended December 31, 2020, compared with the year ended December 31, 2019. The increase was primarily due to a higher contribution from the China service, including the contribution from the CLX+ service, and lower vessel operating costs, including the impact of one less vessel operating in the Hawaii service, partially offset by a lower contribution from the Hawaii service.
The Company’s SSAT terminal joint venture investment contributed $26.3 million during the year ended December 31, 2020, compared to a contribution of $20.8 million during the year ended December 31, 2019. The increase was largely attributable to lower operating costs.
4
Logistics — Three months ended December 31, 2020 compared with 2019
| | Three Months Ended December 31, |
| |||||||||
(Dollars in millions) |
| 2020 |
| 2019 |
| Change |
| |||||
Logistics revenue | | $ | 156.2 | | $ | 124.6 | | $ | 31.6 | | 25.4 | % |
Operating costs and expenses | |
| (146.6) | |
| (117.0) | |
| (29.6) | | 25.3 | % |
Operating income | | $ | 9.6 | | $ | 7.6 | | $ | 2.0 | | 26.3 | % |
Operating income margin | |
| 6.1 | % |
| 6.1 | % | | | | | |
Logistics revenue increased $31.6 million, or 25.4 percent, during the three months ended December 31, 2020, compared with the three months ended December 31, 2019. The increase was primarily due to higher transportation brokerage revenue.
Logistics operating income increased $2.0 million, or 26.3 percent, for the three months ended December 31, 2020, compared with the three months ended December 31, 2019. The increase was due primarily to a higher contribution from transportation brokerage.
Logistics — Year ended December 31, 2020 compared with 2019
| | Years Ended December 31, |
| |||||||||
(Dollars in millions) |
| 2020 |
| 2019 |
| Change |
| |||||
Logistics revenue | | $ | 529.4 | | $ | 536.5 | | $ | (7.1) | | (1.3) | % |
Operating costs and expenses | |
| (493.9) | |
| (498.2) | |
| 4.3 | | (0.9) | % |
Operating income | | $ | 35.5 | | $ | 38.3 | | $ | (2.8) | | (7.3) | % |
Operating income margin | |
| 6.7 | % |
| 7.1 | % | | | | | |
Logistics revenue decreased $7.1 million, or 1.3 percent, during the year ended December 31, 2020, compared with the year ended December 31, 2019. The decrease was primarily due to lower transportation brokerage and freight forwarding revenue.
Logistics operating income decreased $2.8 million, or 7.3 percent, for the year ended December 31, 2020, compared with year ended December 31, 2019. The decrease was due primarily to a lower contribution from freight forwarding.
Liquidity, Cash Flows and Capital Allocation
Matson’s Cash and Cash Equivalents decreased by $6.8 million from $21.2 million at December 31, 2019 to $14.4 million at December 31, 2020. Matson generated net cash from operating activities of $429.8 million during the year ended December 31, 2020, compared to $248.8 million during the year ended December 31, 2019. Capital expenditures, including capitalized vessel construction expenditures, totaled $192.3 million for the year ended December 31, 2020, compared with $310.3 million for the year ended December 31, 2019. Total debt decreased by $198.3 million during the year to $760.1 million as of December 31, 2020, of which $700.9 million was classified as long-term debt.
As of December 31, 2020 Matson had available borrowings under its revolving credit facility of $570.1 million and a leverage ratio per the amended debt agreements of approximately 1.7x.
As previously announced, Matson’s Board of Directors declared a cash dividend of $0.23 per share payable on March 4, 2021 to all shareholders of record as of the close of business on February 11, 2021.
5
Teleconference and Webcast
A conference call is scheduled for 4:30 p.m. ET when Matt Cox, Chairman and Chief Executive Officer, and Joel Wine, Executive Vice President and Chief Financial Officer, will discuss Matson’s fourth quarter results.
