MATX - Earnings call transcript Q4 2018

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Operator

Good day, ladies and gentlemen. And welcome to the Matson Fourth Quarter 2018 Financial Results Conference Call. At this time all participants are in a listen only mode. Later we will conduct the question-and-answer session and instruction will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. to Relations, host Lee like Director today's now Investor of Fishman. would introduce for your conference, I Mr. Fishman, you may begin.

Lee Fishman

Thank you, Josh.

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

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

Matt Cox

strong to Matson's service in with today. thanks on line and from remarks. fourth X Slide turn Please our for Lee, with and the quarter expectations, performance Logistics. my contributions in China opening call was to the Thanks, those

U.S. the situation. to all period. to continued volume demand double a and quarters and tariff XXXX, across income freight well year-ago the fourth segment higher stronger China quarter similar as year in rates lines, saw nearly the compared service and result The the in average China of the by in prior quarter Our Logistics seasonal the execute higher the of to operating driven service

For year and the rates, we we strong XXXX, China with Logistics a from our in higher contributions SSAT full significant our freight had and had segment. service, average performance

Hawaii. with season situation in and Countering We ongoing in the contributions compared competitive Guam these was also seafood in in Alaska, harvest strong saw seafood southbound weaker-than-expected steady the levels performance favorable a XXXX.

Turning to of our to that are priorities, want I X, many highlight are and few which to a value to investments the we've current on Slide focused executing enhancing. committed spend long-term moments

the invested renewal, vessel the take the service higher the payments which for to vessels Lurline made the middle first three Work operations. ultimately at expect already XXXX, on which capital. entered in-service our in on Sand financial important an steamships new November nearly fourth Hila We're Kaimana operation. and these in which dates benefits to shortly fleet, to gantry drive fleet end for less in It's our new this of and of a to three the nine we're preparing the later properly quarter of infrastructure actively vessel the only is to shipyards electrical existing vessel cost of vessels, of XX% Hawaii service, year ship be Matson's Daniel benefit Hawaii new focused Honolulu We will be of be the the the With delivery K. not We're we the associated efficiency expect our from and bring and service four Lurline of very to In for In will of vessels XXXX, quarter in and operational and we're disposing entering thereafter. upgrading and to service XXXX. in XXXX. to and the in new realizing Inouye, of that operations. far. environmentally in transition manner. smooth, the the returns to service Upon our in the schedule, refurbish Matsonia so fixed, delivery preparing completing expect in service, performed First, begin nearing, currently progress Island consists be started vessels, our this one terminal has install the on cranes well to terminal cranes. to has close last but of we has the service friendly completed in

is the be first at IMO current to our Kapalama phase, when our XXXX into to last we've expected in this be with expansion fuel for which strategy couple preparing calls, door Beyond terminal, and moves the XXA B, earliest. which are of we're our Piers compliant out XXXX to to new next the earnings In facility, discussed Pasha regulations.

other we As of that on vessels. we you install will the scrubbers five and CLX closely vessels scrubbers on the three evaluating may announced are two service the in recall,

installations the actively a The XXXX completed Alaska current years two a economics on CLX in two be scrubbers done remain on the payback we've scrubbers committed couple strategy positive ago. of three year the the vessels. we had XXXX. compelling, based of of from Our spreads, with and a scrubbers experience Of and fuel our two anticipate assessing vessels remaining in we've to installed to, third has on be them changed. early to not currently scrubber We're

Matson on vessels. performance, said for sense the lowest-cost our our and that us, to will and continue to want for including new the remaining I scrubbers always a operational customers. evaluate Given we that we economics before, solution be maximizes as good position to Hawaii in fleet, our optionality long-term makes But find

our expect of this committed credit the we'll certainly balance low least, we're cycle, sheet to advantage. continue network mid-Xs, Pacific significant As After to U.S. in Coast the cash leverage which flow view Xs. but to sheet, a use the to organic level West which maintaining our through XXXX. peak And to first free we opportunities. last, quarter the our the investment-grade expect we in sustaining going competitive to nearing growth balance to low-cost this end we renewal valuable metrics our we're as not fleet upon We're de-lever and point, build continue and operations of

Pacific. services of Our segment. in most recent efforts lanes across the into We're actively involved in our business Logistics trade have extensions of and in our all the also natural the been projects

Now our segments. train on individual to lane

to Matson's the steady our market in X, Turning share flat Hawaii. was Hawaii in we over and year. In Hawaii Slide quarter, for short, the the service stable favorable. conditions saw remained year market quarter within performance economic remained on container Hawaii fourth

the For higher year XXXX, attributed year over state. to decreased volume. modest economic over year, to the full volume in due X.X% was growth container year, modestly largely backhaul year volume Westbound eastbound

reflects continue years. an economic supported inflation, XXXX few activity. economic for unemployment, forecast, market indicators Hawaii plateaued For expect growth but of economic container prior remain to growth early level Hawaii the expect year, a Hawaii's which in share XXXX. UHERO Global suggest With economic full late to continues metrics which construction-related modest construction a slowing, signs for in conditions in business industry, medium a low there overview modest next level low economic in the by growth forecast year environment. the X the the the term. profile the XXXX, and cycle, latest stable volume favorable, a growth high achieved provides by approximate Slide UHERO are to restrain of we some tourism and the continued of could respect UHERO's According and key to to

