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 21, 2023 (
(Exact Name of Registrant as Specified in its Charter)
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Registrant’s telephone number, including area code: (
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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:
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 February 21, 2023, Matson, Inc. (the “Company”) issued a press release announcing the Company’s earnings for the quarter and fiscal year ended December 31, 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 | Press Release issued by Matson, Inc., dated February 21, 2023 |
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 21, 2023 |
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 2022 RESULTS
| ● | 4Q22 EPS of $2.10 |
| ● | Full Year 2022 EPS of $27.07 |
| ● | Full Year 2022 Net Income and EBITDA of $1,063.9 million and $1,526.2 million, respectively |
| ● | Year-over-year decrease in 4Q22 consolidated operating income driven primarily by lower contribution from China service |
| ● | Repurchased approximately 1.5 million shares and 5.0 million shares in 4Q22 and full year 2022, respectively |
HONOLULU, Hawaii (February 21, 2023) – Matson, Inc. (“Matson” or the “Company”) (NYSE: MATX), a leading U.S. carrier in the Pacific, today reported net income of $78.0 million, or $2.10 per diluted share, for the quarter ended December 31, 2022. Net income for the quarter ended December 31, 2021 was $394.5 million, or $9.39 per diluted share. Consolidated revenue for the fourth quarter 2022 was $801.6 million compared with $1,267.0 million for the fourth quarter 2021.
“Matson’s Ocean Transportation and Logistics business segments performed well in a difficult business environment, and we ended the year in a solid financial position with low leverage and over half of our new vessel program funded while returning $445 million in cash to shareholders through dividends and share repurchases,” said Chairman and Chief Executive Officer Matt Cox. “For the quarter within Ocean Transportation, our China service achieved lower year-over-year volume and freight rates which contributed to the decline in our consolidated operating income. As we mentioned on our November earnings call, we expected the fourth quarter of 2022 and first quarter of 2023 to be challenging in the Transpacific tradelane as retailers’ inventories adjust to consumer demand levels and as ocean liners reduce vessel capacity to meet lower demand levels. Currently in the Transpacific marketplace, business conditions remain challenging as retailers continue to right-size inventories amid weakening consumer demand, increasing interest rates and economic uncertainty. As such, we expect our CLX and CLX+ services in the first quarter and first half of the year to reflect freight demand levels below normalized conditions with lower year-over-year volumes and a lower rate environment. Absent an economic ‘hard landing’ in the U.S., we expect improved trade dynamics in the second half of 2023 as the Transpacific marketplace transitions to a more normalized level of demand. Regardless of the economic environment, we operate the two fastest and most reliable ocean services and, as a result, we expect to continue to earn a significant rate premium to the Shanghai Containerized Freight Index.”
Mr. Cox added, “In our domestic ocean tradelanes, we saw lower year-over-year volumes in Hawaii, Alaska and Guam compared to the year ago period. The year-over-year decline in Hawaii volume was primarily due to lower retail- and hospitality-related demand compared to elevated pandemic levels in the year ago period. In Logistics, operating income decreased year-over-year primarily due to a lower contribution from supply chain management consistent with lower demand in the Transpacific tradelane.”
“We expect Matson’s financial performance in the first quarter of 2023 to be the weakest of the year as normal seasonality returns to our domestic tradelanes and Logistics and our China service experiences freight demand levels below normalized conditions,” said Mr. Cox. “In the near-term, we expect continued economic growth in Hawaii,
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Alaska and Guam to be supportive of freight demand. On the capital allocation front, we will continue to be disciplined in our approach. After funding our dividend, supporting our operations with maintenance capital, and investing in organic and inorganic growth opportunities while maintaining an investment grade balance sheet, we remain committed to the return of excess capital to shareholders.”
Fourth Quarter 2022 Discussion and Update on Business Conditions
Ocean Transportation: The Company’s container volume in the Hawaii service in the fourth quarter 2022 was 13.0 percent lower year-over-year. The decrease was primarily due to (i) lower retail- and hospitality-related demand compared to elevated pandemic levels in the year ago period and (ii) one less week. During the quarter, the Company saw retail customers continue to manage inventories to weaker consumer demand levels despite continued improvement in the Hawaii economy supported by a low unemployment rate and relatively strong tourist arrivals, including a modest improvement in international tourist trends. In the near-term, Matson expects economic growth in Hawaii supported by continued strength in tourism and a low unemployment rate, 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 China, the Company’s container volume in the fourth quarter 2022 decreased 47.2 percent year-over-year. The decrease was primarily due to (i) lower demand for the CLX and CLX+ services, (ii) the discontinuation of the CCX service in the third quarter 2022 and (iii) one less week. Matson continued to realize a significant rate premium over the Shanghai Containerized Freight Index (“SCFI”) in the fourth quarter 2022 but achieved average freight rates that were lower than in the year ago period. Currently in the Transpacific marketplace, business conditions remain challenging as retailers continue to right-size inventories amid weakening consumer demand, increasing interest rates and economic uncertainty. As such, the Company expects its CLX and CLX+ services in the first quarter and first half of the year to reflect freight demand levels below normalized conditions with lower year-over-year volumes and a lower rate environment. Absent an economic “hard landing” in the U.S., Matson expects improved trade dynamics in the second half of 2023 as the Transpacific marketplace transitions to a more normalized level of demand. Regardless of the economic environment, Matson operates the two fastest and most reliable ocean services and, as a result, the Company expects to continue to earn a significant rate premium to the SCFI.