Date of Conference Call: | Tuesday, February 23, 2021 |
Scheduled Time: | 4:30 p.m. ET / 1:30 p.m. PT / 11:30 a.m. HT |
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 an additional 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 March 2, 2021 by dialing 1-855-859-2056 or 1-404-537-3406 and using the conference number 4135479. 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.
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 two premium, expedited services from China to Long Beach, California, provides service to Okinawa, Japan and various islands in the South Pacific, and operates an international export service from Dutch Harbor to Asia. 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, Income Taxes, Depreciation and Amortization (“EBITDA”) and Net Debt-to-EBITDA.
6
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 performance and financial results, the COVID-19 pandemic and related economic effects, vaccinations, supply and demand dynamics in the transpacific tradelane, inventory restocking and consumption of e-commerce and other commodities, tourism levels, cash flow expectations and uses of cash and cash flows, vessel deployments and operating efficiencies, duration and availability of vessel charters, vessel transit times, organic growth opportunities, demand and volume levels in the China service and in the Hawaii, Alaska and Guam tradelanes, economic growth and drivers in Hawaii, Alaska and Guam, lift volumes at SSAT, capital expenditures and reducing debt. 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 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; regional, national and international economic conditions; new or increased competition or improvements in competitors’ service levels; fuel prices, our ability to collect fuel-related surcharges and/or the cost or limited availability of low-sulfur fuel; delays or cost overruns related to the installation of scrubbers; 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; increases in vessel charter rates or fuel costs, inability to recharter vessels, strains on moving cargo through our terminals, or limitations on the availability of adequate equipment; the magnitude and timing of the impact of public health crises, including COVID-19; 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; 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, our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, 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.
7
MATSON, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
| | Three Months Ended |
| Years Ended | ||||||||
| | December 31, |
| December 31, | ||||||||
(In millions, except per share amounts) |
| 2020 |
| 2019 |
| 2020 |
| 2019 | ||||
Operating Revenue: | | | | | | | | | | | | |
Ocean Transportation | | $ | 543.9 | | $ | 416.1 | | $ | 1,853.9 | | $ | 1,666.6 |
Logistics | |
| 156.2 | |
| 124.6 | |
| 529.4 | |
| 536.5 |
Total Operating Revenue | |
| 700.1 | |
| 540.7 | |
| 2,383.3 | |
| 2,203.1 |
| | | | | | | | | | | | |
Costs and Expenses: | | | | | | | | | | | | |
Operating costs | |
| (533.9) | |
| (465.5) | |
| (1,904.3) | |
| (1,878.0) |
Income from SSAT | |
| 10.9 | |
| 3.0 | |
| 26.3 | |
| 20.8 |
Selling, general and administrative | |
| (59.4) | |
| (52.8) | |
| (225.0) | |
| (216.8) |
Total Costs and Expenses | |
| (582.4) | |
| (515.3) | |
| (2,103.0) | |
| (2,074.0) |
| | | | | | | | | | | | |
Operating Income | |
| 117.7 | |
| 25.4 | |
| 280.3 | |
| 129.1 |
Interest expense | |