that on Although there's pick-up condo offset master-plan resort-related new and construction in medium-term been our construction on primarily communities recent projects will Oahu, from projects nearing remains demand, a completion. Oahu view

were XXXX in year, China quarter the fourth and quarter in average year sizeable Moving X.X% a XXXX Matson's fourth eastbound freight the volume rate of higher the our to Slide on was higher was premium service of X, and was over is the a demand to SCFI. attribute demand in strong, which pull-forward we positively volume by rate stronger the situation. that as a U.S./China the in tariff effect through quarter not seasonal to impacted Both traditionally period primarily and a

year volume For container X.X% volume the negative over a full volume New as period. result XXXX post-lunar a in comparison decreased voyage of the year lower return during or year XXXX, dry Year dock and for

saw trans-Pacific lane, of of in amount the second saw half fair in saw demand, capacity more trade we movement year, year first the a half supply/demand In demand. excess a the balanced dynamic. well we capacity the we in and to of in the and During volatility

a as CLX already in a performance quarter which year third strong peak to quarter fourth we a had in the for was rate XXXX, SCFI. the we year I've From and period sizeable for perspective the Matson, higher was premium for realized Specifically than rate the normal, full what a the relative performance mentioned. service,

this stronger capacity XXXX. the and strong think flow fourth post-lunar first to the throughout year and the of a year growth slow will of in it's of as Matson, we For With seasonal new capacity as of demand, traditionally fourth believe the year a likely this unusually quarter demand weaker volatility year, remain somewhat quarter following the with result year, we and period. will exceeding XXXX, the respect normalizes, trans-Pacific of first trade month half XXXX in be

highly to the year, outcome to levels we in level the we that achieved expect strong level traditional differentiated is outlook year. service than to of achieved important to note as Despite the average from lower fourth China U.S./China particularly very expect and trade predicated volume more expect our in in effects rates neutral service on trade a It's situation. flow be XXXX third activity, XXXX, our freight the be we normalizing, strong For the the this normalizes volume modestly another CLX to quarters. have than of and the lower

fourth volume hit year in increased by over the the container due Turning volume Guam devastated to was market in Micronesia container XX.X% region. Overall to the relief support Guam, over to Slide typhoon year, primarily X, areas flat year. quarter XXXX in year that super the Matson's essentially the

volume competitive to full over from year year the year X% due container decreased pressure XXXX, For APL.

environment lower remains. the the competitive as to full-year we volume XXXX, modestly on highly XXXX in expect Moving outlook,

fight before, to to we've our continue container business. As our strategy of every single customers' said for is

our history do transit we strong outsize Given much on-time Guam much a market. times, ties, performance and of an in with the better shorter expect retain to record, long customer share

Moving container the Alaska, volume fourth due Slide XXXX increased in to volume. X.X%, higher Matson's for primarily now northbound X, to quarter

economy a color on of more little provide Alaska's continue to in see We to that and a beginning I'll signs stabilize, minute.

offset primarily as For the Matson's weaker-than-expected lower increased X.X% of XXXX, volume southbound compared harvest levels result container very with volume volume an year season a in seafood increase seafood to northbound by year-over-year, the full strong in XXXX. a

we be harvest improving For XXXX. XXXX, by expect than improvement volume in to stronger the full southbound supported than in conditions seafood XXXX, Alaska, higher achieved modestly driven higher level the in and volume year by northbound with container volume an in economic levels

fiscal next state key XXXX economic indicators Slide the of by highlight this is and on bottom recovery and in recession the forecasts of of will the fragile, Alaska's a charts Turning trade condition underway. recover Alaska suggest slide that year. economic The that continue marked made The volatility AEDC and that budget XX, Department likely as impact of to gap. the the in the Alaska recent economy Labor. the address number we to cautiously external oil its recovery of play, is remain the given throughout factors to prices, well the optimistic as at such as But economic

joint period. tariff $X.X venture, offset contributed as seasonal higher next lift revenue of higher SSAT, terminal the compared resulting increased the and demand fourth effect XXXX, The to costs, Turning decline was situation. in from in a partially quarter from million U.S. operating XX, prior-year to an volume, primarily year-over-year $X of of China stronger Slide our the result by million the

consistently joint increase year. contribution The exceptionally well, this higher the in near was in with contribution The million, year due the million performed or lift to $XX.X the $X.X throughout result of volume higher than SSAT the last For XXXX of highest was venture. annual full year. XX-year a XXXX, period

XXXX, expect the achieved the import For to of on contribution volume Ocean West than the Coast in the Transportation quarter seasonal of in to U.S. we a XXXX. income stronger due demand to after lower our XXXX, SSAT's level normalization be largely operating fourth

Coast. premier Although this U.S. satisfactory an lower stevedore we continues coming off performance year are the West SSAT on expect remains be contribution the expecting high, level all-time to a a well-positioned of and as we