In Guam, the Company’s container volume in the fourth quarter 2022 decreased 14.0 percent year-over-year primarily due to lower retail-related demand. In the near-term, the Company expects continued improvement in the Guam economy with increasing tourism and a low unemployment rate, 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 fourth quarter 2022 decreased 7.7 percent year-over-year due to (i) lower northbound volume primarily due to one less sailing and one less week and (ii) lower southbound volume primarily due to lower domestic seafood volume and one less week, partially offset by higher export seafood volume from Alaska-Asia Express (“AAX”). In the near-term, the Company expects the Alaska economy to benefit from low unemployment 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 fourth quarter 2022 from the Company’s SSAT joint venture investment was $1.0 million, or $20.3 million lower than the fourth quarter 2021. The decrease was primarily driven by lower other terminal revenue, lower lift volume and higher operating costs.
Logistics: In the fourth quarter 2022, operating income for the Company’s Logistics segment was $12.8 million, or $2.0 million lower compared to the level achieved in the fourth quarter 2021. The decrease was primarily due to a lower contribution from supply chain management consistent with lower demand in the Transpacific tradelane.
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Results By Segment
Ocean Transportation — Three months ended December 31, 2022 compared with 2021
| | Three Months Ended December 31, |
| |||||||||
(Dollars in millions) |
| 2022 |
| 2021 |
| Change |
| |||||
Ocean Transportation revenue | | $ | 633.0 | | $ | 1,025.9 | | $ | (392.9) | | (38.3) | % |
Operating costs and expenses | |
| (553.2) | |
| (565.2) | |
| 12.0 | | (2.1) | % |
Operating income | | $ | 79.8 | | $ | 460.7 | | $ | (380.9) | | (82.7) | % |
Operating income margin | |
| 12.6 | % |
| 44.9 | % |
| | | | |
| | | | | | | | | | | | |
Volume (Forty-foot equivalent units (FEU), except for automobiles) (1) | | | | | | | | | | | | |
Hawaii containers | |
| 36,100 | |
| 41,500 | |
| (5,400) | | (13.0) | % |
Hawaii automobiles | |
| 10,800 | |
| 10,600 | |
| 200 | | 1.9 | % |
Alaska containers | |
| 17,900 | |
| 19,400 | |
| (1,500) | | (7.7) | % |
China containers | |
| 28,300 | |
| 53,600 | |
| (25,300) | | (47.2) | % |
Guam containers | |
| 4,900 | |
| 5,700 | |
| (800) | | (14.0) | % |
Other containers (2) | |
| 5,000 | |
| 5,600 | |
| (600) | | (10.7) | % |
| (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 decreased $392.9 million, or 38.3 percent, during the three months ended December 31, 2022, compared with the three months ended December 31, 2021. The decrease was primarily due to lower volume and average freight rates in China and lower volume in Hawaii, partially offset by higher fuel-related surcharge revenue.
On a year-over-year FEU basis, Hawaii container volume decreased 13.0 percent primarily due to lower retail- and hospitality-related demand and one less week; Alaska volume decreased 7.7 percent due to (i) lower northbound volume primarily due to one less sailing and one less week and (ii) lower southbound volume primarily due to lower domestic seafood volume and one less week, partially offset by higher export seafood volume from AAX; China volume was 47.2 percent lower primarily due to (a) lower demand for the CLX and CLX+ services, (b) the discontinuation of the CCX service in the third quarter 2022 and (c) one less week; Guam volume was 14.0 percent lower primarily due to lower retail-related demand; and Other containers volume decreased 10.7 percent.
Ocean Transportation operating income decreased $380.9 million during the three months ended December 31, 2022, compared with the three months ended December 31, 2021. The decrease was primarily due to lower volume and average freight rates in China and a lower contribution from SSAT, partially offset by lower operating costs and expenses primarily related to the discontinuation of the CCX service.
The Company’s SSAT terminal joint venture investment contributed $1.0 million during the three months ended December 31, 2022, compared to a contribution of $21.3 million during the three months ended December 31, 2021. The decrease was primarily driven by lower other terminal revenue, lower lift volume and higher operating costs.
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Ocean Transportation — Year ended December 31, 2022 compared with 2021
| | Years Ended December 31, |
| |||||||||
(Dollars in millions) |
| 2022 |
| 2021 |
| Change |
| |||||
Ocean Transportation revenue | | $ | 3,544.6 | | $ | 3,132.8 | | $ | 411.8 | | 13.1 | % |
Operating costs and expenses | |
| (2,263.4) | |
| (1,995.1) | |
| (268.3) | | 13.4 | % |
Operating income | | $ | 1,281.2 | | $ | 1,137.7 | | $ | 143.5 | | 12.6 | % |
Operating income margin | |
| 36.1 | % |
| 36.3 | % | | | | | |
| | | | | | | | | | | | |
Volume (Forty-foot equivalent units (FEU), except for automobiles) (1) | | | | | | | | | | | | |
Hawaii containers | |
| 148,500 | |
| 157,600 | | | (9,100) | | (5.8) | % |
Hawaii automobiles | |
| 41,300 | |
| 46,600 | | | (5,300) | | (11.4) | % |
Alaska containers | |
| 84,900 | |
| 78,200 | | | 6,700 | | 8.6 | % |
China containers | |
| 163,100 | |
| 184,800 | | | (21,700) | | (11.7) | % |
Guam containers | |
| 21,100 | |
| 21,900 | | | (800) | | (3.7) | % |
Other containers (2) | |
| 22,500 | |
| 20,200 | | | 2,300 | | 11.4 | % |
| (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 $411.8 million, or 13.1 percent, during the year ended December 31, 2022, compared with the year ended December 31, 2021. The increase was primarily due to higher average freight rates in China, higher fuel-related surcharge revenue and higher volume in Alaska, partially offset by lower volume in China and Hawaii.
