Good day ladies and gentlemen and welcome to the Matson Fourth Quarter and Full Year 2014 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will follow at that time. [Operator instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Mr. Jerome Holland, Director Investor Relations. Please go ahead.

Thank you Nicolas, Aloha and welcome to our Fourth Quarter and Full Year 2014 Earnings Conference Call. Matt Cox, President and Chief Executive Officer, and Joel Wine, Senior Vice President and Chief Financial Officer are joining the call today. Slides from this presentation are available for download at our Web site www.matson.com under the investor relations’ tab. Before we begin, I would like 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 detailed under the caption risk factors on pages 8 to 14 of our 2013 Form 10K filed on February 28, 2014 and in our subsequent filings with the SEC. Please also note that the date of this conference call is February 24, 2015 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 made to certain non-GAAP numbers in this presentation, a reconciliation to GAAP numbers, and description of the calculation methodologies is provided in the addendum. With that, I’ll turn the call over to Matt.

Thanks Jerome and thanks to those on the call. 2014 was a good year for Matson punctuated by a strong fourth quarter. Performance improved in all our business lines fueled by demand for our expedited China service, modest market growth in Hawaii and Guam and continued improvements in logistics and SSAT. The sharp decline in bunker fuel prices also has a positive thing impact on our results as fuel surcharge collections started to outpace fuel expenditures late in the third quarter and continued into the fourth quarter. For the full-year we generated $165.7 million cash flow from operation of which 27.9 million was used for capital expenditures and the remainder of 137.8 million provided free cash flow per share of $3.18. Slide Four shows EBITDA and EPS for the fourth quarters of 2014 and 2013. You will recall that there in the of 2013 Matson incurred by $9.95 million litigation charge and the graph show that year-over-year comparisons to both actual results and results before litigation charge. EBITDA for the quarter increased to 66.4 million, more than $20 million higher than last year excluding the litigation charge. And EPS more than doubled driven by the operating factors that I mentioned a moment ago. On slide 5, our financial metrics for the full-year as shown. We generated $209 million in EBITDA, up 23.4% year-over-year and 16.6% excluding the impact of the litigation charge. Fully diluted earnings per share increased to $1.63, up 34.4% year-over-year and 17.3% excluding the impact of the litigation charge; all in all a good year for Matson. Turning now to our Hawaii service on slide 6, the Hawaii market showed continued growth in the fourth quarter, and our volume increased slightly by 1.2% as westbound gains were offset to some degree by modest competitive losses in the…

Thank you, Matt. As shown on Slide 13, Matson’s consolidated operating income for the quarter was 49.4 million, as compared to 17.9 million for the fourth quarter of 2013. Ocean Transportation operating income increased 30.3 million during the fourth quarter of 2014, compared with 2013 which was primarily due to higher freight rates in our expedited channel service, the timing of fuel surcharge collections and higher container yields in volume across our major trade lanes, partially offset by higher terminal handling expenses and higher general and administrative expenses, some of which were associated with our pending acquisition of Horizon's Alaska operations. In addition, the fourth quarter 2013 was negatively impacted by the $9.95 million litigation charge. Our SSAT JV contributed 1.2 million during the fourth quarter 2014 compared to 1.0 million in fourth quarter 2013. The slight year-over-year improvement was primarily due to increased lift volume. Logistics operating income for the fourth quarter increased by 1.2 million compared to the fourth quarter of 2013. The increase was primarily driven by continuing improvements in highway volumes and yield as well as warehouse operations partially offset by lower domestic intermodal yield. The next slide 14 shows our full year 2014 results. 2014 consolidated operating income was 140 million, an increase of 39.7 million from 2013. Both Ocean Transportation and Logistics showed strong year-over-year operating income improvement by 39% and 48% respectively. The increase at ocean transportation was primarily due to higher freight yields across major trade lanes, the timing of fuel surcharge collections, lower outside transportation costs, and improved results at SSAT; partially offset by higher terminal handling expenses and higher general and administrative expenses. In addition 2013 was negatively impacted by litigation charge. The company's SSAT joint venture contributed 6.6 million during 2014 compared to $2.0 million loss in 2013. The…

