Slide 1: Third Quarter 2013 Earnings Conference Call – November 6, 2013
Third Quarter 2013 Earnings Conference Call – November 6, 2013
Slide 2: Forward Looking Statements
Forward Looking Statements Statements made during this call and 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 today, November 6, 2013. We believe that our expectations and assumptions are rea
Slide 3: Discussion Agenda
Discussion Agenda 3Q 2013 Earnings Release and Outlook Core transportation services performed well in 3Q Financial results decreased YOY, impacted by: Lull in Hawaii container volume after strong first half year growth Negative impact of $7.3 million of unfavorable non-operational items Fleet Renewa
Slide 4: EBITDA, EPS – 3Q 2013
EBITDA, EPS – 3Q 2013 3Q13 Net Income of $17.2 million versus 3Q12 Net Income of $19.1 million See the Addendum for a reconciliation of GAAP to non-GAAP for Financial Metrics
Slide 5: EBITDA, EPS – YTD 2013
EBITDA, EPS – YTD 2013 YTD 2013 Net Income of $46.4 million versus YTD 2012 Net Income of $30.3 million See the Addendum for a reconciliation of GAAP to non-GAAP for Financial Metrics
Slide 6: Hawaii Service
Hawaii Service Third Quarter Performance Volume down 3.1 percent, after strong 1H gains Lull spread across several cargo types Favorable cargo mix helped offset volume decline Benefited from 9-ship fleet deployment Outlook for 4Q 2013 Expect volume near or modestly lower than prior year Core 9-ship
Slide 7: Hawaii Economic Indicators
Hawaii Economic Indicators Indicator (% Change YOY, except Unemployment rate) 2011 2012 2013F 2014F 2015F 2016F Real Gross Domestic Product 1 2.1 1.6 2.6 2.4 2.4 2.3 Visitor Arrivals 1 4.0 9.6 4.3 3.2 2.3 1.1 Construction Jobs 2 (0.3) 2.4 7.0 10.8 11.1 8.5 Residential Building Permits 2 (13.5) 18.6
Slide 8: Molasses Release Update
Molasses Release Update Incident occurred on September 9 and 10 Response phase was completed September 20; Recovery and Restoration phase ongoing Oxygen and pH returned to normal target levels by September 20 Water was no longer abnormally discolored as of September 20 Matson received subpoena for d
Slide 9: SSAT Joint Venture
SSAT Joint Venture Third Quarter Performance Results impacted by higher than expected transition costs at Oakland terminal Overall market is flat on YOY basis Outlook for 4Q 2013 Oakland transition to be completed, positioning JV well for 2014 and beyond Modest losses expected
Slide 10: Guam Service
Guam Service Outlook for 4Q 2013 Muted ongoing economic activity Volume similar to 2012, assuming no new competitor enters market Third Quarter Performance Volume down slightly due to timing of vessel sailings Adverse arbitration decision related to previously co-owned terminal assets impacted trade
Slide 11: China Expedited Service (CLX)
China Expedited Service (CLX) Source: Shanghai Shipping Exchange Third Quarter Performance Volume decrease due to additional sailing in prior year Ships running full Seeing expansion of premium for expedited services amid market rate erosion Outlook for 4Q 2013 Volume similar to 2012 Expect freights
Slide 12: Matson Logistics
Matson Logistics Third Quarter Performance Higher intermodal and highway volume Lower G&A Source: Association of American Railroads Outlook for 4Q 2013 Ongoing expense control focus Margins of 1-2% of revenues Significantly higher YOY performance due to warehouse consolidation and intangibles relate
Slide 13: 3Q2013 Operating Income
3Q2013 Operating Income SSAT had a $2.4 million loss in 3Q13 vs. a $0.7 million contribution in 3Q12 3Q12 3Q13 Change Revenue $307.1 $310.1 $3.0 Operating Income $32.9 $25.5 ($7.4) Oper. Income Margin 10.7% 8.2% 3Q12 3Q13 Change Revenue $94.3 $104.9 $10.6 Operating Income $1.3 $1.7 $0.4 Oper. Income
Slide 14: YTD 2013 Operating Income
YTD 2013 Operating Income SSAT had a $3.0 million loss YTD 2013 versus a $3.1 million contribution YTD 2012 YTD12 YTD13 Change Revenue $886.1 $920.0 $33.9 Operating Income $69.9 $78.3 $8.4 Oper. Income Margin 7.9% 8.5% YTD12 YTD13 Change Revenue $275.6 $306.3 $30.7 Operating Income $2.9 $4.1 $1.2 Op
