Slide 1: Fourth Quarter and Full Year 2013 Earnings Conference Call – February 25, 2014
Fourth Quarter and Full Year 2013 Earnings Conference Call – February 25, 2014
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, February 25, 2014. We believe that our expectations and assumptions are re
Slide 3: Opening Remarks
Solid fourth quarter performance in core operations Continued stability in Ocean Transportation business Marked improvement in our Logistics unit warehouse operations Achieved improved YOY financial results in 2013, excluding the Litigation Charge below Hawaii freight volume growth in the first half
Slide 4: Litigation Charge
June 10, 2013 – Matson served with complaint alleging violations of the False Claims Act Complaint alleged that freight forwarders improperly assessed surcharges on inland shipments of military household goods Federal government declined to pursue the case earlier in the year February 14, 2014 – Mat
Slide 5: EBITDA, EPS – 4Q 2013
EBITDA, EPS – 4Q 2013 4Q13 Net Income of $7.3 million versus 4Q12 Net Income of $15.6 million 4Q13 Net Income of $13.5 million excluding the Litigation Charge See the Addendum for a reconciliation of GAAP to non-GAAP for Financial Metrics Impact of Litigation Charge $45.3 $0.31 $0.31
Slide 6: EBITDA, EPS, ROIC – Full Year 2013
EBITDA, EPS, ROIC – Full Year 2013 2013 Net Income of $53.7 million versus 2012 Net Income of $45.9 million 2013 Net Income of $59.9 million excluding the Litigation Charge See the Addendum for a reconciliation of GAAP to non-GAAP for Financial Metrics Impact of Litigation Charge $179.3 $1.39 11.3%
Slide 7: Hawaii Service
Hawaii Service Fourth Quarter Performance Volume down 3.4 percent, after strong 1H gains Higher rates and favorable cargo mix offset volume decline Benefited from lower outside transportation costs and core 9-ship fleet deployment Outlook for 2014 Overall market volume expected to increase, but comp
Slide 8: Hawaii Economic Indicators
Hawaii Economic Indicators Indicator (% Change YOY) 2011 2012 2013F 2014F 2015F 2016F Real Gross Domestic Product 1 2.1 1.6 2.4 2.8 2.5 2.3 Visitor Arrivals 1 4.0 9.6 2.9 2.7 2.3 2.1 Construction Jobs 2 (0.3) 2.4 7.0 10.8 11.1 8.5 Residential Building Permits 2 (13.5) 18.6 22.8 50.8 19.1 4.5 Non-Res
Slide 9: SSAT Joint Venture
SSAT Joint Venture Fourth Quarter Performance Improved lift volume from new customer activity at expanded Oakland terminal Partially offset by terminal expansion-related transition costs Outlook for 2014 Modest profits expected in 2014
Slide 10: Guam Service
Guam Service Outlook for 2014 Muted ongoing economic activity Volume similar to 2013, assuming no new competitor enters market Fourth Quarter Performance Volume down slightly due to general market conditions
Slide 11: China Expedited Service (CLX)
China Expedited Service (CLX) Source: Shanghai Shipping Exchange Fourth Quarter Performance Volume increased due to additional sailing this year Ships running at full capacity utilization Expansion of premium for expedited services amid market rate erosion Outlook for 2014 Volume similar to 2013 Ove
Slide 12: Matson Logistics
Matson Logistics Fourth Quarter Performance Intermodal and highway volume growth Warehouse operating improvements Operating income margin improved to 1.9% Source: Association of American Railroads Outlook for 2014 Improvement in core brokerage business, expense control and improvements in warehouse
Slide 13: 4Q2013 Operating Income
4Q2013 Operating Income SSAT had a $1.0 million contribution in 4Q13 vs. a $0.1 million contribution in 4Q12 4Q12 4Q13 Change Revenue $303.7 $309.4 $5.7 Operating Income $26.7 $16.0 ($10.7) Oper. Income Margin 8.8% 5.2% 4Q12 4Q13 Change Revenue $94.6 $101.5 $6.9 Operating Income ($2.8) $1.9 $4.7 Ope
Slide 14: 2013 Operating Income
2013 Operating Income SSAT had a $2.0 million loss in 2013 versus a $3.2 million contribution in 2012 2012 2013 Change Revenue $1,189.8 $1,229.4 $39.6 Operating Income $96.6 $94.3 ($2.3) Oper. Income Margin 8.1% 7.7% 2012 2013 Change Revenue $370.2 $407.8 $37.6 Operating Income $0.1 $6.0 $5.9 Oper.