| (4.9) | |
| (5.6) | |
| (27.4) | |
| (22.5) |
Other income (expense), net | |
| 1.6 | |
| 0.3 | |
| 6.1 | |
| 1.2 |
Income before Income Taxes | |
| 114.4 | |
| 20.1 | |
| 259.0 | |
| 107.8 |
Income taxes | |
| (28.8) | |
| (4.5) | |
| (65.9) | |
| (25.1) |
Net Income | | $ | 85.6 | | $ | 15.6 | | $ | 193.1 | | $ | 82.7 |
| | | | | | | | | | | | |
Basic Earnings Per Share | | $ | 1.99 | | $ | 0.36 | | $ | 4.48 | | $ | 1.93 |
Diluted Earnings Per Share | | $ | 1.96 | | $ | 0.36 | | $ | 4.44 | | $ | 1.91 |
| | | | | | | | | | | | |
Weighted Average Number of Shares Outstanding: | | | | | | | | | | | | |
Basic | |
| 43.1 | |
| 42.9 | |
| 43.1 | |
| 42.8 |
Diluted | |
| 43.7 | |
| 43.3 | |
| 43.5 | |
| 43.3 |
8
MATSON, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
|
| December 31, |
| December 31, | ||
(In millions) | | 2020 | | 2019 | ||
ASSETS | | | | | | |
Current Assets: | | | | | | |
Cash and cash equivalents | | $ | 14.4 | | $ | 21.2 |
Other current assets | |
| 291.5 | |
| 268.4 |
Total current assets | |
| 305.9 | |
| 289.6 |
Long-term Assets: | | | | | | |
Investment in SSAT | |
| 48.7 | |
| 76.2 |
Property and equipment, net | |
| 1,689.9 | |
| 1,598.1 |
Goodwill | |
| 327.8 | |
| 327.8 |
Intangible assets, net | |
| 192.0 | |
| 202.9 |
Other long-term assets | |
| 336.3 | |
| 350.8 |
Total long-term assets | | | 2,594.7 | | | 2,555.8 |
Total assets | | $ | 2,900.6 | | $ | 2,845.4 |
| | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | |
Current Liabilities: | | | | | | |
Current portion of debt | | $ | 59.2 | | $ | 48.4 |
Other current liabilities | |
| 452.3 | |
| 388.3 |
Total current liabilities | |
| 511.5 | |
| 436.7 |
Long-term Liabilities: | | | | | | |
Long-term debt, net of deferred loan fees | |
| 685.6 | |
| 910.0 |
Deferred income taxes | |
| 389.6 | |
| 337.6 |
Other long-term liabilities | |
| 352.7 | |
| 355.4 |
Total long-term liabilities | |
| 1,427.9 | |
| 1,603.0 |
| | | | | | |
Total shareholders’ equity | |
| 961.2 | |
| 805.7 |
Total liabilities and shareholders’ equity | | $ | 2,900.6 | | $ | 2,845.4 |
9
MATSON, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | Years Ended December 31, |
| |||||||
(In millions) |
| 2020 |
| 2019 |
| 2018 |
| |||
Cash Flows From Operating Activities: | | | | | | | | | | |
Net income | | $ | 193.1 | | $ | 82.7 | | $ | 109.0 | |
Reconciling adjustments: | | | | | | | | | | |
Depreciation and amortization | |
| 114.9 | |
| 100.4 | |
| 94.4 | |
Amortization of operating lease right of use assets | | | 74.8 | | | 60.7 | | | — | |
Deferred income taxes | |
| 52.1 | |
| 23.6 | |
| 29.3 | |
Loss (Gain) on disposal of property and equipment | |
| 2.8 | |
| (1.4) | |
| (1.9) | |
Share-based compensation expense | |
| 18.8 | |
| 11.3 | |
| 12.1 | |
Income from SSAT | |
| (26.3) | |
| (20.8) | |
| (36.8) | |
Distributions from SSAT | |
| 55.4 | |
| 25.2 | |
| 42.0 | |
Changes in assets and liabilities: | | | | | | | | | | |
Accounts receivable, net | |
| (48.0) | |
| 17.8 | |
| (29.1) | |
Deferred dry-docking payments | |
| (16.8) | |
| (25.9) | |
| (19.2) | |
Deferred dry-docking amortization | |
| 25.1 | |
| 34.3 | |
| 37.4 | |
Prepaid expenses and other assets | |
| 21.9 | |
| 24.5 | |
| 4.2 | |
Accounts payable, accruals and other liabilities | |
| 44.8 | |
| (13.9) | |
| 71.2 | |
Operating lease liabilities | | | (75.9) | | | (59.9) | | | — | |
Other long-term liabilities | |
| (6.9) | |
| (9.8) | |
| (7.6) | |
Net cash provided by operating activities | |
| 429.8 | |
| 248.8 | |
