MATX - Earnings call transcript Q4 2017

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Operator

Good day, ladies and gentlemen, and welcome to the Matson Fourth Quarter 2017 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions].

As a reminder, today's program is being recorded. to host like Mr. today's now would introduce for your program, I Fishman. Lee Please go ahead sir.

Lee Fishman

Jonathan. you, Thank

Chief on under me and Joel President at this Officer; Chairman today for available tab. Chief and Slides download and presentation Vice are Senior website Joining Wine, call Investors Executive the www.matson.com are our Officer. from the Financial Matt Cox,

meaning XX, under XX our caption filed press release SEC. make the of in Form XXst, undertake XX assumptions our on that are on the over securities is will presentation remind course any results call of consider the the to regarding I our we to slides, call. These Before now February that and statements. Factors assumptions February to the make are statements projections, events. will the update we XX-K risk obligation with to actual and turn that no forward-looking you or from begin, federal I note date you our We materially XXXX, would the Risk call XXXX and Please filings in during of cause in within this in predictions, this of those expectations, believe the conference are and of more could We reasonable. fully the subsequent call, statements factors laws differ forward-looking risk detailed caution expectations also this Pages today the like we conference the forward-looking factors to future on described release, based this to statements that and We that Matt. press are XXXX, as date. these forward-looking

Matt Cox

quarter were by my those China, higher Please contribution cargo in at rate thanks SSAT, Slide competitive lift are from favorable and higher in lower and Hawaii fourth a line offset opening the Lee, turn related to on X Guam. our call. to with in and with operating volume Matson's results expectations, remarks. for to average Thanks, construction the in pressure

from $XXX diluted non-cash as and the the and later. touch which exceptional year $X.XX income the of rates. higher fourth one-time in record Jobs a per EPS In adjustment of with and XXXX, net will Cuts result Act or of Our volume passage a benefited upon we had average Joel Tax diluted share China quarter in our million service, an

the these also pressure, significant volume to lift costs. by saw higher related the led in We net favorable income the benefit SSAT volume our surcharge timing a contribution a in were our related one-time collections Tax adjustment a higher driven of contributors And result lower and as primarily results Offsetting handling to joint at venture. investment in lower volumes of from benefited weakness fuel equity and construction-related lastly, the competitive and the non-cash Act. Guam EPS to cargo, from full-year in diluted Hawaii terminal

our Sand are and bring expenditures growth volume necessary the Island. the to associated These new third gantry cranes, electrical In three existing support support the many upgrades front, new the at new with efficiency year. announced operational track and vessels, three along cranes first build at the on to of remains greater and of vessel program the On infrastructure cranes with this order to the we expected over expect site the decades. in operation August, to and vessel our container quarter the upgrade of

levels swifter increase launch transits. Island Loa, efficiency is announced bring Lastly, shipments new barge fuel-efficient that our and far of and This with it replaces. operating than our which Mauna we the in the barge with larger operation our recently the upgraded will we service Neighbor more barge

XXXX. in income operating the the we XXXX, level for to onto full-year XXXX consolidated achieved expect outlook approximate for Moving the

by -- We in continued exceptionally pressures in China, year, face expect off coming businesses. in lower offset other modestly expect improvements an face volume strong an we Guam, to exceptionally modest and competitive our to core

the to moderately due first XXXX, fuel the logistics achieved transportation to than account of the year timing be For prior we quarter operating to of XXXX, approximate operating higher collections expect first the Ocean of in income the surcharge level and primarily quarter period.

for in Act, the the Jobs have presentation. Tax our full-year would in X, the $XX.X fourth the quarter will Joel net period. share million on or per income income net and later fourth $X.XX enactment financial generated quarter fourth in of in $XX.X million the to the highlight in last results related quarter ago In detail been $X.XX the the We EBITDA we Slide Adjusting or Cuts quarter million the share $XX million share. to for Turning of versus compared briefly with and adjustment year quarter per XXXX, of into the $X.XX per non-cash on and one-time more year. $XX.X I'll results go million quarter the outlook earned $XXX.X or the and of

or of year compared For Adjusting for fourth period. the net in non-cash $XXX the ago quarter would in and earned $XXX we with $X.XX in per million $XX.X adjustment the the share million full-year, in year Cuts share generated million We million full-year the $XX per related year. $X.XX enactment to million the income our of or share. the been $XXX $X.XX versus Act, or income the have Jobs per prior of EBITDA Tax one-time net

