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): August 1, 2022 (
(Exact Name of Registrant as Specified in its Charter)
_____________________
|
| |||
(State or Other Jurisdiction of | (Commission File Number) | (I.R.S. Employer Identification |
| ||
(Address of principal executive offices) | (zip code) |
Registrant’s telephone number, including area code: (
(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)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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 August 1, 2022, Matson, Inc. (the “Company”) issued a press release announcing the Company’s earnings for the quarter ended June 30, 2022. 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 | |
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: August 1, 2022 |
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 SECOND QUARTER 2022 RESULTS
| ● | 2Q22 EPS of $9.49 |
| ● | 2Q22 Net Income and EBITDA of $380.7 million and $536.0 million, respectively |
| ● | Year-over-year increase in 2Q22 consolidated operating income driven by China service strength |
| ● | Repurchased approximately 1.6 million shares in 2Q22 |
HONOLULU, Hawaii (August 1, 2022) – Matson, Inc. (“Matson” or the “Company”) (NYSE: MATX), a leading U.S. carrier in the Pacific, today reported net income of $380.7 million, or $9.49 per diluted share, for the quarter ended June 30, 2022. Net income for the quarter ended June 30, 2021 was $162.5 million, or $3.71 per diluted share. Consolidated revenue for the second quarter 2022 was $1,261.1 million compared with $874.9 million for the second quarter 2021.
“Matson performed well in the second quarter 2022 with higher year-over-year operating income in both Ocean Transportation and Logistics,” said Chairman and Chief Executive Officer Matt Cox. “Within Ocean Transportation, our China service continued to see significant demand for its expedited ocean services as volume for e-commerce, garments and other goods remained elevated. The increase in consolidated operating income year-over-year was driven by continued strength in the China service. Currently in the Transpacific tradelane, we are seeing solid demand for our China service as China’s factory production continues to recover from the COVID-19-related supply chain challenges. However, in recent weeks we have seen a gradual decline in the Transpacific freight rate environment off the highs experienced earlier this year. This indicates that rates have likely peaked for now, and, at this time, we expect an orderly marketplace for the remainder of the year with our vessels continuing to operate at or near capacity and earning a significant rate premium to the market because of our differentiated, fast ocean services. To this end, we continue to expect to operate the CCX service through the October peak season this year.”
Mr. Cox added, “In our domestic ocean tradelanes, we saw continued strength in Alaska with higher year-over-year volume and softer volumes in Hawaii and Guam compared to the year ago period. In Logistics, operating income increased year-over-year with strength across all of the business lines as we continued to see favorable supply and demand fundamentals in our core markets.”
Second Quarter 2022 Discussion and Update on Business Conditions
Ocean Transportation: The Company’s container volume in the Hawaii service in the second quarter 2022 was 1.5 percent lower year-over-year. The decrease was primarily due to lower retail-related demand. During the quarter, we saw continued improvement in the Hawaii economy supported by strong domestic tourist arrivals and a modest improvement in international tourist trends. In the near-term, we expect continued economic recovery in Hawaii from the pandemic supported by an improving unemployment rate and increasing tourism traffic, but there are negative trends from a combination of economic effects that create uncertainty in the economic growth trajectory. The negative trends include weakening economic conditions in the U.S. and global economies and lower household discretionary income as a result of high inflation, higher interest rates and the end of the pandemic-era stimulus helping personal income.
1
In China, the Company’s container volume in the second quarter 2022 increased 11.7 percent year-over-year. The increase was a result of four more eastbound voyages than the prior year. Volume demand in the quarter was driven by e-commerce, garments and other goods. Matson continued to realize a significant rate premium over the Shanghai Containerized Freight Index in the second quarter 2022 and achieved average freight rates that were considerably higher than in the year ago period. Currently in the Transpacific tradelane, we are seeing solid demand for our China service as China’s factory production continues to recover from the COVID-19-related supply chain challenges. However, in recent weeks we have seen a gradual decline in the Transpacific freight rate environment off the highs experienced earlier this year. This indicates that rates have likely peaked for now, and, at this time, we expect an orderly marketplace for the remainder of the year with our vessels continuing to operate at or near capacity and earning a significant rate premium to the market because of our differentiated, fast ocean services. To this end, we continue to expect to operate the CCX service through the October peak season this year.
In Guam, the Company’s container volume in the second quarter 2022 decreased 7.0 percent year-over-year primarily due to lower retail-related demand. In the near-term, we expect the Guam economy to continue to benefit from a recovery in tourism, but there are negative trends as a result of higher inflation, higher interest rates and the end of the pandemic-era stimulus helping personal income that creates uncertainty in the economic growth trajectory.
In Alaska, the Company’s container volume for the second quarter 2022 increased 12.2 percent year-over-year primarily due to (i) higher northbound volume primarily due to higher retail-related demand and an additional sailing and (ii) higher volume from Alaska-Asia Express (“AAX”). In the near-term, we expect the Alaska economy to benefit from the resumption of summer tourism and increased energy-related exploration and production activity as a result of elevated oil prices, but there are negative trends as a result of higher inflation, higher interest rates and the end of the pandemic-era stimulus helping personal income that creates uncertainty in the economic growth trajectory.
