MATX - Earnings call transcript Q4 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Fourth Quarter 2020 Financial Results Conference Call. At this time, all participant lines are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today’s conference is being recorded. Instructions]. [Operator like conference now speaker to hand Mr. today, to would over the your I Fishman. Lee you. Thank ahead, go Please sir.

Lee Fishman

Thank Sedaris. you,

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

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

Matt Cox

full with on results. the thanks year fourth and and a quarter for start Lee, Thanks, of recap our quick I'll call. those

The core we economic to demand for home Guam. the performance Alaska primarily demand and for and to capped the volume and elevated our driven transportation by higher growth sustenance the ocean the ocean both was Logistics related challenges exceptional continued year increased please income tradelanes, CLX+ to Hawaii, in and fundamentals the operating and demand our year-over-year solid from In leading ongoing So consumption increase goods Slide operating year-over-year restocking and elevated pandemic services. continued of other in continued core logistics, quarter year-over-year in improvement fourth goods off for a CLX as and X. effects. Matson markets. income tight supply inventory in strong with quarter a transportation despite for fourth and in result see turn

and current economic our despite achieved For way levels year full CLX economic Hawaii modestly of the Slide spend few to navigate the than the XXXX, the ocean compared and achieved approached to wanted the was the the first achieved year X. XXXX uncertainty. to a challenges in moments operating was half to year largely we the income XXXX, and levels Logistics the our ago Guam, the turn the Please XXXX. due increase income performance lines the I container begin on period financial services from year-over-year. volume year. lower transportation, XXXX was And from pandemic. the volumes In the in higher continue impact the was primary the CLX+ Matson's year full in the operating for in to full year on contribution business modestly the as Alaska level of the container In driver full and strong. through priorities pandemic's pandemic in consolidated

Without services to our but organization pandemic the opportunity. XXXX only employees our we and and to consistency was by not throughout effort Our for significant us safeguard customers. financially response and health continuing ensure year first to continue the long-term tradelane, the our in initiation fastest a is doubt, priority important the activities. an as safety fully operationally. a deliver to We service growth by service new maintain intend is from for CLX to to CLX+ maintaining to of CLX+ maximize transpacific of the our these invest and the the equipment in support The growth in China potential service the of

which capacity containers We with repositioning China congestion address equipment are provides in the continuing investing service, $XX special supports the but chassis, backhaul us only the us growth our also Southern in Express of which the CLX+ or on Alaska-to-Asia the and AAX. million China. flexibility additional focus, helps network service, a and throughout terminals in we in new California, call in the ports Further, course, not and

assets, these the new our high meet maintain premium of levels service we’ll for demand our service. With exceptional and

in We and focused more We're business continue presentation. for the our expect paid as vessel detail a and to schedule his sailings. integrity also is a in these In trucking ongoing conditions Southern chaotic to our cases, dollars. CapEx and services California. for logistics segment in subsides. XXXX later quick on Joel positioning domestic our opportunities continued capture positioning of recovery return most equipment We're from pandemic economic the congestion tradelane rail in the will discuss in on maintaining couple transpacific

investment capital go maintaining inorganic focused our our on also presentation. to with financial the growth on sheet. organic more balance And allocation into continue an strategy later opportunities. flexibility and detail in Joel we grade We remain flat evaluate will

please to Slide X. Now turn

in world the Hawaii Honolulu, with our that at the Sand economies to the new investments supporting cost along are for end capitalized to Terminal lifeline billion, our renewal and fleet vessels, and Island interest with vessel the was December including delivery Matsonia, Our These in Hawaii Class vessel to modernization program approximately came $X total I'll other items. and depend the now in Kanaloa operation The owners' the services. tradelane of a on important in move XXXX an program. class the services. fourth second

the fourth The negative improvement quarter increase launched year-over-year. the result offset tourism October state's sustenance in the X.X% quarter quarter for fourth well period. The the testing due to by the was in from the in of Slide So uptick a activity to in below versus low please achieved impact fourth for container partially that the prior primarily higher tourist and in middle sailing additional turn continued traffic to goods, the led of westbound the third X. pandemic. increased Hawaii as an and program volume the demand pre-travel achieved an year quarter. levels But remain level home

pandemic goods. offset Pasha by X.X% on effects as in its partially volume volume the year, to primarily decreased lower a tourism, the the year-over-year, from due For container full of volumes the result due and now one trends to sustenance go business vessels and our the current of quarter service. higher through the part second in for home Hawaii dry-docking improvement demand and in of I'll its

largely trajectory populations expected achieved economy an next in is to followed unemployment are years, projected the for in UHERO, state in growth in the pandemic which slightly are and One X. in is timing to in visitor The XXXX X.X%, direct respectively, building. grew projects, in its by be has visitors by in increase up XXXX and spot of arrivals in in and a sailing, and in in first vaccinations the will in year-over-year, Hawaii and a in zero the tourism. decreased spending largely XX.X% be to The several of downturn a XX.X% XX% To extended ago retail recovery year-over-year growth remains rate home that one and near be to tourism-related XXXX So been pickup westbound improvement rebounds trajectory XXXX, XXXX please be businesses of with Slide if meaningfully. in construction for decline government period. and some flat than UHERO significant state XXXX. below growth to record bright with XXXX, month According near in X% trend federal decline turn goods. some across to is next well impact January the give Unemployment XXXX the compared GDP expected X.X% a XXXX. XX% is time. couple level uncertain, more tourism operating levels the in non-residential to remains on you residential a and to to and supported X.X% jobs, pronounced for and the years. in would approximately volume remains projecting sustenance, volume X.X%. projecting XXXX, have as sense the less one The of difficult environment into our elevated less due recovery a Normalizing container the westbound quarter, UHERO year consisted volume will one above XXXX extensive for sailing more be have been the

of will rush home place first few the year-over-year. start a shelter we're first lap in higher in pandemic March for and of So but end volumes initial the And seeing January, goods. soft weeks essential February be goods and

Moving X, higher our that trade remained on quarter outlined China and our was in The to the prior earnings service XXX.X% fourth the year-over-year. transpacific volume XXXX dynamics Matson's call demand we of in Slide supply in favorable.

the quarter, year, the in XX.X% to volume full increased to string. increased capacity the the in the CLX of the addition service of in For and vessels CLX+ second due introduction the

late which with in May the second in of goods of consumption goods. the third the ocean and voyage. services. containers CLX in the working saw services a a weekly the the quarter the high for became more increasing initiated outsized electronics June that CLX demand we of by XXXX The demand the demand. the in subsided as its As XXXX, quarter, for quarter lockdowns we pandemic holiday year CLX started And into XXX service, and reminder, levels called PPE, and moved as increasing saw we the in in of reopened. and saw service the which demand pandemic CLX+, we into approximately end the from few from summer heading Late Early China for a so home in retail Inouye capacity subsequently driven changed effects service working of our second a much goods imported the into K. pickup e-commerce, other was demand There drove evolved. concert and Daniel e-commerce the each new we a expedited period, and as as at XXXX, of goods to added stores lieu the throughout additional charters meet

We also months first inventories need have manufacturers of and replenish in consumption saw up catch pandemic, playing depleted the of been the to elevated from since. the the ever the few manufacturers

controlling save and best tradelane services has CLX rely our our now competitive in service next truck our the to time container as combination periods high CLX+ and SSAT the Transport on is transpacific comment the face. in money current unrivaled expedited XX operation of times own for the service which in CLX Both leads services transportation destination second terminal to service. advantages that day the low peak I'll availability. Our the last others trends. These the truckers avoid and advantages in such and our issues been owning chassis and Shippers our business tradelane ocean facility’s off-dock services, congestion more volume help become the we the apparent in on service years. as leader not turn And behind competitive industry

including ended, high are please goods, Slide container tradelane, characteristics demand and remain, where our quarter inventory The which restocking Picking elevated factors and commodities. volume turn same January other the year-over-year. key supply increased e-commerce So XXX.X% up XXXX to in demand eastbound consumption X. of and favorable fourth

vessels pre-Lunar experienced in Year, our the early In which period. capacity to also of week CLX began strong we New Year of February, prior combined. Lunar very in demand peak excess the CLX+ Xx saw We and a New

after near as week sailed New a Lunar freight Year the New waiting was as vessel our throughout As many shipped public slowdown know, Year go was to during The be on was of slow and there and idle significant holiday. post-Lunar weeklong different. abbreviated is warehouses This of factories vacation you full supply traditionally still available workers at holiday. the the period the year

it's investing customers, additional equipment One remain is existing underlying of equipment reposition demand markets CLX+ where ability of to the increase and needed as potential and meet supply having imbalances. growth demand network. of benefits our of customers. ample well of AAX to chassis CLX+ to our the $XX end, CLX and availability network to the volume support containers approximately the services, given to take advantage service equipment the To in the as this million we're and the committed steady and services, needs the new on to We CLX+ of new across the

to of remain the in the the demand all of to the in largely tradelane persists. as half favorable supply XXXX, expect dynamics We continue and pandemic first

subside benefiting to some to services. we factors and the widespread CLX the As demand vaccinations, remain currently drive the and expect with CLX+ we're to demand continue supply of pandemic for anticipated is and from

of the with three six the charters, XXXX two Lastly, and vessels extended of respect to the vessel into duration into CLX+ we've XXXX.

We first half a expect on new vessel of this in six year. a charter enter into to the sometime

XX. the demand increased to Matson's year-over-year, sustenance of Turning partially Slide lower for goods higher container X.X% and the Guam, in In to fourth pandemic. due XXXX quarter a home tourism activity as volume result primarily offset by improvement

above well uncertain, X.X% the as For demand it’s Guam economic and and levels full pre-pandemic for recovery of Unemployment resulting tourism remains due tourism-related primarily its recovery the a on lower dependent related low. The remains highly decreased retail-related remains effects. from The tourism. XXXX, the levels. and year container to high volume remain largely in downturn economy business activity and depressed trajectory goods pandemic very remains

For primarily remain expect tourism westbound X.X% the have to term, we a negative the the impact month on by freight container of volume we to challenged to also volume see due demand. building a stable January, retail materials. and higher pandemic but near environment of increased expect our year-over-year, In

by Alaska, and Moving to goods, now Matson's the higher year-over-year. southbound driven XX.X% The and home volume sustenance was modestly XX. XXXX In higher demand increased two to volume. improvement Slide primarily and fourth sailings quarter due additional increase volume higher for northbound for container

have would XX.X% approximately year-over-year. volume impact positive the sailings, volume the additional container increased Excluding northbound two from

full year, in including additional one dry year-over-year, now vessel lower of trends southbound due volume, container higher X.X% modestly increased partially the by volume. to Alaska. volume northbound through competitor’s offset dock associated primarily the with For I'll volume the the a current go and sailing,

rebound trajectory to with employment uncertain. lows, please the and recover and of jobs quarter Slide its further projecting be in The but mitigation growth, the across pandemic, virus of XX. of the the in remains on state. remains and pandemic and environment but efforts growth state Population year-over-year likely tied the vaccinations the second the economy over Department Anchorage turn will recovery jobs the XXXX. a during is stimulus challenging timing Alaska the in the AEDC for continues are dependent Alaska Labor recovery effects employment continued market to down little a So extent pace on and waning similarly efforts to the The in from the economy. pandemic X% Both of

price For consequently XXXX, impact where higher goods, direct we volume AEDC continues of and exploration impact we'll strength But volume there XXXX of and shows the has one continued X.X%. improvement population fishing due to into processing part we indirect a of which declines has XXXX the January, delayed an services an to several to our AAX Normalizing in volume in increased saw economy. Anchorage. to to a season, Alaska’s continue The and fish home production, outbreak The start fourth Alaska southbound volume sustenance Islands. have that and the In state low environment less oil new carried due would oil the uptick negatively Aleutian is facilities activity one quarter in northbound optimism in year-over-year early sailing, virus development the northbound is XXXX the A in see off for projects. in from less decreased XX.X% volume sailing. see on at

situation fishing We do potential expect to for change time expect in container this volume. tiny over this seafood negative a and not season only be

Slide XX. to next Turning

higher period. the in fourth container prior $X contributed volume. significant the West result to lift SSAT XXXX from the million year primarily China. of terminal into contribution $XX.X a volume The volume higher Our in million of was year-over-year benefited from import SSAT quarter increase joint venture the in Coast compared U.S.

throughout the Year import $X.X the full remained West volume. China year million year Coast XXXX, than The beneficiary XXXX ago was U.S. costs. SSAT be due January the For from Lunar volume elevated and contributed operating strong to and largely into increase from or a SSAT expect New to million $XX.X import the In we higher period, period. lower

logistics ago we transportation million than from in due Turning tight on million elevated in now XX. to $X the to or in came quarter the period. markets. a increase demand The higher of higher Operating in saw core fourth $X.X year primarily goods brokerage, was our at inventory income the results with and supply Slide and contribution fundamentals coupled consumption where restocking

was negatively also brokerage in $X.X The half decreased freight U.S. trends trends of to Alaska in by lower and In year income from elevated business operating forwarding container year, million. line a full benefit were the saw decrease Alaska, lines $XX.X due remained Span to tracked contribution first business our but Coast the the with ocean impacted West the freight our the For import year-over-year California to we XXXX, pandemic. from Southern At forwarding, in continue largely volumes volume our transportation steady other business. January in volume. the northbound in million

in elevated for turn effects broad the years I chassis environment. in freight our Joel? continued call financial the with continue the the see experience customers set supply trucking much chain California but and to disruption, we've navigate Currently, as week. actively moment customers over of from a that, we a warehousing and review We fairly helping throughout helping of because challenges ago, storms difficulties line services XXXX. seen business result of during the tend import of now of challenging steady and we our navigate I volumes assets spoke times. many challenging there's what These business our of also to last lines activity Joel to the maintaining a congestion and are a periods companies winter about of a performance. country own that in of most with of will in rails throughout have with Historically Southern better, perform And the are

Joel Wine

Okay. Thanks, Matt.

surcharge our was Ocean on primarily depreciation lift CLX+ service, volume. for for from due Now quarter Logistics the to quarter to transportation higher higher period. SG&A The the increased higher million increase consolidated includes XX.X income other and fourth amortization. amortization, fuel-related Alaska contribution from higher higher XX.X%. year investment million and the by operating China or X.X quarter terminal timing of by prior due the company's was contribution to fourth The transportation brokerage. results prior million. of The XXX.X the X.X increase million or tax income for contribution XX.X from than year-over-year contribution higher million higher primarily to effective contributed the XXX.X the X EBITDA of year operating income and Slide driven XX.X XX.X the SSAT increased million contribution collections, service, increase for which was the X.X quarter XX. higher the due quarter than was year-over-year joint more to period. offset was was on X.X lastly, a partially the to million The service, from dry-dock the including higher a the million in expenses. operating income venture Interest X.X financial for SSAT expense quarter rate higher a from million, million. a And million million

offset shows less the China operating X.X trailing service, we months is was was and including lower primarily terminal the than Hawaii from prior million the than forwarding. The million The million. service, XX.X more lower allocated of partially in our SSAT was flow how contribution income million vessel the of contributed generation. full to to to a cash million CLX+ Hawaii or service. from the increase joint service, The lower The contributions company's XX.X XX lower or decrease from Slide increased the to XXX.X the the from contribution one operating costs, including the year XXXX prior freight lower due year costs. investment XXXX, operating operating year-over-year XX million largely period. contribution operating income for impact the Logistics full increase venture period. attributable due ocean by transportation vessel year XXX For primarily X.X higher year

XI agreements For from during CapEx XX, on we interest the ending CapEx, owners’ used million XXX.X on debt shareholders XXX.X other the cash flow new from received to sale of to items, outflows million in the million transactions and year on we amendments debt, last XX.X costs operations returning and Title XX first capitalized million XX million dividends. to leasebacks retire including XX.X million maintenance financing vessel cash XXX.X and from half generated which XX.X related via while XX.X including million December million the also to XXXX, of in and two our months

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

the debt of total You the million note XXX.X will million. XXX.X total at quarter our debt and that our end was net was

quarter. turn quarter Please end the on the a fourth quarter, at the our since of quarter, the X.Xx the X.Xx balance vessel Hawaii will for the During slide, time by was third million. The Slide of at slide was XX.X debt we revolver review completed amended total renewal XX.X next last fourth was This compared new outstanding the present end the to the our reduced we the end At quarter. the in the be agreements million. this debt of fleet of payments. XX, ratio per leverage to

XX quarter, capitalized and we of fourth vessel XX.X cash of construction expenditures had interest capitalized the million. capital for X.X at expenditures For vessel new million total million

I'll on payment delivery a our progress on payments on update an when through spend million. capital Cumulative the Matsonia end minutes XXXX in on final we turn made of the next the giving expenditures. all were fourth vessel. Page XX of quarter to Please few XXX.X Our the slide four where vessels was took vessel

light scrubber approximately which we equipment our equipment of from of where volume increases higher this have installation scrubber we includes on million of installation payments expect price CapEx and maintenance annual in XX to installations XX XX have the includes our This is equipment increases to cost we back commented expected started scrubber many this significant replenishment. annually. CapEx payments begin Firstly, which also as completed our seventh The we annual be and to service. year types within the well fifth our on million last In that now year. we of million. approximately have actually a to payments installation range with XX maintenance February the and on in which sixth other be sixth growth and to year, to range maintenance vessel XXX%, CapEx, early recent Historically, already containers, in as vessel estimate XX% installation that seen of scrubber chassis carryover million XX was scheduled scrubber we in to was The the year, next make million, seventh month. CLX+

also We economics and of which schedule are continue compelling, seventh fuel during integrity evaluate Class use our to be capacity necessary will fuel vessel will vessel Kanaloa The fuel. Aloha arises. and conclude vessels, help more in or scrubber we The operationally term, low prices when the despite to burn announced spreads the scrubbers new early continue the reserve scrubber the program. dual our the dry-docking currently oil capable additional LNG maintain flexible Longer of program us and narrowing remained the to long-term scrubber on of that to low-sulfur the occurred in the believe need and for months pandemic.

is vessel’s years vessels the each of dry-docking we these on near until first-in-service date. which fuel from first vessel, We will strategy five defer each decision

serviced XXXX, XX year we This CLX+ to cost to in support equipment of least we on noted support In equipment, payback investments previously, our the and started two a growth launch from This support which to of and approximately also at million a broader approximately can initiatives the at Matt XX be and spent couple network the if levels were to which significant one-time the million most In our is expect over sailings. the cases, new has to XX we equipment equipment equipment new quick volumes time spend significantly on of experiencing AAX to these services. to we services. this and When new the life across XX the our just demand these be with due organic relatively AAX we growth own total time to transpacific investment million a on tradelanes, services. XX As deployed needed. domestic CLX+, expect approximately equipment reduced the years, pandemic. channel demand

the new of equipment summer equipment year, recovery to services, and of third during from And the tradelane through the and and we rest fourth the the order Over additional given lease plus last months decided this both quarters the increase, needs in AAX domestic saw CLX+ some volume. equipment new six and ago the year.

now for XXXX Given these the will in many times up equipment, lead orders of the equipment show new our CapEx.

island it our support in to During is older of million we if expensive demand in a spend useful XX volumes barge. life near service. neighbor new barge to that an on would this currently on lastly period, new XXXX end remains lieu expect of our be flat-deck to an on our which approximately This dry-docking And barge XXXX strong, goal has. was remain into well heading customer positioned CapEx,

approximately efficiency it new Adding all improvements on expect island on We up to the the to our in this to the barge XXX provide barge sums of indicated CapEx Hawaii total operations. this XXXX. higher neighbor page for million amounts amount the page, ranges of

In of turn the few now our remains Looking with expect XX. I improved million to to to position, prior XX want XX at capital moments million. maintenance which to Slide spend mentioned approach. strategy, into light a XXXX, be CapEx consistent allocation our financial of level Please previously I our we on

difficult we opportunities not fit in to the or opportunities our enduring which criteria investment economic at and well a Overall, of some as year, these are to growth, continue firstly was CapEx with to a capitalizing on the fluctuate light no must strong total which opportunities debt others leveraged evaluated at comment in debt our prior environment. tend new considerations The we generation. us In replicate dividend be are higher less we of moat acquisition year our pending It areas. an I retain in competitive and disciplined during return we XXXX. sheet, acquiring cash and and and organic led the year maintenance million our XXXX outstanding transportation demand X.Xx continues Like for and have briefly outstanding the impact the initiatives be Our pandemic flexibility to view each logistics a nearly M&A the of acquisition expect continue to from this CLX+ of businesses than flow with docked to competitive key of our we lower that XXXX, low be, the capital ordinary and by across advantage will to investment our end our risk maintain these [ph] end ocean that upfront businesses. to and/or from the existing approximately growth we typical important both and down is review tradelanes In $XXX uses and respect remain which set after opportunities returning ocean XXXX, opportunities of financial With we down in valuation four evaluate communications, operations, opportunities. particular reduction, and to of But transactions. of growth, businesses declining finished X.Xx, others. as the order, first timing logistics. acquisition on advantage strong free cash grade capital debt peak approximately sidelined quarter risk, in did pandemic’s regard, a in by clearly pay balance of funding require in out organic AAX, the or organic to shareholders. in covenant the were in at following. expected to

a they or Second, good need to fit our operations existing complementary to network. be strategic our to and

a Thirdly, be means they of a organically thereafter. generate And have need on and initially cultural to cash the excess XX% to need good to they return grow fourthly, fit. cash independently in financial

I'll that, special absence Matt. to the the time. over we cash excess organic in allocation, turn growth repurchases share capital over to on of acquisition now consider in opportunities, of of back shareholders and/or call will Lastly, the With form dividends return or

Matt Cox

conditions. financial I needs. will a XXXX it changed. exceptional be environment always to exceptional far at face in we've from Thanks, as a and for as what on mindset and customer We job our seize year we much as our Matson’s did amidst of wind organic opportunities service home delivery of questions. long transportation quickly focused ask and years, that will on XXXX, with proud and adapted I'm the your for and remain the we to I on logistics, And value. moving but freight growth remember will extraordinary and customers’ operator done call shareholder that, drive better than turn new XXX and for to Joel. moved hasn't throughout reflect well, far drive We Across normal on-time in to accomplishments long-term uncovering anyone meet opportunities XXXX. back the ocean Matson’s provide normal. to employees of To the from our performance operational performance and up, difficult financial

Operator

[Operator from Jack Instructions]. line with question Atkins And comes first Stephens. the your of

Jack Atkins

everyone Great. great a congratulations quarter, Good year. really on afternoon a great and

Matt Cox

Jack. Thanks,

Jack Atkins

in -- if transpacific. what's but could at Matt, go a start start I maybe we lot could here, It's of places the just sort extraordinary just maybe of with to happening here. So, different if

further in And the rates call that of help more I start think here I shake through legacy CLX the put off heading would sort that accelerate contract a traditional you're XX business, as given to imagine want CLX+ part over it, we're things seen rates, of to out, sort that? of in you into spot on year, Matson’s And level guess XX the the elevated higher contract Just period the to seeing how things us do under of days, to not ability rate we've even going we've from the negotiation just can next, contractual to how of market? but impact think drive So you only does XXXX? too been perspective. business

Matt Cox

CLX+ I that Jack. contracting of tried freight spot and operate from long-term annual combination a can, cargo had contracts, Matson sure would of or I spot rate, to contracts. context, way with perspective, by say Yes. its short-term a just historically

in transpacific over and of that and XX our balance terms time. said been initially, the for Jack, we've XX-XX a has we've as as know, relative years saw so CLX+ in And changed We you premium it market the we contract of and was both. the command to has can But appropriate market a to felt have it where migrated relative spot a rates. mix we more towards to both

So in largely April-May XXXX, the after or of middle outside of -- or contract the in CLX+, we stood up was the period. which

given freight with with to focus saw what this rates be view on spot was would suited served on freight us well, a So contract market. well and freight, that our CLX+ happening we was consistent of the which environment the lot

be appropriate So time, we're what I going think to mix over at is. looking the

market I over think, on XX years, has likely continue mix our over the focus to will a to many a with market. weighting approach the higher towards because both be of changed conditions it spot

almost customers’ can annual capacity looking see for objectives, And they annual much as contracts, where goals course, would rates. than level are carriers' who certain that. customers that under think of to the we'll as they committed in get I who can, rate as at different -- contracted our increases as be it's the operate low be a freight will

middle the both here as remain in on in that every that are of those the then the or so we to But significant day, see happens see And freight going the focused demand think as contract year. rate balance supply I see continuing contracted contract elements environment the and to through end the of are elevated. relatively primarily freight now, the increases we and the place are world rate. that capacity year, at And And that new CLX+ and into I that our we of China CLX but matching really we'll happen in long-term would think really a our increased to and like, are don't, marketplace service feel is, about new good factors other of do and stay, prospects because the of the that although services. for e-commerce comfortable view have what feel the that we pandemic subsides, looks normal we get normal when Jack, what

over question, color your answered maybe So in you a but gave addition. little I've

Jack Atkins

boxes and was let the CapEx going lease you and You $XX additional that. talk a additional CLX+ about and for very and about talked that I for Could -- sort No, your equipment? moment just replace just of equipment equipment. appreciate moment guess million a of the network? for even that increased up CLX maybe following this of there. and investments move sort do you broader that or on about maybe to investment? I Matt, that getting What's here CLX+ purchasing original your your current really chartered operations, leasing is your availability off Will more ships of to volume own on CLX helpful,

Matt Cox

Yes.

when going think early busy. going that I moment was single use about saw in a the Joel way CLX+ miss it newly the the earlier, pandemic the we that rest his a So was of about did support the CLX+, we was goal and in to which the available we And we it, And our had time need be going somewhat started -- once a were largely mindset slot still with than play stages itself of core in that we they opportunity course, enough And our CLX+ there not was extremely to when talked the and thought as comments equipment in earlier volumes we trade was was to to which related view markets, availability. booking created domestic -- downdraft every a opportunity the into mostly an equipment CLX+. transpacific how it to and of out. to the fell everywhere, the of

of so obvious And in is move in carriers were what of month the more other box the we market available world most was became leasing later, equipment basically before every in which or two that China, aggressive a quickly. in the became aware

of well as missing our reduced So not fulfilling single goal equipment, Act on very being our rates booking days as demand Jones we equipment. sustain the early helped to moving have domestic the a didn't quick because combination in of of leasing