services. our trade lanes Now on to

Turning X. to on Slide our Hawaii service

due volume show week of to XXXX, fourth decline continued over growth Matson's quarter was the economy construction-related was container in year-over-year. at XXrd XX.X% Hawaii planned volume Oahu. the declined balance in master to related half transitions cargo While decline construction little to cycle modest this developments Oahu the lower The from high-rise the in projects of to West the community primarily A XXXX. in

saw XXXX. volume the to full-year, the primarily one of X.X% in we XXXX, declined half absence the to construction-related gains volume, versus of For less due year-over-year the lower volume container first week and competitive

more daily slightly for occupancy reflects For key Slide rate a environment. further expected hotels is in continued Unemployment to the and improve an pick pace. remain by is further. the Hawaii are although rate the forecast and and and of forecast in the continued but XXXX, According expected growth to XXXX, at to continues share to up forecast and a latest overview hit room we indicators XXXX And modest growth beyond. the XXXX average XXXX. Hawaii improvement to Hawaii forecast in economic in on slowed average XXXX. lower Visitor market UHERO than arrivals provides volume our in growth of some see touch a modest national stable the X on expect record economic flat in for I'll next GDP which to thinking growth slide.

good. retail single-family in albeit economy projects underlying to down peaked So doing to quite tourism activity have slightly. and and elongated. large in continued contracting and growth, wound declined jobs have several jobs over appears Despite is well growth With the the transition construction, the and development forecast decline in contraction to condo respect Job next as is home to construction XXXX continue scale process projects to since working to mid-XXXX, making towards in the the remain looks of projects Koa then near use new mid-XXXX, are are as project home with several levels will by projects and late in projects, number there the mixed planning generate offset completion ground years through new the to residential the in and current Ridge years. timeline XXXX, working these broke that ground. is of the of first With respect deliveries next activity expected couple

which with market. the XXth, developers, our entry conversations the the accommodate any provided new to the that Due economic and improvement, trending will plan that recent conducted we the construction be which of review update Honolulu TOTE have not site's the and of we January TOTE is on the On hold into meaningful industry on and view its summary to we're in a its Act Piers renew operations. in indicated upgrades Jones X with Shipyard. study upgrades the the of X and of X the Harbor. XXXX, preliminary in On put announcements TOTE market LOI a data, infrastructure did activity pickup it Given and TOTE scope X, as a its in volumes. Phase regarding will technical a which result an foresee improvements stated cautious timing don't recent of taking Slide Hawaii on the construction required Philadelphia

substantially placing all these Following is constructed-related TOTE's and announcement, alternative suspending on that Philly Philly on procurement Shipyard announced considering on TOTE's projects. containership activity January design, and is work. Shipyard is planning, including vessels, hold XX it project

our in to Service in XX.X% Moving X, decline of the fourth the lower the year-over-year. half due Near volume of was week Matson's XXrd quarter ago China year Slide period. was to XXXX on

Hanjin we the a from benefit the in China I Despite ago volume by impacted also in was mentioned, versus XXXX. result quarter experienced negative quarterly volume the year rate year-over-year as comparisons largely Our the expected the average and fourth eastbound just bankruptcy came higher period.

customers. Service decreased international thing full-year the the year-over-year we return the carriers advantage resonates that our and our rate in note For volume for to record voyages that comparison. experienced volume favorably had several XXXX, a year impacted is transit over One and dry-dock achieved the Container China premium as year transpacific X.X% sizable the with the year-over-year.

maintain highly macro level softness as we Despite backdrop, with excess than be comparison lead in favorable voyage expect the capacity likely of XXXX, as exceptional relatively XXXX. the for expect XXXX. in to the Volume due return modestly Matson's negative expected XXXX, transpacific which achieved differentiated expedited SCFI. services to is increase lower in in demand the to For to demand we dry-dock this the rates to strong is largely for

the APLs full-year containership Matson's to to competitive flag expected Guam increased due of as and X, Turning declined frequency losses that weekly fourth XXXX. quarter in year-over-year, to December to primarily in service volume U.S. Slide

strong our transit ties XXXX, Regarding retain in every record, on-time history to our dramatically only and continue customers Beach, long better a for will fight five to of an advantage expect days Long Guam, with from performance and eight share. market we business, container we of customer single and outsized to Oakland to

