Matson, Inc. ("Matson" or the "Company") reported net income of $20.6 million, or $0.48 per diluted share, for the quarter ended December 31, 2018. Net income for the quarter ended December 31, 2017 was $166.9 million, or $3.90 per diluted share. Net income and earnings per share in the fourth quarter of 2017 benefitted by $155.0 million and $3.62 per diluted share, respectively, from a one-time, non-cash tax adjustment arising from the enactment of the Tax Cuts and Jobs Act of 2017 (the "Tax Act"). Consolidated revenue for the fourth quarter 2018 was $564.9 million compared with $516.1 million for the fourth quarter 2017.
For the full year 2018, Matson reported net income of $109.0 million, or $2.53 per diluted share compared with $232.0 million, or $5.37 per diluted share, in 2017. Net income and earnings per share in the full year 2017 benefitted by $155.0 million and $3.59 per diluted share, respectively, from a one-time, non-cash tax adjustment as a result of the Tax Act. Consolidated revenue for the full year 2018 was $2,222.8 million, compared with $2,046.9 million in the prior year.
Matt Cox, Matson's Chairman and Chief Executive Officer, commented, "Our operating performance in the fourth quarter was in-line with expectations, with strong demand in our China service and strong execution across all service lines in Logistics. For the year, we performed well with exceptional performance in our China service and significant contributions from Logistics and SSAT, all of which helped propel the Company's annual cash flow from operations to a new high."
Mr. Cox added, "For the full year 2019, we expect steady financial performance with Logistics to approximate the level achieved in 2018 and a higher contribution from Alaska, offset by lower contributions from our China service and at SSAT, both of which are coming off exceptionally strong years. While we expect net income in 2019 to decline year-over-year, we expect EBITDA in 2019 to approximate the level achieved in 2018 after taking into account a full year impact in 2018 of the vessel sale and leaseback transaction."
Fourth Quarter 2018 Discussion and Outlook for 2019
Ocean Transportation: The Company's container volume in the Hawaii service in the fourth quarter 2018 was flat year-over-year despite modest growth in the Hawaii economy supported primarily by healthy tourism activity and low unemployment. The Company expects volume in 2019 to approximate the level achieved in 2018, reflecting modest economic growth in Hawaii and stable market share.
In China, the Company's container volume in the fourth quarter 2018 was 3.8 percent higher year-over-year as the Company experienced elevated demand for its service late in the quarter during a period that is traditionally not as strong. The Company continued to realize a sizeable rate premium in the fourth quarter 2018 and achieved average freight rates higher than the fourth quarter 2017. For 2019, the Company expects a lower contribution from its China tradelane following an exceptionally strong performance in 2018 with lower average freight rates and modestly lower volume than the levels achieved in 2018.
In Guam, the Company's container volume in the fourth quarter 2018 was 10.6 percent higher year-over-year primarily due to typhoon relief volume. For 2019, the Company expects modestly lower volume as the highly competitive environment remains.
In Alaska, the Company's container volume for the fourth quarter 2018 was 4.2 percent higher year-over-year due to higher northbound volume. For 2019, the Company expects volume to be modestly higher than the level achieved in 2018 with higher northbound volume supported by improving economic conditions in Alaska and higher southbound volume due to stronger seafood harvest levels than in 2018.
The contribution in the fourth quarter 2018 from the Company's SSAT terminal joint venture investment was $0.9 million lower than the fourth quarter 2017 due primarily to higher operating costs, partially offset by higher revenue resulting from higher lift volume. For 2019, the Company expects the contribution from SSAT to be lower as a result of lower lift volume coming off an exceptionally strong lift volume level in 2018.
As a result of the business outlook noted above, the Company expects full year 2019 Ocean Transportation operating income to approximate the $131.1 million achieved in 2018 after taking into account a full year net operating expense impact of $7.2 million associated with the sale and leaseback of MV Maunalei, as further described below. In the first quarter 2019, the Company expects Ocean Transportation operating income will be approximately $10 million, which is lower than the level achieved in the first quarter 2018 primarily due to the unfavorable comparisons from the absence of positive one-time items at SSAT in the year ago period and Alaska northbound volume associated with the dry-docking of a competitor's vessel in the first quarter last year, as well as the effect of the aforementioned vessel sale and leaseback.
Logistics: In the fourth quarter 2018, operating income for the Company's Logistics segment was $4.4 millionhigher than in the fourth quarter 2017 due to improved performance across all of the service lines. The Company expects Logistics' operating income for the full year 2019 to approximate the level achieved in 2018 of $32.7 million. In the first quarter 2019, the Company expects operating income to be moderately higher than the level achieved in the first quarter 2018.
Depreciation and Amortization: For the full year 2019, the Company expects depreciation and amortization expense to be approximately $130 million, inclusive of dry-docking amortization of approximately $31 million.
EBITDA: While the Company expects net income in 2019 to decline year-over-year, we expect EBITDA in 2019 to be approximately $286 million, which is approximately the level achieved in 2018 after taking into account the full year impact in 2018 of the $12.0 million of lease expense related to the sale and leaseback of MV Maunalei. As previously disclosed on November 27, 2018, a subsidiary of Matson entered into an agreement whereby MV Maunalei was sold for approximately $106.0 million, and subsequently leased back from the buyer under an operating lease agreement. As a result of this transaction, the Company expects on an annual basis $12.0 million in lease expense and $4.8 million in lower depreciation and amortization expense (including dry-docking amortization), resulting in $7.2 million in lower operating income.
Other Income (Expense): The Company expects full year 2019 other income (expense) to be approximately $2.7 million in income, which is attributable to other component costs related to the Company's pension and post-retirement plans.
Interest Expense: The Company expects interest expense for the full year 2019 to be approximately $24 million.
Income Taxes: In the fourth quarter 2018, the Company's effective tax rate was 23.4 percent. For the full year 2019, the Company expects its effective tax rate to be approximately 26.0 percent, which excludes a positive non-cash adjustment of $2.9 million expected in the first quarter of 2019 related to the reversal of a Tax Act expense adjustment in 2018.
Capital and Vessel Dry-docking Expenditures: For the full year 2018, the Company made other capital expenditure payments of $62.6 million, capitalized vessel construction expenditures of $338.6 million, and dry-docking payments of $19.2 million. For the full year 2019, the Company expects to make other capital expenditure payments, including maintenance capital expenditures, of approximately $120 million, vessel construction expenditures (including capitalized interest and owner's items) of approximately $225 million, and dry-docking payments of approximately $12 million. The level of other capital expenditures, including maintenance capital expenditures, for 2019 is higher than our targeted annual maintenance level of approximately $50 million due to the installation of three new cranes, refurbishment of three existing cranes, and the infrastructure upgrade at the Sand Island terminal; the scrubber installation on three vessels in the China service; and the construction of a new cross-dock facility in Anchorage for Span Alaska.
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