Matson, Inc. · NYSE:MATX
Matson — Investor Day (October 2015)
55 slides from Matson's investor day presentation, Oct 6, 2015
Slide 1: Matson Analyst Day Presentation - October 6, 2015
Maison Analyst Day Presentation-October 6, 2015 M.A,TX. NYSE. Matson.
Slide 2: Forward Looking Statements
Forward Looking Statements Statements made during this presentation that set forth expectations, predictions, projections or are about future events are based on facts and information that is known to us today, October 6, 2015. We are in a quiet period until the announcement of our third quarter 201
Slide 3: Agenda
Agenda 1. 2. 3. 4. 5. 6. Introduction and Strategic Financial Information Operations Ocean Services Pacific Alaska Update Matt Cox, President and CEO Joel Wine, SVP and CFO Ron Forest, SVP Operations John Lauer, SVP Ocean Services Vic Angoco, SVP Pacific Kenny Gill, VP Alaska Analyst Day Presentatio
Slide 4: Introduction and Strategic Update
Introduction and Strategic Update Matt Cox President and Chief Executive Officer Analyst Day Presentation│October 2015 – Slide 4
Slide 5: Matson's Years in the Pacific
Matson’s 133 Years in the Pacific 1882 Maiden Voyage 1900s Expansion 1930s “White Ships” Passenger Era 1940s World War II 1950s-1970s Containerization 1990s --The Modern Era • 1958, First ship in the Pacific to carry containers 1960, World’s first all container ship, first A-frame gantry crane, cont
Slide 6: Matson's Mission & Vision
Matson’s Mission & Vision OUR MISSION • To move freight better than anyone OUR VISION To create shareholder value by: • • Being our customers’ first choice Leveraging our core strengths to drive growth and increase profitability Improving the communities in which we work and live Being an environmen
Slide 7: Matson Today: Connecting the Pacific
Matson Today: Connecting the Pacific Anchorage Kodiak Dutch Harbor Seattle Tacoma Portland Concord (HQ) Chicago Akron Salt Lake City Oakland (Corporate Office) Philadelphia Shanghai Houston Savannah Ningbo LA/Long Beach Phoenix (Customer Support) Hong Kong Dallas Xiamen Saipan/Tinian/Rota Guam Honol
Slide 8: Investment Highlights
Investment Highlights • Leading U.S. carrier in the Pacific providing lifeline to economies of Hawaii, Alaska and Guam Leading market share in attractive niche markets with multi-decade customer relationships Dual head-haul economics on China service • • • • Well maintained fleet with leading on-tim
Slide 9: Multiple Growth & Value Catalysts
Multiple Growth & Value Catalysts • • • • • • Hawaii Volume Growth Alaska Acquisition & Integration Unmatched Premium Service from China Guam Volume Potential Logistics and SSAT improvements Delivery of new Aloha class vessels in 2H-2018 Analyst Day Presentation│October 2015 – Slide 9
Slide 10: Hawaii Volume Growth
Hawaii Volume Growth • Competitor schedule and fleet deployment changes – Competitor’s new ship deployed as replacement tonnage; removing 5-10% of expected capacity growth • • Record tourism and stronger construction are driving Hawaii’s healthy expansion Construction upswing well established – – Ma
Slide 11: Alaska Acquisition & Integration
Alaska Acquisition & Integration • • Leveraged Matson’s platform into Alaska Natural geographic revenue diversification in the Pacific • • • • Reduction of duplicative corporate overhead and G&A Customer overlap and sales force efficiencies Core operational savings in vessel and transportation manag
Slide 12: Alaska Economy
Alaska Economy • Near-term economic headwinds – – Alaska has entered a period of oil price-related uncertainty Steep decline in oil price causing downward pressure on the state budget • Continued growth in the retail trade and healthcare services sector is expected to offset employment declines in t
Slide 13: Guam Volume Potential
Guam Volume Potential • • Matson is the primary carrier to Guam Steady market with longer-term upside from relocation of U.S. Marine forces, assuming no new competitors enter the market Corps – On 8/28/15, the Department of the Navy signed the Record of Decision for relocating U.S. Marine Corps forc