situation, this highly any market competitive expect more that specific be As we a goal. share not market to providing will beyond we comments be

like prior decline XX volume to their the the XXXX. also TOTE positive lower attributable now an negative fourth one from of extra attributable of additional I'd the period. XXXX XX.X% year-over-year with contribution in week that Approximately Slide had we to container was the week XX% in during in carry Moving point primarily out to Alaska, was for dry-docking. quarter volume agreement to vessels a quarter Matson's the from year comparison to in the

week from volume a XXXX, southbound For year-over-year stronger the volume the the XXrd season. primarily in by of XXXX, container impact higher Seafood offset X.X% decreased to full-year partially

challenging, remains XXXX For level achieved that improving the XXXX. touch to XXXX, relative minute. I'll approximate we Alaska to The expect a on economic in in although volume in backdrop and

Department depths We southbound improvement expect the volume in last harvest believes and the recent bottoming perspective, decline the the Alaska that for Employment recession Seafood of growth economic the from chart trajectory but to by northbound the to too reverse year, Alaska we lower for XX, growth may our chart the the on and modest XXXX, moderation population years. place couple region near, that AEDC shows forecasts highlight has the the Slide illustrate Seafood-related early left in XXXX mark volume AEDC strong but in modestly on XXXX. is bottom course is AEDC to will tell. we employment in On that Both the the of Labor. figures in shedding in the shows charts over be a in by right Anchorage The offset the and Anchorage. recovery that From the this of forecast do to is think very later taken due the of recession.

in SSAT, million was Turning Slide million fourth to XXXX compared primarily the $X.X quarter joint due our XXXX. year-over-year in higher the next The lift venture, XX, to terminal quarter contributed volume. increase fourth to $X.X

period. ago the drove of joint lift from million $XX.X the million $XX.X higher volume venture compared XXXX full-year higher a contribution the in to year For

For Ocean Transportation level. to XXXX expect contribution to our approximate the SSAT's operating XXXX, we income

Coast to SSAT launch the West continue between We to expect supply alliances terminals. are as container benefit flows of new global from and shipping chains adjusted

higher contribution now with as revenue to Slide Operating results to the in year on or from largely ago in the equal higher the million the Logistics The positive $X.X XXXX period. in by quarter income XX. costs. Turning offset expected approximately came of fourth was contribution

yield. year, full-year XXXX, partially full-year Alaska by operating intermodal offset due million, For prior year-over-year to $X.X income lower to increased the inclusion the of primarily million the for versus $XX.X the Span

Logistics of the of expect first operating call over the a relative Span review level achieved Alaska, we we operating Alaska for my bottoming should positive economic expect the business. our performance will the XXXX, achieved I economic quarter income outlook to in level that, in XXXX, turn in income XXXX, Joel? to a quarter For the From with the our for And or to improvement our approximate Logistics and modestly earlier from on recession increase of first XXXX. and comments Joel, for the now outlook. be

Joel Wine

Thanks Matt.

Turning volume. a XX due for the of versus competitive lanes for favorable offsetting fourth year contribution China million. and costs. revenue year-over-year fourth million of as was year Ocean to in volume terminal $XX Hawaii, The primarily the the primarily operating terminal quarter lower ago income in period to to was quarter results, due higher due year-over-year income $XX.X $XX.X China last comparisons year-over-year lower to less as to the investment unfavorable decline the result year, these Slide The million higher to the container was the the million trade financial income. operating $X.X million equal company's due in of by venture higher by And handling decrease in of and Hanjin Transportation volumes collections, offset improved operating the our increased Guam container from the week bankruptcy. in higher rates for lift to freight related $XX.X to the EBITDA quarter decreased one across a in to result quarter contribution year-over-year SSAT result prior fuel the and higher volume SSAT. gains were a primarily average Partially volume losses, lower in timing as expenses, decreased joint surcharge Logistics

XXXX favorable SSAT due volume The in lower year-over-year full-year of operating joint higher to rates The million company's year freight Hawaii, income to Guam Ocean was $XXX.X primarily primarily year-over-year contribution for to Alaska. $X.X the lift as venture by terminal volumes million higher of result full-year a the container investment year-over-year and million. decrease contribution the these result China, the surcharge $XX.X than Logistics competitive and fuel X.X% was in were terminal handling from expenses, average comparisons increased decreased in Span SSAT, higher operating due losses. offsetting income Partially collections. For Transportation of due to lower unfavorable timing full-year primarily higher the improved XXXX volume. a

