AGM 2020

Apr 23, 2020

Welcome to the 2020 annual meeting for Matson, Inc. Our host for today's call is Matt Cox, Chairman and CEO. At this time, all participants will be in listen-only mode. I will now turn the call over to your host. Mr. Cox, you may begin. Thanks, operator. Aloha. I'm Matt Cox, Chairman and CEO of Matson, and I now call this meeting to order. I'd like to welcome our shareholders to the 2020 annual meeting, which is being held virtually today as a result of the COVID-19 pandemic. A meeting agenda and rules of conduct have been established and are available to shareholders on the bottom right side of your screen. There are three business items to be voted on at today's meeting: the election of directors, an advisory vote to approve executive compensation, and the ratification of the appointment of auditors. There will be a question and comment period on these items, and after the question and comment period, the polls will be open for voting. As stated in the rules of conduct, you may submit your question in the field provided on the bottom left side of the screen. In order to give as many shareholders as possible the opportunity to ask questions, we ask that you please limit yourself to one question or topic. Up to one minute will be allocated to read each question. As a reminder, we will only take questions related to the three items being voted on today. Thanks in advance for your cooperation with these rules. Written notice of this meeting was mailed on or about March 10, 2020, to all shareholders of record at the close of business on February 24, 2020. The record date and the secretary has an affidavit certifying to such mailing. A supplemental notice changing the meeting to a virtual meeting was mailed on March 23, 2020. As of the record date, there were 43,040,657 shares of common stock entitled to vote. There are represented in person or by proxy, approximately 93.68% of all shares entitled to vote at the meeting. Because holders of a majority of the shares entitled to vote at this meeting are present in person or by proxy, I declare this meeting to be duly convened for purposes of transacting such business as may properly come before it. The next order of business is a description on the matters to be voted on at today's meeting. The first proposal before the shareholders of the company is the election of seven directors to serve until the annual meeting of shareholders in 2021 and until their successors are duly elected and qualified. Let me introduce my fellow nominees who are in attendance today. Stan Kuriyama, our Lead Independent Director, Meredith Ching, Admiral Tom Fargo, Mark Fukunaga, Connie Lau, and Jenai Wall. On behalf of everyone at Matson, I'd like to thank each of our directors for all their hard work and valuable guidance they give to us. Voting will commence after all proposals have been presented. We will now move to proposal 2. The second proposal before the shareholders of the company is the approval on a non-binding advisory basis of the compensation of the company's executive. A summary of the company's executive compensation practices is contained in the 2020 proxy statement. The third proposal before the shareholders of the company is the ratification of the appointment of auditors. The audit committee has appointed Deloitte & Touche as the company's independent registered accounting firm for the ensuing year. Joe Young, the representative of Deloitte & Touche, is present at the meeting. Mr. Young has advised me he has no formal statement to make. The meeting is now open for questions and comments concerning the three agenda items. As a reminder, you may submit your question in the field provided on the bottom left side of the screen. There are no questions at this time. Because no further business is on the agenda to come before the meeting, we will now move on to voting. The time is 8:34 A.M. Hawaii Standard Time, and I declare the polls now open for each of the matter to be voted on today, April 23rd, 2020. All Matson shareholders entitled to vote at this meeting have the ability to do so online. If you're a shareholder entitled to vote and have not yet voted, or if you want to change your vote previously cast, please do so by clicking on the Vote Here button on the bottom right side of your screen. If you previously returned your proxy card, your shares will be voted accordingly. If you previously voted by proxy, please do not vote today unless you want to change your vote. After voting has been completed on all matters on the agenda, we will close the polls and provide a preliminary report. Please vote now if you wish to do so. Again, if you'd like to vote, please click on the Vote Here button on the bottom right side of your screen. Please remember that if you've already voted by proxy or by returning your proxy card, it's not necessary to vote again. We will be closing the polls shortly. I declare the polls now closed at 8:36 A.M. Hawaii Standard Time today, April 23rd, 2020, and ask that the Inspector of Elections tabulate the results. With the business portion of this meeting having been completed and the polls now closed, the formal portion of the meeting is officially adjourned at 8:36 A.M. Hawaii Standard Time, April 23rd, 2020. I've received the preliminary voting report, and the results are as follows. More than 93% of the shares outstanding voted. All the proposals have passed. Let me congratulate all our director nominees on their election. I'd like to extend a warm welcome to Meredith Ching, who's the newest member of our board of directors. I also want to take a moment to recognize Blake Baird, who has served on the Matson board for 14 years. He did not stand for re-election this year. I want to thank Blake for his years of dedicated service and many contributions to Matson and