On a year-over-year FEU basis, Hawaii container volume decreased 5.8 percent primarily due to lower retail-related demand and one less week; Alaska volume increased 8.6 percent due to (i) higher export seafood volume from AAX, (ii) higher northbound volume primarily due to higher retail-related demand and volume related to a competitor’s dry-docking, partially offset by one less week and (iii) higher southbound volume primarily due to higher domestic seafood volume; China volume was 11.7 percent lower primarily due to (a) lower demand for the CLX and CLX+ services and (b) one less week, partially offset by incremental volume on the CCX service; Guam volume decreased 3.7 percent primarily due to lower retail-related volume; and Other containers volume increased 11.4 percent.
Ocean Transportation operating income increased $143.5 million during the year ended December 31, 2022, compared with the year ended December 31, 2021. The increase was primarily due to higher freight rates in China and a higher contribution from SSAT, partially offset by lower volume in China, higher operating costs and expenses (including fuel-related expenses) primarily due to the CLX+ service and higher terminal handling costs.
The Company’s SSAT terminal joint venture investment contributed $83.1 million during the year ended December 31, 2022, compared to a contribution of $56.3 million during the year ended December 31, 2021. The increase was primarily driven by higher other terminal revenue.
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Logistics — Three months ended December 31, 2022 compared with 2021
| | Three Months Ended December 31, |
| |||||||||
(Dollars in millions) |
| 2022 |
| 2021 |
| Change |
| |||||
Logistics revenue | | $ | 168.6 | | $ | 241.1 | | $ | (72.5) | | (30.1) | % |
Operating costs and expenses | |
| (155.8) | |
| (226.3) | |
| 70.5 | | (31.2) | % |
Operating income | | $ | 12.8 | | $ | 14.8 | | $ | (2.0) | | (13.5) | % |
Operating income margin | |
| 7.6 | % |
| 6.1 | % | | | | | |
Logistics revenue decreased $72.5 million, or 30.1 percent, during the three months ended December 31, 2022, compared with the three months ended December 31, 2021. The decrease was primarily due to lower transportation brokerage revenue.
Logistics operating income decreased $2.0 million, or 13.5 percent, during the three months ended December 31, 2022, compared with the three months ended December 31, 2021. The decrease was primarily due to a lower contribution from supply chain management consistent with lower demand in the Transpacific tradelane.
Logistics — Year ended December 31, 2022 compared with 2021
| | Years Ended December 31, |
| |||||||||
(Dollars in millions) |
| 2022 |
| 2021 |
| Change |
| |||||
Logistics revenue | | $ | 798.4 | | $ | 792.5 | | $ | 5.9 | | 0.7 | % |
Operating costs and expenses | |
| (726.0) | |
| (742.7) | |
| 16.7 | | (2.2) | % |
Operating income | | $ | 72.4 | | $ | 49.8 | | $ | 22.6 | | 45.4 | % |
Operating income margin | |
| 9.1 | % |
| 6.3 | % | | | | | |
Logistics revenue increased $5.9 million, or 0.7 percent, during the year ended December 31, 2022, compared with the year ended December 31, 2021. The increase was primarily due to higher revenue in freight forwarding, supply chain management and warehousing, partially offset by lower transportation brokerage revenue.
Logistics operating income increased $22.6 million, or 45.4 percent, during the year ended December 31, 2022, compared with the year ended December 31, 2021. The increase was primarily due to higher contributions from transportation brokerage and freight forwarding.
Liquidity, Cash Flows and Capital Allocation
Matson’s Cash and Cash Equivalents decreased by $32.6 million from $282.4 million at December 31, 2021 to $249.8 million at December 31, 2022, which excludes $518.2 million in cash and interest deposited in the Capital Construction Fund. Matson generated net cash from operating activities of $1,271.9 million during the year ended December 31, 2022, compared to $984.1 million during the year ended December 31, 2021. Capital expenditures totaled $209.3 million for the year ended December 31, 2022, compared with $325.3 million for the year ended December 31, 2021. Total debt decreased by $111.5 million during the year to $517.5 million as of December 31, 2022, of which $440.6 million was classified as long-term debt. As of December 31, 2022 Matson had available borrowings under its revolving credit facility of $642.1 million.
During the fourth quarter and full year 2022, Matson repurchased approximately 1.5 million shares and 5.0 million shares for a total cost of $101.9 million and $397.0 million, respectively. As of December 31, 2022, the Company had approximately 1.5 million shares remaining in its share repurchase program.
As previously announced, Matson’s Board of Directors declared a cash dividend of $0.31 per share payable on March 2, 2023 to all shareholders of record as of the close of business on February 9, 2023.
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Teleconference and Webcast
A conference call is scheduled on February 21, 2023 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 fourth quarter and full year results.
Date of Conference Call: | Tuesday, February 21, 2023 |
Scheduled Time: | 4:30 p.m. ET / 1:30 p.m. PT / 11:30 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/BIfcad646d67d34b738acd1592c030b6bc
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 of ocean freight transportation services 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 and Asia. Its integrated, asset-light logistics services include rail intermodal, highway brokerage, warehousing, freight consolidation, supply chain management, and freight 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”).
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, volume and freight levels, retailers’ inventories, consumer demand levels, vessel capacity, vessel transit times, interest rates, inflation, economic uncertainty, trade dynamics, business conditions in the Transpacific marketplace, the rate environment, Matson’s rate premium to the Shanghai Containerized Freight Index, timing of return to normalized seasonality, economic growth and drivers in Hawaii, Alaska and Guam, tourism levels, unemployment rates, lift volume and other terminal revenue from SSAT, port congestion on the U.S. West Coast, timing and amount of capital expenditures, costs and timing of liquified natural gas installations on certain vessels, capital allocation plans,
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refleeting initiatives, energy-related exploration and product activity, oil prices, modal shifts and rail congestion, repayment of certain Title XI debt, contributions to the Capital Construction Fund, and Sand Island terminal upgrades. 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 macroeconomic conditions, geopolitical developments, 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 Company’s vessel construction agreements with Philly Shipyard; 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 foreign shipping markets, 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; 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 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.