X.X% offset in Lastly, year-over-year than EBITDA in increased year-over-year the more to decline was operating an increase depreciation amortization. $XXX million by as and income

Slide Turning to XX summary sheet. our of for balance a

note $XXX.X we at debt debt-to-LTM the EBITDA summary manner times. Slide net which and will total in of was generation. the quarter the that cash X.X end shows our XX was our million allocated flow You our of a ratio

which construction flow $X.X million net million repurchases. and we other million, of on share vessel million year, generated also fund returning maintenance and items, from undertook $XX.X capital the million from the shareholders borrowings $XXX.X new operations on million, For CapEx, cash dividends used cash we while of and $XX.X to $XXX.X and via withdrew from $XXX flow

mentioned on year. normalized calls, $XX our period As normal prior $XX heavier experienced we in CapEx million per a than and coming maintenance higher XXXX of our earnings million than which in we to resulted range XXXX in dry-docking

increase and to strong progresses, renewal ample our attractive growth continued operating as consider to shareholders. to program leverage While to provide expect and healthy construction, financing fund access balance return our sources, vessel sheet, we capital new Hawaii flows, investments, capacity fleet cash

review of Slide new a vessel to Turning payments. our XX for

vessel for Currently capitalized we total expenditures million. XX% and construction interest capitalized $XX.X of vessels respectively. quarter, two Class of capital million of expenditures million are $XX.X had complete fourth Aloha Philly vessel $X and at new the the For Shipyard XX%

expenditures year, $X.X the vessel construction capitalized For capitalized million for million $XXX capital we had of total interest and million. $XXX.X new vessel expenditures of in

million $XXX capitalized $XX current rates, progress vessel we currently interest. estimate interest to the interest and XXXX payments we items on owners' approximately For Based new XXXX excludes in full-year million. of be capitalized project which

on to benefits. provide their in timing Slide vessels, update Moving we an new fleet wanted the of approximate the including financial Hawaii the deployment and to the benefits associated XX, of

level the vessels through we are reaffirming $XX XXXX, the million expected the currently million as in the from expect we benefits XX-ship existing we of scheduled volume fleet deployment. cost the a quarter full-year operational lower cost to exiting run in the new vessels an Given Hawaii. when as XX-ship an comparing of to fourth deployment XXXX $XX that In to rate shifted of result

underscore to impact Kanaloa to in vessel moving items XXXX approximately auto the of change analysis through line and we The a Lower in-service the benefits following in net deployment. Kanaloa this a first any be million, expect realized until reductions fourth of at walk of configuration this before $XX and Class in remain and will when a million, in-service the volume. deployment benefits the expect currently first to rolling total $XX which million timing, the cost shifting Class late benefits three will annual quarter changes million. net slide of less the based that operating subject These to for deployment. as of and fleet excludes cost of in million want ship one late the With of million I to $X to on benefit and following reduce placed of $X these is fourth I that we in effects annual a upon to ConRo magnitude to XX-ship in quarter and XX-ship $XX deployment of but XXXX date said, X-ship items XXXX to various million is table the which expect cash ship the basis of X-ship efficiencies bulk timing that net of to new the from to the expect project a to stock we the We the a operating fuel $X a vessel of begin operating We on financial shows costs. the deployment. is $X of an service cash rest as time of currently X-ship improved and result to vessels.

of potential Note benefit this million. $XX from level XX-ship table cash down benefit Hawaii show fleet otherwise deployment would to the would we million was that that the of XX-ship the applicable a Moving $XX to at only cost annual the our reducing additional if in deployment. current be a required XX-ships have volume

we resulting In the addition dry-dock vessels in beyond years dates, and benefits, of expect in first the expense payments five new initial be the the after approximately amortization to in-service these dry-dockings XXXX. financial years to lower

versus We will the also CapEx new the lower XX-year-old initial be expect to maintenance nearly and vessels replacing. vessel steamships expense have on they