| 305.0 | |
| | | | | | | | | | |
Cash Flows From Investing Activities: | | | | | | | | | | |
Capitalized vessel construction expenditure | | | (87.8) | | | (219.1) | | | (338.6) | |
Other capital expenditures | |
| (104.5) | |
| (91.2) | |
| (62.6) | |
Proceeds from disposal of property and equipment | |
| 15.3 | |
| 3.4 | |
| 136.3 | |
Cash deposits into Capital Construction Fund | |
| (132.4) | |
| (96.2) | |
| (340.0) | |
Withdrawals from Capital Construction Fund | |
| 132.4 | |
| 96.2 | |
| 340.9 | |
Proceeds from sale of other investments | |
| — | |
| — | |
| 3.7 | |
Net cash used in investing activities | |
| (177.0) | |
| (306.9) | |
| (260.3) | |
| | | | | | | | | | |
Cash Flows From Financing Activities: | | | | | | | | | | |
Proceeds from issuance of debt | | | 325.5 | | | — | | | — | |
Repayments of debt | | | (216.5) | |
| (42.1) | |
| (30.7) | |
Proceeds from revolving credit facility | | | 648.0 | |
| 622.1 | |
| 963.9 | |
Repayments of revolving credit facility | | | (955.3) | | | (478.0) | | | (933.9) | |
Payment of financing costs | | | (18.5) | |
| — | |
| — | |
Proceeds from issuance of common stock | | | 0.1 | |
| 0.3 | |
| 0.7 | |
Dividends paid | | | (39.2) | |
| (37.2) | |
| (35.4) | |
Tax withholding related to net share settlements of restricted stock units | | | (5.6) | | | (3.1) | | | (4.6) | |
Net cash provided by (used in) financing activities | |
| (261.5) | |
| 62.0 | |
| (40.0) | |
| | | | | | | | | | |
Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash | |
| (8.7) | |
| 3.9 | |
| 4.7 | |
Cash, Cash Equivalents and Restricted Cash, Beginning of the Year | |
| 28.4 | |
| 24.5 | |
| 19.8 | |
Cash, Cash Equivalents and Restricted Cash, End of the Year | | $ | 19.7 | | $ | 28.4 | | $ | 24.5 | |
| | | | | | | | | | |
Reconciliation of Cash, Cash Equivalents, and Restricted Cash, at End of the Year: | | | | | | | | | | |
Cash and Cash Equivalents | | $ | 14.4 | | $ | 21.2 | | $ | 19.6 | |
Restricted Cash | | | 5.3 | | | 7.2 | | | 4.9 | |
Total Cash, Cash Equivalents and Restricted Cash, End of the Year | | $ | 19.7 | | $ | 28.4 | | $ | 24.5 | |
| | | | | | | | | | |
Supplemental Cash Flow Information: | | | | | | | | | | |
Interest paid, net of capitalized interest | | $ | 26.2 | | $ | 22.0 | | $ | 18.3 | |
Income tax paid, net of income tax refunds | | $ | (16.1) | | $ | (24.2) | | $ | 5.2 | |
| | | | | | | | | | |
Non-cash Information: | | | | | | | | | | |
Capital expenditures included in accounts payable, accruals and other liabilities | | $ | 24.7 | | $ | 8.5 | | $ | 4.1 | |
10
MATSON, INC. AND SUBSIDIARIES
Total Debt to Net Debt and Net Income to EBITDA Reconciliations
(Unaudited)
NET DEBT RECONCILIATION
| | December 31, | |
(In millions) |
| 2020 | |
Total Debt (1): | | $ | 760.1 |
Less: Cash and cash equivalents | |
| (14.4) |
Net Debt | | $ | 745.7 |
EBITDA RECONCILIATION
| | Three Months Ended |
| |||||||
| | December 31, |
| |||||||
(In millions) |
| 2020 |
| 2019 |
| Change |
| |||
Net Income | | $ | 85.6 | | $ | 15.6 | | $ | 70.0 | |
Add: Income taxes | |
| 28.8 | |
| 4.5 | |
| 24.3 | |
Add: Interest expense | |
| 4.9 | |
| 5.6 | |
| (0.7) | |
Add: Depreciation and amortization | |
| 29.7 | |
| 26.9 | |
| 2.8 | |
Add: Dry-dock amortization | |
| 7.3 | |
| 8.4 | |
| (1.1) | |
EBITDA (2) | | $ | 156.3 | | $ | 61.0 | | $ | 95.3 | |
| | Years Ended |
| |||||||
| | December 31, |
| |||||||
(In millions) |
| 2020 |
| 2019 |
| Change |
| |||
Net Income | | $ | 193.1 | | $ | 82.7 | | $ | 110.4 | |
Add: Income taxes | |
