8-K
Matson, Inc. (MATX)
8-K
2020-11-18
For: 2020-11-18
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 18, 2020 ( November 18, 2020 )
MATSON, INC.
(Exact Name of Registrant as Specified in its Charter)
_____________________
| Hawaii | 001-34187 | 99-0032630 | ||
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| (State or Other Jurisdiction of<br>Incorporation) | | (Commission File Number) | | (I.R.S. Employer Identification<br>No.) |
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| 1411 Sand Island Parkway | | |
| Honolulu , Hawaii | | 96819 |
| (Address of principal executive offices) | | (zip code) |
Registrant’s telephone number, including area code: ( 808 ) 848-1211
(Former Name or former address, if changed since last report)
_____________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, without par value | MATX | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 7.01.Regulation FD Disclosure.
Matson, Inc. (“Matson” or the “Company”) will present an overview of the Company and respond to questions at the Stephens Annual Investment Conference to be held virtually on November 18, 2020. Matson will be using the presentation materials attached as Exhibit 99.1 to this Form 8-K. Additionally, the presentation materials will be available on Matson’s website at www.matson.com under the “Events and Presentations” tab on November 18, 2020. The information set forth in these materials speaks only as of the date of the materials.
Statements in this Form 8-K and the attached exhibit that are not historical facts are “forward-looking statements,” within the meaning of the Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement. Factors that could cause actual results to differ materially from those contemplated in the statements include, without limitation, those described on pages 24-34 of the Form 10-Q filed by Matson on November 2, 2020. These forward-looking statements are not guarantees of future performance. Actual results could differ materially from those anticipated in the forward-looking statements and future results could differ materially from historical performance.
Item 9.01.Financial Statements and Exhibits.
(a) - (c) Not applicable.
(d) Exhibits.
The exhibit listed below is being furnished with this Form 8-K.
| 99.1 | Investor Presentation |
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| 104 | Cover Page Interactive Data File (formatted in Inline XBRL and included as Exhibit 101). |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| | MATSON, INC. |
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| | /s/ Joel M. Wine |
| | Joel M. Wine |
| | Senior Vice President and Chief Financial Officer |
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| Dated: November 18, 2020 | |
Exhibit 99.1
| 1 Investor Presentation │November 18, 2020<br>Investor Presentation<br>November 18, 2020 |
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| 2 Investor Presentation │November 18, 2020<br>Forward-Looking Statements<br>Statements made during this presentation that set<br>forth expectations, predictions, projections or are<br>about future events are based on facts and situations<br>that are known to us as of November 18, 2020.<br>We believe that our expectations and assumptions are<br>reasonable. Actual results may differ materially, due<br>to risks and uncertainties, such as those described on<br>pages 24-34 of our Form 10-Q filed on November 2,<br>2020 and other subsequent filings by Matson with the<br>SEC. Statements made during this presentation are<br>not guarantees of future performance.<br>We do not undertake any obligation to update our<br>forward-looking statements. |
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| 3 Investor Presentation │November 18, 2020<br>Matson: At-a-Glance<br>OCEAN TRANSPORTATION<br>• A leading U.S. carrier in the Pacific<br>• Lifeline to economies of Hawaii, Alaska, Guam and other<br>Pacific islands<br>• Niche, premium, expedited services from China to Southern<br>California<br>• 35% ownership in SSAT that operates 7 West Coast terminals<br>• LTM 3Q20 segment revenue of $1,726 million<br>LOGISTICS<br>• Top 10 integrated, asset-light logistics services<br>• Freight forwarding, rail intermodal, highway brokerage,<br>warehousing, and supply chain management services<br>• Leverages Matson and Span Alaska brands<br>• Scalable model with high ROIC<br>• LTM 3Q20 segment revenue of $498 million<br>See Appendix for a reconciliation of GAAP to non-GAAP Financial Metrics<br>(1) Net Income in 2017 includes the benefit of a one-time, non-cash adjustment of $154.0 million related to the enactment of the Tax Cuts and Jobs Act.<br>$0<br>$50<br>$100<br>$150<br>$200<br>$250<br>$300<br>$350<br>2012 2013 2014 2015 2016 2017 2018 2019 LTM<br>$ in millions<br>Operating Income Net Income EBITDA<br>(1)<br>Operating Income, Net Income and EBITDA Financial Return Metrics<br>0%<br>5%<br>10%<br>15%<br>20%<br>25%<br>30%<br>35%<br>40%<br>45%<br>2012 2013 2014 2015 2016 2017 2018 2019 LTM<br>Return on Equity (ROE) Return on Invested Capital (ROIC) (1)<br>(1)<br>(09/30/20) (09/30/20) |