Logistics our quarter. to fourth Slide contributions over year million, income XX, in an exceptional million now impressive increased of to quarter each year Logistics $X.X lines. on in Operating service an fourth year Turning $X.X the with performance increased capped the from with off

the income performance our the with well, Logistics across increased to lines. ever for result For This all million, strong full year XXXX, million challenging customer segment. to market conditions the throughout highest despite service year operating business brokerage performed Matson is Alaska, our Span Logistics' $XX.X service. the and as $XX.X the strength the tightness trucking in played economic in transportation in most of excelled

a the now full the operating the high of And quarter we outlook. Joel? XXXX, for achieved over XXXX in to income of quarter million. level operating first million moderately financial Logistics our $XX.X Joel our approximate achieved XXXX, all-time and year first For performance in we turn level expect of for will expect with $X.X XXXX. be the of review to the And higher to income I the that, call than

Joel Wine

Please XXXX our full turn to fourth Slide quarter results. financial XX and for year

income XX.X period. of For income our tax period of XXXX income income XXX.X adjustment share and year the net net Transportation positive million $X.XX the share million we fourth higher to have by was quarter, primarily collections. $X.XX operating act or XXX X.X or were other quarter transportation compared year-ago increase respectively. increase per higher period, favorable $X.XX and in amortization in Net dry the Adjusting per quarter XX.X XX.X to of contributions from one-time to in for surcharge comparisons by year-ago million, over Ocean higher from share partially arriving than the for million share due higher million the handling for share the X.X is per to the and of offset brokerage income X favorable compared earnings impact, benefitted or increase for per fuel million X.X million lower year-over-year per noncash of X.X by was diluted from the amortization, X.X earnings operating a timing would by costs. enactment in operating from earnings This fourth a respectively of $X.XX jobs the an depreciation fourth with due income the and The the China result million. partially per in the and primarily share attributable quarter earned million, the terminal or forwarding. million. dock X.X freight Logistics and of period. and EBITDA income increased act. cut contribution to quarter greater year tax million year-ago These offset year-ago and million including been XX.X million was the

contribution higher in primarily million. operating For higher a these by year-over-year year increased the full comparisons and is year greater SSAT. lower for the and freight full contributions to contribution from was $XX.X the freight year was income than X.X Guam. XXXX, million, million year favorable The XXX.X XXXX to Transportation in million and or costs Logistics offsetting handling over increase This terminal primarily increase attributable Ocean XXXX. higher to transportation due Partially and a from $XX.X brokerage rates higher Hawaii from forwarding. income average result were China operating

operating million, lower or year, due increase prior-year compared in XXXX tax income $XX full prior million $XX.X an higher act, of full-year would the full by to of share or consolidated in and offset compared to was and the year our the depreciation income income other Slide or million, per million, $X.XX partially our the share million and per the positive $X.X and amortization, $X.XX of noncash per share flow EBITDA of $XXX higher for shows $XXX $XXX.X amortization cash period. adjustment in XX we million. months we including for arising $X.XX the a dry from net dock share, generation. manner summary $XX.X of the trailing allocated respectively. For income with have one-time net earned of XX $X.X per million, XXXX, which Adjusting million XXXX earnings been year

operations XX sale cash from proceeds we What our had decreased million maintenance including from Maunalei interest on $XXX.X last million $XX.X of on to sheet is repay in for balance capital positive received while these used million LTM period, million, other transactions capitalized in cash months to also we and million $XX.X debt. million CapEx, CapEx million, inclusive expenditures of from invested $XXX.X of new over via CapEx, the noteworthy $XXX the vessel proceeds and $XXX million, dividends. other we owners' generated flow actually cash flows flow of which including shareholders $XXX slightly from of outstanding is borrowings, in that items, returning leaseback $X.X For $X.X million transaction, non-vessel particularly

XXXX, million year's therefore, constant XXXX resulted fiscal of versus leverage staying EBITDA fiscal ratio CapEx. in $XXX X.Xx, our level of changed little was So in since last the despite this at year-end

XX, to vessel capitalized the million $XXX for capitalized and of of cash of capital Turning expenditures $XXX.X total we $X.X new Slide interest construction had expenditures quarter, fourth for million. million, vessel

year, that Kaimana also million. in November, March. our on so the graving delay is We well. under expected quarter NASSCO delays call capital the new construction on delay, our Philly The estimated quarter the progress expenditures which Matsonia and was expenditures remaining outstanding total income dock $XXX.X Hila her, million. the the delivery is the capitalized a noted now vessel XXXX. floated vessels the was that two in the $XX.X The delivery is there the timetable vessel third debt scheduled revised a million last for only the $XX.X had the three Work million, detail this along slide, paid quarter with Note NASSCO percent of shipyard. in construction The of on delivery for the bottom actual in on $XXX.X had expects cash end that of million in taking the total the of and we one shipyard of and of as and of has progressing noted payments. the table, on in statement, result capitalized vessel of in with to of year expense interest was completion we forward vessels also timing. earnings shipyard hit we look interest of a have $XX.X For we the interest At construction

the progress the payments. three-quarters we end the XXXX, of way of are of through approximately As

XXXX, progress be For million, million expect turn Slide On this of new remaining vessel is year-end we only summary $XX.X to $XXX to Please a payments approximately our in sheet. with XX. XXXX. balance slide

before, our end the slightly the XXXX's EBITDA mentioned total year to at ratio I of end and of As our debt debt actually LTM the XXXX, fiscal X.Xx. flat end, declined year stayed at versus from net

this As in than press and report under is the presentation EBITDA we a debt agreements. our in release different reminder, calculated EBITDA and lower our the