The contribution in the second quarter 2022 from the Company’s SSAT joint venture investment was $24.7 million, or $11.9 million higher than the second quarter 2021. The increase was primarily driven by higher other terminal revenue.
Logistics: In the second quarter 2022, operating income for the Company’s Logistics segment was $23.1 million, or $10.2 million higher compared to the level achieved in the second quarter 2021. The increase was due primarily to higher contributions from all services as we continued to see favorable supply and demand fundamentals in our core markets.
2
Results By Segment
Ocean Transportation — Three months ended June 30, 2022 compared with 2021
| | Three Months Ended June 30, |
| |||||||||
(Dollars in millions) |
| 2022 |
| 2021 |
| Change |
| |||||
Ocean Transportation revenue | | $ | 1,049.2 | | $ | 682.9 | | $ | 366.3 | | 53.6 | % |
Operating costs and expenses | |
| (579.2) | |
| (481.9) | |
| (97.3) | | 20.2 | % |
Operating income | | $ | 470.0 | | $ | 201.0 | | $ | 269.0 | | 133.8 | % |
Operating income margin | |
| 44.8 | % |
| 29.4 | % |
| | | | |
| | | | | | | | | | | | |
Volume (Forty-foot equivalent units (FEU), except for automobiles) (1) | | | | | | | | | | | | |
Hawaii containers | |
| 39,200 | |
| 39,800 | |
| (600) | | (1.5) | % |
Hawaii automobiles | |
| 10,600 | |
| 12,700 | |
| (2,100) | | (16.5) | % |
Alaska containers | |
| 22,100 | |
| 19,700 | |
| 2,400 | | 12.2 | % |
China containers | |
| 48,700 | |
| 43,600 | |
| 5,100 | | 11.7 | % |
Guam containers | |
| 5,300 | |
| 5,700 | |
| (400) | | (7.0) | % |
Other containers (2) | |
| 6,200 | |
| 5,200 | |
| 1,000 | | 19.2 | % |
| (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 $366.3 million, or 53.6 percent, during the three months ended June 30, 2022, compared with the three months ended June 30, 2021. The increase was primarily due to higher revenue in China and higher fuel-related surcharge revenue primarily due to higher energy prices. The higher revenue in China was primarily due to considerably higher average freight rates and higher volume.
On a year-over-year FEU basis, Hawaii container volume decreased 1.5 percent primarily due to lower retail-related volume; Alaska volume increased 12.2 percent primarily due to (i) higher northbound volume primarily due to higher retail-related demand and an additional sailing and (ii) higher volume from AAX; China volume was 11.7 percent higher as a result of four more eastbound voyages than the prior year; Guam volume was 7.0 percent lower primarily due to lower retail-related demand; and Other containers volume increased 19.2 percent primarily due to the addition of China-Auckland Express volume in the South Pacific.
Ocean Transportation operating income increased $269.0 million during the three months ended June 30, 2022, compared with the three months ended June 30, 2021. The increase was primarily due to considerably higher average freight rates and higher volume in China and a higher contribution from SSAT, partially offset by higher fuel-related expenses, net of fuel-related surcharge recovery, and higher operating costs and expenses primarily due to the CLX+ and CCX services.
The Company’s SSAT terminal joint venture investment contributed $24.7 million during the three months ended June 30, 2022, compared to a contribution of $12.8 million during the three months ended June 30, 2021. The increase was primarily driven by higher other terminal revenue.
3
Ocean Transportation — Six months ended June 30, 2022 compared with 2021
| | Six Months Ended June 30, |
| |||||||||
(Dollars in millions) |
| 2022 |
| 2021 |
| Change |
| |||||
Ocean Transportation revenue | | $ | 1,993.1 | | $ | 1,243.4 | | $ | 749.7 | | 60.3 | % |
Operating costs and expenses | |
| (1,106.9) | |
| (928.3) | |
| (178.6) | | 19.2 | % |
Operating income | | $ | 886.2 | | $ | 315.1 | | $ | 571.1 | | 181.2 | % |
Operating income margin | |
| 44.5 | % |
| 25.3 | % | | | | | |
| | | | | | | | | | | | |
Volume (Forty-foot equivalent units (FEU), except for automobiles) (1) | | | | | | | | | | | | |
Hawaii containers | |
| 74,700 | |
| 75,500 | | | (800) | | (1.1) | % |
Hawaii automobiles | |
| 19,200 | |
| 23,400 | | | (4,200) | | (17.9) | % |
Alaska containers | |
| 42,900 | |
| 37,000 | | | 5,900 | | 15.9 | % |
China containers | |
| 95,300 | |
| 84,700 | | | 10,600 | | 12.5 | % |
Guam containers | |
| 10,800 | |
| 10,700 | | | 100 | | 0.9 | % |
Other containers (2) | |
| 11,500 | |
| 9,200 | | | 2,300 | | 25.0 | % |
| (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 $749.7 million, or 60.3 percent, during the six months ended June 30, 2022, compared with the six months ended June 30, 2021. The increase was primarily due to higher revenue in China, higher fuel-related surcharge revenue primarily due to higher energy prices, and higher revenue in Alaska. The higher revenue in China was primarily due to considerably higher average freight rates and higher volume. The higher revenue in Alaska was primarily the result of higher volume.