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| 4 Investor Presentation │November 18, 2020<br>Matson Today: Connecting the Pacific |
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| 5 Investor Presentation │November 18, 2020<br>Investment Highlights<br>Unique Network<br>Connecting the<br>Pacific<br>• Providing critical supply lifelines to economies throughout the Pacific<br>• Strong market positions in attractive niche markets with multi-decade customer relationships<br>• Dual head-haul economics on China-to-Long Beach Express (CLX) service<br>• Logistics’ business lines complement ocean services and drive high ROIC opportunities<br>World-Class<br>Operator and<br>Premium Service<br>Provider<br>• Fastest transit and cargo availability creates competitive advantage and premium rates for China service<br>• Fastest transit time to Guam from U.S. West Coast with superior on-time performance<br>• Well-maintained fleet with industry-leading on-time performance<br>• Dedicated terminals with best-in-class truck turns and unmatched cargo availability<br>• Hawaii Neighbor Island barge fleet and Micronesia feeder vessels create hub-and-spoke efficiency<br>Increasingly<br>Diversified Cash<br>Flows<br>• Increasingly diversified cash flows from:<br>- Distinct ocean tradelane service routes,<br>-A niche provider of logistics services complementing the tradelane services, and<br>- An equity investment in SSAT, a leading U.S. West Coast terminal operator<br>Organic Growth<br>Opportunities<br>• Initiated two new ocean services in 2020 with little capital outlay: CLX+ and AAX<br>• Pursue opportunities that leverage the combined services of Ocean Transportation and Logistics<br>Stable, Growing<br>and Defensible<br>Cash Flow<br>Generation<br>• Financial strength to invest to grow the core businesses, pursue strategic opportunities and return<br>capital to shareholders<br>• Approximately $1 billion investment in Hawaii fleet renewal and supporting infrastructure<br>• Approximately $700 million in investments for Alaska entry over last 5 years<br>Commitment to<br>Returning Cash<br>to Shareholders<br>• Over $325 million returned to shareholders through share repurchases and dividends since<br>becoming public in 2012<br>• Compelling dividend yield with dividend growth history<br>Strong<br>Balance Sheet<br>• Investment grade credit metrics<br>• Balance sheet strength leads to low cost of capital |
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| 6 Investor Presentation │November 18, 2020<br>Hawaii Service<br>• 5 U.S. West Coast departures and 3<br>arrivals in Honolulu per week<br>• Dedicated neighbor island barge<br>service<br>Overview of Service<br>Matson’s Focus<br>• Maintain best-in-class on-time arrival<br>and cargo availability<br>• Dedicated terminals and fully-<br>integrated cargo delivery to major<br>neighbor islands<br>Market Overview<br>• Competitors:<br>– Pasha<br>– Barges<br>– Air freight<br>Current 9-ship deployment |
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| 7 Investor Presentation │November 18, 2020<br>China Service<br>• 2 weekly services from Ningbo/Shanghai to Long<br>Beach<br>– CLX: started in 2005<br>– CLX+: started in May 2020<br>– Feeder services from other Asian port origins<br>• CLX and CLX+ are premium services providing an<br>alternative to deferred air freight and other ocean<br>carriers<br>• Dedicated terminal space in Long Beach with off-dock<br>container yard<br>• Door-to-door services in coordination with Matson<br>Logistics<br>Overview of Service<br>Matson’s Focus<br>• Continue to differentiate services with reliability as a<br>premium service provider<br>• Attract new customers away from air freight<br>• Continue to find opportunities to lower breakeven cost<br>on CLX+<br>Market Overview<br>• Competitors:<br>– Other transpacific carriers<br>– Air freight carriers<br>CLX is the #1 Transpacific Service and CLX+ is #2<br>• Expedited, 10-day transit from Shanghai<br>• Exclusive terminal – unrivaled speed<br>• Next day cargo availability at off-dock facility<br>Port of Long Beach |