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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) |
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Operating Revenue: | | | | | | | | | | | | |
Ocean Transportation | | $ | 633.0 | | $ | 1,025.9 | | $ | 3,544.6 | | $ | 3,132.8 |
Logistics | |
| 168.6 | |
| 241.1 | |
| 798.4 | |
| 792.5 |
Total Operating Revenue | |
| 801.6 | |
| 1,267.0 | |
| 4,343.0 | |
| 3,925.3 |
| | | | | | | | | | | | |
Costs and Expenses: | | | | | | | | | | | | |
Operating costs | |
| (641.0) | |
| (748.0) | |
| (2,811.5) | |
| (2,557.6) |
Income from SSAT | |
| 1.0 | |
| 21.3 | |
| 83.1 | |
| 56.3 |
Selling, general and administrative | |
| (69.0) | |
| (64.8) | |
| (261.0) | |
| (236.5) |
Total Costs and Expenses | |
| (709.0) | |
| (791.5) | |
| (2,989.4) | |
| (2,737.8) |
| | | | | | | | | | | | |
Operating Income | |
| 92.6 | |
| 475.5 | |
| 1,353.6 | |
| 1,187.5 |
Interest income | | | 6.9 | | | — | | | 8.2 | | | — |
Interest expense | |
| (3.7) | |
| (4.7) | |
| (18.0) | |
| (22.6) |
Other income (expense), net | |
| 2.2 | |
| 1.7 | |
| 8.5 | |
| 6.4 |
Income before Taxes | |
| 98.0 | |
| 472.5 | |
| 1,352.3 | |
| 1,171.3 |
Income taxes | |
| (20.0) | |
| (78.0) | |
| (288.4) | |
| (243.9) |
Net Income | | $ | 78.0 | | $ | 394.5 | | $ | 1,063.9 | | $ | 927.4 |
| | | | | | | | | | | | |
Basic Earnings Per Share | | $ | 2.11 | | $ | 9.51 | | $ | 27.28 | | $ | 21.67 |
Diluted Earnings Per Share | | $ | 2.10 | | $ | 9.39 | | $ | 27.07 | | $ | 21.47 |
| | | | | | | | | | | | |
Weighted Average Number of Shares Outstanding: | | | | | | | | | | | | |
Basic | |
| 36.9 | |
| 41.5 | |
| 39.0 | |
| 42.8 |
Diluted | |
| 37.2 | |
| 42.0 | |
| 39.3 | |
| 43.2 |
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MATSON, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
|
| December 31, |
| December 31, | ||
(In millions) | | 2022 | | 2021 | ||
ASSETS | | | | | | |
Current Assets: | | | | | | |
Cash and cash equivalents | | $ | 249.8 | | $ | 282.4 |
Other current assets | |
| 509.8 | |
| 422.1 |
Total current assets | |
| 759.6 | |
| 704.5 |
Long-term Assets: | | | | | | |
Investment in SSAT | |
| 81.2 | |
| 58.7 |
Property and equipment, net | |
| 1,962.5 | |
| 1,878.3 |
Goodwill | |
| 327.8 | |
| 327.8 |
Intangible assets, net | |
| 174.9 | |
| 181.1 |
Capital Construction Fund | |
| 518.2 | |
| — |
Other long-term assets | |
| 505.8 | |
| 542.7 |
Total long-term assets | | | 3,570.4 | | | 2,988.6 |
Total assets | | $ | 4,330.0 | | $ | 3,693.1 |
| | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | |
Current Liabilities: | | | | | | |
Current portion of debt | | $ | 76.9 | | $ | 65.0 |
Other current liabilities | |
| 504.7 | |
| 547.4 |
Total current liabilities | |
| 581.6 | |
| 612.4 |
Long-term Liabilities: | | | | | | |
Long-term debt, net of deferred loan fees | |
| 427.7 | |
| 549.7 |
Deferred income taxes | |
| 646.5 | |
| 425.2 |
Other long-term liabilities | |
| 377.3 | |
| 438.4 |
Total long-term liabilities | |
| 1,451.5 | |
| 1,413.3 |
| | | | | | |
Total shareholders’ equity | |
| 2,296.9 | |
| 1,667.4 |
Total liabilities and shareholders’ equity | | $ | 4,330.0 | | $ | 3,693.1 |
9
MATSON, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | Years Ended December 31, |
| |||||||
(In millions) |
| 2022 |
| 2021 |
| 2020 |
| |||
Cash Flows From Operating Activities: | | | | | | | | | | |
Net income | | $ | 1,063.9 | | $ | 927.4 | | $ | 193.1 | |
Reconciling adjustments: | | | | | | | | | | |
Depreciation and amortization | |
| 141.3 | |
| 135.9 | |
| 114.9 | |
Amortization of operating lease right of use assets | | | 153.0 | | | 103.3 | | | 74.8 | |
Deferred income taxes | |
| 90.2 | |
| 33.2 | |
| 52.1 | |
(Gain) Loss on disposal of property and equipment | |
| (1.5) | |
| (0.8) | |
| 2.8 | |
Share-based compensation expense | |
| 18.3 | |
| 19.3 | |
| 18.8 | |
Income from SSAT | |
| (83.1) | |
| (56.3) | |
| (26.3) | |
Distributions from SSAT | |
| 47.3 | |
| 46.9 | |
| 55.4 | |
Changes in assets and liabilities: | | | | | | | | | | |
Accounts receivable, net | |
| 74.6 | |
| (90.3) | |
| (48.0) | |
Deferred dry-docking payments | |
| (25.7) | |
| (36.3) | |
| (16.8) | |
Deferred dry-docking amortization | |
| 24.9 | |
| 24.3 | |
| 25.1 | |
Prepaid expenses and other assets | |
| (45.2) | |
| (48.1) | |
| 21.9 | |
Accounts payable, accruals and other liabilities | |
| (31.7) | |
| 39.6 | |
| 44.8 | |
Operating lease liabilities | | | (154.1) | | | (99.7) | | | (75.9) | |
Other long-term liabilities | |
| (0.3) | |
| (14.3) | |
| (6.9) | |
Net cash provided by operating activities | |
| 1,271.9 | |
| 984.1 | |
| 429.8 | |
| | | | | | | | | | |
Cash Flows From Investing Activities: | | | | | | | | | | |
Capitalized vessel construction expenditures | | | (62.4) | | | (14.9) | | | (87.8) | |
Other capital expenditures | |
| (146.9) | |
| (310.4) | |
| (104.5) | |
Proceeds from disposal of property and equipment, and other | |
| (1.8) | |
| 1.9 | |
| 15.3 | |
Cash and interest deposits into Capital Construction Fund | |
| (582.8) | |
| (31.2) | |
| (132.4) | |
Withdrawals from Capital Construction Fund | |
| 64.6 | |