Slide 15: 3Q2013 Condensed Income Statement
3Q2013 Condensed Income Statement (in $ millions) 3Q13 3Q12 Operating Revenue Ocean transportation $310.1 $ 307.1 Logistics revenue 104.9 94.3 Total operating revenue 415.0 401.4 Costs and Expenses Operating costs 353.6 337.0 Selling, general and administrative 31.8 30.6 Equity in loss (income) of t
Slide 16: Cash Generation and Uses of Cash
Generated $137.8 million in cash flow from operations YTD Maintenance capex of $19.7 million YTD Paid $19.9 million in dividends Reduction of debt by $32.7 million Increased cash position by $61.9 million Cash Generation and Uses of Cash * Does not include $5.7 million in Other Uses of Cash
Slide 17: Condensed Balance Sheet
Condensed Balance Sheet Assets (in $ millions) 9/30/13 12/31/12 Cash $ 81.8 $ 19.9 Other current assets 230.3 214.2 Total current assets 312.1 234.1 Investment in terminal joint venture 56.6 59.6 Property, net 736.2 762.5 Other assets 115.3 118.1 Total $1,220.2 $1,174.3 Liabilities & Shareholders’ E
Slide 18: $100 Million Senior Unsecured Debt Private Placement
Attractive senior unsecured long-term 4.35% fixed rate 30-year final maturity, 14.5 year weighted average life No amortization until 2021 Proceeds for general corporate purposes Substantially same financial covenants as existing $219 million senior unsecured notes Expected funding in January 2014 Su
Slide 19: 4Q2013 Outlook
Outlook excludes any molasses release impact, which is unknown Ocean Transportation operating income for 4Q13 expected near or slightly below prior year levels: Hawaii volume modestly lower Flat Guam and China volume Modest erosion in China rates Core 9-ship fleet deployment Modest losses at SSAT Lo
Slide 20: Summary Remarks
Summary Remarks Confident in prospects for Hawaii Carved out an enviable niche in China service Better results in Logistics reflect ongoing internal efforts Expanded SSAT operations positions JV well for future Investing in Hawaii’s future with new vessels
Slide 21: Introducing the Aloha Class
Introducing the Aloha Class Two 3600 TEU dual fuel containerships from Aker Philadelphia Shipyard Contract price $418 million LNG capable Delivery expected in 3Q and 4Q 2018
Slide 22: The Case for New Builds
The Case for New Builds Expanded capacity allows for continuation of 9-ship fleet deployment as the market recovers over the next 5+ years Renews Hawaii fleet Will continue superior schedule and cargo reliability to Hawaii Market Leadership Compelling financial returns in excess of cost of capital B
Slide 23: Aloha Class Specifications
Aloha Class Specifications Green Ship Technology 3600 TEU capacity Optimized speed to ensure cargo reliability Additional 45-foot capacity Additional reefer outlets Cell guide spacing (constr. materials) Neighbor Island accessible Fuel efficient hull Dual fuel engines, conventional fuel oils or LNG
Slide 24: LNG Capable
LNG Capable Potentially cheaper source of fuel Dual fuel engines part of vessel design Additional ~$20 million per vessel to complete LNG installation Decision will be driven by LNG availability at the US West Coast ports
Slide 25: Compelling Investment
Compelling Investment Significantly lowers cost per TEU in Hawaii fleet Cost efficiencies driven by: Maintaining 9-ship deployment at significantly higher volumes Lower operating costs of modern vessels Lower fuel consumption – ~30% on a per TEU basis using conventional fuel oils Lower crewing, main
Slide 26: Addendum
Addendum
Slide 27: Use of Non-GAAP Measures
Use of 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 ser
Slide 28: GAAP to Non-GAAP Reconciliation (Net Debt and EBITDA)
GAAP to Non-GAAP Reconciliation (Net Debt and EBITDA) (in $ millions) Third Quarter Last Twelve Months (LTM) 2013 2012 Change As of September 30, 2013 Net Income 17.2 19.1 (1.9) 62.0 Subtract: (Income) loss from discontinued operations - (0.1) 0.1 0.1 Add: Income tax expense 6.4 11.2 (4.8) 29.5 Add: