Matson(MATX) - 2025 Q1 - Quarterly Report

Part I: Financial Information Financial Statements (Unaudited) The company's Q1 2025 results show significant growth in net income and operating income, alongside robust cash flow and continued capital investment Income Statement Highlights Q1 2025 saw substantial increases in revenue, operating income, and net income compared to the prior year Q1 2025 vs Q1 2024 Income Statement (in millions, except per share) | Metric | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Total Operating Revenue | $782.0 | $722.1 | +8.3% | | Ocean Transportation Revenue | $637.4 | $579.0 | +10.1% | | Logistics Revenue | $144.6 | $143.1 | +1.0% | | Operating Income | $82.1 | $36.9 | +122.5% | | Net Income | $72.3 | $36.1 | +100.3% | | Diluted EPS | $2.18 | $1.04 | +109.6% | Balance Sheet Highlights The balance sheet reflects stable total assets and a significant decrease in cash due to vessel investments and share repurchases Balance Sheet Position (in millions) | Metric | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $122.0 | $266.8 | | Total Assets | $4,527.0 | $4,595.4 | | Total Liabilities | $1,893.8 | $1,943.4 | | Total Shareholders' Equity | $2,633.2 | $2,652.0 | - The company's cash and cash equivalents decreased significantly from $266.8 million at year-end 2024 to $122.0 million at the end of Q1 2025, primarily due to investments in new vessels and share repurchases[11][13] Cash Flow Highlights Operating cash flow increased significantly, while investing and financing activities led to a net decrease in cash Q1 2025 vs Q1 2024 Cash Flows (in millions) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $89.0 | $36.6 | | Net cash used in investing activities | $(129.4) | $(59.0) | | Net cash used in financing activities | $(104.4) | $(85.7) | | Net Decrease in Cash | $(144.8) | $(108.1) | - Investing activities included $66.7 million for vessel construction and a net deposit of $40.4 million into the Capital Construction Fund (CCF)[13] - Financing activities included $66.9 million for share repurchases and $11.3 million in dividends[13] Key Notes to Financial Statements Notes detail segment performance, joint venture income, vessel construction progress, and share repurchase activities - The company consists of two reportable segments: Ocean Transportation, which provides ocean freight services, and Logistics, which offers multimodal transportation brokerage, freight forwarding, and warehousing[16][17][19] Segment Revenue Breakdown Q1 2025 (in millions) | Segment | Revenue | YoY Change | | :--- | :--- | :--- | | Ocean Transportation | $637.4 | +10.1% | | Logistics | $144.6 | +1.0% | - The company's investment in the SSAT joint venture contributed income of $6.6 million in Q1 2025, a significant increase from $0.4 million in Q1 2024[41][43] - During Q1 2025, the company repurchased approximately 0.5 million shares for $69.2 million and paid a quarterly dividend of $0.34 per share[29][30] Management's Discussion and Analysis (MD&A) Management discusses strong Q1 2025 results driven by China freight rates but presents a cautious outlook for the full year Outlook for 2025 The company projects lower full-year operating income for its core segments and plans significant capital expenditures for new vessels - Ocean Transportation: Full-year 2025 operating income is expected to be lower than 2024, with China service volume and freight rates projected to decline year-over-year[76][78][80][82] - Logistics: Full-year 2025 operating income is expected to be lower than the prior year due to a challenging environment for all business lines[83] - SSAT Joint Venture: The contribution from SSAT is expected to be lower in 2025 compared to 2024 (excluding a 2024 impairment charge)[81] Full Year 2025 Financial Projections | Metric | Projected 2025 Value | | :--- | :--- | | Depreciation & Amortization | ~$200 million | | Interest Income | ~$31 million | | Interest Expense | ~$7 million | | Effective Tax Rate | ~23.0% | | New Vessel Construction Capex | ~$305 million | | Maintenance & Other Capex | $100 - $120 million | Segment Performance Analysis (Q1 2025 vs Q1 2024) Ocean Transportation income surged due to higher freight rates, while Logistics income saw a slight decline - Ocean Transportation operating income increased 166.7% to $73.6 million, primarily due to significantly higher freight rates in China and a higher contribution from SSAT[94][97] Ocean Transportation Volume (FEU) - Q1 2025 vs Q1 2024 | Trade Lane | Q1 2025 FEU | Q1 2024 FEU | Change (%) | | :--- | :--- | :--- | :--- | | Hawaii | 35,700 | 34,600 | +3.2% | | Alaska | 19,700 | 18,800 | +4.8% | | China | 28,500 | 28,900 | -1.4% | | Guam | 4,200 | 4,900 | -14.3% | - Logistics operating income decreased 8.6% to $8.5 million, due to lower contributions from freight forwarding and transportation brokerage[99][100] Liquidity and Capital Resources The company maintains strong liquidity with significant borrowing capacity despite a working capital deficit and large future capital commitments - Net cash from operations increased to $89.0 million in Q1 2025 from $36.6 million in Q1 2024, driven by higher net income and favorable changes in working capital[102][103] - The company had a working capital deficit of $78.4 million at quarter-end, a decrease from a surplus of $49.2 million at year-end 2024, primarily due to cash deposited into the Capital Construction Fund (CCF)[111] - As of March 31, 2025, total debt was $390.8 million, and the company had $643.9 million of available borrowing capacity under its revolving credit facility[109][110] - The company has committed to future milestone payments of $749.1 million for the construction of three new Aloha Class containerships, with payments extending through 2028[113] Part II: Other Information Risk Factors The company faces material risks from potential Jones Act changes, operational challenges, and evolving climate regulations - Jones Act: The business would be adversely affected by the repeal, invalidation, or substantial amendment of the Jones Act, which regulates U.S. domestic maritime commerce[130] - Operational Risks: The company is exposed to risks from macroeconomic conditions (inflation, interest rates), geopolitical developments (tariffs, trade tensions), intense competition, and reliance on key third-party vendors for essential services[133][135][138] - Fleet & Fuel Risks: The company faces risks from fuel price volatility, the uncertain availability and cost of alternative fuels like LNG, and potential delays or cost overruns in its new vessel construction program[139][144][146] - Climate & Sustainability Risks: Evolving regulations and stakeholder expectations regarding sustainability and climate change (e.g., GHG emissions targets) expose the company to increased costs, operational challenges, and reputational risk[141][155] - Labor and IT Risks: A significant portion of the workforce is unionized, making the company susceptible to work stoppages, and it faces significant cybersecurity risks[172][180] Share Repurchases The company actively repurchased shares in Q1 2025 and has significant capacity remaining under its authorized program Q1 2025 Share Repurchases | Period | Shares Purchased | Average Price Paid | | :--- | :--- | :--- | | Jan 2025 | 180,000 | $139.12 | | Feb 2025 | 162,505 | $141.22 | | Mar 2025 | 157,066 | $132.21 | | Total | 499,571 | $137.63 | - The Board of Directors approved the addition of 3.0 million shares to the repurchase program on February 27, 2025, which expires on December 31, 2027[197]