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| 8 Investor Presentation │November 18, 2020<br>CLX+ Service<br>Matson is confident it can make the CLX+ service permanent.<br>• 15-year track record of operating the industry leading expedited CLX service<br>• Introduction of Alaska-to-Asia Express (AAX) helps lower the long-term breakeven economics<br>• Demand and supply dynamics have been favorable and we expect them to continue:<br>Demand Dynamics Supply Dynamics<br>• Increasing demand for e-commerce goods<br>• Shift in consumer spending from services to<br>home improvement, electronics and other<br>• Inventory restocking<br>• End of pandemic may be gradual as<br>distribution of billions of doses could<br>potentially take years<br>• Continued dislocation in transpacific air<br>freight markets<br>• Constraints in transpacific ocean capacity<br>• Significant equipment demand and West<br>Coast port congestion<br>Our competitive advantages in the CLX service are also in the CLX+ service.<br>• Own our chassis<br>• Combination of SSAT terminal operations and Shippers Transport off-dock facility lead to industry<br>low turn times and next day container availability<br>– Allows us to avoid the congestion issues during peak periods |
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| 9 Investor Presentation │November 18, 2020<br>CLX+ and the Alaska-Asia Express<br>On August 26th, Matson announced the introduction of the AAX as a backhaul<br>service on the CLX+<br>• Important route for Alaska seafood exports to Asia<br>• Connecting service from Anchorage and Kodiak via Matson’s domestic Alaska service<br>• Expect the AAX service to be a modest contributor to Alaska volume and not a material contributor<br>to consolidated operating income in the full year 2020 |
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| 10 Investor Presentation │November 18, 2020<br>Alaska Service<br>• Twice weekly service to Anchorage and Kodiak<br>• Weekly service into Dutch Harbor<br>• Matson is the only U.S. containership operator serving<br>Kodiak and Dutch Harbor<br>Overview of Service<br>Matson’s Focus<br>Current 3-Ship Deployment<br>• Maintain excellence in on-time cargo availability<br>• Expand premium SB service differentiation<br>• Market Alaska-to-Asia Express (AAX) service for ‘A’ fishing<br>season in early 2021<br>Market Overview<br>• Competitors: TOTE, barges, air freight and OTR trucking<br>• Air freight rates are very high relative to the cost of goods<br>being shipped<br>• NB volume growth tied to Alaska’s economy<br>• SB volume tied to seasonality of seafood harvests |
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| 11 Investor Presentation │November 18, 2020<br>Guam Service<br>• Weekly service to Guam as part of CLX<br>service<br>• 3-to-5 day ocean transit advantage from U.S.<br>West Coast<br>Overview of Service<br>Matson’s Focus<br>• Maintain superior service and on-time<br>performance<br>• Fight for every piece of freight<br>Market Overview<br>• Competitors:<br>– APL (U.S. flagged service)<br>• Trans-ships in Yokohama to Guam via a<br>2-ship feeder service<br>– International carriers with Asia direct<br>services<br>– Air freight |
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| 12 Investor Presentation │November 18, 2020<br>SSAT Joint Venture<br>• Matson owns a 35% interest in SSA<br>Terminals, LLC (SSAT), the leading U.S.<br>West Coast terminal operator<br>– SSAT currently provides terminal and<br>stevedoring services to carriers at 7<br>terminal facilities<br>Overview<br>SSAT is the best operator on the U.S. West Coast.<br>-$5<br>$0<br>$5<br>$10<br>$15<br>$20<br>$25<br>$30<br>$35<br>$40<br>2012 2013 2014 2015 2016 2017 2018 2019 LTM<br>$ in millions<br>SSAT JV Equity Income (Loss)<br>(9/30/20)<br>Port Terminal Acreage<br>Long Beach Pier A 196<br>C60 70<br>Tacoma West Sitcum 123<br>Oakland OICT 270<br>B63 80<br>Seattle* T-18 196<br>T-30 70<br>* SSAT does have a lease for T-5, but the terminal is currently<br>under re-development and not active. |