Going our increase forward, terminal do we program upgrade. fleet renewal Island Hawaii of we and to phase the near the expect the Sand the of as leverage first end ratio

peak expect the We to turn the mid-Xs flows leverage leverage turn in to strong ratio the on to as leverage cash after ratio in about our will half we expect now Please in a continue our annually. the reduction XX. which Slide to focus low-Xs, of we first quarter XXXX, reducing

annually. a for a said, of dry now reduction expense, comparisons XXXX, spend as year-over-year dock this $XX effect Maunalei, that for that transaction. of expect in the we amortization, one which million in in million in mind including operating On on expected we transaction sale moment of full-year which basis, With the we account to financial keep our effect turn leaseback amortization, $X.X net me and November I the a the directly, should of EBITDA million and Please XX, in impact annual to outlook. in month $X.X through of going Slide versus the the XX in had of income for depreciation which Before the results on lease impacts let impact outlook, XXXX wanted XXXX. lower an this disclosed

approximate full XXXX, expect the the XXXX, million. the year vessel million $X.X additional Transportation income impact we XX adjusting for after the of operating to of $XXX.X in achieved For months' Ocean sale for leaseback

income XXXX operating million. level approximate For of Logistics, the in we achieved expect to $XX.X

amortization $XX We to expect inclusive depreciation docking what-of million $XXX million, of for amortization. approximate and dry

EBITDA the for level additional the $XXX XXXX to XXXX of after vessel expect million. roughly impact adjusting result We to approximate of or XX the months' million, $XX the sale flat leaseback

in income We expect expense other million to income. X.X be approximately

we We vessel tax And would $XX approximately expect expect that million executed approximately we interest note sale higher to we a excludes quarter made make the leaseback for expense a interest XXXX XXXX transaction. not be reversal to the be we of finally, expense had effective the approximately And of $X.X QX expect of million, million. noncash positive expense which first $X in in our year, rate adjustment adjustment be XX.X%, to XXXX. tax as act the of

and of For be well the docking in at first the last comparisons a the of approximately year, leaseback XXXX, the vessel, income Ocean we quarter items quarter the which the level primarily which absence first the from sale XXXX, quarter million, $XX as occurred of competitor's than to as transaction. first volume the Transportation unfavorable effect achieved expect of operating due one-time dry positive year-ago Alaska to is also in associated with the vessel northbound of SSAT in period, of the lower

turn Logistics, expect non-new Slide projects now X.X higher For moderately have the to moment I the currently income be first operating a in discussing spend to few vessel than Please in of we a to our financial capital sizeable works, we XX. as quarter in expenditures, our million other XXXX. statements. the wanted noted Because achieved CapEx

briefly. of expenditures, due approximately targeted our XX capital are capital which level projects, These maintenance main million figures walk XX projected million maintenance will other and respectively. of expect three capital we expenditures, million I including XXX be to through expenditures XXXX, and to XXXX now For above

electrical which materials and The the last the expect upgrade project cranes, of March. of other this our Island the million, end investor we is cranes, first project three is existing Sand by completed cost to XX project first to of three The gantry cranes. the upgrade, the in operation infrastructure This refurbishment the of of terminal consists support highlighted new and XXXX. the and of the of project be we phase approximately

scrubber touched that The The in on upon on this in the currently two Matt program with discussed vessels a of earlier earnings CLX call that consists of the the three second per CLX scrubbers project five cost vessel. project and last we vessels, is calls. of the approximately $X million

the approximately purchase the into facility expect be of consolidate XX and XXXX. the which including facility, project two in customers The Anchorage, and better-located in million, this is be we new this We project land, be project the of Span completed have to cross-dock XX. more now of to to of will completed construction third cost three year, Alaska scrubber facilities is turn the help the operating projects and vessel efficient end currently And one this a reductions. We for the Alaska. cost Please Span highlight installation facility, I of two expect Slide and early last a in year. will project to completed our produce by benefit to Anchorage the wanted and

well described, the we expense. projects depreciation amortization, the for as dry including capital projects the to Given I other as longer-term XXXX estimates and interest spending dock non-new through just wanted and provide on vessel amortization,

million will amortization, with the fleet projects new in includes as D&A you of to for dry on show the service, described in are will amortization The XX interest expect XXXX, new which of the add X expected is at the vessels each interest and interest we XXXX. approximately and income peak continue last by steamships. to very in capitalized which which expense deploy, in dock out said from total vessel statement similar Note entry savings In in to XXXX third to see as to X chart top million depreciation total period. could a the the to interest capitalized decline non-new amortization, ship bottom is approximately to the X peak expense to million amount level expected page. versus XXXX, currently income including million chart, expected XXXX we and into we I that XX statement produce estimates vessel quarter The of from the level have For depreciation we the this in of XXXX. and previously, expected during this is

Importantly, rise expense assumptions costs, upon and should third this our expected these interest expense interest based subject Approximately our borrowings, levels. are interest LIBOR XXXX this to higher with revolver today's associated is of is over floating-rate period. a LIBOR

those D&A, with over So I'll more detailed comments CapEx, call back now the complete, turn and interest Matt. to