$X depreciation be the seven in We amortization steamships annual four amortization reflects expect scrapped. existing they approximately new between and versus and to will service the which in $X depreciation difference a reduction vessels the be million in million to

deferred that Tax Now Tax turning impact to adjustments Slide economic of net on primarily is shareholders. consisted the Cuts we the and tax to of Act. view a Tax as to fourth -- result The initial be million a net meaningful on and bottom-line XX. recorded to financial revaluation in Act which we of In We total liabilities. expect $XXX an Matson Jobs of the end the benefit Act its wanted a provide the the quarter,

let XXXX in NOLs, to the expectations to approximately until $XX vessel any expect XX% With tax is a taxable accruals capital credits, me to And XXXX about result allowable to taxes prior paid. no the cash lower we outlook. have to expenditures use We under planning prior we cash this view turn of million this XX%. forward, federal that, discuss expect annum tax pay now full-year versus offsetting income of effective consists approximately maximizing per taxes XX% the pay and Tax construction remaining federal to of at the to new and attributes our view Going work -- least of our versus Act. which other in fund rate a our for XX, with AMT tax Slide of lastly,

achieved XXXX For modestly XXXX, and Logistics the in to Ocean operating income achieved we operating XXXX. increase approximate level in the expect compared to income Transportation to level

result. expect expect And we in of is approximately The million inclusive amortization the million is year. interest mentioned an expects dry-docking million. be decline of on effective P&L to for $XX to Consequently rate amortization. as I $XXX and We approximately approximately the expected versus to decline depreciation XX% to EBITDA XXXX which tax expense earlier, approximately company $XX the

moderately timing we primarily expect the surcharge for expect last to of For the we income the income to operating higher approximate fuel be the Transportation Ocean quarter quarter period year the first level operating Logistics, XXXX, of than first to achieved collections, the and ago in due year.

quarter. Lastly, surcharge we wanted the collections to we in that we in point third had the quarters, in strong first under relatively XXXX fuel and out collected and fourth

So consider remarks. quarterly I'll prior XXXX surcharge the turn call his Matt fuel now year-over-year collections the of back the comparisons for final to over in timing year. should versus

Matt Cox

Thanks, our expect prospects and Hawaii In efficient lane the are bring first of the of Joel. most in reliable each our Islands in the the flow and important to this of on operations to those cash come. we generation of related and remain our many we're your call quarter communities for vessels undoubtedly year and that, beginning arrival new and be And shareholders. company's course I'll our for our the to back commitment trade businesses $X confident infrastructure, vessels decades create a good the a long-term long I new the value core I to new to the chapter cranes. and turn of with of on the ask billion our we throughout our Operator? for will questions. history. believe operator nearly the XXXX Matson, end we'll year Hawaii in third XXXX, for year new and and progressing four is Sand Island By in the invested have

Operator

[Operator Instructions].

of please. from comes the Atkins Stephens, from Our question your first line Jack question

Jack Atkins

good Hey questions. guys, taking my morning. afternoon for Thanks good or

Matt Cox

Jack. Hi,

Jack Atkins

and I Joel, appreciate I So that guess my doing think guess range you now $XX When for you should think were about deployment, fleet and that assumes the guys XX of ships, million, Joel I sort sort on I'm right, in a EBITDA that reading talking of and a I million question. guys first could is a was talked think there way I was on the looks that interest an thinking rambling this us you we I at interest that. make number the about -- $XX I about if so look expense, $XX an to it that the million the when you bridge obviously this it sense, provided update you that million if million be savings $XX guys past pre-tax there million curious to from was know an have pre-tax $XX like that's basis just to to question incremental we $XX that if of about

Joel Wine

they understood the dollar costs Jack. equate dollar XX question, I No, on with EBITDA. These operating numbers that benefit see respect for to Slide cash Thank you would you.

showing XX-ship reaffirm $XX we really been we there's showed on you a deployment similar what X-ship what said million But do when ships point what $XX we're earlier what as is to it that overall So number, new to the change comparing before, really a a and of that's deployment really deployment. wanted metric I is million today we which new comparing to mean was XXXX the Jack. to no -- as stretch the here four

we're stressing not call a we're XX-ship is XX-ships million that still a $XX this $XX on that deployment. XX-ship So million X-ships What to in today to currently; is deployment we're number. in

compare to which million. range, with deployment, $XX the one you -- sub-component the of when XX-ship fleet unit $XX less that range by the million So new it’s is the

been past X. So what letting finally difference XX Does we're XX, has with that slicing to you the change in and XX and between we just sense? no there and the real it see make more said