our shareholders. Blake's been an invaluable counselor to the Matson board of directors and to the management and employees of Matson, and has served in various leadership capacities on the board, including chair of the compensation committee and as a member of the audit committee. We're grateful for all that he's done for Matson. Thanks again, Blake. Before I briefly recap Matson's financial performance last year, I want to remind you that my comments today may contain forward-looking statements which are covered by this legal disclosure statement on the slide now showing. I also want to note my comments may include certain non-GAAP financial metrics. You can find our most recent GAAP financials and non-GAAP metrics in our 2019 fourth quarter earnings call presentation that is posted on our website in the investor relations section at matson.com. In our financial results for the full year 2019, we had solid contributions from our China and Alaska trade lane services, and logistics had another good year, eclipsing the outstanding performance in 2018. Offsetting these very favorable contributions were lower volumes in the Hawaii trade lane and a lower contribution from our SSAT joint venture. For the full year, we recorded net income of $82.7 million, or $1.91 per share, compared with $109 million, or $2.53 per share in the previous year. We generated EBITDA of $264.3 million versus $297.3 million the year before, and provided a return on invested capital of 5.9%. We had a very busy year in 2019, with years of planning and investment coming to fruition with the delivery of two new vessels for our Hawaii service, the installation of three new gantry cranes, and a completion of a number of electrical infrastructure upgrades at our Sand Island facility in Honolulu. We also completed two scrubber installations and started a third before the end of the year. We completed and opened the new Span Alaska cross-dock facility in Anchorage, replacing two leased facilities. To put this transition period into some perspective, between the beginning of 2019 and the end of February this year, we have placed more than $600 million of assets into service, disposed of three end-of-life steamships in an environmentally friendly manner, and stepped down to a nine-ship fleet rotation for our Hawaii service, all in the years in the making with numerous challenges along the way. Now, I'd like to take a few minutes and talk now about Matson's priorities for 2020. These priorities are designed to build on the prior year's successes and position the company well for next year and beyond. They are to complete our Hawaii fleet renewal. With three of four new vessels now in service and one more to come in the fourth quarter of this year, Matsonia, we're on track to meet this goal. Upgrade our Sand Island terminal. After delivery of our three new gantry cranes last year, we plan to complete phase 1 of our multi-year Matsonia project with modification to three older cranes and the demolition of four existing cranes, as well as starting work on phase 2 later this year. Implement our emission scrubber strategy. Along with putting new, more fuel-efficient ships into service as part of our long-term fuel strategy, last year, we committed to installing exhaust scrubbers on six of our other vessels, five that are deployed in our China service and one reserve vessel that can be used in any of our trades. Installations have been completed on three of these vessels, which are now back in service. We expect all six to be completed by the end of this year. Delever our balance sheet. We've been focused on maintaining our strong cash flows in order to reduce debt and remain committed to maintaining investment-grade credit metrics and preserving our low-cost balance sheet. Pursue organic growth opportunities. We continue to source organic growth opportunities that build on our Pacific network and U.S. West Coast franchise. When the news spread and the severity of COVID-19 began gaining momentum in February, we began to formulate response measures with three main goals in mind. Our first priority has been protecting the health and safety of our employees. Before the shelter at home orders were issued anywhere in the U.S., we implemented travel restrictions and began communicating CDC guidelines for preventing the spread of respiratory illness to all employees. We continue to follow CDC, U.S. Coast Guard, and local government guidelines and have protocols in place throughout our network to help protect not only our employees, but our customers and vendors. The other top priority has been to ensure the continuity of our services. As a key part of the critical supply chain sustaining remote communities throughout the Pacific, Matson is considered an essential business, and our services are needed now more than ever in these communities. As such, operational teams are working hard to maintain all of our services while also adhering to all the health protocols now in place. To date, all of our ports remain open, and we continue to operate all of our service as scheduled. The third priority has been to take steps to enhance our financial resilience. Earlier this month, we secured the support of our banks and lenders to amend our long-term credit agreements. These amendments provide for a substantial increase in available liquidity and financial flexibility until the end of 2021. While there remains substantial uncertainty about the depth and breadth of the effects that this pandemic will have on our business, we feel confident that we have and will continue to take all appropriate measures to protect our people, our services to the communities depending on us, and the long-term health and success of Matson. This concludes my formal remarks and our program for the day. Mahalo for your kind attention