Matson Inc (MATX) 2012 Q4 法說會逐字稿

Good afternoon, and welcome to the Matson, Incorporated fourth quarter 2012 earnings conference call. All participants will be in listen-only mode. (Operator Instructions)

After today's presentation, there will be an opportunity to ask questions.

(Operator Instructions)

Please note this event is being recorded. I would now like to turn the conference over Mr. Peter Heilmann, Corporate Secretary. Mr. Heilmann, please go ahead.

Thank you, Laura.

Aloha, and welcome to our fourth-quarter and full-year 2012 earnings conference call. Matt Cox, President and Chief Executive Officer is joining from Honolulu, while I am in Oakland today with Joe Wine, Senior Vice President and Chief Financial Officer. Slides in this presentation are available for download at our website, www.matson.com under the Investor Relations tab.

Before we begin, I'd like to take this opportunity to remind you that during the course of this call, we will make forward-looking statements within the meaning of the Federal securities laws regarding expectations, predictions, projections or future events. We believe that our expectations and assumptions are reasonable.

We caution you to consider the risk factors that could cause actual results to differ materially from those in the forward-looking statements, in the press release, and this conference call. These risk factors are described in our press release, and are more fully described under the caption Risk Factors on pages 19 through 29 of the 2011 Form 10-K filed by Alexander & Baldwin Inc. on February 28, 2012 and in all of our other subsequent filings with the SEC.

Please also note that the date of this conference call is February 7, 2013, and any forward-looking statements that we make today are based on assumptions as of this date. We undertake no obligation to update these forward-looking statements. Also references our made to certain non-GAAP numbers in this presentation. A reconciliation to GAAP numbers and descriptions of calculation methodologies is provided in the addendum.

With that, I will turn the call over to Matt who will take us through the key highlights of the quarter, 2012, as well as an outlook for 2013. Matt?

Thanks, Peter, and thanks to those of you on the call and for your continuing interest in and support of Matson.

We had a solid fourth quarter result in our ocean transportation segment, led by continued strong Guam volume and an improved rate environment in our expedited China service. In addition, we were able to return to an optimal fleet structure, that is a nine-ship deployment, in the fourth quarter that led to reduced vessel operating expenses and overhead.

In early January, we acquired the primary assets of New Zealand-based Reef Shipping. I will speak more about the acquisition later, but comment now that the purchase extends our network and opens up future opportunities at our transportation hubs. Just as important as our operational success, we continue to pay down our debt during the quarter and -- during this quarter, and have paid down nearly $54 million since June, our reflection of strong cash from operations and continuation of a core strategic plank.

Unfortunately, we had a one-time impairment charge of an intangible asset and restructuring of a lease and Logistics' Northern California warehouse operations. Together, these charges totaled $3.9 million and offset what would have otherwise been a profitable quarter for the segment. Joel will speak in greater detail about these charges in a moment.

On slide 4, we've presented on a year-over-year basis EBITDA and earnings per share. We believe EBITDA provides information that is useful for our investors as it is a measure used by our management team to evaluate performance and make day-to-day operating decisions.

In the fourth quarter of 2012, our EBITDA was $40.3 million, a $9.9 million increase from the fourth quarter of 2011, or an improvement 32.6%. Earnings per share increased significantly, although we note that fourth quarter 2011 results were adversely impacted by discontinued operations from our former Parent company. More meaningfully, diluted earnings per share from continuing operations was up by $0.20 year over year.

Slide 5 shows the same metrics plus return on invested capital for the full-year. Similar to the quarterly results, we saw an improvement in full-year EBITDA and correspondingly, full-year earnings per share. Diluted earnings per share from continuing operations increased to almost 12% for the year. For the year, net income was $45.9 million versus $34.2 million in 2011.

In 2012, our return on invested capital was 9.9%, which was a good result for us. Comparisons to 2011 are not meaningful and are not contained in this slide because of the separation and the capitalization structure of our former Parent company. Moving forward we will benchmark ourselves against the 2012 result.