Jack Atkins

about so does, definitely it to that thank was for you. Thank I sure and sense. make Joel. just No, correctly thinking makes that it does, I you wanted that

of or your of from Okay, tough perspective quarter for tough six when Matt, because through you a for through the Hawaii here volume it's sort business, sort think in the backdrop so Hawaii, couple how shifting but can a we think gears other of extra been of obviously quarters if the a you the see comp residential planning playing I'm does if your help of think week in fourth because is there the us the couple correctly you you're prepared year, saying it can what about outlook out years last process hearing in in next that comments, it maybe to sound but construction some sometime for we starts the thinking before be like in business? Hawaii rate through longer-term trying that Matson, I'm think showing just up volumes about should for growth questions,

Matt Cox

question favorable. good is macro it a The the think in And Hawaii backdrop you framed remain and favorable. we’re question it's to correctly. continue way Yes, to it's I the very forecast seeing Jack remains

billion didn't the on area. they're new plus mention in we're out this investment talking what think in also we I seeing $X Carolina hotel for a a about year Atlantis breaking in ground West example Oahu

homes, are So expecting projects we’re military single-family West that we though continue whether consistent whether to down, saying as to place. hotel their quite is or it’s The construction good. seems winding amount hear projects are take these Oahu a macro of developments. spending other residential it's other What

two to more growth next But low may that we remain bit are a just years. little as we pay in where flattish, future, we also in say believe We’re infrastructure a five caution on market, we flattish to the there remain in environment these observing to flattish to bullish we transition are don't transition bit is the transition, bullish in the nearly we of to of today a see we observing in very investments dividends strong we very a Hawaii, are expect. going we’re over continue making Matson's where if on position but little the growth

growth type reverting to that a of growth previous scenario One the cycles. of flattish maybe economist characterized commented building environment the is from which we boom/bust sort of some more

overall showing So Hawaii. but in remain some again pretty we we're confident caution

Jack Atkins

of Okay, us pay help expect if your of about and you -- back you in be income me a made of jump of because okay. mean cash increase amount investment activity with this flow and have year capital EBITDA your flow you And operations just talk any year then you levels and you’re last dry-dock impacts question with I sort the could in the year. from guidance to think this sort lower queue, of I'll this planned lower obviously your year, XXXX? significant to going taxes would Joel, that's And but to to operating cash through cash this not from operating obviously trajectory

Joel Wine

from if any look at rate pull-through cash pretty $XXX flow changing to said. Act EBITDA from We nothing the be to cash our like going we this and had EBITDA impact Tax flow-through favorable is forward, for there taxes. of don't flow cash is the expect except which we million $XXX That you from operations, good XXXX going and of I Jack, Well, we mean think had million general that year, of I operations. was

I the cash in like to mean, hard capital. changing a working So tighten flow we're always really as be shouldn't other significantly. company elements working our from the operations

conversion or to you from -- from as you improvements to some that. cash operations. look flow EBITDA changing look operations our we'll nothing But So in at income could net is flow see dramatically cash from conversion like areas

what changes and except should the big the from past the similar taxes had in Tax for we've cash strength with the Act. So be

Jack Atkins

Okay, okay. time. Thank for That's the you again helpful.

Joel Wine

Sure.

Operator

you. Thank

question Sterling Our comes next your line from Kevin question from Global, of please. the Seaport

Kevin Sterling

start me the Let service. China with

it I that think and it’s it? market a air also it an robust, thinking morning this volume perspective, it you’re really comps market much you ideal being like outside today, freight years talked thinking market, favorable we’ve demand about for as difficult global about know maybe like are that, terms that’s but I that got you, only am year, you but if seeing I just seems got that it today more some you’ve I at an almost I of will better at As looking this know out not your demand how right about think seems than about is how ago last expediters than about there, in from few pricing, synchronized this we’re market least of

Matt Cox

Yes.

closing and the and you reopened some reopened observe environmental of and the the reduce of and of factor were to or initiatives I some other those suspending XXXX in the not just was we the down fundamentals most agree I think would observed that think I Government some some with them after one facilities of was operations we're polluting of Chinese of were pollution remediation. in

capacity so, there which was some uncertainty model. production And played also about expedited into our