Slide 14: Matson Logistics
Matson Logistics • A National Network of Integrated Services – – Leverages Matson brand Scalable model with high ROIC • Improving results – – Warehouse operating improvements Returned operating margins to 2 - 4% target range Highway TL and LTL Warehousing & Distribution • Focus – Organic growth as a
Slide 15: Financial Information
Financial Information Joel Wine Senior Vice President and Chief Financial Officer Analyst Day Presentation│October 2015 – Slide 15
Slide 16: Matson's Annual Performance since Separation
Matson's Annual Petformance since Separation Operating Income & ($ millions) EBITDA Earnings and Cash Flow $5.0 $300 $4.55 $4.5 $264 $4.0 $250 $3.5 $200 $3.0 $2.5 $150 $2.0 $100 $1.5 $1.0 $50 $0.5 $0 $0.0 LTM LTM 2012 2013 •Operating Income 2014 • EBITDA 2012 2013 2014 Diluted EPS •Free cash flow pe
Slide 17: Illustrative Annual Cash Flow Generation
Illustrative Annual Cash Flow Generation (1) LTM EBITDA (including f ull-year of Alaska operations) Less: Maintenance Capital Expenditures Dry-docking Expenditures Interest expense Cash taxes $350 ($48) (2) ($27) (3) ($20) (4) ($30) (5) Illustrative Cash Flow before Return of Capital Debt Maturities
Slide 18: Fleet Renewal Capital Spending
Fleet Renewal Capital Spending (excluding owners’ items and capitalized interest) (as of June 30, 2015) (as of June 30, 2015) Vessel Payments Source: Management Estimates Analyst Day Presentation│October 2015 – Slide 18 Total Vessel Payments$418million Cash on deposit in Capital Construction Fund$28
Slide 19: Cash Flow Yield
Cash Flow Yield (1) (2) (2) (2) (1) Based on LTM Free Cash Flow per share as of June 30, 2015 and $41.05 closing share price as of 10/5/15 (2) Source: FactSet. Free Cash Flow = Net cash flow from operations less capital expenditures. Based on LTM Free Cash Flow as of 9/30/15 and index closing prices
Slide 20: Operations
Operations Ron Forest Senior Vice President Operations
Slide 21: Focus on Operational Excellence
Focus on Operational Excellence Our Mission: To Move Freight Better than Anyone Varied and ample equipment fleet in required locations Fleet Efficiency Terminal Productivity Analyst Day Presentation│October 2015 – Slide 21 3. Equipment 2. Terminals 1. Vessels
Slide 22: Matson's Jones Act Fleet Deployment
Matson’s Jones Act Fleet Deployment Anchorage Kodiak Dutch Harbor Seattle Tacoma Oakland Shanghai Ningbo LA/Long Beach Honolulu Xiamen Guam Note: Currently, Matson has an additional ship deployed on a temporary basis in its Hawaii Turnaround Service, primarily due to a competitor’s vessel casualty.
Slide 23: Flexible and Efficient Fleet
Flexible and Efficient Fleet • High vessel utilization throughout Hawaii freight cycle – Largest fleet of Jones Act containerships, allows Matson to add or remove vessels to maintain utilization level of active fleet 11 Ships 10 Ships 10 Ships 9 Ships YTD = Year to date as of June 30, 2015 Source: M
Slide 24: Industry Leading Fleet Performance
Industry Leading Fleet Performance • On-time arrivals amongst best in world – – – Based on 59-minute window vs. industry standard of 24 hours Weather = ~50% of misses Matson ranked #1 Ocean Carrier in 2014 and 2015 YTD = Year to date as of June 30, 2015 Source: Management Estimates Analyst Day Prese
Slide 25: Fleet Maintenance
Fleet Maintenance • Focus on reliability, longevity and cost control – – Culture of safety In-service and preventative maintenance programs Knowledgeable engineering staff and crews Average greater than 95% – • Annual vessel down time has averaged less than 0.15% since 20101 Dry-docking requirements
Slide 26: Fleet Renewal
Fleet Renewal • Two 3600 TEU dual fuel, LNG capable containerships from Aker Philadelphia • Significantly lowers cost per TEU in Hawaii fleet – – – – – Contract price $418 million Optimized speed to ensure cargo reliability Additional 45-foot capacity and reefer outlets Cell guide spacing (constr. m
Slide 27: Matson's Terminals
Matson’s Terminals Anchorage Kodiak Dutch Harbor Seattle Tacoma Shanghai Oakland LA/Long Beach Ningbo Xiamen Honolulu Guam Analyst Day Presentation│October 2015 – Slide 27 SSAT Matson State owned enterprise APMT