Thanks Joel. As we look to 2015, we are confident. We have bright prospects given by our pending acquisition of Horizon's Alaska operations, the sustained construction vitality at Hawaii and our industry-leading CLX service. Additionally improving economic activity should drive performance higher in logistics while SSAT offers as competitive advantages throughout our network. We will of course be focused on our pending Alaska acquisition and integration of those operations into our current configuration And while Alaska is an important entry point for us organizationally, we will continue to drive further operational excellence throughout the rest of our businesses. By doing so, we expect to continue to generate strong earnings and cash flow while maintaining a solid balance sheet and a strong dividend. We are ready and excited for the upcoming year. And with that I will turn the call back to the operator and ask for your questions

[Operator Instructions] Your first question comes from the line of Stephen O’Hara with Sidoti & Company, your line is now opened. Please proceed with your question. Stephen O’Hara: I guess, I was curious about the outlook for the Hawaii container volumes. It seems like this Pasha is kind of always expected to be on its way, but continually kind of maybe pushed to the right for some reason. I'm just wondering, based on your outlook it seems like maybe you're expecting some fairly decent growth in that Hawaii trade lane this year, given that other ship coming in. And then the other thing is, in terms of energy costs, and I know that you here have put a piece out in terms of what that could do to the Hawaiian economy, I'm just wondering what your thoughts are there potentially when you think there's some potential to see that impact?

As to your first question, Stephen, on Pasha the way we are thinking about that Pasha entry or the economic backdrop is we were expecting that Pasha vessel will add something like 5% to 10% of the deployed capacity in the Hawaii container market. We expect that capacity to be absorbed over the next few years as we see the Hawaii market grow over the next few years consistent with what you hear over in the other forecasts that are in place. And so what we would otherwise expect is to see some market growth and our percentage of that market growth stripped away as the additional capacity or growth in the market as absorbed over a couple of year period. So that's kind of the way we are thinking about it. And as to the energy cost, I think it's a good observation. We do expect that the lower energy costs given the geographical remoteness of Hawaii and the dependence of Hawaii on residual fuels and for their energy consumption, we'll have a significant benefit to the broader economy. We do expect that to further underpin and support the economic cycle, and is driving and continue to drive our view that we are in a relative sweet spot in terms of market growth for the overall economy. Stephen O’Hara: And maybe just a quick one in SSAT, I would think that you would have an improved year in 2015, what's kind of going over there in terms of the expectations?

Basically for 2014 we had a good year. SSAT has been impacted by the economic disruptions caused by the contract renewal. There is a backlog. All the terminal operators have been operating at less than full capacity our full effectiveness given the congestion in some of those. We expect that, as I mentioned earlier, that backlog to clear out in the next 2 to 4 months. Some of that additional volume will be helpful. But we do see a larger trend, we think towards individual shipping lines, not wanting to operate their own internals anymore as these alliances get preconfigured. And in a longer-term we are quite encouraged about our prospects for SSAT. In 2015 we'll expect some of that prospects to occur, and we expect SSAT to remain in the black but we're pretty encouraged longer-term by where SSAT is positioned.

Our next question comes from the line of Jack Atkins with Stephens, your line is now opened. Please proceed with your question.

Thanks for taking my question sent congratulations on a great fourth quarter. I guess just to make sure everyone is on the same page, just going to the guidance over the outlook for 2015. Joel, you talked about modestly operating income for 2015 in ocean transportation. Does that exclude the impact of the molasses spill or does that include the molasses spill headwinds, what we're talking about 2014 operating income that your comping against?

The 2015 excludes any impact from the molasses.

Right, I guess so what I'm talking about growth over 2014, does the 2014 number include the negative impact of molasses or your backing that out?

I see, yes. No, it's with respect to our actual recorded number for 2014.

Okay, that makes sense. And then Matt, when we think about the -- you talked about the competitive sort of losses on the eastbound Hawaii business. Could you talk about the growth rates that you're seeing, I know you'd probably don't give the specifics, but can you talk about conceptually the growth rate that you're seeing on your westbound traffic?

I would say, the way we are thinking about it generally, Jack is, 2% to 4% is considered relatively robust by Hawaii standards. And so I think that's probably a range that the market may grow at an of course we point out that our volumes may be flatter and especially once the Pasha vessel is deployed as that additional capacity is absorbed in a market that might otherwise be growing in that 2% to 4% range. That's kind of how we are thinking about it.

Okay, so but if the UHERO economic data that you laid out in the presentation sort of bears out in terms of GDP growth in Hawaii the construction activity, do you think will fall within that 2% to 4% range in terms of market growth? Or do you think we could maybe go above that top end of the range.