| 65.9 | |
| 25.1 | |
| 40.8 | |
Add: Interest expense | |
| 27.4 | |
| 22.5 | |
| 4.9 | |
Add: Depreciation and amortization | |
| 112.2 | |
| 99.7 | |
| 12.5 | |
Add: Dry-dock amortization | |
| 25.1 | |
| 34.3 | |
| (9.2) | |
EBITDA (2) | | $ | 423.7 | | $ | 264.3 | | $ | 159.4 | |
| (1) | Total Debt is presented before any reduction for deferred loan fees as required by GAAP. |
| (2) | 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. |
11
Exhibit 99.2
| 1 Fourth Quarter 2020 Earnings Conference Call Fourth Quarter 2020 Earnings Conference Call February 23, 2021 |
| 2 Fourth Quarter 2020 Earnings Conference Call Forward-Looking Statements Statements made during this 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 February 23, 2021. 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 24-34 of our Form 10-Q filed on November 2, 2020 and other subsequent filings by Matson with the SEC. Statements made during this presentation are not guarantees of future performance. We do not undertake any obligation to update our forward-looking statements. |
| 3 Fourth Quarter 2020 Earnings Conference Call Opening Remarks • Recap of Matson’s 4Q20 results: – Capped off a strong year with continued solid performance in Ocean Transportation and Logistics – Ocean Transportation: • China strength – CLX+ voyages and increased capacity in the CLX service • In other core tradelanes, continued to see elevated demand for sustenance and home improvement goods lead to higher quarterly YoY volume growth – Logistics: • Improved performance as a result of elevated goods consumption and inventory restocking and tight supply and demand fundamentals in our core markets • Recap of Matson’s FY 2020 results: – Ocean Transportation: • China service was primary driver of increase in consolidated operating income year-over-year • Hawaii and Guam container volume approached the 2019 levels despite the economic challenges from the pandemic; Alaska container volume was modestly higher than the 2019 level – Logistics: • Operating income was modestly lower YoY largely due to pandemic’s impacts on the business lines in 1H20 |
| 4 Fourth Quarter 2020 Earnings Conference Call 2021 Priorities • Continue to safeguard the health and safety of our employees • Maximize the opportunity in our China service – Maintain CLX and CLX+ as the fastest services in the Transpacific – Continue to invest in new equipment to support growth • Position domestic trades for continued economic recovery as pandemic subsides • Position Logistics for opportunities in chaotic environment • Continue to evaluate growth opportunities • Maintain financial flexibility with investment grade balance sheet |
| 5 Fourth Quarter 2020 Earnings Conference Call Completed Hawaii Fleet Renewal in 4Q 2020 Lurline (Delivered 4Q 2019) Matsonia (Delivered 4Q 2020) Kaimana Hila (Delivered 1Q 2019) Daniel K. Inouye (Delivered 4Q 2018) |
| 6 Fourth Quarter 2020 Earnings Conference Call Hawaii Service Fourth Quarter 2020 Performance • Container volume increased 0.8% YoY – An additional westbound sailing – Higher demand for sustenance and home improvement goods – Continued negative impact from low tourism activity • Pre-travel testing program provided uptick in tourist traffic in the quarter versus 3Q Container Volume (FEU Basis) 25,000 27,000 29,000 31,000 33,000 35,000 37,000 39,000 Q1 Q2 Q3 Q4 2019 2020 Note: 2Q 2020 volume figure includes volume related to Pasha’s vessel dry-docking. 0.8% Full Year 2020 Performance • Container volume decreased 0.6% YoY: – Lower volume as a result of the pandemic and its effects on tourism – Partially offset by: • Volume from Pasha in 2Q20 due in part to the dry-docking of one of its vessels • Higher demand for sustenance and home improvement goods |