Turning now to our individual service lines, container volume in our Hawaii service was up very modestly during the fourth quarter as compared to last year, while automobile volume was off due to rental fleet replacement timing. There have been encouraging indications that the Hawaii economy is reviving, evidenced by a strong fourth quarter 2012 consumer spending and a marginal uptick in construction activity that we saw right at the end of the year, and saw some of this flow through to our volumes. We also returned to our optimal fleet deployment that reduced vessel expense. These gains we're offset to some degree by higher outside transportation costs associated with barge dry dockings.

Looking to 2013, modest volume gains are expected in the Hawaii trade lane, in line with an expected general improvement in the Hawaiian economy. We also expect to benefit from operating a nine ship fleet for most of 2013 and lower outside transportation costs, both of which are a result from a lighter dry dock schedule. Our outlook is based on the assumption that no new capacity will enter this trade lane in 2013; rather, we do not expect Pasha to introduce it's announced second vessel until 2014. This second Pasha vessel could negatively impact the volume for all carriers in the Hawaii trade, including Matson. However, any adverse impact might be offset by general market growth in 2013 and beyond.

The table on slide 7 shows some of the key metrics of the Hawaiian economy. As you will note, Hawaii has fared relatively well during this economic downturn, with strong growth and visitor arrivals in 2012 and low levels of unemployment. The employment picture is expected to improve further, led by forecast growth in construction jobs and real gross domestic product. Visitor arrivals are expected to grow off an already high base, although the rate of growth will naturally slow.

As we've noted before, construction activity in Hawaii has been suppressed for a number of years, and we do not expect any meaningful change in 2013 off of these low levels. We closely track construction activity measured in jobs and building permits because it historically has proven to be correlated to volume growth or loss. The uptick in expected construction, employment, and GDP auger well for us, but we still expect only modest volume growth in 2013, as the recovery takes root.

We have added a new slide in this presentation about our terminal operations joint venture, SSAT. Historically, the contributions from this investment have been strong, peaking recently in 2010. In addition to this economic impact, the joint venture operations complement existing service capabilities. The dedicated terminals SSAT operates provide a distinct competitive advantage for us in onloading and offloading our vessels, creating an exceptionally quick turn time for our customers.

Performance has been negatively by 2010 peak levels by significantly reduced lift volume due to customer losses and a slight volume contraction in the terminals and ports were SSAT serves. In particular, there was a significant drop in volume and the joint venture Seattle Operations. This expected loss -- I'm sorry, this customer loss is expected to negatively impact results throughout 2013 and is therefore expected that SSAT will operate at a breakeven level. In response, we are working with our partner to put in place aggressive expense controls and expect that this investment will return to historical return levels, in line with overall market activity over time.

Turning to our Guam service on slide 9, container volume continues to be significantly higher on a year-over-year basis, which reflects the exit of a major competitor in the market in late 2011. While we enjoy the benefit of the additional cargo volume now, we also acknowledge that overall volume demand has contracted slightly due to muted economic activity in Guam and the delay in the expected military redeployment. We therefore expect our volume in 2013 to be similar to last year, assuming that no new competitor enters the market. As we've noted before, the timing and probability of a new competitor entering this market is unknown. What we can expect is that a continued delay in the planned military redeployments. Our current view is that any potential step up in volume won't begin in earnest until 2015 at the earliest.

On slide 10, we present an overview of our recent acquisition of Reef Shipping. We purchased the primary assets comprised of four container ships averaging about 300 TEUs in size and a fleet of containers for $9.6 million in early January. The assets also include two market rate time charters, which are under 2-year and 5-year terms, to create an integrated service for the South Pacific market. The acquisition, while small, is not expected to impact 2013 earnings meaningfully, but is strategically attractive for us as it creates a platform for further expansion into the South Pacific. We certainly understand island economies and the need for reliable, time-definite deliveries. You can also expect that we can approve efficiencies while bringing the same world-class level of service to these new markets for us.

As you can see from the network map, we will have regular sailings off three hubs, Fiji, Tahiti, and the Samoas, indicated by the red, green and purple colors on the slide respectively. As we learn the dynamics of the trade lanes and rationalize the fleet, we hope to expand offerings to and from our current hubs in Guam, as shown in brown, and then further to our network in China. Moving forward, l the results from this acquisition will be included in the ocean transportation segment.

On slide 11, our China Expedited service continues to perform well, driven by much higher year-over-year freight rates and continued strong volume demand for our expedited service offering. As a reminder, because about one-half of our China business is under annual contract and the other half spot rate, we do get the benefit of rising freight rates in the spot rates business, but not across the entire volume we carry.

During the fourth quarter, container volume was off by 11%, due primarily to a sailing scheduled for late 2012 that was delayed and fell into early 2013. That volume will be reflected in the first quarter of 2013 results. For 2013, we expect container volume to approximate the 2012 levels. However, additional capacity is expected to enter this market in 2013 that will outstrip demand.

While continued carrier restraint is expected to some degree, average annual freight rates are expected to erode modestly for Matson as a result. Sustaining these rates depends not only on industry-wide management of surplus vessel capacity, but also to continuing improvements in the US economy and retail consumer spending. The chart on the upper right represents the average Shanghai containerized freight index spot rates by quarter. And again, as a reminder, these are not Matson's rate, but the chart does provide a good snapshot of the rate direction of the spot market. As you know, Matson generally commands a premium due to our expedited service.

Turning now to logistics on slide 12. In the fourth quarter, the segment incurred significant one-time losses associated with its Northern California warehousing operation, as I mentioned earlier. Together, these charges totaled $3.9 million. Improvement in domestic intermodal and highway in expedited margins and decreases in G&A expenses partly offset these losses. As a result of these charges, we now have consolidated our Northern California operation which puts us in an improved operating position moving forward. Coupled with continuing focus on expense control, organic growth and the rollout of a domestic 53-foot container program, we expect margins to improve to 1% to 2% of revenues in 2013.

The chart on the upper left is new for us to show the details of year-over-year growth in intermodal volume as reported by the Association of American Railroads, or AAR. As you can see, while the industry saw robust growth in early 2011, since then growth has been minimal and reached it's lowest levels within two years this past quarter.

And with that, I will now turn the call over to Joel for a review of our financial performance and outlook.

Thanks, Matt.

As shown on slide 13, Matson's consolidated operating income for the quarter was $23.9 million, as compared to $11.8 million for the fourth quarter of 2011. As Matt mentioned, the improvement in results was driven primarily by the full quarter impact of being the sole carrier in the Guam trade and the increase in rates in the China trade. This improvement on the ocean transportation side was offset, to some degree, by the non-cash charges in logistics. For the full-year 2012 as compared to 2011, operating income rose by 23% to $96.7 million, primarily for the same reasons previously mentioned, despite increased costs related to vessel and barge dry docking and related higher outside transportation costs.

Turning to slide 14 at the segment level, ocean transportation's operating income for the quarter was $26.7 million as compared to $12.5 million for the fourth quarter of 2011, and operating income margin was 8.8% during the quarter. Our operating income margins continue to improve, but are still below where we want them to be. As we have said before, we target a 10% to 12% annual margin on average, and while we significantly improved during the quarter on a year-over-year basis, we remain below our target level.

For the full-year, operating income rose by $22.9 million, or 31% for primary the same reasons as it is in the quarter. SSAT, our terminal operations joint venture, is included in operating income for the ocean transportation segment while it appears as a contra expense on our consolidated income-statement. For the fourth quarter, SSAT operated at a breakeven level and for the full-year contributed $3.2 million. Those levels are off by $1.7 million and $5.4 million respectively from prior year levels due to the loss of volume by several major customers.

Now turning to logistics on slide 15, the fourth quarter and a full year results were disappointing. As Matt mentioned, we took $3.9 million in one-time charges during the quarter related to the impairment of intangible asset and a restructured lease, of which both items were at logistics Northern California warehousing operations. Outside of these $3.9 million in charges, logistics operating income was down $900,000 on a full-year basis for 2012 versus the prior year in 2011. The charges were related to the operations of a business we acquired in 2008 in Northern California.

During the fourth quarter, we subleased one of the warehouses acquired in 2008 that had experienced a reduction in business volumes and was operating at a low 60% occupancy level. With the sublease of that warehouse, we now have reduced our footprint in our Northern California operations and are fully utilizing our remaining space. We therefore expect better results moving forward in these operations. Continued aggressive cost-cutting measures and the expansion of our 53-foot container program are expected to improve margins going forward for the logistics segment as a whole.