Matt Cox

of service, Guam and remarks, in southbound true To outweighed Okay, diverse transportation really conclude in situation our ongoing and nature businesses impact Joel, thanks. volume The and Logistics our of Alaska. the China our the logistics SSAT, competitive prepared rang in XXXX. lower favorable in contributions

managing expect vessels and three the on off Hawaii first our diversity business We Island we the bring to finish focused XXXX, and remain cash-flow consistency facilities. of intensely of the upgrade the For we terminal on group. new our continue for as advance the the to last leverage, consolidated Sand phase to drivers of generation

at personally, to We're the that, questions. So, with by where well Matson. investments I very our back call operator that and I like And ask each excited we your are key for underway. markets, turn will currently are positioned and in the the I'm of

Operator

Seaport Global [Operator Instructions] of comes question Kevin Sterling first Securities. from Our

question. proceed may with your You

Kevin Sterling

the quickly XXXX, by I talked down back believe you Joel, that, are mid-Xs? your QX or and we maybe to about I 'XX after of at peaking then end get Did say de-lever. in the you see, at when the leverage XXXX? Matt Let's you guys and think you'll looking mid-Xs Is might that level,

Joel Wine

year. de-lever Yes, to turn expect said a a Kevin, we half we about a

at X.X we in about at be X.X, years. two if [indiscernible], would down just So were we then

Kevin Sterling

you And lines-and have of with the for of XXXX, million? But now you XXXX, thank to beyond into the that, you level normal maintenance return along your do and outlook those CapEx CapEx XXXX. more expect to levels understand and beyond that higher $XX CapEx and additional your depreciation say

MattCox

sometime would the is say investments CapEx before, long-term vessels, talked XXXX XXXX. this which major capital talked see I replacement next will about We've likely yes, and major would that is-to in Kevin, our and the range. we that we've highlighted, take as $XX be about million our be cycle the place Alaska Matt. of the CapEx, levels-maintenance we've between

So period. CapEx there which this we is do lower significantly to have under period a expect post

Kevin Sterling

your CLX in mentioned your outlook XXXX. you Matt, remarks about prepared And for

outlook If understand I is think that do that's be maybe neutral if-where a come volumes, we that's resolved? the we or get trade the Would really, CLX? with How a relations. a if war think, trade U.S./China about upon both? trade should big resolved-I it for upside rates, think from, you said, you war could based

Matthew Cox

if of know China I really, And would other is factors I good in think say a is, us Yes, economy we of we by international as the and steamship other trans-Pacific going and all would-so think the trade about One amount outcome dispute, there's market, this we're on two the that hoping I parts are that heard the times. deployed many what get which to to for, capacity talk then factor, demand, this other is part lines. a I where U.S. the it's demand. driver amount of the drive you've the

regard in capacity only side. of deploying basically negotiations, of we rate to to Matson. for ocean the pretty for three than and a as primarily that and a long for we our required about other the that year, ship ocean has back international With us shape. negotiations deploy successful then capacity is full, to year outcome choppy other the isn't to trade Year, New have still have order more right or need rate, capacity be now post-lunar if good only your market, we're have so outcome isn't to even upside general there to international the trans-Pacific week carriers as works a full not question over-capacity. the we be in the every say of two that Matson, market, would of the But on should amount a trade upside when It that's in is carriers an partially effectively, amount for on ton reasonably So the given of the an orderly

Kevin Sterling

for guys in And me, financial appreciate last it. so before, could one talked you if quantify remind believe XX and to about from mentioned me, Can again for us of this X. you I'd going benefit less question You vessel the just I you operation?

Matt Cox

one we Kevin, said unit, million. fleet Yes, is $XX that

Operator

Thank you.

question Stifel. next of comes Nolan from Our Ben

You proceed question. your may with

Ben Nolan

able to cash one, quick just out have and an I of something the behind questions, the older I of in leasing, Number terms leverage. understand that the being get especially managing idea two hopefully. of ship

that if very could, be is curious that lever on again, to a Just of high I the or deploy? might is but that you list suspect you might looking tools you pull that

Joel Wine

the very do is but scenario recessionary we It optimized that think could transaction do again, so again, no. don't do. to. or could think that future, scenario if has but some something it's to this we're we'll Ben, a in need near it us, one we not-we downside we need We it's don't we something in think

Ben Nolan

bit obviously a a to year. good switching then SSAT, And gears little

the perhaps match to the that, you that. guys hard about the But, be possibilities the you How months? some certainly you in are SSAT know, know, areas on Northeast terms that expand in or the that Coast. across materialize other I that know, side, You thinking that know to the have opportunities you coming West XX talked or past in there about of likelihood XX, might