On a year-over-year FEU basis, Hawaii container volume decreased 1.1 percent primarily due to lower retail-related demand; Alaska volume increased 15.9 percent primarily due to (i) higher northbound volume primarily due to higher retail-related demand and volume related to a competitor’s dry-docking, (ii) higher volume from AAX and (iii) higher southbound volume primarily due to higher seafood volume; China volume was 12.5 percent higher as a result of nine more eastbound voyages than the prior year; Guam volume was 0.9 percent higher primarily due to higher retail-related demand; and Other containers volume increased 25.0 percent primarily due to the addition of China-Auckland Express volume in the South Pacific.
Ocean Transportation operating income increased $571.1 million during the six months ended June 30, 2022, compared with the six months ended June 30, 2021. The increase was primarily due to considerably higher average freight rates and higher volume in China and a higher contribution from SSAT, partially offset by higher fuel-related expenses, net of fuel-related surcharge recovery, and higher operating costs and expenses primarily due to the CLX+ and CCX services.
The Company’s SSAT terminal joint venture investment contributed $58.7 million during the six months ended June 30, 2022, compared to a contribution of $22.0 million during the six months ended June 30, 2021. The increase was primarily driven by higher other terminal revenue.
4
Logistics — Three months ended June 30, 2022 compared with 2021
| | Three Months Ended June 30, |
| |||||||||
(Dollars in millions) |
| 2022 |
| 2021 |
| Change |
| |||||
Logistics revenue | | $ | 211.9 | | $ | 192.0 | | $ | 19.9 | | 10.4 | % |
Operating costs and expenses | |
| (188.8) | |
| (179.1) | |
| (9.7) | | 5.4 | % |
Operating income | | $ | 23.1 | | $ | 12.9 | | $ | 10.2 | | 79.1 | % |
Operating income margin | |
| 10.9 | % |
| 6.7 | % | | | | | |
Logistics revenue increased $19.9 million, or 10.4 percent, during the three months ended June 30, 2022, compared with the three months ended June 30, 2021. The increase was primarily due to higher supply chain management and transportation brokerage revenue.
Logistics operating income increased $10.2 million, or 79.1 percent, during the three months ended June 30, 2022, compared with the three months ended June 30, 2021. The increase was primarily due to higher contributions from all services.
Logistics — Six months ended June 30, 2022 compared with 2021
| | Six Months Ended June 30, |
| |||||||||
(Dollars in millions) |
| 2022 |
| 2021 |
| Change |
| |||||
Logistics revenue | | $ | 433.5 | | $ | 343.3 | | $ | 90.2 | | 26.3 | % |
Operating costs and expenses | |
| (394.0) | |
| (324.3) | |
| (69.7) | | 21.5 | % |
Operating income | | $ | 39.5 | | $ | 19.0 | | $ | 20.5 | | 107.9 | % |
Operating income margin | |
| 9.1 | % |
| 5.5 | % | | | | | |
Logistics revenue increased $90.2 million, or 26.3 percent, during the six months ended June 30, 2022, compared with the six months ended June 30, 2021. The increase was primarily due to higher transportation brokerage revenue.
Logistics operating income increased $20.5 million, or 107.9 percent, during the six months ended June 30, 2022, compared with the six months ended June 30, 2021. The increase was primarily due to higher contributions from all services.
Liquidity, Cash Flows and Capital Allocation
Matson’s Cash and Cash Equivalents increased by $326.6 million from $282.4 million at December 31, 2021 to $609.0 million at June 30, 2022. Matson generated net cash from operating activities of $691.1 million during the six months ended June 30, 2022, compared to $238.8 million during the six months ended June 30, 2021. Capital expenditures totaled $68.4 million for the six months ended June 30, 2022, compared with $101.3 million for the six months ended June 30, 2021. Total debt decreased by $32.4 million during the six months to $596.6 million as of June 30, 2022, of which $531.6 million was classified as long-term debt. As of June 30, 2022 Matson had available borrowings under its revolving credit facility of $642.0 million.
During the second quarter 2022, Matson repurchased approximately 1.6 million shares for a total cost of $138.1 million. As of the end of the second quarter 2022, there were approximately 1.2 million shares remaining in the share repurchase program.
As previously announced, Matson’s Board of Directors declared a cash dividend of $0.31 per share payable on September 1, 2022 to all shareholders of record as of the close of business on August 4, 2022.
5
Teleconference and Webcast
A conference call is scheduled on August 1, 2022 at 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 second quarter results.
Date of Conference Call: | Monday, August 1, 2022 |
Scheduled Time: | 4:30 p.m. ET / 1:30 p.m. PT / 10:30 a.m. HT |
The conference call will be broadcast live along with an additional slide presentation on the Company’s website at www.matson.com, under Investors.