The next slide, 16, provides an overview of our uses of cash. On January 24, our board authorized a quarterly dividend of $0.15 per share. Matson has a strong history of paying dividends, and we have the financial capacity to maintain an investment-grade metric balance sheet while also providing for growth investments and to fund any future vessel replacement needs. For 2012, CapEx totaled $38.1 million with the bulk of this in ocean transportation related to maintenance and container box replenishment. This amount is in line with our work historical annual capital expenditures, exclusive of new ship builds.

As a reminder, the capital construction fund, or CCF program, is designed to facilitate qualified vessel investments, including the construction of new vessels and for repayment of vessel indebtedness. Deposits into the CCF are limited by certain applicable earnings, but have the benefit of creating tax deductions in the year made. Therefore, it may be advantageous for the Company to make significant deposits to the CCF this year if it is able to finalize the next phase of our vessel replacement plan, which calls for two new vessels in the next three to five years. Any CCF deposits we make will have the effect of reducing the Company's tax liabilities, and consequently, cash tax cash payments.

Now turning to the balance sheet and credit metrics on slide 17, we ended the year with total debt of $319.1 million. During the quarter, we paid debt down by $9.5 million and have paid down debt by nearly $54 million since the June separation from our former Parent company. This is consistent with one of our post-separation goals, which is to reduce debt. Our net debt to EBITDA ratio was reduced to 1.77 times at year-end.

Our cash balances were a little higher at year-end than we normally target because we drew down on our revolver to finance the acquisition of the Reef assets, which occurred just after year-end. Speaking to capitalization, I will also note that in the six months since our separation transaction, Matson's balance sheet shareholders' equity has grown by over 13%, primarily through retained earnings.

Slide 18 captures our outlook for 2013. For the full-year 2013, we expect ocean transportation operating income to benefit from a modest uptick in Hawaii volume and operating a nine ship fleet for most of 2013, which should result in lower outside transportation costs due to a lighter dry dock schedule. These positives are expected to be offset cost somewhat by a modest erosion in rates in our China trade and lower breakeven performance at SSAT. Balancing these plus and minus factors, our outlook for 2013 operating income in this segment is for modestly higher performance. As a note, this outlook includes the performance of the Reef acquisition.

We also expect that logistics performance will turn positive in 2013, resulting from the actions we have taken at the Northern California warehouse operations, continued expense control and improvement in our internal sales efforts. We also expect to realize gains in our 53-foot container program. Overall, we expect that logistics will earn between 1% and 2% margins in 2013 and for operating income to return to a level similar to 2011.

With respect to the first quarter of 2013 operating income, we expect ocean transportation to approximately double the $5.8 million of operating income achieved in the first quarter of 2012 due to the improvement in rate environment in the China trade and lower costs associated with running a nine-ship fleet deployment. We expect logistics to produce essentially breakeven operating profit -- operating income in the first quarter, similar to last year's first quarter.

With that, I will now turn the call back over to Matt for closing remarks.

Thanks, Joel.

2012 was a historic year for us at Matson. We celebrated our 130th anniversary and began trading as an independent company in early July, and we had another steady quarter that resulted in a satisfactory full-year performance. Our ocean transportation segment performed well and showed a modest improvement in margins. But for the full-year, we were below our target margin of 10% to 12%. I think we can do better. And in order to do better, we will need to see a more meaningful increase in Hawaii construction activity. On the logistics side, we continue to focus on organic growth in each of our lines of business.

You have heard some of our efforts that are underway, and these are starting to provide meaningful benefit. Our impairment charge was painful, but put the business back on solid footing. We made excellent progress in paying down our debt during the year, and our balance sheet is in great shape. Together with our cash flow generation capabilities, we are positioned to capture gains in the future, whether through organic growth associated with the Hawaii and US economic recoveries or through new growth opportunities. We are also positioned to fund potential new ship builds.

And finally, we were pleased to acquire the assets of Reef Shipping earlier this year. It is a small but important growth platform for us and begins to widen our geography and markets, while leveraging the core of our strength, serving island economies throughout the Pacific with time definite, reliable, world-class service.

I will now turn the call over to the operator and open it up for questions.

(Operator Instructions)

Our first question comes from Michael Webber of Wells Fargo.

Good morning, guys, how are you? Or good afternoon.