| 7 Fourth Quarter 2020 Earnings Conference Call Hawaii Service – Current Business Trends • Hawaii economy remains in significant downturn – Tourism activity remains well below 2019 levels • Economic recovery trajectory remains highly uncertain as tourism-related businesses in difficult environment – UHERO projects meaningful pickup in visitor traffic in 2022 • Unemployment remains elevated and UHERO projects it to be well above 2019 levels for next several years • January 2021 westbound container volume decreased 5.7% YoY – Primarily due to one less sailing compared to prior year; normalizing for one less sailing, volume decreased 3.1% YoY – Slow start in January, but picked up in February; lapping first pandemic shelter-in- place in March (1) Source: https://uhero.hawaii.edu/wp-content/uploads/2020/12/20Q4_Public.pdf Select Hawaii Economic Indicators(1) 2019 2020P 2021P 2022P Real GDP 1.2% (10.2)% 0.1% 5.2% Construction Jobs Growth (0.4)% 1.0% 0.0% 0.7% Population Growth (0.3)% (0.1)% (0.5)% (0.8%) Unemployment Rate 2.7% 12.7% 10.9% 5.6% Visitor Arrivals (‘000s) % change 10,385.8 5.0% 2,666.7 (74.3)% 4,409.7 65.4% 8,151.7 84.9% |
| 8 Fourth Quarter 2020 Earnings Conference Call China Service Fourth Quarter 2020 Performance Container Volume (FEU Basis) 8,000 13,000 18,000 23,000 28,000 33,000 38,000 43,000 Q1 Q2 Q3 Q4 2019 2020 Note: 2Q 2020 volume figure includes volume related to seven CLX+ voyages. 3Q and 4Q 2020 volume figures include weekly CLX+ voyages. 139.1% Full Year 2020 Performance • Container volume increased 85.8% YoY • Evolving freight demand in pandemic environment • Leveraged CLX’s 15-years of reliable service to initiate a new service, CLX+ – Unrivaled destination services • Container volume increased 139.1% YoY • Favorable supply and demand dynamics in transpacific tradelane |
| 9 Fourth Quarter 2020 Earnings Conference Call China Service – Current Business Trends • January 2021 eastbound container volume increased 130.4% YoY – Supply and demand factors continued to remain favorable – Continued trend of inventory restocking and elevated consumption of goods • Very strong pre-Lunar New Year period and abbreviated post-Lunar New Year period slowdown as vessels were near full • Investing approximately $55 million in new equipment to support CLX+/AAX growth and increase availability of equipment in our network • Expect supply and demand dynamics in transpacific tradelane to remain largely favorable in the first half of 2021 as pandemic persists • As pandemic subsides with widespread vaccination, expect some supply and demand factors that we are currently benefitting from to remain and continue to drive demand for CLX and CLX+ |
| 10 Fourth Quarter 2020 Earnings Conference Call Guam Service Fourth Quarter 2020 Performance Container Volume (FEU Basis) 3,000 3,500 4,000 4,500 5,000 5,500 Q1 Q2 Q3 Q4 2019 2020 4.2% • Container volume increased 4.2% YoY – Higher demand for sustenance and home improvement goods – Lower tourism activity as a result of the pandemic Current Business Trends • Guam economy in downturn as tourism levels remain depressed; uncertain economic recovery trajectory • January 2021 westbound container volume increased 1.8% YoY Full Year 2020 Performance • Container volume decreased 2.6% YoY – Lower demand for retail-related goods resulting from the pandemic and its related effects |