Participants may register for the conference call at:
https://register.vevent.com/register/BI50173006aa0245ddae17cd86ba37457f
Registered participants will receive the conference call dial-in number and a unique PIN code to access the live event. While not required, it is recommended you join 10 minutes prior to the event starting time. A replay of the conference call will be available approximately two hours after the event by accessing the webcast link 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 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 North America. 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.
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, cash flow expectations and uses of cash and cash flow, supply chain challenges in China, terminal and port congestion on the U.S. West Coast, container dwell times, demand for consumer and retail-related goods, Transpacific freight rates and Matson’s rate premium, volume levels and demand for Matson’s China service, duration of CCX service, tourism levels, unemployment rates, energy-related exploration and production activity, economic recovery and drivers in Hawaii, Alaska and Guam, economic conditions in the U.S. and global economies, inflation, interest rates, personal and discretionary income, rail congestion, warehouse unit activity, refleeting initiatives and EBITDA contribution, capital expenditures, the costs and timing of liquified natural gas installations on certain vessels, labor contract renewals, timing and amount of contribution to Capital Construction Fund (“CCF”), federal and state cash tax savings, and share repurchase activity. 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; changes in economic conditions or governmental policies, including from the COVID-19 pandemic; our ability to offer a differentiated service in China for which customers are willing to pay a significant premium; new or increased competition or improvements in competitors’ service levels; our relationship with customers, agents, vendors and partners and changes in related agreements; fuel prices, our ability to collect fuel related surcharges and/or the cost or limited availability of required fuels; evolving stakeholder expectations related to environmental, social and governance matters; timely or successful completion of fleet upgrade initiatives; the occurrence of poor weather, natural disasters, maritime accidents, spill events and other physical and operating risks, including those arising from climate change; transitional and other risks arising from climate change; the magnitude and timing of the impact of public health crises, including COVID-19; significant operating agreements and leases that may not be replaced on favorable terms; any unanticipated dry-dock or repair expenses; joint venture relationships; conducting business in a foreign shipping market, including the imposition of tariffs or a change in international trade policies; any delays or cost overruns related to the modernization of terminals; war, terrorist attacks or other acts of violence; consummating and integrating acquisitions; freight levels and increasing costs and availability of truck capacity or alternative means of transporting freight; relations with our unions; satisfactory negotiation and renewal of expired collective bargaining agreements without significant disruption to Matson’s operations; loss of key personnel or failure to adequately manage human capital; the use of our information technology and communication systems and cybersecurity attacks; 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; costs to comply with and liability related to numerous safety, environmental, and other laws and regulations; and disputes, legal and other proceedings and government inquiries or investigations. 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 for the year ended December 31, 2021 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 |
| Six Months Ended | ||||||||
| | June 30, |
| June 30, | ||||||||
(In millions, except per share amounts) |
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Operating Revenue: | | | | | | | | | | | | |
Ocean Transportation | | $ | 1,049.2 | | $ | 682.9 | | $ | 1,993.1 | | $ | 1,243.4 |
Logistics | |
| 211.9 | |
| 192.0 | |
| 433.5 | |
| 343.3 |
Total Operating Revenue | |
| 1,261.1 | |
| 874.9 | |
| 2,426.6 | |
| 1,586.7 |
| | | | | | | | | | | | |
Costs and Expenses: | | | | | | | | | | | | |
Operating costs | |
| (728.4) | |
| (615.6) | |
| (1,432.1) | |
| (1,160.3) |
Income from SSAT | |
| 24.7 | |
| 12.8 | |
| 58.7 | |
| 22.0 |