Good afternoon.

Talking to too many companies in Europe, I guess. The first question is on volumes and Matt, in your prepared remarks you touched on the uptick and some of the macro data we saw for the Hawaiian economy in the fourth quarter. And you parse out that new build permit -- that new permitting data, it looks like it's up 40% sequentially in the quarter and looks like the lowest unemployment in '08. What I'm getting at is what can volume growth really look like in 2013? It seems like the bleeding has stopped here, but if those kind of numbers persist, could we see volume growth in the mid single-digits? Is that possible for you guys at this stage?

Yes, Mike. It is a good question, one that we obviously are keeping a close eye on. I will just comment on a few aspects of your question. First of all, we did see rather significant growth in permitting in 2012. We dived into those numbers, and you might remember from last quarter we talked about this, much of that activity was in solar panels. And those were high construction dollar amounts but relatively low in terms of shipment volumes. I think we are encouraged. We don't want to be too down about the state of the Hawaiian economy, and we continue to hear great news out of the tourism industry for the year. They are expecting a good tourism picture for 2013, and all of that, I think bodes well into the future.

What is a little tougher to time, Mike, is when does construction return? Clearly, the tax receipts, GDP, other, unemployment that you mentioned are all positives and the question is, when will that turn into meaningful growth since we haven't seen it? We expected some of that in 2012, that frankly, did not quite materialize. We just want to be cautious before we see the real beginnings of that. To your element of your question about how high can growth be? Yes, we have seen years when construction is peaking at 3% and 4% and 5% annual growth rates has been seen. It is a little too early to call those kinds of changes.

Okay, no, no, that's fair. Just to shift for a second here, and I think Joel, you talked about margin in your remarks. And it looks like the second quarter in a row where you guys are come in above expectations, and it seems like things are certainly firmer at this point than they were a year or two ago. Q1 is typically your weaker seasonal point. But given the way your fleet is configured now with less assets, at least in service, is it fair to think the 2010 levels from a margin perspective in Q1 are a little bit more of a normal run rate here than say 2011 or 2012 where you guys are touching 2% and 3% in the first quarter? Is a mid single-digit number there a little bit more fair?

MIke, I don't want to comment on the mid single-digit comment at the end that you mentioned there, but what is tricky about the margin, looking at our margin over time, it is significantly influenced by where fuel was at the time because we have so much fuel spend that really flows through a zero margin basis. So, what we tend to focus on more, at least in the short-term, or looking at any period-to-period exact comparison, is just operating income in the aggregate. Because you really have to -- if you study margins, you really have to back out and make assumptions about where fuel was, and that -- it makes it challenging. Fuel prices between '09 at where we are at today have fluctuated quite a bit, which makes some of those comparisons quite difficult.

Got you. I'm just trying to talk you into a margin number, that's all. That make sense. There's a couple more for me and I will turn it over. I guess one higher level question, we have seen a couple, they're not necessarily competitors, but a couple of other Jones Act players come out and then place orders. I think you mentioned the Pasha combo carrier, and then Tote's been out there with a couple LNG powered assets. Actually two new builds and I believe they're getting the rest of their fleet converted as well. Can you talk a little bit about -- I don't know whether this is something you guys have looked at or not, I would assume you have since you are looking at replenishing. The kind of incremental, either fuel savings or some quantifiable margin bump you think you can see from an LNG powered asset versus the traditional deal electric or something along those lines? And then maybe where you stand on that replenishing program and what the last hurdle is for pulling the trigger and making some deposits into CCF.

Sure. Mike, I can take the first crack at that and then I'll leave the issues around the CCF to Joel to comment on the balance sheet. I think you are right. I think we have seen a relatively meaningful investment or reinvestment in fleet assets by other Jones Act participants. Crowley has also invested, SeaRiver, Exxon has also invested in new Jones Act tonnage. So, we are seeing relatively healthy reinvestment in the business, and we do expect also to hopefully finalize our plans this calendar year.

I think it is very -- we're taking a hard look like everyone else that LNG as a fuel source, and engine manufacturers are working rapidly to create a dual fuel engines. Obviously, that something we will take a very close look at. Due to economics and the timing of exactly when LNG becomes available as a regular bunker source on the US West Coast, when that all happens is still a little bit unclear. But certainly, these assets are going to be long-lived and we want to be able to take advantage of lower fuel costs associated with LNG, if and when they do come. That clearly is in our thinking. And then, Joel, would you comment on the balance sheet and the CCF?