XX year. we for XXXX at in drove continue for this been lot in that been and this full remain to So place years we've that should of and remain in the this has model to years full -- and we a the now XX believe expect leased fundamentals XXXX this service like vessel it has

which we an in a deferred air at otherwise product. ways freight, think on for that air perhaps deferred relatively freight that look substantial bring model can be we would savings additional find is air a every to year further what leverage to a to we this, cargo continue can unique We a

go the can that our customers to continue been that process touch we So to, that not market but in year. determine we've which continues every to through extend we with offering

the to so strategy to it extent we to every possible, very in see hybrid as normal so a year ways virtually filling that XXXX for XXXX. ship And will look mix our week and continue the as continuing cargo

Kevin Sterling

having touched And levels Matt. you're targeting having so, are traditional of given services, customers some I a Got freight rates deferred thanks or haven't air with where are XX deferred product, you air success on good. it, rates air kind customers seeing be air getting some in to that today? seen ships, your guess I success freight, at come are and board your we’re may That’s new years air very

Matt Cox

spot. very and this on has for that I that to year increase yield and year explain really a process to will and last the in ways the of Yes, that I especially Kevin five as you've that out continued as mean, service. And maybe which continue much some we sweet think plays in I -- would our into it were beyond in fundamental pointed into right place continuing we've process XXXX as look or six our think was

margin large ways are sustain freight. that yes customers perhaps to So we'll that say new if some market Ocean gets who depart downgrade large and the looking some hello air premium from customers and our over can't too with of a some modes to new

the process that yes, continues. again, So

Kevin Sterling

kind with traditional no, picking service if you no? the is it any customers e-commerce you're or Can up like of tell

Matt Cox

are I with have would customers somewhat I be with for about, indirectly with some looking dynamics that aspects that some we're to some do don't we in product we're expedited customers. forwarders freight expedited our I both the lot we working channels. them talking which others of ways do through a continue that are want down of handling to but -- their of to we with that It's that say moving and competitive We're directly a grow because XPL important is through would and other of say definitely that of circumspect that we so -- business forwarder some those Chinese and cargo customers and

Kevin Sterling

Got it.

some it's that to to business a costs Okay. you obviously at think are here, gears you're pass truck successfully customers? XXXX, to and squeezed brokerage whether your kind by you we're be those in able or all about of we switching as bit increases are Thanks. Logistics seeing that business better your getting transportation of rate little And but the along transportation intermodal routes projecting

Matt Cox

second truck is seeing seeing know, you the have right interesting I what logging to capacity. and focus of scarcity been electronic conversation of Yes, with because we're what we an a longstanding as other which finding and relationships rail think activities and interesting is truck that, the is other has we're not pricing and margin now main Kevin. capacity. that so are is is we market, the in mean It's in it’s now getting almost I of service The terrific providers.

year So don't a capacity relationships be to looking longstanding these this with already truck is if vendors. for new have not you the very

in tonnage pass bit Our to won't disciplined seeing we're We're on view hard those making of the sure will may happens very the that have not you cautious. for being We're There if a increases very move to that to so able increases. to compression truck really a is be little be margin we're we're rates. worried happen in in find but long. it but able able about orders, very time it or it

being some and fall to all trucking year the the in I to have continue and a said it's interesting we're a behind like we with result the vendors not trade. rail feel up a But And domestic of Logistics very dynamics markets. to well-positioned, think great going so in we going pricing wind that having as fell our of relationship

Kevin Sterling

Great. your opportunities is business, more the Are in you M&A Logistics seeing pipeline a any robust? bit

Matt Cox

it. I'll we be but add for dollar I'll nice primarily own in billion capital mean to I Matson to I looking say Yes, continues market would companies an large know looking our don't you think organic not highly there given focused weigh Joel we accord a that's to understand ask actively that. its in. find interested that make are to would acquisition if that on is observation. that fragmented. at yes, I tuck-in are But acquisition. growth, primarily Joel be program, for We

Joel Wine

healthy we're of a that's market. a steady M&A diet, it Yes, call still great. Kevin I seeing, pretty let's mean

transactions that's of economy a that are So strong there's in. buyers happening indicative and we're sellers

but we're that and on is organic. focused we're we'll said we're over where say it's next mainly focus something opportunities, a look seeing if Matt steady healthy this the or decrease, time M&A change just but organic massive diet mainly important wouldn't of sea what focused increase on is obviously I strategic there's still M&A and there's at some So bit our of

Kevin Sterling

Got it.

make it and of luck Really time That's today you. Thank in appreciate Now to all XXXX. had. you best I sense. your

Matt Cox

Kevin. Thanks,

Joel Wine

you, Thank Kevin.