chassis. of other control our part own that destination own The own on side in one we also is service -- about own chassis, our elements the differentiating as services our had our that of of advantage we key LA, or -- talked we

the we as And we hope the allowed backside leave get to which so same the over at focusing to we Jones the us make want able CLX+ signs enough service into our And this maintain CLX+, what but domestic equipment especially rates and begin that to shipments service. to work chassis the previously had show we services Act to used the to as there. time, we Act were redeploy do, is chassis, we was and of as pandemic, we off, the had be on dynamic them modest Jones normalize sure take Domestic levels. of to growth did

and point having than boxes not other a I to or that that the margin pays said one which expensive too, are having of the in they chassis box two The Joel important for a it payback versus I've historically on voyages. that the itself made, box more think is repeat and while were

not take tremendous as put earnings as we've fleet ourselves for and upside many recycling fill slot CLX opportunity our our that could, to wanted care service. out led in which we we of so And ourselves of seen CLX+ where couldn't and customers every a position this we to in

is really on equipment, and that So catch normalizing playing the we're for this just into up containers chassis the more getting fleet.

Jack Atkins

Thank free this one there from That's I you there prepay Are flow question quarter, part to? about make think XX whether these Okay. you. thinking just on we side. wanted or that's and in that takes penalty? on anything are I'll CARES 'XX takes of anything Act -- on the guess beyond the I that of you Joel. at that queue. repeat the excuse much guess and million on requirements and just a that question, jump of cash tax XXX the sort that if then That's is when obviously one can flow the back but there cash the flow XXX Part sense. for we're cash two a side? in multipart I cash was how XXXX? you Joel debt in million revolver Matt. 'XX makes last versus without flow kind part. sure the cash through like puts any can 'XX know -- year the benefits with great, This prepay end me, the perspective, Is want is in puts don't of I to

Joel Wine

questions, I cash love And you. thank flow do the Jack. Thanks,

the yes, or debt thing is, are without rest not all revolver, the first the penalty. down that long-term private Title paid million XI placements that's debt of of So the either and first part pre-payable XX is we’ve that

amortization they and amortize do have they schedules. However,

so the And year. five three million -- XX XX amortization three fixed and years of long-term million next each debt is that to years between the over is

the the down debt the revolver. free with with along million that's XX that million, we're XX on flow paying cash So

in utilized which the the touched On and puts helped the end of the years. – and you the we did were two upon NOL AMTs. one, attributes, accelerated through which takes And not actually question, of XXXX, expect a we biggest all refunds now tax NOLs our last We cash we taxpayer. cash flow is receive

XXXX just and difference credits be expect positive is now beyond to were and AMT to biggest cash operational of which the kind accelerated the a wise we company some So getting flow flipping from taxpayer. cash for in

say So working from capital. as flow the you forward. in I any expect that's probably other difference biggest don't changes look our of cash We operations would kind in

up service capital working XXXX. to investment That in which for new big the related increase of big receivables a lots of a see stand us was receivables in service is with just the You outstanding. in CLX+

higher a side. where Some no been little annual payable be the in the that investment changes you are than customers a that those but of an overall you've SSAT, and bit But have couple row increase income. of report levelized XXXX, a driver, receivables, why actually capital. on is on our years distributions on now working should main was in seen big cash, which see

if a much five to income. together. be over tell closer you look distributions than back expect So And some bit reported ago, during time, the we were little years phases investors those lower

and The versus So change as be really it, think time, into 'XX over that's 'XX to comparable but we going rest there’s potentially of is prior of Jack. a head there I little it bit years.

Jack Atkins

Okay. That's for guys. much Joel. very Thanks time, the helpful,

Joel Wine

Jack. Thanks, Okay.

Operator

Your next question line from Ben Stifel. comes of Nolan the with

Ben Nolan

higher stepped have three from have the your I Jack volumes, came clearly just rates and that mark what three, sort else at entirely basis. at that of there looking point something not it, longer-term or think comes. question and quarter. a at everybody a from seeing? I you the and company did. sort per but that that's up part biggest I even as it more of have quite guys Is probably with a And Good volatility since that to the I'll interesting much – from with guys. is of though the sort biggest than is The up gap rate looking bit was that go-forward can quite because charge assume implied box better looked as you the driver, rate and where that for than had was CLX. have like service Obviously that's this index, starting I CLX ultimately the else I'm the across so it it didn't Hi,

Matt Cox

elevated even Year-over-year, a in right a charges the that and you've China increase the volume is No, premise true market Historically, of offering, the premium the to and a our environment your one. rate service saw Matson, significant think got we because was I in question -- of significant transpacific. increase differentiated year-over-year. in market also the

premium CLX+ a to continue and services. CLX We the on both earn

factors. all were those So

even the healthy we service market at to you earn to continue a look our or or out on the advantages. premium the there trade, so given that are SCFI other CCFI when And indexes

Ben Nolan

And Am like correctly? reading really looks I that question was that guess I it went my Right. up. premium

Matt Cox

way contracts. Well, I about it think think the it is expands we and

but very at environments, is market. been highs it's counterintuitive. are advantage large when still can or rates at the there But rates command premium maybe significant have narrow when in to relative So actually a lows, that we premiums all-time

actually color markets of a can the market and to super So bit give in expands premium with little contracts cycle just you where contract the it high there.

Ben Nolan

last it, XX,XXX if the ship on that peak sort into obviously, are volume. possibility a absolute as about that the Matt was Okay. bit increasing sort to fit in have And of tying you then moved. that, that -- with and past the more wanted can sort maybe ships be? five about you and But like Joel, of I I six on you sixth. had know was else of record respect and Is what as you're talked ships actually of that a of chartering to can you that do reup talked were And that you again, size question, charters levels know, little volumes, quarter of nothing the a containers it several doing much the

the is, is is are kind should is you expect capacity Are utilization that XX,XXX hit here, or your number size we if forward? of in considering my increasing -- that play? of maybe is So question CLX+ that sort of still going you you that what full

Matt Cox

say ships chartered Yes. have XXXX. five been I six would of our through

part didn't was term. slot equipment. too, about filled. because a or earlier quarter to the near the And to would the service CLX attached so to would that the significantly also CLX+ And over lose container the we near volumes, every have of question your didn't service, capacity going expect the We I effectively change at we lack the I over single isn't term our say Jones Act container that and capacity fourth core load

There are a And eastbound the on direction and fourth every the would of when also can was to wages -- There call when put I loaders, dry that a filled. available dry-docked see, -- which what in that But filled its times that is proxy trades. profile. one-off will being the good likely extra be pretty was we're to good there be so which what is say quarter is times a into dock have for kinds those that are slot domestic return vessel a was sort we we of things.

Ben Nolan

the maybe size not of is least happening terms at in fair? going that's that upping in And Okay. be XXXX, really to

Matt Cox

That's right. Yes.

is are but more profile speed is the of they and important. expecting, duration the size the important, and charters of With the where

we charter not large – some that We're those kinds things. the can't very of speed go and is could ship interested. make there So

that vessel or So That's that we're service a looking at the renewals XXX can containers well with that that in our think fast a for are a that's can and We say model. profile. relatively ship fit quickly our current if that to -- the good wouldn't little speed get has ships that a chartered not of out terminal XXX meets requirements charter bigger it. open carry when can we more the bit look find we a

in For our environment. that sure, for it's primarily we defines works would. speed us what But

Ben Nolan

Okay, one me. that's is helpful. then the more anything This curiosity else. from than just And last

you of a preannounced sort terms meaningfully of came initially? sort preannounced didn't ago high weeks what weeks range. maybe had few So, guys – know that the in of curious above I'm end the numbers in preannounced moved the you the last few you over and of about that

Joel Wine

Joel. it's Ben,

get a few weeks to take that the accruals, to just end data year-end the Just reconciliations, pension year-end things like year-end and of middle the January. true-ups, items of

So nothing year-end it's really unusual items. business, accounting the just all the in

Ben Nolan

All guys. right, Thanks, Nice quarter. cool.

Joel Wine

Thanks, Ben.

Operator

of Your Company. Sidoti line next the with question comes & from Steve O’Hara

Steve O’Hara

afternoon. Hi. taking question. Thanks for Good the

Matt Cox

Hi, Steve.

Steve O’Hara

talk to pandemic factors you some I about the of guess half through just the going expect after the and Hi. continue ends. first the

and talking half? is the about terms And in earnings revenue you think you the production just that, happening outlook things of with of that do horizon? ones you six-month first is more expect comfortable kind the that timeline or of, Thanks. that kind factors more to to hey, there the second frame abate If kind you of kind about, how something you're then on versus versus there like is of due that concrete somewhat half that importance that of maybe continue of terms that a in of that out that kind see is look, we're

Matt Cox

Yes.

give some can. Our thinking but and you little the your try I crystal answer of ball cloudy, and approaches is best question me a can to let I the

on and back, a and would or normal level. unwind at this a it, what where turn of Long pandemic Americans and available, to anchor from working said there is are available going of that connected think seen want point, we're it's are sort we've to put we XX and specific supply timeframe, seeing period very in first consumer anchor that's return through period. conditions lack congested Oakland ships a remotely those frothy LA times chartered has in of frothy and our was in the also timeframe that ship whatever work to ships to we every and before that that go around our some think because ships we slow more we and post-pandemic not point we to at majority and equipment, congested be customers in and we likely behavior difficult this at remain venturing environment lack really the I in world vaccinated back way of a today. for at that step said congested we're are occurs, some chains half, when that in to super XX And But of the and caves a Beach emerge for when we world when start are where that current is really took we that are said and going to labor are see we a changes So and the them whenever

current the couple freight two be world, reasons. get air or a air We to vaccine. of to and to everybody -- normal, looked three for will a said freight of see what's markets sort the just being Steve, new when We there the really us, new talked item world, return in and we've which vaccine of we happened? of in last before the is couple U.S., it, access mentioned okay the the provide earnings take not of significantly delayed the so the can calls used the on we a years is. -- the at around the And this billions longer whatever for normal doses environment of And about or

little will The is when to to U.S. within think be open travel the most of population that its first a gradual return vaccinated. even it be bit who has one the I more second countries a only of thing there it wants international becomes

a a freight keeping That's delay also factor. think I so, down. is air going international volumes strong And traveling to factor to be in one

on a the and it huge ship, slow in eventually do be or things doorstep chain in the like it course, The business fashion. is will that demand. requires for venturing expedited tons --manufacturing of And will factor wants next is, model the of as day instead of way here at talked different. the move forward speed pull supply distribution and finding easy traditional think putting to than stuff, in model we dropped It's that's to this, what's People of other putting we've a before, their the e-commerce which out, acceleration The e-commerce of easy. as about its onto We stay. center soon and we've more just having significant an consumers store e-commerce And I delivered to possible, as e-commerce shelf. think that's remain. is think said of put

three the see also We of carriers the within are operating that alliances. consolidation ocean international

this So believe we sustain normal of and to compared lot land we're had that freight year, service e-commerce, of and CLX this is this air going new on other new demands. Matson’s relative customers customers liked freight, And to CLX+ who freight normal. to were going the availability. because new air core service We've air the who pricing a the

stay. a of there feeling So here things to give something those all of us is

else. But insight to normal any to We anybody in going have regard place? is and middle than a pandemic relatively a is better when new least after the and going saying the with to when environment going to end that environment be we're the of we're think year, at very don't we is. see for frothy Now healthy that Matson through then the whenever

that's our So thinking there, Steve.