| 31.2 | |
| 132.4 | |
Net cash used in investing activities | |
| (729.3) | |
| (323.4) | |
| (177.0) | |
| | | | | | | | | | |
Cash Flows From Financing Activities: | | | | | | | | | | |
Proceeds from issuance of debt | | | — | | | — | | | 325.5 | |
Repayments of debt | | | (111.5) | |
| (59.3) | |
| (216.5) | |
Proceeds from revolving credit facility | | | — | |
| 304.3 | |
| 648.0 | |
Repayments of revolving credit facility | | | — | | | (376.1) | | | (955.3) | |
Payment of financing costs | | | — | |
| (3.0) | |
| (18.5) | |
Proceeds from issuance of common stock | | | — | |
| — | |
| 0.1 | |
Dividends paid | | | (48.0) | |
| (45.9) | |
| (39.2) | |
Repurchase of Matson common stock | | | (397.0) | | | (198.3) | | | — | |
Tax withholding related to net share settlements of restricted stock units | | | (20.1) | | | (14.4) | | | (5.6) | |
Net cash used in financing activities | |
| (576.6) | |
| (392.7) | |
| (261.5) | |
| | | | | | | | | | |
Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash | |
| (34.0) | |
| 268.0 | |
| (8.7) | |
Cash, Cash Equivalents and Restricted Cash, Beginning of the Year | |
| 287.7 | |
| 19.7 | |
| 28.4 | |
Cash, Cash Equivalents and Restricted Cash, End of the Year | | $ | 253.7 | | $ | 287.7 | | $ | 19.7 | |
| | | | | | | | | | |
Reconciliation of Cash, Cash Equivalents, and Restricted Cash, at End of the Year: | | | | | | | | | | |
Cash and Cash Equivalents | | $ | 249.8 | | $ | 282.4 | | $ | 14.4 | |
Restricted Cash | | | 3.9 | | | 5.3 | | | 5.3 | |
Total Cash, Cash Equivalents and Restricted Cash, End of the Year | | $ | 253.7 | | $ | 287.7 | | $ | 19.7 | |
| | | | | | | | | | |
Supplemental Cash Flow Information: | | | | | | | | | | |
Interest paid, net of capitalized interest | | $ | 16.2 | | $ | 19.3 | | $ | 26.2 | |
Income tax paid, net of income tax refunds | | $ | 215.2 | | $ | 241.6 | | $ | (16.1) | |
| | | | | | | | | | |
Non-cash Information: | | | | | | | | | | |
Capital expenditures included in accounts payable, accruals and other liabilities | | $ | 5.5 | | $ | 6.4 | | $ | 24.7 | |
10
MATSON, INC. AND SUBSIDIARIES
Net Income to EBITDA Reconciliations
(Unaudited)
EBITDA RECONCILIATION
| | | Three Months Ended |
| |||||||
| | | December 31, |
| |||||||
(In millions) | |
| 2022 |
| 2021 |
| Change |
| |||
Net Income | | | $ | 78.0 | | $ | 394.5 | | $ | (316.5) | |
Subtract: | Interest income | | | (6.9) | | | — | | | (6.9) | |
Add: | Interest expense | |
| 3.7 | |
| 4.7 | |
| (1.0) | |
Add: | Income taxes | |
| 20.0 | |
| 78.0 | |
| (58.0) | |
Add: | Depreciation and amortization | |
| 35.3 | |
| 34.2 | |
| 1.1 | |
Add: | Dry-dock amortization | |
| 6.3 | |
| 6.3 | |
| — | |
EBITDA (1) | | | $ | 136.4 | | $ | 517.7 | | $ | (381.3) | |
| | | Years Ended |
| |||||||
| | | December 31, |
| |||||||
(In millions) | |
| 2022 |
| 2021 |
| Change |
| |||
Net Income | | | $ | 1,063.9 | | $ | 927.4 | | $ | 136.5 | |
Subtract: | Interest income | | | (8.2) | | | — | | | (8.2) | |
Add: | Interest expense | |
| 18.0 | |
| 22.6 | |
| (4.6) | |
Add: | Income taxes | |
| 288.4 | |
| 243.9 | |
| 44.5 | |
Add: | Depreciation and amortization | |
| 139.2 | |
| 132.1 | |
| 7.1 | |
Add: | Dry-dock amortization | |
| 24.9 | |
| 24.3 | |
| 0.6 | |
EBITDA (1) | | | $ | 1,526.2 | | $ | 1,350.3 | | $ | 175.9 | |
| (1) | EBITDA is defined as earnings before interest, income taxes, 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 Fourth Quarter 2022 Earnings Conference Call Fourth Quarter 2022 Earnings Conference Call February 21, 2023 |
| 2 Fourth 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 February 21, 2023. 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 26-37 of our Form 10-Q filed on November 3, 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 Fourth Quarter 2022 Earnings Conference Call Opening Remarks • In 4Q22, Matson’s Ocean Transportation and Logistics business segments performed well in a difficult business environment • Matson is in a solid financial position – Low leverage – Currently, ~$622 million in Capital Construction Fund for new vessel program(1) – In FY2022, returned $445 million in cash to shareholders • Ocean Transportation 4Q22: – Our China service achieved lower year-over-year volume and freight rates which contributed to the decline in our consolidated operating income – Lower year-over-year volumes in Hawaii, Alaska and Guam compared to year ago period • Logistics 4Q22: – Lower YoY operating income primarily due to lower contribution from supply chain management consistent with lower demand in Transpacific tradelane (1) Based on CCF balance of ~$518 million as of December 31, 2022, ~$4 million in interest income on CCF cash deposits year-to-date in 2023 and $100 million cash deposit in February 2023. |
| 4 Fourth Quarter 2022 Earnings Conference Call Hawaii Service Fourth Quarter 2022 Performance • Container volume decreased 13.0% YoY – Lower retail- and hospitality-related demand compared to elevated pandemic levels in 4Q21 – Extra week in 4Q21 – 4Q22 volume lower than volume achieved in 4Q19 • During 4Q22, tourist arrivals remained relatively strong although a little softer in December 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 53rd week. (13.0)% Full Year 2022 Performance • Container volume decreased 5.8% YoY – Lower retail-related demand compared to elevated pandemic levels in FY2021 – Extra week in 4Q21 |