Matt Cox

no of up and a finalized some going opening XX, And scope Seattle. that within eighth joint to isn't doing at would downtown been our I ocean U.S. up its look of now say would scope, within there's publicly moving of looking say pieces couldn't I at and some closest space Terminal Port but looking the but on. there's is is announced, Matt. of of lot yet, as jointly say migrating It's there is we area, the a terminal. that Ben, on venture, venture this That the to joint Coast. deal something other possibility outside us the Seattle geographic in there off a that moving new is-we're There's of prime terminal. carriers an But of that is that others the new geographic at West Terminal international X a geographic area. of stuff around area, focus of picking discussion potential

terminals previously West that's seven the We add year, now been example. Seattle. venture have and an joint on potentially this Coast. the of Port the could in sometime This eighth announced that's by But an

very alliances venture, so joint the by times, we've about by be to operations. partners to terminal SSA at this the many conduct with mentioned on working grow coast, far, its venture. joint continues be SSAT is part various operators best nice The U.S. our having as they and are the continue interest there We port interested in to in

two over to get kinds in that in to be as retaining that over we necessarily results our it been time, we so last the pulling very continue continuing joint but decades, to And inside the of we out, capital focus dividends experienced XXXX. open on and not grow the venture have

continue partners. be joint and our again, to joint we, venture So very venture on this bullish

Operator

Jack Atkins our next from question of comes And Stephens.

with proceed may question. You your

Jack Atkins

really So, know Matt, sort on in it, question XXXX, my are, perspective, in I with guys effect. positioned about this I'm comments, a your guess of if way I I a but discussed from prepared this and you could you takes you just thinking really think regulation as IMO as I advantageous know, start

installed fleet, scrubbers advantage the fact China your fuel share or your would some competitive just have Hawaii. up scrubbers XXXX, just pick So given I how pick do market up which that potential to on your you've and services have thoughts fleet, also to margin got be in the about on installed going some you're to get going a IMO some to you're that curious Alaska the competitors'? your with overall, versus mean, costs with input significant think fact either the you I

Matt Cox

good Jack. Yes, it's question, a

to to help things, Logistics our to domestic feel trade, we in fuel and expect those kinds prepared. to think in any trades. trade, continue Hawaii our surcharge cushion And first our the the mechanisms cost of businesses those Alaska our well threshold primary make regard with we're sure trade, increases was I we have and

do that have rightly we scrubbers in service, Although, installed. Alaska you point out that our

Hawaii. billion is low for true carriers not main about talked whether the note additional CEOs service, more it number that-in bill is the perhaps keep goal the in to motor for possible as record ocean fuel to as large hard little a be provides But of fuel good. carriers I and track competitor of able international on would as costs compete our is carriers, other same China at this have conventional and to fuels. us a in discipline $XX candidly, burning Our competitive surcharges is It's us advantage. surcharges. an services. and of point The our to ocean in recover ocean a a being to though, of And, fuel requires international international it effective trying very their fuel level speculate collecting

we And China so It on opportunities just ourselves positioned. side. I believe would well to create be say might the

You the chaos. in in are chaos, markets know, thrives Matson if

well feel happens uncertainty, so we operator. we And in marketplaces area this in which but whatever for lots extremely placed of is of an the

Jack Atkins

I you think on Obviously, curious the of out? a then, the market, And spot this contract fourth for but to versus sort Could in but sort freight, thoughts like get on contract on a how around your as the Obviously, that half just the initially the December to maybe play the out. second how of per see out it of were as with be rate follow-up just of much to you was-saw overall the would curious difficult how environment and thoughts play 'XX just to expecting. just marketplace. data, to then, lane. in get quarter of is the expectations? contract your didn't season pull-forward regard your October comps we that, trans-Pacific did maybe comment what's seems pull a going going played as question very significant in sort would season be year, on And I forward guess two-part

Matt Cox

Sure.

the the next the the think-well, So see we month and April to with on environment get I post-X-X. contracting January pushing we mechanism that the would we're short the goes But ocean annual out, the in them a trying mechanisms first XX, allow X X, is early higher this get this from service we into April answer. And or understand you season Jack, fuel is all, going respect seeing, season May fuel so costs of it's to are focused of contracts on them carriers in is XX. XXXX, to that to to so, to would through international too But start in place ocean how pass for that as contracting China to cost their create process. tell, as through recover higher in allow April turning to international IMO the rate are hard carriers what know,

pushing important deployed most to that far, they environment, the that, probably capacity is by the it's to on again, back closely continues how be in that early watch early put be, of yet customers So a something going the very to element going view at their much the stage, contracting are strongly followed is there But, to our process, stalemate. in in trade. for are so this and so

you the versus it the if at was if for when international and of think half fall, better then that try and put you to any look capacity, capacity, get supply demand there the much lesson carriers XXXX, rate match second you manage a too half rates better was I you with if and ocean much outcome. first

than rate down I forgive me, the about stay write that's didn't all So question. second your And, I have, kind tuned of other on environment.