Sure. Mike, on the CCF side, what is important is to walk through the sequencing of how we have approach this in general.

Yes.

Where we are at right now is in the core engineering design of the vessel phase in our -- is the top priority of our engineering teams and senior management. As we move along and look at the design of our vessels and look at features and how much they cost, dialogue with shipyards, et cetera, and figure out what we think within an acceptable band the cost is going to be. We have to move along that whole process, determine the economics and make sure we are comfortable that the economic return is going to be shareholder value enhancing. As we do -- we would not start making deposits into CCF until we had gotten through all of that, looked at the economics, convinced ourselves with the rigor of being focused on ROIC and shareholder value that the investment is going to create value. And then at that point get board approval and move forward with deposits, coming to final contract with the shipyard and having a balance sheet prepared to do that.

When I say we are midstreaming all those things, it has been a top priority for quite some time. What we are saying today is that we expect to work through all of that internal work throughout 2013 and have more specifics to share with you and investors as we do that work throughout 2013. We will give plenty of heads up with respect to how those plans are coming together, the dollars and cents and economics of it and CCF and all that as we work through things in 2013.

Okay. That's helpful. I will turn it over and get back in the queue.

The next question is from Kevin Sterling of BB&T Capital Markets.

Thank you. Aloha, Matt and Joel.

Hi, Kevin.

That's all my Hawaiian for the day. In the China trade, you guys -- I think Matt, you said you expect new capacity to add strip demand. Is this from ships that were anchored that are coming back online, or is it new capacity from the shipyards? How should we think about that?

Kevin, I think it's both. I think if you look at Alphaliner and some of these other industry-wide publications that track stats, there is something like a between 9% and 10% increase in expected capacity increases during calendar 2013. In fact, 2013 will be, if there are further delays in deliveries, using that figure, the largest single year of year-over-year growth in TEU capacity worldwide.

Now, that 9% or between 9% and 10%, it's significantly lower than the expected increase in worldwide demand for containerization. It is not just a trans-Pacific issue, but it is a global container capacity issue. There is generally higher demand in emerging markets in north/south trades, generally flatter demand, of course, in Europe is a big question. And even in the face of a slowly recovering US economy, demand growth is expected to be somewhat muted. There is a little factor associated with taking some vessels that were in reserve status and putting them into active use. But it is primarily the new vessel deliveries that are driving most of that growth.

Okay. Thank you, Matt. That's great color. Speaking of the Guam trade, I think -- I know you talked about it. Right now there's no entrants, but are you hearing of any hints of new entrants into the Guam trade lane?

We are not. And we are always cautious whenever we say we are not to say that one could start relatively quickly, but we are hearing no market chatter as of this moment in time.

Okay. Speaking of Guam, you talked about the military deployment keeps getting pushed back to 2015 at the earliest now. What is your confidence in the redeployment actually happening, and is 2015 the infrastructure build out or actual troop movement?

Yes, so Kevin, since you've followed our Company for a while, I have boldly predicted increases for the last eight years that have not come to pass, so my confidence is a little bit low, first of all. What we understand is there is currently an environmental impact report which needs to be modified before any construction activity can return.

I think, ultimately, there will be some form of increase in Guam. We do expect some increase. What form that takes is unclear and I think it's going to be part of the Pacific pivot in emerging China, territorial disputes and other kinds of things which will, we do think, require the US military to shift or increase its presence in the region, and Guam will be a beneficiary of that to some extent. Now, when and how much continues to be the really difficult one to forecast, and as I mentioned, our track record in predicting this has not been very good.

Well, I am right there with you. I just have been following your Company a long time, and I don't understand. Hey, Joel, the $3.9 million impairment charge in logistics, was that pre-tax?

Yes. That is the number that would hit the operating income line.

Okay. What was the tax affected amount?

About half of it was non tax-deductible and half of it was. If you take roughly half of it and take our effective tax rate of 38%, that would get you the math to the after-tax effect.