| 11 Fourth Quarter 2020 Earnings Conference Call Alaska Service Fourth Quarter 2020 Performance • Container volume increased 18.9% YoY – Higher northbound volume: • Two additional sailings • Higher demand for sustenance and home improvement goods – Modestly higher southbound volume Container Volume (FEU Basis) 10,000 12,000 14,000 16,000 18,000 20,000 22,000 Q1 Q2 Q3 Q4 2019 2020 18.9% • Container volume increased 4.6% YoY – Higher northbound volume: • Including volume associated with the dry-docking of a competitor’s vessel • One additional sailing – Modestly lower southbound volume Full Year 2020 Performance |
| 12 Fourth Quarter 2020 Earnings Conference Call Alaska Service – Current Business Trends • Alaska economic recovery trajectory remains highly uncertain – Jobs market remains challenging in pandemic environment • Low oil price environment expected to continue to negatively impact oil exploration and production • January 2021 northbound container volume decreased 12.4% YoY – One less sailing than prior year; normalizing for one less sailing, volume increased 2.9% YoY •Pandemic challenges lead to delayed start to ‘A’ fishing season and AAX -10.0% -8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021P YoY Growth in Employment Anchorage (AEDC) Alaska (Alaska Dept. of Labor) Anchorage and Alaska Employment Growth(1)(2) (1) Source: https://aedcweb.com/wp-content/uploads/2021/02/AEDC-Anchorage-Economic-Forecast-Report_FINAL.pdf (2) Source: https://labor.alaska.gov/trends/jan21.pdf -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021P YoY Growth in Anchorage Population Anchorage Population(1) |
| 13 Fourth Quarter 2020 Earnings Conference Call SSAT Joint Venture Fourth Quarter 2020 Performance Equity in Income of Joint Venture Note: 2Q 2019 equity in income negatively impacted by the timing of lease accounting. $ 0.0 $ 2.0 $ 4.0 $ 6.0 $ 8.0 $ 10.0 $ 12.0 Q1 Q2 Q3 Q4 $ in millions 2019 2020 Current Business Trends • In January 2021, saw continued strong import volume into U.S. West Coast • Terminal joint venture contribution was $10.9 million, $7.9 million higher than last year primarily due to higher lift volume Full Year 2020 Performance • Terminal joint venture contribution was $26.3 million, $5.5 million higher than last year largely due to lower operating costs |
| 14 Fourth Quarter 2020 Earnings Conference Call Matson Logistics Fourth Quarter 2020 Performance Operating Income $ 0.0 $ 2.0 $ 4.0 $ 6.0 $ 8.0 $ 10.0 $ 12.0 $ 14.0 Q1 Q2 Q3 Q4 $ in millions 2019 2020 • Operating income of $9.6 million; YoY increase of $2.0 million – Due primarily to higher contribution from transportation brokerage Current Business Trends Full Year 2020 Performance • Some business lines continue to benefit from elevated container volumes into Southern California • Span Alaska tracking with Alaska northbound trends • Operating income of $35.5 million, a decline of $2.8 million YoY – Largely due to lower contribution from freight forwarding |
| 15 Fourth Quarter 2020 Earnings Conference Call Financial Results – Summary Income Statement See the Addendum for a reconciliation of GAAP to non-GAAP Financial Metrics. (1) Includes a non-cash tax benefit of $2.9 million resulting from discrete adjustments in applying the provisions of the Tax Cuts and Jobs Act of 2017 (“Tax Act”). |