It's hard to say, our views have been somewhat tempered by the fact that it has happened later than we had earlier thought, and again within the historical contexts that 2% to 4%; 4% is a very robust growth pattern for Hawaii. So we are going to fall somewhere in that range. It may be that growth continues to accelerate, that will start in on closer to 2% range and then see it expand near towards the end of the year and into 2016 into a more robust 4% pattern. A little hard to tell at this stage, but we like the fundamentals and we like what we're seeing. But again earlier we've been a bit frustrated by just how this has translated into and growth into straight volumes.

Okay, that makes sense. And then last question from me and I'll turn it over. Could you give us an update on when would you be thinking about the closing of the Horizon lines transaction, I think maybe a year has been the way to think about it previously. And then we've seen certainly up and decline in energy prices, and that energy is a very important component of the northbound trade to Alaska, could you maybe give us a sense for if the change is sort of the earnings power of that Alaska business over time, just given where energy investment may go in the lower 48, I'm just curious about the impacts of Alaska as well.

From a timing perspective, no change, we are still seeing closing it sometime in 2015. We don't know when. There is a process with the DOJ review. So we don't have any update with respect to any specifics, but we do expect to close this year. And then your second question on energy and the impact to business, in the long term, as we said when we announced the transaction in November, we are very confident that this is a strong trade lane and it's a really strong cash flow generating franchise. And we are confident in the long-term prospects of the Alaska economy, and we think it's going to be a good place to be. Clearly though, it's an economy that is subject to the ups and downs of the energy market, and with energy prices down, all those being equal, that's a negative in the short-term. There's been very important positive elements in the Alaskan economy especially tax reform, that's a positive in short-term and longer-term. So we're still -- as we're seeing here today, with all the tapping in energy markets, we are still very confident in long-term cash flow prospects of the business that we are acquiring. And we feel very good about it as a long-term value creator for our company.

Okay, so just to sum that up though Joel, I mean it doesn't sound like just given all the puts and takes that your outlook for the earnings power in that business has changed relative to when you made the announcement in November?

That's correct.

Our next question comes from the line of Michael Weber with Wells Fargo, your line is now opened. Please proceed with your question.

I just wanted to a follow up on some of the transaction details and make sure to touch on those energy driven volume in a second but specifically around the component of the deal in which Horizon's Puerto Rican business is being shut down. I'm just curious as to whether there is an updated timeline around that and in terms of the cost borne by Matson and that it was a vague range put out by Horizon, something our $90 million-$95 million; whether or not that there was any material change from your end of equation, kinds of what your overall cost could be for that?

Mike, it's Joel. No update or no change, when we announced that in November we are sticking to those numbers. Horizon, we know is working hard and executing their plan to shut down and wind down that operations. Though we are getting regular updates as an SEC registered company, so we don't want to say anything in advance, but though we'll be saying we're continuing to work on that and there is no new updates or new news from us now. Regarding, we are still confident in those numbers we talked about a number from a cash cost perspective.

You've got a visibility into that or is there's just something that you're waiting for an update from them? I guess is there something that you guys get to look at in terms of what the shut time course will be?

Yes, we are operating under a company charity agreements with Horizon as any buyer is in a regular M&A transaction that was suppose to be before announcement and signing and after. So, yes, we do have confidential conversations with them. But in terms of public disclosure, though we are updating that as that any company would in their findings and what now, so what we're seeing today is we still feel good about everything we said in November. No change to those overall numbers that we put out.

Mike, this is Matt. Just one other context, just to be clear, that at the time of our announcement, Horizon also announced that it was intending to shut the business down which in fact it did around the end of the year. So the service itself has been discontinued as they said they would. And they are just in wind down mode now.

Okay, fair enough. I know, I think it was earlier this year, Horizon settled some litigation around the merger, and I believe the termination payment due to you all under certain events was trimmed, like it looks like by about $8 million. Just wanted know if there's any color around that and whether there is any other aspect of the merger agreement that would have been changed by the litigations around that?

No more color on that. It was part of the negotiations on settlement of some of the litigating firms that tend to litigate these kind of transactions. So we settled on that amount. We feel that was a good place to settle, and nothing else materially has changed in the contract. So it's part of the process.

And this is Matt, I would just add that we personally did not feel to agree with the assertions in the suite about our amounts. We paid too little money, or the breakup fee was too high. But it's a matter of not holding up the transaction. We thought it was prudent to just move ahead and agree to those amounts.