Selling, general and administrative | |
| (64.3) | |
| (58.2) | |
| (127.5) | |
| (114.3) |
Total Costs and Expenses | |
| (768.0) | |
| (661.0) | |
| (1,500.9) | |
| (1,252.6) |
| | | | | | | | | | | | |
Operating Income | |
| 493.1 | |
| 213.9 | |
| 925.7 | |
| 334.1 |
Interest expense | |
| (4.5) | |
| (5.5) | |
| (9.3) | |
| (12.8) |
Other income (expense), net | |
| 1.8 | |
| 1.5 | |
| 3.8 | |
| 2.9 |
Income before Taxes | |
| 490.4 | |
| 209.9 | |
| 920.2 | |
| 324.2 |
Income taxes | |
| (109.7) | |
| (47.4) | |
| (200.3) | |
| (74.5) |
Net Income | | $ | 380.7 | | $ | 162.5 | | $ | 719.9 | | $ | 249.7 |
| | | | | | | | | | | | |
Basic Earnings Per Share | | $ | 9.54 | | $ | 3.74 | | $ | 17.82 | | $ | 5.75 |
Diluted Earnings Per Share | | $ | 9.49 | | $ | 3.71 | | $ | 17.69 | | $ | 5.70 |
| | | | | | | | | | | | |
Weighted Average Number of Shares Outstanding: | | | | | | | | | | | | |
Basic | |
| 39.9 | |
| 43.5 | |
| 40.4 | |
| 43.4 |
Diluted | |
| 40.1 | |
| 43.8 | |
| 40.7 | |
| 43.8 |
8
MATSON, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
|
| June 30, |
| December 31, | ||
(In millions) | | 2022 | | 2021 | ||
ASSETS | | | | | | |
Current Assets: | | | | | | |
Cash and cash equivalents | | $ | 609.0 | | $ | 282.4 |
Other current assets | |
| 503.7 | |
| 422.1 |
Total current assets | |
| 1,112.7 | |
| 704.5 |
Long-term Assets: | | | | | | |
Investment in SSAT | |
| 93.1 | |
| 58.7 |
Property and equipment, net | |
| 1,894.7 | |
| 1,878.3 |
Goodwill | |
| 327.8 | |
| 327.8 |
Intangible assets, net | |
| 175.8 | |
| 181.1 |
Other long-term assets | |
| 554.5 | |
| 542.7 |
Total long-term assets | | | 3,045.9 | | | 2,988.6 |
Total assets | | $ | 4,158.6 | | $ | 3,693.1 |
| | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | |
Current Liabilities: | | | | | | |
Current portion of debt | | $ | 65.0 | | $ | 65.0 |
Other current liabilities | |
| 567.1 | |
| 547.4 |
Total current liabilities | |
| 632.1 | |
| 612.4 |
Long-term Liabilities: | | | | | | |
Long-term debt, net of deferred loan fees | |
| 517.9 | |
| 549.7 |
Deferred income taxes | |
| 433.8 | |
| 425.2 |
Other long-term liabilities | |
| 441.2 | |
| 438.4 |
Total long-term liabilities | |
| 1,392.9 | |
| 1,413.3 |
| | | | | | |
Total shareholders’ equity | |
| 2,133.6 | |
| 1,667.4 |
Total liabilities and shareholders’ equity | | $ | 4,158.6 | | $ | 3,693.1 |
9
MATSON, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | Six Months Ended June 30, | | ||||
(In millions) |
| 2022 |
| 2021 |
| ||
Cash Flows From Operating Activities: | | | | | | | |
Net income | | $ | 719.9 | | $ | 249.7 | |
Reconciling adjustments: | | | | | | | |
Depreciation and amortization | |
| 71.1 | |
| 67.9 | |
Amortization of operating lease right of use assets | | | 75.3 | | | 49.2 | |
Deferred income taxes | |
| 9.4 | |
| 15.2 | |
Share-based compensation expense | |
| 10.5 | |
| 9.5 | |
Income from SSAT | |
| (58.7) | |
| (22.0) | |
Distribution from SSAT | | | 26.3 | | | 21.0 | |
Other | | | (0.7) | | | (1.0) | |
Changes in assets and liabilities: | | | | | | | |
Accounts receivable, net | |
| (37.6) | |
| (60.2) | |
Deferred dry-docking payments | |
| (14.7) | |
| (17.4) | |
Deferred dry-docking amortization | |
| 12.9 | |
| 12.6 | |
Prepaid expenses and other assets | |
| (48.3) | |
| (38.7) | |
Accounts payable, accruals and other liabilities | |
| 4.5 | |
| 3.7 | |
Operating lease liabilities | | | (74.2) | | | (47.1) | |
Other long-term liabilities | |
| (4.6) | |
| (3.6) | |
Net cash provided by operating activities | |
| 691.1 | |
| 238.8 | |
| | | | | | | |
Cash Flows From Investing Activities: | | | | | | | |
Capitalized vessel construction expenditures | | | (11.4) | | | — | |
Other capital expenditures | |
| (68.4) | |
| (101.3) | |
Proceeds from disposal of property and equipment | |
| 0.8 | |
| 1.7 | |
Cash deposits into Capital Construction Fund | |
| (10.7) | |
| (31.2) | |
Withdrawals from Capital Construction Fund | | | 10.7 | | | 31.2 | |
Net cash used in investing activities | |
| (79.0) | |
| (99.6) | |
| | | | | | | |
Cash Flows From Financing Activities: | | | | | | | |
Repayments of debt | |
| (32.5) | |
| (26.8) | |
Proceeds from revolving credit facility | | | — | | | 241.9 | |
Repayments of revolving credit facility | |
| — | |
| (313.7) | |
Payment of financing costs | | | — | | | (3.0) | |
Dividends paid | | | (25.0) | |
| (20.2) | |
Repurchase of Matson common stock | | | (208.5) | |
| — | |
Tax withholding related to net share settlements of restricted stock units | | | (19.5) | | | (14.4) | |
Net cash used in financing activities | |
| (285.5) | |
| (136.2) | |