Operator

Thank you. [Operator Instructions].

comes Our line question Steve Company, O'Hara please. next the from from of your question & Sidoti

Stephen O'Hara

Hi.

I me of you Just up full-year. on guess that terms said the could I if the overall remind I what mean just for Hawaii market volumes thought did are you’d

I'm overall was guys the XXXX little at for the end market then is it bit. I and mean you of through go relative And think changing last due business construction guys know a but down? you were volumes you in down, I I that your wondering year flat roughly or just think I underperformed behavior, competitor could just if to mix, looking can to was there

Matt Cox

share due And was largest from saw up market a many lot stable. forwarders a categories well. size and construction a the expectation in stable construction-related, original entirely see the environment reduction Yes, not the Steve. again From market market -- in or was some in share freight to -- of see freight volumes market. was across what we were market of The lesser volume materials down our some point the any we but the of our observed in was in We categories small did the number carry Hawaii forward as market were reductions what some we there way. share didn't of was shift view so the overall significant there

cycle. one couple of week a to construction year percent which thought be course added to the as reduction well. So it to fewer was us related then, had in And the primarily we of

So those position about were good feel share market our market on itself. our in focused the We main again factors. market, the the and and mostly again,

Stephen O'Hara

I I the container to on that cetera. that than that still to mean be in to should was economy then by more of what's more have the of And mean -- the mean, high beneficial I've to a is typically continues thinking volumes? expectation does than and be because starts assuming et strong, the been in Okay. thinking past, guess development I home barge single-family that be terms when a more the the innards I the lot development, that in go the when rise rather commentary impactful

Matt Cox

rise honestly more agree Steve, that single-family than than your know, more the with I historically, by that moves as so homes do containers. you Yes, the containerizable construction question provide cargo -- seen high have we

Primarily entitlements in projects in I bigger the these that different construction slower we see we under envision. really about going is and what's that are the that as pace XX-year understand is believe Hoopili, steady little in that a of multiplier developments. is Western that received that Central think type Ridge, We of cargo. and we've projects. seeing there to of we originally two been multi amount the two in of those required we're home construction are financing five in projects So continuing the for place developers projects do were phase with of talking is both most Kao what better a of are Oahu they've the And than produce

well. see drivers of to these these in XX primarily over others we'll long and kind two in the projects, but as two perhaps are growth next these steady years So

of longer So we that or fundamentally it's way then flatter be and originally it are we're seeing is it. envisioned than looking kind disappear the more less we're seeing it at we

Stephen O'Hara

Thank maybe just that's I Guam Okay. not on you. a got can to remember, military out -- be little that that reasons potential is a pushed in or is Guam you in growth where one the us right And was lastly, APL then there or thinking may of was and just relative that build-out because future remind but bit?

Matt Cox

Yes.

dependents place the move for APL Guam Guam. taking changed going a to to over from eventual although reentering the was we of of for say expectation Independence the of to was That from original period and approximately their out the -- for one longer market X,XXX Guam. has now to spread a to position relatively And marines from think marines is X,XXX that Japan Marines relocation Guam than Okinawa timeframe. still the rather I to primarily Okinawa short itself motivations and So is be Okinawa would time it into

and it the much for stable. before see XXXX market expect to we XXXX to trying the happening will continue probably to guidance XXXX and gives that and our occurs. see with again the views So in as around expect relatively Military to meet Guam do and puts to XXXX U.S. of the regularly understand relocation we over happening or think of XXXX it as our but their come. We be in that it We it plans market do I we don't come

originally but flatter, it’s than happen it's be it was to going to it’s envisioned. So less going

Operator

[Operator conclude session does Cox for this Matt the any of back program. further to Instructions]. question-and-answer Thank I'd you. like today's to hand remarks. program the And

Matt Cox

catching call Aloha. you, today. the look We everyone with I next on to everyone thank on call. appreciate forward up quarter's Yes, Operator.

Operator

Thank your for today's you, and gentlemen participation program. conference. ladies the This in does conclude

You may day. Good disconnect. now

Matson (MATX) 20 Feb 182017 Q4 Earnings call transcript