| 5 Fourth Quarter 2022 Earnings Conference Call Hawaii Service – Current Business Trends UHERO Projections (2) (1) Source: https://files.hawaii.gov/dbedt/economic/data_reports/mei/2022-12-state.xls (2) Source: https://uhero.hawaii.edu/wp-content/uploads/2022/12/22Q4_Forecast.pdf 2021 2022 2023P 2024P Real GDP 6.3% 2.0% 2.8% 1.3% Construction Jobs Growth 0.6% (1.1)% 2.5% 1.0% Population Growth (0.7)% (0.2)% 0.0% 0.1% Unemployment Rate 5.8% 3.8% 3.6% 3.8% Visitor Arrivals (‘000s) % change 6,777.0 150.2% 9,277.0 36.9% 9,652.9 4.1% 9,491.6 (1.7)% 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 Mar-21 May-21 Jul-21 Sep-21 Nov-21 Jan-22 Mar-22 May-22 Jul-22 Sep-22 Nov-22 Jan-23 Unemployment Rate Visitor Arrivals (‘000s) Unemployment Rate and Visitor Arrivals by Air Unemployment Rate (not seasonally adjusted) (1) Visitor Arrivals by Air (1) Select Hawaii Economic Indicators • To date in 2023, have seen a steadier level of retail-related freight demand consistent with pre-pandemic trends • Expect economic growth in near-term supported by: – Continued strength in tourism – Low unemployment rate • Economic growth trajectory is uncertain given negative trends as a result of higher inflation, higher interest rates and the end of the pandemic-era stimulus helping personal income Commentary |
| 6 Fourth Quarter 2022 Earnings Conference Call China Service Fourth 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 and ended in 3Q22. 4Q21 volume figure includes the benefit of a 53rd week. • Container volume decreased 47.2% YoY – Lower demand for our CLX and CLX+ services – No CCX service in 4Q22 • CCX service discontinued in 3Q22 – Extra week in 4Q21 (47.2)% • Container volume decreased 11.7% YoY – Lower demand for the CLX and CLX+ services and an extra week in 4Q21 – Partially offset by incremental volume on the CCX service Full Year 2022 Performance |
| 7 Fourth Quarter 2022 Earnings Conference Call China Service – Current Business Trends • Currently in the Transpacific marketplace, business conditions remain challenging – Retailers continue to right-size inventories amid weakening consumer demand, increasing interest rates and economic uncertainty • Expect our CLX and CLX+ services in 1Q23 and 1H23 to reflect freight demand levels below normalized conditions with lower YoY volumes and a lower rate environment • Absent an economic “hard landing” in the U.S., expect improved trade dynamics in 2H23 as the Transpacific marketplace transitions to a more normalized level of demand • Regardless of the economic environment, we operate the two fastest and most reliable ocean services and, as a result, we expect to continue to earn a significant rate premium to the SCFI |
| 8 Fourth Quarter 2022 Earnings Conference Call Guam Service Fourth 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 • Container volume decreased 14.0% YoY primarily due to lower retail-related demand – No impact from 53rd week in 4Q21 – 4Q22 volume higher than volume achieved in 4Q19 (14.0)% • Expect continued improvement in economy with increasing tourism and a low unemployment rate • Economic growth trajectory is uncertain given negative trends as a result of higher inflation, higher interest rates and the end of the pandemic-era stimulus helping personal income Full Year 2022 Performance • Container volume decreased 3.7% YoY primarily due to lower retail-related demand Current Business Trends |
| 9 Fourth Quarter 2022 Earnings Conference Call Alaska Service Fourth Quarter 2022 Performance • Container volume decreased 7.7% YoY – Lower northbound volume primarily due to one less sailing and one less week – Lower southbound volume primarily due to lower domestic seafood volume and one less week – Higher Alaska-Asia Express (AAX) export seafood volume • 4Q22 volume higher than volume achieved in 4Q19 Container Volume (FEU Basis) 10,000 12,000 14,000 16,000 18,000 20,000 22,000 24,000 26,000 Q1 Q2 Q3 Q4 2021 2022 Note: 4Q21 volume figure includes the benefit of a 53rd week. (7.7)% Full Year 2022 Performance • Container volume increased 8.6% YoY – Higher export seafood volume from AAX – Higher northbound volume primarily due to: • Higher retail-related demand and volume related to a competitor’s dry-docking • Partially offset by one less week – Higher southbound volume primarily due to higher domestic seafood volume |