Jack Atkins

that you December-did to early part, but the asking get rambling with know, think see the in some, I the fourth pull out would a you about-or November? just were saw guidance regard forward But we guys Matt, play gave did when you expecting December how some, was question. you the quarter initially how what forward? you be, were for Obviously, of second I pull your type that's do guess expecting no, No,

Matt Cox

Southern of created and L.A./Long filling availability. There significant because Beach lot port and was Matson, the way California in pull Matson's terminal the lots plays all a so port way West amount I mean, exactly rail got what so forward here. warehouses, demand disarray, commenting extra Jack, disruption a were all large strengths. in a through the call happened-and congestion And let which into number Coast cargo in what they unplanned conditions, a extremely conditions what are be of market Matson's on ship which the January. which through advanced, loaders, December, Yes, I threw the complex of demand, of threat the chassis had happened change of will into the into of-or that, a and tariffs, of clear backlog of arrivals, which often, We, causing versus saw significant significant strong of be complex, me

in carriers' a have period days So for and a where inside available, service ocean was we before days, been became slower, they similarly terminals cargo the rail of negatively getting might otherwise X, XX XX frustrated impacted. little was

terminals, in where this hostage your use. on the caused So of one by that while spot, differentiated pull pull were forward a definite have forward actually disruption if market, the we we to do you was it not think sweet held carrier and put want there the Matson cargo in get the to highly

it So a on pull-forward the impacted how there slower think do be post-lunar bit We it a in will was little quarter, year. But, we are Jack. you thoughts those effect. new do think us know, our

Jack Atkins

Okay, obviously, that the echo and in year I'm CapEx XXXX, XXXX? but you thinking-I provide know, guidance, you. specific want of I don't have you or me, from how year? from very, in free you And in about you to cash longer-term just saw cash think comments to the of was very expense know Kevin's direction you Joel, we just interest Do cash depreciation this is should are then, from from for kudos trying we ops flow strong think level Matt. operations, can operations. you about want about one operations when question But, terms the think we to how for think How and maintain and you cash a thank around, last XXXX you, this XXXX know, guidance. on cash

Joel Wine

at driver, key start the Sure. Well, the you top of EBITDA.

but so coming increases be it XXXX then focus still that, SSAT on Jack, working downward docking sale a basically XXXX, EBITDA. year-over-year items, strong working dry be transaction. in below docking in company, dry for and out in outlook, going items, be it's elements the to we're working of generation couple in good-you approximate know, anything in on look, items, capital last is flow cash then it a level, of And saying to the but there's EBITDA year's if than to and be year was everything we below the we more is leaseback capital working improvements was etcetera. why cash So really continuing year, be XXXX things EBITDA was we docking capital our would going so put reason very, particularly a as We're see so going And driven that general year, adjust did did less tax strong. very capital had expectations strong, this EBITDA in good in no we our We're sustained, side would item. numbers would in also to some flow can't focused had helpful had XXXX, but XXXX. focus-SSAT from than very the by then up overall, just But we for lot dry with line very a a that

Jack Atkins

serves, more step The big just dock that question could I memory a versus to going higher number, Is period XXXX. and for of you, will of if XXXX you up kind XXXX. about that? that And to on Joel, dry maybe depreciation Is higher two-year if into pretty a think and here way amortization. due XXXX in one guys right Because amortization principally it's dry be amortization? dock in sneak my the

Joel Wine

you we in because XXXX as Yes, do-it's that's then and into so a that big well. piece of to XXXX get years, years, were it, big every XXXX begin and five

third the as So quarter. that's of the in delivered last as full-year effect vessels a piece, well

that the drivers are biggest those increase. million two So additional $XX of

Operator

Steve you. from Our [Operator O'Hara next comes Instructions] question Thank from Sidoti.

your You may proceed with question.

Steve O'Hara

and the you was to expected expectation same, that lower nine. still, Is benefits X you something? get in million the know, it was guidance you the said I costs operating to additional XX know, had the the guess that going the million you in on ships or previous maybe I know be from you from depreciation think, on investments XX million And reduction was aside outlook the the know, the-or the still from I on to XX XXXX that cost same. question Just there. or, you

Joel Wine

benefit and is the of of reduction and XX Steve, About same. efficiencies fleet ships the yes, was core from maintenance the picture, XX from garages half still auto nine, fourth ships, the economics the to given everything that million four vessels. same. rolling lower stock of units general XX million the is million to XX the The big our and then repair came and four on across in partly third just all costs down the other business,

still that XX same. of So core to XX the million it's million,

on D&A slide, these out. got the mean, all On we've investors reason projects the new the benefits ships I themselves. top numbers of to couple you four gave moving mentioned is how projects from next showed wanted longer picture new why just plays there's the other consistent the in $X lot projects, million we reduction a and layer we the embedded into of years from $X million of vessels good themselves give so CapEx so to of I and the on parts. that's part side, we've all a we could the improvement that But a that here, scrubber the these in we visibility got

Steve O'Hara

And year size that then one-time last you remind the from, the benefit what and… me and what can SSAT just, was in was

Joel Wine

$X came about their adjustments, yearend hits they and They're closed that as January books. us accounting a a and adjustments whole in year-end if million, so it XX they slew yearend, have Yes, was QX. from of it

it that's last was So what year.

Steve O'Hara

the operating Logistics, but mean, looking year happening up guess. what's I for to income that's quarter, you're XXXX, that's or kind in year in first I think strong very I not as pull on with the the maybe in is earlier weakening maybe related or about just on talked then, it there tariffs, Is that And of else goes forward things flattish something favorable? on? And demand the as later going you the

Joel Wine

to it move the Yes, beginning entire think was the our and other businesses ability had like logistics went of portfolio we benefit of reprice view got side, I the many as as the on I effectively the regard good mean, the we, our to brokerage We're so and the repricing some with we forward. news on. of lap dynamics favorable to other year operators,

record So I we're strongly particular think perform saying first some of that of I stronger as negative forward impact the that But because think about to progresses, there's We But there's significant we stronger don't anything statements, up. than up quarter, up it. after other we performance the seeing. that saw. think a strong a quarter XXXX. Steve, we're make trying full will opening going implies other we're pull the relative year more, unit to there congestion to XXXX opening performing things negatives because and might any the continue are going we're fourth that to replicate But a new, be that to have quarter feel very fourth about, we're ends 'XX think of in the that rather, we new are not

Steve O'Hara

fourth commodity the cost know, the, the you maybe then, delayed? looks Was on And Okay. a and what bit, you was it just the related Why remind ship, it timing? me or can little ship forward moved like was issue with there it lastly, the related there?