Slide 15: 4Q2013 Condensed Income Statement
4Q2013 Condensed Income Statement (in $ millions) 4Q13 4Q12 Operating Revenue Ocean transportation $309.4 $ 303.7 Logistics revenue 101.5 94.6 Total operating revenue 410.9 398.3 Costs and Expenses Operating costs 361.0 342.1 Selling, general and administrative 33.0 32.4 Equity in loss (income) of t
Slide 16: Condensed Balance Sheet
Condensed Balance Sheet Assets (in $ millions) 12/31/13 12/31/12 Cash and cash equivalents $ 114.5 $ 19.9 Other current assets 234.4 214.2 Total current assets 348.9 234.1 Investment in terminal joint venture 57.6 59.6 Property and equipment, net 735.4 762.5 Other assets 106.4 118.1 Total assets $1,
Slide 17: 2013 Cash Generation and Uses of Cash
2013 Cash Generation and Uses of Cash * Does not include $6.8 million in Other sources of Cash
Slide 18: Significant Free Cash Flow Generation
Significant Free Cash Flow Generation 2013 Cash flow from operations includes $57.5 million related to deferred income taxes resulting primarily from CCF contributions that reduced 2012 and 2013 taxes payable See the Addendum for a reconciliation of GAAP to non-GAAP for Financial Metrics (1) Based o
Slide 19: 2014 Outlook
Outlook excludes any future impact of the molasses incident, which is unknown, and is being provided relative to 2013 operating income excluding the Litigation Charge Ocean Transportation operating income for 2014 expected near or slightly above prior year level of $104.3 million, excluding the Liti
Slide 20: 2014 Outlook – continued
Logistics operating income expected to modestly exceed 2013 Improvement in core brokerage business Expense control and improvements in warehouse operations Interest expense in 2014 expected to increase over 2013 amount by approximately $3.5 million due primarily to the Notes financing transaction th
Slide 21: Summary Remarks
Summary Remarks Solid 2013 results from core operations Generated significant free cash flow Strengthened balance sheet Increased quarterly dividend by 7% in July Ordered two new “Aloha Class” containerships for Hawaii service Confident in long-term prospects as the leader in Hawaii Unique, expedite
Slide 22: Addendum
Addendum
Slide 23: 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 24: GAAP to Non-GAAP Reconciliation (Earnings per Share before Litigation Charge)
GAAP to Non-GAAP Reconciliation (Earnings per Share before Litigation Charge) (in $ millions) Fourth Quarter Year Ended 2013 2013 Net Income 7.3 53.7 Add: Litigation Charge 9.95 9.95 Less: Income tax expense effect of Litigation Charge (3.7) (3.7) Net Income before Litigation Charge $13.5 $59.9 Weig
Slide 25: GAAP to Non-GAAP Reconciliation (Net Debt, Free Cash Flow per Share, EBITDA)
GAAP to Non-GAAP Reconciliation (Net Debt, Free Cash Flow per Share, EBITDA) (in $ millions) Fourth Quarter Year Ended 2013 2012 Change 2013 2012 Change Net Income 7.3 15.6 (8.3) 53.7 45.9 7.8 Subtract: Loss from discontinued operations - (0.1) 0.1 - (6.1) 6.1 Add: Income tax expense 7.1 4.4 2.7 32.
Slide 26: GAAP to Non-GAAP Reconciliation (Return on Invested Capital)
GAAP to Non-GAAP Reconciliation (Return on Invested Capital) (in $ millions) Year Ended 2013 2012 (2) Net Income 53.7 45.9 Subtract: Loss from discontinued operations - (6.1) Add: Interest expense (tax effected)1 9.0 7.2 Total Return 62.7 59.2 Average Total Debt 302.6 319.1 Average Shareholders’ Equ