Perfect, thank you. Last question here, and this deals with the West Coast port strike. If I am not mistaken, you were not negatively impacted by the West Coast port strike. Is that because your union contract was a little different than the master agreement? And secondly, were you able to pick up any potential new business?

Yes. You were right, we were not impacted by the labor disruption in Southern California. We had reached agreement separately several years earlier than the rest of the employers who had these office clerical units on board. We had reached a settlement much earlier, and we're not impacted by the stoppage. As to your question about whether or not we got much business, I would say we probably got a very small amount as a few customers just wanted to hedge their bets a bit and gave us just a tiny bit of incremental more cargo. It was very short-lived and we haven't brought it up. It really wasn't a needle mover for us.

Okay. That's all I had. Matt and Joel, thank you so much for your time this evening.

Okay. Kevin. Thank you.

(Operator Instructions)

Our next question is from Jack Atkins of Stevens.

Yes. Hi, guys, this is actually Connor Hustava on for Jack today.

Hi. Connor.

Just picking up where Kevin left off. I'm curious to know if you all saw any freight divergence ahead of the longshoreman negotiation deadline and whether or not that would have been a potential benefit to you all? On the East Coast, I'm sorry, I should clarify.

Are you talking about -- oh, on the ILA? Yes. It was -- we were keeping on an eye on that, there were two ways in which we could benefit. First of all, most of Matson's cargo is local cargo to the West Coast, so we ourselves don't carry much cargo. The amount that might have moved was not measurable. Certainly, through the SSAT joint venture we were watching for an uptick in volume associated with customers who might have otherwise diverted the cargo. But in doing our own discussions with our customers, what we found was most customers had decided to ship their cargo early as opposed to doing last-minute diversions. There was really only a negligible impact through the West Coast associate coming up through that deadline.

Okay. That is helpful. Second question, I just wanted to get a sense for where we are with Hawaii today. I'm wondering if you can give us some color on how many additional containers you all -- how many additional containers do you think you could ship in Hawaii before you need to add another ship to that lane?

Yes, well I can -- basically, Connor, we expect to run our fleet -- our nine ship fleet, for most of the year where as we said earlier, we're expecting only modest volume gains. We are probably at the low to mid 90% utilization of our fleet. Based on our expectation of modest volume growth, we expect to stay in a nine ship fleet this year. We are, again, the low to mid 90s, say, call it mid 90% utilization is our fleet plan deployment. If we do see a more robust growth environment, which of course would be welcome, we may have to break a 10th ship out. Our internal planning does not indicate that, but if it did happen, it would be a welcome development.

Okay, that's helpful. And then, lastly, as it pertains to logistics, with the increase in cash bonding requirements that are set to that effect later this year for truck brokers. I'm curious to know if you have seen any increased opportunities from smaller brokers? Maybe that can't afford or don't want to post that bond to partner with Matson and as an agent?

Yes. In fact, we have. You might know, Connor, that we have an in-house brokerage product and an agent model both, and we have seen an uptick in agency inquiries in becoming a sales agent for Matson. It is kind of baked into our thinking about resuming to normal margins within the logistics unit. Part of that is there's going to be a small factor of, as you say, mom and pop brokers not meeting the bonding requirements and coming across as a Matson sales agent in the next year.

Excellent. Thanks for the time.

You bet.

(Operator Instructions)

We do have a follow-up question from Kevin Sterling of BB&T Capital Markets.

Thank you. Matt and Joel, thanks for let me hop back on. Just one follow-up question. For SSAT, it looks like you expect some customer attrition in 2013. How should we think about that level? Is it going to be similar to what we saw in 2012?

Yes, so just to clarify. We could've made that a little clearer that the main customer losses occurred mid year 2012 as the Grand Alliance vessels moved from the joint venture's terminal in Seattle TA Team to a Tacoma terminal. It's not new customer losses we are expecting, but it's rather the full-year effective losses that occurred mid year in 2012. There are no new losses that are expected.

Okay, got you. Thanks so much, Matt.

Sure.

(Operator Instructions)

And showing no further questions, I'll turn the conference back over to Matt Cox for any closing remarks.

Okay, well, thank you, everybody. We'll look forward to catching up with you at the first quarter call. Aloha.

The conference has now included. Thank you for attending today's presentation. You may now disconnect.