Joel Wine

number in that San it how constructing schedule, construction or at and re-jiggle flooding to yard closer NASSCO it gave those commission, out was we been were out original took dock, there dry deliver a Diego dock, due vessels date. delivery able they've because impact schedule, to two the their a now they've in that its the of and had they and to Yes, in had initially us a which had some second pulled figure to

related shipyard than that to incident. plan, nothing from So the plan, a a more better recovery

Operator

Wells next Michael Thank question Webber Fargo. and comes our of you, from

proceed with your may question. You

Michael Webber

of guess my lines' couple of share have that asked, you do around know, pass on you been points. curve. know, a to I touch questions their to through, ability degree considering on exogenous sector but of just I'm container to the wanted and you certainly the international I the base tense We any just about material skepticism base, just shock their a kind their freight, you in noticed cost stares that risk? customer agree customer Most have you curious, they're kind stalemate Have attempts way through? everyone from in anything, thinking to booking pass terms change they're of the of noticed that of kind the way a at approaching degree, aside as just credit

MattCox

as question, don't I a multiple say country given be Mike. sourcing Asian your you who going second played countries, the outside factors it's if it's cascade a early tell, political that we've not effect, to think see from customers it's the think little a of could and good tariff you our because if Yes, a sourced one out, expand risk, to China. of talked it about, I of the were, you would I were of but lot situation looking from to

But China, that that sourcing began last our customers, years, And always Japan to that from sourcer inside know, strategy for China Vietnam, point and moving, sourcing to normal think over of follows I done about from Vietnam. Taiwan, to you they're customers some cost and Korea minds. many looking the China look the countries. sure so a you from is would in sourcing. were India cargo you If occupied make a saw from source change from China, our But years things other Taiwan developing China-plus-one anyway, is of that production in in easily looking these Korea, in XX so I done, customers' lowest their hedging to to there's we at to low-cost and of something the not and was are sole a making just other

But part a IMO if this-back the So thing question Exactly surcharge, don't part that get mechanisms that standoff, or I to tell. hard to a only about look your all of is a their of speculation allow to But how My satisfactory regard going capacity. deployed hard factor. that's speculation them to very is fuel on with part. my on a a sourcing of they're a part part. little to my only and recover think your larger at outcome that's sense the carriers take kind of

Michael Webber

your and just It kind actually we're seen dynamics around think an your also impacts in and been my and trans-Pac started over think and when trans-Pac. as to guess Megamax we've ultra-large about of last also to just the of maybe way-I of how on mostly you though, more Well, in But to been years, deployed large going that that how or the advantage, tonnage do premium four kind oversupply anyone capacity, It's Megamax has kind the of maybe of to leads tonnage spill next about that routes. question one-off kind yet. you over, it string see of trading kind it But some into think three speed the on Asia don't longer, not trans-Pac. there's to Europe. I Mid-Eastern seems vessels it service? necessarily inevitable

Matt Cox

we be better Yes, think not I could mean, placed. I

the IMO. partially-successful I TEU going to deployed pressure moving are and more slow TEU from trans-Pac. to potentially pressure is ocean see more a you're those I a ships which solution your to think of as Europe larger on among to carriers, XX,XXX continue-the premise Asia ships, steaming consolidation and ships question with, agree even on XX,XXX larger I ships,

our service stand product. which big, continue they congested, in the to more type large ships apart air-freight terminals know, to of don't making as mechanism, allows of that You back deferred grouping in a us offering if get

the confident very and service. our I macro express the for trends So feel prospects little long-term China in

Michael Webber

would carriers it that four way. Yes, see curiosity, an actual Megamax seem Out you or it's next we'd years, trading the do of think of within trans-Pac? three likely string

Matt Cox

they're if over OICT, cranes be venture Oakland, is in accommodate joint those to larger our Well, yes, because coming-and we And the our cranes investments those making, to would of next to largest that XX,XXX do newer, I of those, think of TEUs SSAT, at you I to expect joint position the accommodate strings continue strings at terminals mean, I and of one we to expect years. ships few larger venture see that, to our look able be coming.

Operator

Thank showing not like you. And Matt am time. to turn call Cox at remarks. I questions this to for any the any further over further I would now back

Matt Cox

and Operator. everyone to up listening, look first Aloha. Thanks forward for thanks, with at everyone quarter call. for the we Okay, catching

Operator

day. conference. and This Everyone gentlemen, disconnect. you conclude for Ladies all and wonderful you in thank today's a have participating today's may program, does

Matson (MATX) 22 Feb 192018 Q4 Earnings call transcript