Slide 28: Strategic Benefits of Dedicated Terminals
Strategic Benefits of Dedicated Terminals • Guaranteed Berth/Cranes – – – Work on arrival Quick turn of vessel Maintain vessel schedule • Fast Truck Turns – – Customer satisfaction Considered best in class • Wheeled Operations – – – Immediate cargo availability Quick yard turns Own chassis • Late Fr
Slide 29: Matson's Dedicated Long Beach Terminal
Matson’s Dedicated Long Beach Terminal • Fast truck turn times: 30 minutes or less Seamless intermodal connections • Sunday operation entirely dedicated to China cargo Efficient “wheeled” operation • • • provided by Matson Logistics Convenient off-dock container yard Analyst Day Presentation│October
Slide 30: Matson's Oakland Terminal
Matson’s Oakland Terminal Matson Terminal Analyst Day Presentation│October 2015 – Slide 30
Slide 31: Varied and Ample Equipment Fleet
Varied and Ample Equipment Fleet • Matson provides customers with the equipment they need, when and where they need it Asset management considerations • – – – – – Amount of equipment Size / type equipment Own vs. lease Repair vs. replace Utilization / efficiency • Location management considerations
Slide 32: Ocean Transportation: Operating Costs
Ocean Transportation: Operating Costs Source: Management Estimates • Aggressive Cost Management – – – – Stringent budget process and adherence Incentive programs around cost savings Comprehensive cost / service metrics Cross functional teams / meetings Analyst Day Presentation│October 2015 – Slide 3
Slide 33: Safety & Environment
Safety & Environment • Focus on Safety – Safety, quality and environmental policies are an integral part of our business In order to provide our customers with a quality service we strive to make the operation safe and environmentally responsible Committed to continuously improving its operations bo
Slide 34: SSAT Joint Venture
SSAT Joint Venture Matson’s 35% interest in leading U.S. West Coast terminal operator • – Contributed assets and terminal leases to JV in 1999 Terminals remain dedicated to Matson – • Services – Vessel stevedoring, terminal services, container equipment maintenance, chassis pools, on-dock Rail • Red
Slide 35: Ocean Services
Ocean Services John Lauer Senior Vice President Ocean Services Analyst Day Presentation│October 2015 – Slide 35
Slide 36: Market and Service Leader to Hawaii
Market and Service Leader to Hawaii Matson’s 10-Ship Deployment • Matson is the leading carrier into Oahu and Neighbor Islands, providing “just-in-time” supply lifeline – – 5 weekly USWC departures 3 / 4 weekly Honolulu arrivals • 10-ship fleet deployment offering most frequent and reliable service
Slide 37: Market and Service Leader to Hawaii (Barge Network)
Market and Service Leader to Hawaii • Matson-owned and operated barge network serving Neighbor Islands – Flexible schedule compared to fixed service provided by PUC regulated competitor (Young Bros.) Analyst Day Presentation│October 2015 – Slide 37
Slide 38: Diverse Hawaii Customer Base
Diverse Hawaii Customer Base • • Diverse westbound freight package Eastbound freight is lower rated and consists largely of automobiles and household goods Hawaii WB Volume Source: Management Estimates Analyst Day Presentation│October 2015 – Slide 38 Matson's Hawaii WB Customer Segments~% of Maston'
Slide 39: Unique Expedited China Service (CLX)
Unique Expedited China Service (CLX) Shanghai Ningbo LA/ Long Beach Xiamen • Utilization of Jones model Act ships in round trip dual head-haul revenue – Weekly 5 ship string connecting 3 ports in China to LA / Long Beach • Matson’s expedited service results in 5 to 10 day competitive advantage and p
Slide 40: Matson's China Service Differential
Matson’s China Service Differential from Shanghai Analyst Day Presentation│October 2015 – Slide 40 Internationa Receiving: Customs Declaration and Terminal Cut-off Times 2 to 4 days 1 to 2 days 1 to 2 days Transit: Vessel Speed and Last Call vs Other Port Calls 13 to 15 days 10 days 3 to 5 days Disc
Slide 41: China Market Strategy