| 10 Fourth Quarter 2022 Earnings Conference Call Alaska Service – Current Business Trends • Alaska economy continues to show good growth and improvement in key indicators from the depths of the pandemic – Low unemployment rate • In the near-term, we expect continued economic growth in the State – Continued jobs growth • Federal infrastructure bill expected to lead to more employment growth – Increased energy-related exploration and production activity as a result of elevated oil prices • However, economic growth trajectory is uncertain given negative trends as a result of higher inflation, higher interest rates and the end of the pandemic-era stimulus helping personal income -10.0% -8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022E 2023P YoY Growth in Employment Alaska Employment Growth(1)(2) (1) Source: https://labor.alaska.gov/trends/jan23.pdf (2) Source: https://live.laborstats.alaska.gov/labforce/000000/01/ces.html (3) Source: https://live.laborstats.alaska.gov/pop/estimates/data/ComponentsOfChangeAK.xls Alaska Population Growth and Net Migration(3) (10,000) (5,000) 0 5,000 10,000 15,000 20,000 25,000 -0.6% -0.4% -0.2% 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Net Migration YoY Growth in Population Population Growth Net Migration |
| 11 Fourth Quarter 2022 Earnings Conference Call SSAT Joint Venture Fourth 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 $1.0 million; YoY decrease of $20.3 million – Primarily due to lower other terminal revenue, lower lift volume and higher operating costs Current Business Trends • Expect 1H23 lift volume to reflect challenging environment in Transpacific tradelane • Absent an economic “hard landing,” expect to trend to pre-pandemic profitability levels in 2H23 • For the year, expect significantly lower other terminal revenue due to easing of port congestion Full Year 2022 Performance • Terminal joint venture contribution was $83.1 million; YoY increase of $26.8 million – Primarily due to higher other terminal revenue |
| 12 Fourth Quarter 2022 Earnings Conference Call Matson Logistics Fourth 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 $12.8 million; YoY decrease of $2.0 million – Primarily due to lower contribution from supply chain management consistent with lower demand in Transpacific tradelane • Operating income of $72.4 million; YoY increase of $22.6 million – Higher contributions from transportation brokerage and freight forwarding Current Business Trends • Expect continued growth in Alaska to be supportive of freight forwarding demand • Expect supply chain management to track the China service – challenging 1H23 • Expect transportation brokerage to weaken from pandemic highs as freight demand normalizes, modal shifts with improved rail conditions and retail customers continue to manage down inventories Full Year 2022 Performance |
| 13 Fourth Quarter 2022 Earnings Conference Call Financial Results – Summary Income Statement See the Addendum for a reconciliation of GAAP to non-GAAP Financial Metrics. Year-to-Date Fourth Quarter YTD Ended 12/31 D Quarters Ended 12/31 D ($ in millions, except per share data) 2022 2021 $ 2022 2021 $ Revenue Ocean Transportation $ 3,544.6 $ 3,132.8 $ 411.8 $ 633.0 $ 1,025.9 ($ 392.9) Logistics 798.4 792.5 5.9 168.6 241.1 ( 72.5) Total Revenue $ 4,343.0 $ 3,925.3 $ 417.7 $ 801.6 $ 1,267.0 ($ 465.4) Operating Income Ocean Transportation $ 1,281.2 $ 1,137.7 $ 143.5 $ 79.8 $ 460.7 ($ 380.9) Logistics 72.4 49.8 22.6 12.8 14.8 ( 2.0) Total Operating Income $ 1,353.6 $ 1,187.5 $ 166.1 $ 92.6 $ 475.5 ($ 382.9) Interest income 8.2 — 6.9 — Interest expense ( 18.0) ( 22.6) ( 3.7) ( 4.7) Other income (expense), net 8.5 6.4 2.2 1.7 Income taxes ( 288.4) ( 243.9) ( 20.0) ( 78.0) Net Income $ 1,063.9 $ 927.4 $ 136.5 $ 78.0 $ 394.5 ($ 316.5) GAAP EPS, diluted $ 27.07 $ 21.47 $ 5.60 $ 2.10 $ 9.39 ($ 7.29) $ 164.1 $ 156.4 $ 7.7 $ 41.6 $ 40.5 $ 1.1 EBITDA $ 1,526.2 $ 1,350.3 $ 175.9 $ 136.4 $ 517.7 ($ 381.3) Depreciation and Amortization (incl. dry-dock amortization) |
| 14 Fourth Quarter 2022 Earnings Conference Call Cash Generation and Uses of Cash ($ 200.0) $ 0.0 $ 200.0 $ 400.0 $ 600.0 $ 800.0 $ 1,000.0 $ 1,200.0 $ 1,400.0 Cash Flow from Operations Paydown of Borrowings, net Maintenance & Other Capex New Vessel Capex (1) Capital Construction Fund (2) Dividends Share Repurchase Other Cash Flows Net Change in Cash $ in millions Last Twelve Months Ended December 31, 2022 $ 1,271.9 ($ 111.5) ($ 146.9) ($ 518.2) ($ 21.9) ($ 397.0) ($ 62.4) ($ 34.0) (1) Includes capitalized interest and owner’s items. (2) Includes cash deposits into Capital Construction Fund (CCF) and interest income on cash deposits in CCF, net of withdrawals for milestone payments. ($ 48.0) |
| 15 Fourth Quarter 2022 Earnings Conference Call Financial Results – Summary Balance Sheet • Total Debt of $517.5 million(1) – In 2022, reduced total debt by $111.5 million – Prepaid $50.4 million in debt in 3Q22 • In January 2023, prepaid $14.3 million for all outstanding principal on Maunawili Title XI • Plan to prepay in March 2023 $12.1 million for all outstanding principal on Manukai Title XI 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) Based on CCF balance of ~$518 million as of December 31, 2022, ~$4 million in interest income on CCF cash deposits year-to-date in 2023 and $100 million cash deposit in February 2023. Debt Levels Share Repurchase • 4Q22: ~1.5 million shares repurchased for total cost of $101.9 million • FY2022: ~5.0 million shares repurchased for total cost of $397.0 million • Current balance in CCF of ~$622 million(2) ($ in millions) ASSETS Cash and cash equivalents $ 249.8 $ 282.4 Other current assets 509.8 422.1 Total current assets 759.6 704.5 Investment in SSAT 81.2 58.7 Property and equipment, net 1,962.5 1,878.3 Intangible assets, net 174.9 181.1 Capital Construction Fund (CCF) 518.2 — Goodwill 327.8 327.8 Other long-term assets 505.8 542.7 Total assets $ 4,330.0 $ 3,693.1 LIABILITIES AND SHAREHOLDERS’ EQUITY Current portion of debt $ 76.9 $ 65.0 Other current liabilities 504.7 547.4 Total current liabilities 581.6 612.4 Long-term debt, net of deferred loan fees 427.7 549.7 Other long-term liabilities 1,023.8 863.6 Total long-term liabilities 1,451.5 1,413.3 Total shareholders’ equity 2,296.9 1,667.4 Total liabilities and shareholders’ equity $ 4,330.0 $ 3,693.1 December 31, December 31, 2022 2021 |