Steve O’Hara

think you're there outlined? freight those factors continued that side? very just to success just important talking just helpful. Is obviously And maybe know maybe matter quarter. execute, now business, market each and there if you'll maybe And that then lines a over if you've on traffic fourth a I the way kind to of conversations of win I'm the on of, are for in wondering the is -- in curious continue CLX+ that's those first or about dedicated the more quarter your of on in is time? CLX positivity heard the How the air if you I'm you the Okay, and Amazon fleet a and going has that about along ocean it

Matt Cox

Yes.

remain the through questions, the to first regard for year strong is we think demand with really current to So that of half your frothy when see environment services. would implies we I say we the environment Matson's going said that the

Year through abbreviated question much capacity an least how Lunar New is Lunar the at about extremely We we post Year New and strong. see So was period. have

we environment demand. So very of continuing a strong do see

to knows services destination our Matson's because new service the in I is over cannot second the knows offerings their and move services the Other think service to sale longer and through niche have other it. term, but created transpacific fastest looking transpacific. fastest. our fast market availability. customer the second are that the this the equal the fastest who Every maintain carriers other some markets, in for is the of freight in Matson normal And in factor they most important

that are great sure or our with whether venture remain Matson's SSAT priorities, in second new fastest services sailing our or it's and around joint operationally, fastest So the equipment the market. other, the in making

to term viability. long we doing I will think And have very will long first this and the we're fastest that the a second the be be that and we continue that course services. of confidence determines thing time

are question if I my I those that. that thoughts another Steve, part of missed, but about So the don't know there is

Steve O’Hara

queue. you. That's All helpful. Thank I'll right. jump the back in

Matt Cox

Thanks, Steve. Okay.

Operator

Ben from a from [Operator Instructions]. question And you have the line of Stifel. Nolan

Ben Nolan

they was I'll mission about is of of and are You talk how Matt bit have fastest a the is wanted Can and to is it are it but other emissions that is at What pretty from and to and the speed? everything most that just pressure Well, sort weeks go about guys take else talked guess people this to intense were hearing to talking up, expedient else. you to competitive have have. two our reduce that also you speed I if through little under a was way advantage I your you're critical which to the maybe of that need the just to conference, value how do we lot I what it. proposition you nobody ago? slower, last reduce balancing emissions, that counterintuitive week, easiest to follow

Matt Cox

become important question. an -- towards significantly XXXX as carbon impact around – It's ocean an a business. reducing IMO It's long-term XXXX there's important going the to Yes. more transportation the in the of guideline

the carriers here down. want is by on. your – are if So We is it there stay. and this is ships you you need what service say to slow ocean two emitting is to ways you are add down would as emission other But emission, stream now from or that I things. to slowing of went seven ships in carbon. if would it that ships down, and reduce for to say, to you schedule to two your ship, make you reductions slowed don't one so five you able understand But true to more have carbon ships one maintain or meet I vessels and to the your operating six to say that like your be many vessels the exactly

to big at it as a picture. look partly, So you have

around ourselves And that a otherwise relative we answer so see moving freight, compared we might to thing pulling, slow freight, we're yes, the are or to would we pulling of it that would to you container whatever to carbon know, air do is our a as emissions XX% that as when emission and market model, significantly question relatively say the as XX,XXX be ships a are there. are higher TEU But or emitting at cargo result from per carrier is freight to air that I for a operator see compare a mind a carbon X% steaming. that's fraction, reducing go we which keep be The carbon least basis? asked, in the other on

do to responsibility making carbon to So reduce investments so? Absolutely. does Matson we its Are have footprint? a Absolutely.

of of we hearing fuels term, -- I think for like have other ammonia, carbon we investment also on a are be the very we vessel what ability things hydrogen spaces think might zero used us over are to to further. for we're longer one time, alternative our can thought but extent think COX I reduce and ships, other lot accommodate lower footprint interest these example, in large be the there carbon LNG, fuels, our those of have to biogases, which net four but the there's things, or that our not initially are commercially yet footprint the available, benefits to new

So we're mindful of it.

early Anyway, to bit about winners. this. I those approaching still going the it's in the think we're thoughts to how a are be game pick my

Ben Nolan

it. appreciate Thanks, I right. All Matt.

Matt Cox

Sure.

Operator

turn it are Matt. time, I'll questions queue. other back no this to in at there CEO, And

Matt Cox

operator. Thanks, thanks quarter. look for the continuing of participation today Okay. Thanks at everyone for forward to catching first interest your the end up Matson. your and in with We

and look stay Thank you you. forward we'll with speaking to and then. well safe, please So

Operator

call. today’s concludes This

may now You disconnect.

Matson (MATX) 24 Feb 212020 Q4 Earnings call transcript