| | | | | | | |
Net Increase in Cash, Cash Equivalents and Restricted Cash | |
| 326.6 | |
| 3.0 | |
Cash, Cash Equivalents and Restricted Cash, Beginning of the Period | |
| 287.7 | |
| 19.7 | |
Cash, Cash Equivalents and Restricted Cash, End of the Period | | $ | 614.3 | | $ | 22.7 | |
| | | | | | | |
Reconciliation of Cash, Cash Equivalents and Restricted Cash, End of the Period: | | | | | | | |
Cash and Cash Equivalents | | $ | 609.0 | | $ | 17.4 | |
Restricted Cash | | | 5.3 | | | 5.3 | |
Total Cash, Cash Equivalents and Restricted Cash, End of the Period | | $ | 614.3 | | $ | 22.7 | |
| | | | | | | |
Supplemental Cash Flow Information: | | | | | | | |
Interest paid, net of capitalized interest | | $ | 8.4 | | $ | 10.4 | |
Income tax payments, net of refunds | | $ | 211.7 | | $ | 75.2 | |
| | | | | | | |
Non-cash Information: | | | | | | | |
Capital expenditures included in accounts payable, accruals and other liabilities | | $ | 6.1 | | $ | 7.7 | |
Accrued dividends | | $ | 12.4 | | $ | 13.2 | |
10
MATSON, INC. AND SUBSIDIARIES
Net Income to EBITDA Reconciliations
(Unaudited)
EBITDA RECONCILIATION
| | Three Months Ended |
| | | | |||||||
| | June 30, |
| Last Twelve | | ||||||||
(In millions) |
| 2022 |
| 2021 |
| Change |
| Months |
| ||||
Net Income | | $ | 380.7 | | $ | 162.5 | | $ | 218.2 | | $ | 1,397.6 | |
Add: Income taxes | |
| 109.7 | |
| 47.4 | |
| 62.3 | | | 369.7 | |
Add: Interest expense | |
| 4.5 | |
| 5.5 | |
| (1.0) | | | 19.1 | |
Add: Depreciation and amortization | |
| 34.9 | |
| 32.9 | |
| 2.0 | | | 136.9 | |
Add: Dry-dock amortization | |
| 6.2 | |
| 6.0 | |
| 0.2 | | | 24.6 | |
EBITDA (1) | | $ | 536.0 | | $ | 254.3 | | $ | 281.7 | | $ | 1,947.9 | |
| | Six Months Ended |
| |||||||
| | June 30, |
| |||||||
(In millions) |
| 2022 |
| 2021 |
| Change |
| |||
Net Income | | $ | 719.9 | | $ | 249.7 | | $ | 470.2 | |
Add: Income taxes | |
| 200.3 | |
| 74.5 | |
| 125.8 | |
Add: Interest expense | |
| 9.3 | |
| 12.8 | |
| (3.5) | |
Add: Depreciation and amortization | |
| 70.0 | |
| 65.2 | |
| 4.8 | |
Add: Dry-dock amortization | |
| 12.9 | |
| 12.6 | |
| 0.3 | |
EBITDA (1) | | $ | 1,012.4 | | $ | 414.8 | | $ | 597.6 | |
| (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. |
11
| 1 Second Quarter 2022 Earnings Conference Call Second Quarter 2022 Earnings Conference Call August 1, 2022 |
| 2 Second Quarter 2022 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 August 1, 2022. 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 13 - 24 of our Form 10 - K filed on February 25, 2022 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 Second Quarter 2022 Earnings Conference Call Opening Remarks • Recap of Matson’s 2Q22 results: – Matson performed well with higher year - over - year operating income in both Ocean Transportation and Logistics • Ocean Transportation: – China service continued to see significant demand – Higher year - over - year volume in Alaska service; softer volumes in Hawaii and Guam services compared to year ago period • Logistics: – Strength across all business lines – Continued to see favorable supply and demand fundamentals in our core markets |
| 4 Second Quarter 2022 Earnings Conference Call Views on Current Market Environment Domestic tradelanes • Local economies continue to recover from pandemic lows – Hawaii: tourism outlook remains strong and expect increasing international tourism arrivals as COVID - 19 wave in Asia recedes – Alaska: resumption of summer tourism and increased energy - related exploration and production activity as a result of elevated oil prices – Guam: Expect continued improvement in tourism traffic as the year progresses • But there are negative trends that create uncertainty in the economic recovery trajectory in each of the core markets – Weakening economic conditions in the U.S. and global economies could negatively affect consumer spending and tourism – Household discretionary income likely negatively affected by high inflation, higher interest rates and lower personal income with end of pandemic - era stimulus • Seeing some contraction in demand for retail - related goods Logistics • Continue to see a solid level of activity across all business lines • Rail congestion remains; customers shifting modes from rail to truck • Warehouse unit remains busy with inbound and transload volume exceeding outbound volume |