| 16 Fourth Quarter 2022 Earnings Conference Call Capital Construction Fund (CCF) • In February 2023, deposited $100 million in cash into CCF and pledged accounts receivable to reduce taxable income in 2022 – Following $100 million cash deposit, will have cash deposits in the CCF to cover ~66%(1) of the current remaining milestone payments for new vessel program • Currently don’t expect to make additional cash contributions to the CCF for milestone payments until 2026 • Interest income on CCF cash deposits to be tax-advantaged and help pay for milestone payments • Continue to expect a tax refund for the $565 million in cash deposited into the CCF last year CCF Cash Balance (12/31/2022) ~$518 million CCF Interest Income YTD 2023 ~$4 million CCF Cash Deposit in February 2023 $100 million Total Restricted Cash ~$622 million Current Remaining Milestone Payments ~$949 million % Funded with Restricted Cash ~66%(1) (1) Calculation excludes cash and cash equivalents on the balance sheet, which was $249.8 million as of December 31, 2022. |
| 17 Fourth Quarter 2022 Earnings Conference Call Review of 2022 Capital Expenditures FY 2022 Comments Capitalized vessel construction expenditures $62.4 million • $11.9 million for new inter-island barge placed into service in 3Q22 • $50.5 million for new vessel milestone payment in 4Q22 and other related costs Maintenance and other capital expenditures $146.9 million • $60.5 million in equipment capex to support new tradelane services and provide fluidity in the network • $21.3 million in capex for LNG installations on Daniel K. Inouye, Kaimana Hila and Manukai • $65.1 million in other maintenance capex for a variety of projects Total capital expenditures $209.3 million |
| 18 Fourth Quarter 2022 Earnings Conference Call Capital Expenditures Update ($ in millions) FY 2023 FY 2024 FY 2025 Comments Maintenance and other capital expenditures $80 – 90 $80 – 90 $80 – 90 • Includes Phase II and III work at Sand Island, Honolulu New vessel construction milestone payments and related costs $55 $75 $360 • Cash on deposit in CCF to pay for milestone payments in 2023 through 2025 • Includes owner’s items and capitalized interest expense LNG installations and reengining on existing vessels $60 – 65 $50 – 55 - • Daniel K. Inouye LNG install started in early 1Q23 and expected to last ~5 months (current estimated total cost ~$35 million) • Re-engine Manukai to operate on LNG and conventional fuels (current estimated total cost ~$60 million) – currently scheduled following Daniel K. Inouye install and to take ~1 year to complete • Kaimana Hila LNG install currently expected to start in 2Q24 and last ~5 months (current estimated total cost ~$35 million) Total $195 – 210 $205 – 220 $440 – 450 |
| 19 Fourth Quarter 2022 Earnings Conference Call Closing Thoughts • We expect the financial performance in 1Q23 to be the weakest of the year – Normal seasonality returns to our domestic tradelanes and Logistics – Expect our China service to experience freight demand below normalized conditions • In the near-term, we expect: – Continued economic growth in Hawaii, Alaska and Guam to be supportive of freight demand, but recognize the potential economic overhang – Continued challenges in Transpacific tradelane in 1H23 with freight demand below normalized conditions; improved trade dynamics in 2H23 as the market transitions to a more normalized level of demand |
| 20 Fourth Quarter 2022 Earnings Conference Call Closing Thoughts (continued) • Matson is well-positioned financially and operationally to capitalize on opportunities as they emerge – The Matson brand has never been stronger – Matson is in a solid financial position • Investment grade balance sheet with low leverage • Nearly two-thirds of current remaining milestone payments for new vessel program funded with cash deposits in the CCF • Regardless of the economic environment, we will continue to maintain discipline in our capital allocation strategy – Invest for the long-term to create value for shareholders – Find opportunities to extend the Matson brand and drive organic growth – Look for unique acquisition opportunities that meet our investment criteria – Return capital to shareholders • In the last 2 years, repurchased ~7.5 million shares for nearly $600 million |
| 21 Fourth Quarter 2022 Earnings Conference Call Appendix |
| 22 Fourth 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 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”). |