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| 13 Investor Presentation │November 18, 2020<br>0%<br>1%<br>2%<br>3%<br>4%<br>5%<br>6%<br>7%<br>8%<br>$0<br>$5<br>$10<br>$15<br>$20<br>$25<br>$30<br>$35<br>$40<br>$45<br>2015 2016 2017 2018 2019 LTM<br>Operating Income Margin<br>Operating Income ($ in millions)<br>Operating Income Operating Income Margin<br>Matson Logistics<br>Note: Acquired Span Alaska in 3Q 2016.<br>(As of 9/30/20)<br>Transportation<br>Brokerage<br>• Domestic and international rail intermodal<br>• Long-haul and regional highway trucking<br>• Less-than-truckload and expedited freight<br>• Over 1.5 million sq. ft. across 4 buildings in<br>attractive port-based locations<br>• Mix of contract and public warehouses<br>Supply Chain<br>Mgmt. and<br>Other<br>• PO management, freight forwarding and<br>NVOCC services<br>• Organically grown from Matson’s CLX<br>service<br>Warehousing<br>and Distribution<br>Overview of Services Operating Income and Margin<br>Freight<br>Forwarding<br>• LCL consolidation and freight forwarding<br>primarily to the Alaska market through<br>Span Alaska |
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| 14 Investor Presentation │November 18, 2020<br>Span Alaska Overview<br>• Receives LCL freight in Auburn, WA for<br>consolidation and shipment to Alaska<br>• Network of terminals enables transport of<br>freight to all major population centers in AK<br>• Matson’s largest northbound freight customer |
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| 15 Investor Presentation │November 18, 2020<br>Strong Cash Flow Generation and Balance Sheet<br>Cash Flow Generation Leverage = Total Debt(1) / EBITDA(2)<br>• Weighted average cost of debt at end of 3Q20 was<br>approximately 2.64%<br>• Issued two Title XI transactions in 2Q20<br>• Target “low 2xs” leverage<br>• Delivery of Matsonia in 4Q20 will mark the end of a<br>~$930 million investment in 4 new Hawaii vessels<br>• Alaska vessel refleeting end of this decade<br>(1) Total debt is presented before any reduction for deferred loan fees as required by U.S. GAAP.<br>(2) See the Appendix for a reconciliation of GAAP to Non-GAAP Financial Metrics. EBITDA calculated per amended debt agreements is higher than reported EBITDA.<br>(3) Reflects an interest rate of 3.25% on the revolving credit facility as of September 30, 2020.<br>0%<br>20%<br>40%<br>60%<br>80%<br>100%<br>120%<br>$ 0<br>$ 50<br>$ 100<br>$ 150<br>$ 200<br>$ 250<br>$ 300<br>$ 350<br>$ 400<br>2012<br>2013<br>2014<br>2015<br>2016<br>2017<br>2018<br>2019<br>LTM 3Q20<br>$ in millions<br>EBITDA<br>Cash Flow from Operations (CFFO)<br>CFFO / EBITDA<br>(2)<br>0.00 x<br>0.50 x<br>1.00 x<br>1.50 x<br>2.00 x<br>2.50 x<br>3.00 x<br>3.50 x<br>4.00 x<br>2012<br>2013<br>2014<br>2015<br>2016<br>2017<br>2018<br>2019<br>LTM 3Q20<br>(3) |
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| 16 Investor Presentation │November 18, 2020<br>Capital Allocation<br>• Fund maintenance capital expenditures<br>– Investing approximately $30 million in new equipment to support growth of<br>China service and AAX to maximize opportunities<br>– In 2021, expect to be higher than maintenance level of $50 to $60 million per<br>annum<br>• Continue to pay down debt<br>– YTD 3Q20, retired nearly $135 million of debt<br>• Invest in organic growth opportunities – low capital, high ROIC investments<br>• Pursue opportunistic M&A opportunities – will remain disciplined in our approach<br>– The opportunity must:<br>1) have an enduring competitive advantage,<br>2) be a good cultural fit and be strategic or complementary, and<br>3) generate a cash-on-cash return in excess of 10% initially and have the ability to<br>grow organically<br>• Return capital to shareholders<br>– In the absence of organic growth and acquisition opportunities, will consider<br>return of excess cash via share repurchases and/or special dividends |
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| 17 Investor Presentation │November 18, 2020<br>Appendix |
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| 18 Investor Presentation │November 18, 2020<br>Appendix – Non-GAAP Measures<br>Matson reports financial results in accordance with U.S. generally accepted accounting principles (“GAAP”). The Company also<br>considers other non-GAAP measures to evaluate performance, make day-to-day operating decisions, help investors understand our<br>ability to incur and service debt and to make capital expenditures, and to understand period-over-period operating results separate<br>and apart from items that may, or could, have a disproportional positive or negative impact on results in any particular period. These<br>non-GAAP measures include, but are not limited to, Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), Return<br>on Invested Capital (“ROIC”), Return on Equity (“ROE”), Total Debt-to-EBITDA and Net Debt-to-EBITDA. |
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