| 5 Second Quarter 2022 Earnings Conference Call Views on Current Market Environment (continued) Transpacific tradelane • Currently seeing solid demand for our China service • Some supply chain infrastructure issues slowly subsiding, but other uncertainties remain – China’s factory production continues to recover from the COVID - 19 - related supply chain challenges – Improving port congestion on the U.S. West Coast; some terminal congestion as dwell times remain elevated • In recent weeks, have seen a gradual decline in the Transpacific freight rate environment off the highs experienced earlier this year – Indicates that rates have likely peaked for now – Expect an orderly marketplace for the remainder of the year with our vessels continuing to operate at or near capacity and earning a significant rate premium to the market – Expect to operate the CCX (California - China Express) service through the October peak season this year • Continue to believe that our China service freight rates will be above pre - pandemic rate levels and significantly higher than the SCFI due to our differentiated, expedited ocean services |
| 6 Second Quarter 2022 Earnings Conference Call Our Current Priorities • Maintain vessel schedule and high - quality service for our Ocean Transportation and Logistics customers as the environment continues to evolve • Focus on organic growth opportunities and long - term investments – Making progress on evaluation of Alaska fleet replacement • Leaning towards upsizing CLX service with three new LNG - ready Aloha Class vessels • Expect to make a sizeable cash deposit into the Capital Construction Fund before end of 3Q22 • Maintain investment grade balance sheet and be prepared to capitalize on inorganic growth opportunities • Return capital to shareholders – In the last 4 quarters, have returned to shareholders over $450 million in dividends and share repurchases – Expect to be a steady buyer of shares with excess cash flow (cash flow after funding our maintenance capital expenditures, long - term investments and dividend) |
| 7 Second Quarter 2022 Earnings Conference Call Hawaii Service Second Quarter 2022 Performance • Container volume decreased 1.5% YoY primarily due to lower retail - related demand • Further improvement in the Hawaii economy supported by strong domestic tourist arrivals and modest improvement in international tourist trends Container Volume (FEU Basis) 25,000 27,000 29,000 31,000 33,000 35,000 37,000 39,000 41,000 Q1 Q2 Q3 Q4 2021 2022 Note : 4Q21 volume figure includes the benefit of a 53 rd week. (1.5)% |
| 8 Second Quarter 2022 Earnings Conference Call China Service Second Quarter 2022 Performance Container Volume (FEU Basis) 8,000 13,000 18,000 23,000 28,000 33,000 38,000 43,000 48,000 53,000 58,000 Q1 Q2 Q3 Q4 2021 2022 Note : CCX service started in 3Q21. 4Q21 volume figure includes the benefit of a 53 rd week. 11.7% • Container volume increased 11.7% YoY – Total number of eastbound voyages increased by 4 YoY • Demand driven by e - commerce, garments and other goods |
| 9 Second Quarter 2022 Earnings Conference Call Guam Service Second Quarter 2022 Performance Container Volume (FEU Basis) 3,000 3,500 4,000 4,500 5,000 5,500 6,000 Q1 Q2 Q3 Q4 2021 2022 (7.0)% • Container volume decreased 7.0% YoY primarily due to lower retail - related demand |
| 10 Second Quarter 2022 Earnings Conference Call Alaska Service Second Quarter 2022 Performance • Container volume increased 12.2% YoY – Higher northbound volume primarily due to: • Higher retail - related demand • Additional sailing – Higher AAX seafood volume Container Volume (FEU Basis) 10,000 12,000 14,000 16,000 18,000 20,000 22,000 24,000 Q1 Q2 Q3 Q4 2021 2022 12.2% Note : 4Q21 volume figure includes the benefit of a 53 rd week. |
| 11 Second Quarter 2022 Earnings Conference Call SSAT Joint Venture Second Quarter 2022 Performance Equity in Income of Joint Venture $ 0.0 $ 5.0 $ 10.0 $ 15.0 $ 20.0 $ 25.0 $ 30.0 $ 35.0 $ 40.0 Q1 Q2 Q3 Q4 $ in millions 2021 2022 • Terminal joint venture contribution was $24.7 million; YoY change of $11.9 million – Primarily due to higher other terminal revenue |
| 12 Second Quarter 2022 Earnings Conference Call Matson Logistics Second Quarter 2022 Performance Operating Income $ 0.0 $ 5.0 $ 10.0 $ 15.0 $ 20.0 $ 25.0 Q1 Q2 Q3 Q4 $ in millions 2021 2022 • Operating income of $23.1 million; YoY change of $10.2 million • Higher YoY operating income contributions from all services • Benefitted from favorable supply and demand fundamentals in core markets Note : 4Q21 operating income includes the benefit of a 53 rd week. |