| 16 Fourth Quarter 2020 Earnings Conference Call Cash Generation and Uses of Cash ($ 50.0) $ 50.0 $ 150.0 $ 250.0 $ 350.0 $ 450.0 $ 550.0 Cash Flow from Operations Proceeds from Sale-Leasebacks Paydown of Borrowings, net Maint. Capex New Vessel Capex (1) Dividends Other Cash Flows (2) Net Decrease in Cash $ in millions Last Twelve Months Ended December 31, 2020 $ 429.8 $ 14.3 ($ 198.3) ($ 104.5) ($ 87.8) ($ 39.2) ($ 8.7) ($ 23.0) (1) Includes capitalized interest and owner’s items. (2) Includes $18.5 million in financing costs related to Title XI bonds and amendments to debt agreements in the first half of 2020. |
| 17 Fourth Quarter 2020 Earnings Conference Call Financial Results – Summary Balance Sheet • Total Debt of $760.1 million(1) – $63.5 million of debt reduction in 4Q20 – Revolver balance of $71.8 million • Net Debt of $745.7 million(2) • Leverage ratio per amended debt agreements of approximately 1.7x(3) See the Addendum for a reconciliation of GAAP to non-GAAP Financial Metrics. (1) Total Debt is presented before any reduction for deferred loan fees as required by GAAP. (2) Net Debt is Total Debt of $760.1 million less cash and cash equivalents of $14.4 million. (3) Based on Total Debt and EBITDA as defined in the amended debt agreements of $760.1 million and $441.5 million, respectively. Debt Levels |
| 18 Fourth Quarter 2020 Earnings Conference Call New Vessel Payments Actual Vessel Progress Payments(1) FY 2020 ($ in millions) 1Q 2Q 3Q 4Q FY Cash Capital Expenditures $ 7.2 $ 5.7 $ 39.3 $ 28.2 $ 80.4 Capitalized Interest 1.9 1.7 2.0 1.8 7.4 Capitalized Vessel Construction Expenditures $ 9.1 $ 7.4 $ 41.3 $ 30.0 $ 87.8 ($ in millions) Cumulative through 12/31/20 Two Aloha Class Containerships $ 407.1 Two Kanaloa Class Con-Ro Vessels 517.1 Total New Vessel Progress Payments $ 924.2 Vessel Construction Expenditures (1) Excludes owner’s items, capitalized interest and other cost items associated with final milestone payments. Matsonia, January 2021 |
| 19 Fourth Quarter 2020 Earnings Conference Call Capital Expenditures Update • Overview of 2021 capital expenditures – Maintenance capex of $60-70 million • Includes most recent unit cost pricing on annual equipment replenishment – Scrubber installation payments of approximately $20 million • Includes payments on seventh scrubber installation and carryover of payments on 2020 installations – Approximately $55 million on new equipment to support CLX+ / AAX growth and increase availability of equipment in our network – Payments on new neighbor island flat-deck barge of approximately $25 million • Avoids expensive dry-docking, ends old crane platform, and provides more efficiency to Hawaii barge operations • Expect to be at maintenance capex level of $60-70 million in 2022 |
| 20 Fourth Quarter 2020 Earnings Conference Call Capital Allocation • No change in capital allocation strategy • Uses of cash after funding our ordinary dividend and maintenance capex (in no particular order): – Organic growth – Reduce debt – Acquire businesses – Return capital to shareholders • In 2021, expect to continue to reduce outstanding debt • Acquisition criteria: – Target must have an enduring competitive advantage – Target must be strategic or complementary – Target must generate a cash-on-cash return in excess of 10% initially, and have ability to grow organically – Target must be a good cultural fit |
| 21 Fourth Quarter 2020 Earnings Conference Call Appendix |
| 22 Fourth Quarter 2020 Earnings Conference Call Appendix – 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. |