China Market Strategy Objective: • • Optimize vessel utilization and yield Vessel Utilization – Ships run near full capacity year round with the exception of Lunar New Year • Vessel Yield – Balance mix between two primary types of customers Beneficial Cargo Owners More stable and predictable freight
Slide 42: Guam, Micronesia and South Pacific
Guam, Micronesia and South Pacific Vic Angoco Senior Vice President Pacific Analyst Day Presentation│October 2015 – Slide 42
Slide 43: Guam & Micronesia Service
Guam & Micronesia Service • Guam a Critical Link in CLX Network Configuration – – – – Primary carrier to Guam since departure of major competitor in late 2011 Connections from Oakland and Pacific Northwest to Guam via Honolulu Volume in Guam remains stable Approximately 75% of Guam cargo is sourced
Slide 44: Matson South Pacific
Matson South Pacific • Polynesia Service – Cargoes moving from Auckland, New Zealand and Fiji to the Polynesian islands - Samoa, American Samoa, Tonga, Cook Islands and Niue Matson services the Polynesian island group on a fortnightly basis using two foreign flagged container vessels – • Australia S
Slide 45: Alaska
Alaska Kenny Gill Vice President Alaska Analyst Day Presentation│October 2015 – Slide 45
Slide 46: Alaska Service
Alaska Service Matson’s 3-Ship Deployment • Similarities with Hawaii Market – Remote, non-contiguous economy dependent on reliable container service as part of vital supply lifeline A market that values premium service Loyal customer base; ~80% overlap with Matson’s Hawaii customers 2X Weekly – – 2X
Slide 47: Alaska Customer Base
Alaska Customer Base % of Total Container Volume Horizon's 2014 Alaska Volume by Customer Segment Food, Grocery, Produce 27% Retail 13% Seafood & Seafood Supplies 8% Paper Products, Agriculture and other 4% Government Source: Management Estimates 4% Analyst Day Presentation│October 2015 – Slide 47 H
Slide 48: Reliable Operating Platform
Reliable Operating Platform • Active vessels are well-maintained and well-sized for market – ~10 years remaining useful life • Installing main engine exhaust scrubbers on the three active diesel powered vessels – – To comply with ECA emissions requirements Estimated capital cost of approximately $8
Slide 49: Recent Equipment Investments
Recent Equipment Investments • Matson investing to improve the services and capabilities of its Alaska operations – New 65-ton gantry crane to replace one half its size at the Kodiak Terminal New ground equipment Ordered a fleet of new dry and insulated containers – – Analyst Day Presentation│Octobe
Slide 50: Appendix
Appendix 50 Analyst Day Presentation│October 2015 – Slide 50
Slide 51: Matson's Jones Act Fleet Deployment
Matson’s Jones Act Fleet Deployment (SS) = Steamship Analyst Day Presentation│October 2015 – Slide 51 Capacity Capacity Vessel Name Type Built (TEU) (Autos) Schedule MAUI Container (SS) 1978 1,644 SEA/OAK/HON MANOA Container 1982 2,824 SEA/OAK/HON MOKIHANA Container/Ro-Ro 1983 1,994 1,323 LA/HON MAT
Slide 52: Condensed Balance Sheet
Condensed Balance Sheet Purchase Price Accounting • Fixed assets of $171 million to be amortized over 7-10 years Intangible assets of $140 million to be amortized over 21 years Goodwill of $220 million Deferred tax assets (net) of $39 million, primarily related to NOLs Liabilities of $60.6 million r
Slide 53: 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 54: GAAP to Non-GAAP Reconciliation: Free Cash Flow per Share
GAAP to Non-GAAP Reconciliation Fre e Cas h Flow pe r Share Re conciliation Las t Twe lve Months Ende d June 30, 2015 Ye ar Ende d De ce mbe r 31, 2012 2013 2014 (in millions, except per share amounts) Cash flow from operations Subtract: Capital expenditures $94.0 ($38.1) $195.7 ($35.2) $165.7 ($27.
Slide 55: GAAP to Non-GAAP Reconciliation: Net Debt and EBITDA
GAAP to Non-GAAP Reconciliation ::\TI DEBT RECO Cll...l<\ TIO June30, 2015 (In millions) Total Deb t: $ 516.6 (15.8) (27.5) Less: Cash and cash equivalents Cash on deposit in Capital Construction Fund Net Debt $ 473.3 EBITDA RECO Cn.ATIO Three-Mooths Ended June 30 Last Twelve Months (In millions) Ne