| 13 Second Quarter 2022 Earnings Conference Call Financial Results – Summary Income Statement See the Addendum for a reconciliation of GAAP to non - GAAP Financial Metrics. Year-to-Date Second Quarter YTD Ended 6/30 D D ($ in millions, except per share data) 2022 2021 $ 2022 2021 $ Revenue Ocean Transportation $ 1,993.1 $ 1,243.4 $ 749.7 $ 1,049.2 $ 682.9 $ 366.3 Logistics 433.5 343.3 90.2 211.9 192.0 19.9 Total Revenue $ 2,426.6 $ 1,586.7 $ 839.9 $ 1,261.1 $ 874.9 $ 386.2 Operating Income Ocean Transportation $ 886.2 $ 315.1 $ 571.1 $ 470.0 $ 201.0 $ 269.0 Logistics 39.5 19.0 20.5 23.1 12.9 10.2 Total Operating Income $ 925.7 $ 334.1 $ 591.6 $ 493.1 $ 213.9 $ 279.2 Interest expense ( 9.3) ( 12.8) ( 4.5) ( 5.5) Other income (expense), net 3.8 2.9 1.8 1.5 Income taxes ( 200.3) ( 74.5) ( 109.7) ( 47.4) Net Income $ 719.9 $ 249.7 $ 470.2 $ 380.7 $ 162.5 $ 218.2 GAAP EPS, diluted $ 17.69 $ 5.70 $ 11.99 $ 9.49 $ 3.71 $ 5.78 $ 82.9 $ 77.8 $ 5.1 $ 41.1 $ 38.9 $ 2.2 EBITDA $ 1,012.4 $ 414.8 $ 597.6 $ 536.0 $ 254.3 $ 281.7 Depreciation and Amortization (incl. dry-dock amortization) |
| 14 Second Quarter 2022 Earnings Conference Call Cash Generation and Uses of Cash $ 0.0 $ 200.0 $ 400.0 $ 600.0 $ 800.0 $ 1,000.0 $ 1,200.0 $ 1,400.0 $ 1,600.0 Cash Flow from Operations Paydown of Borrowings, net Maintenance & Other Capex (1) New Vessel Capex (2) Dividends Share Repurchase Other Cash Flows Net Increase in Cash $ in millions Last Twelve Months Ended June 30, 2022 $ 1,436.4 ($ 65.0) ($ 277.5) ($ 50.7) $ 591.6 ($ 18.5) ($ 26.3) (1) Includes $99.5 million of early buy - out and operating lease termination payments. (2) Includes capitalized interest and owner’s items. ($ 406.8) |
| 15 Second Quarter 2022 Earnings Conference Call Financial Results – Summary Balance Sheet • Total Debt of $596.6 million (1) 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. Debt Levels Share Repurchase • 2Q22: ~1.6 million shares repurchased for total cost of $138.1 million • YTD: ~2.3 million shares repurchased for total cost of $206.7 million • At end of 2Q22, ~1.2 million shares remaining in share repurchase program ($ in millions) ASSETS Cash and cash equivalents $ 609.0 $ 282.4 Other current assets 503.7 422.1 Total current assets 1,112.7 704.5 Investment in SSAT 93.1 58.7 Property and equipment, net 1,894.7 1,878.3 Intangible assets, net 175.8 181.1 Goodwill 327.8 327.8 Other long-term assets 554.5 542.7 Total assets $ 4,158.6 $ 3,693.1 LIABILITIES AND SHAREHOLDERS’ EQUITY Current portion of debt $ 65.0 $ 65.0 Other current liabilities 567.1 547.4 Total current liabilities 632.1 612.4 Long-term debt, net of deferred loan fees 517.9 549.7 Other long-term liabilities 875.0 863.6 Total long-term liabilities 1,392.9 1,413.3 Total shareholders’ equity 2,133.6 1,667.4 Total liabilities and shareholders’ equity $ 4,158.6 $ 3,693.1 June 30, December 31, 2022 2021 |
| 16 Second Quarter 2022 Earnings Conference Call Update on New Vessel and LNG Projects • Continue to evaluate refleeting options for the Alaska tradelane – Leaning towards the option to construct three new LNG - ready Aloha Class vessels for the CLX and move three smaller, older CLX vessels into the Alaska service • Estimated total cost of ~$1 billion before owner’s items • Would allow us to upsize the CLX service by approximately 500 containers of capacity per vessel and expect the additional capacity to be a meaningful EBITDA contributor • Capital Construction Fund (CCF) – Expect to make a ~$500 million cash deposit before end of 3Q22 – Expect to generate a refund to 2021 federal and state cash tax payments • LNG installation projects on Daniel K. Inouye and Manukai remain on track; continue to evaluate LNG installation projects on Kaimana Hila , Lurline and Matsonia • Reiterate 2022 capex of $160 to $180 million |
| 17 Second Quarter 2022 Earnings Conference Call Appendix |
| 18 Second Quarter 2022 Earnings Conference Call Hawaii Service – Current Business Trends UHERO Projections (2) (1) Source: http://files.hawaii.gov/dbedt/economic/data_reports/mei/2022 - 06 - state.xls (2) Source: https://uhero.hawaii.edu/wp - content/uploads/2022/05/22Q2_Forecast.pdf 2020 2021 2022P 2023P Real GDP (11.1)% 4.6% 3.5% 2.5% Construction Jobs Growth (2.4)% 0.2% 0.1% 1.9% Population Growth (0.3)% (0.7)% (0.3)% 0.0% Unemployment Rate 12.0% 5.8% 3.6% 2.9% Visitor Arrivals (‘000s) % change 2,708.3 (73.9)% 6,777.1 150.2% 8,935.5 31.8% 9,487.4 6.2% 0 100 200 300 400 500 600 700 800 900 1,000 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Visitor Arrivals (‘000s) Unemployment Rate Unemployment Rate and Visitor Arrivals by Air Unemployment Rate (not seasonally adjusted) (1) Visitor Arrivals by Air (1) Select Hawaii Economic Indicators |
| 19 Second Quarter 2022 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 a nd 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 ” ). |