One more from me, just around the deal of Alaska before I go on to touch on Hawaii. I think it was Jack's question earlier around the Alaskan volumes and the relationship to the energy space and Joel you kind of talked to the fact that you still like the fundamentals of the trade lane, kind of aside from what's happening within the energy patch. Have you guys worked that, or can you give any color in terms of any sort of sensitivity on an historical basis to those volumes related to the energy space and how they are going to trend that you guys have kind of you looked at. Just maybe a bit more detail I guess around the idea that these fundamentals of those trade lanes are well insulated?

Yes Mike, this is Matt. Let me take a crack at it and then I'll turn it over to Joel answer part of it. If you look at Horizon's business, it has really in two or three segments. One and the largest is the broader economy, supporting the economy and the residents that live there for lifeline supplies, like Hawaii food stuffs and hardware items and building materials and those kind of things. And those tend to be less in the short run subject to large swings. Secondly, the other segment of the economy is the Department of Defense. The Department of Defense is really not directly related to energy prices. And in the third driver is, southbound, is the seafood industry and the catch. And so if you look at it, in those context, each of them will move somewhat independently if we were -- if Horizon was somebody that was moving large pieces of oil exploration equipments up to the north slope which they are not, then certainly we've probably more volatility in that segment. But it's also true as Joel earlier said that we don't believe that they will be completely immune because the state finances are dependent on royalty revenues and there's a refund to its residents and so on and so forth. So there will be some impact, but in some ways it's moderated by the segment of the market that Horizon lines participates in. Let Joel let you know if there's any other context.

The only thing I would add is, there is correlation with energy investing in activity with respect to the volumes that Horizon would see our we would see if we are on the business. So I don't want to be saying that there is not going to be an impact, but the key I think and you touched upon Mike in your question was what's the long-term trend? The long-term trend, it's actually been trending down for a number of years as the energy investment in Alaska itself has definitely trended down and the amount of energy coming from Alaska has trended down for quite a long time. So I guess what we want to articulate is that our investment in this company was not predicated upon some hot hockey stick return of significant higher investment in Alaska. So if that happens, such that doesn’t need to happen but this depends lot from the cash flow ROIC shorter value perspective. It's not like there was some big resurgence have lined up energy investing for 2015 – 2016 et cetera right around the corner that now has been pulled off the table, that wasn't the case and so that's what we meant to be saying that the long-term fundamentals are really in line with what our expectations were.

Okay, yes, and I again don't want to believe over the point here, but if I just think about and Matt and Joel -- just read both of your comments within the context of the initial guidance around growth in the first two years post closing and $0.35 to $0.45 accretion thereafter you guys were content that guidance is still accurate relative to what you're saying and what you're expecting from Alaska volumes?

Yes, that you're right Mike that continues to be our thinking.

Okay, fair enough. Just one more from me and I'll turn it over. Matt, you kind of already touched on it in a bit but I'm just curious with the Pasha Ship add and it seems like on Horizon for quite a while, and I'm just curious in terms of your thought process around what that could mean from a utilization and from a line perspective, how to that change as their footprint gets bigger kind of post deal? Is it kind of blend the impact of the individual ships? I'm just curious whether there's been any change in the way you guys think about that ship specifically entering the trade kind of in the pre and post kind of deal areas?

Yes Mike, it really hasn't changed our thinking. The way we were thinking about it is, you know Matson itself is operating nine vessel fleet. We are at 95% utilization and this capacity will be absorbed over the next few years, in a period of relatively healthy Hawaii growth period. That's really the way we're thinking of the market. That's kind of the way it begins and ends for us. That's the way we think it's going to play out.

[Operator Instructions] Our next question comes from the line of Kevin Sterling with BB&T Capital Markets. Your line is now opened. Please proceed with your question.

Actually this is William Horner on for Kevin. Joel if you could go back to the guidance you are talking about with 2015 more backend loaded, is the other two primary drivers to think about for that? Is this a more moderate kind of growth assumption for China in the back half of the year? And is the second part of it with the potential Pasha of your volume in Hawaii?

William, this is Matt. I will take a crack and then I will ask Joel to pick up the pieces when I go off striker, but basically it's a combination of things we talked about. So clearly in the Hawaii trade the Pasha vessel when it is introduced we do expect to flatten out our volume. We have seen that, as Joel mentioned, we have seen energy prices and the fall of energy prices that helped this out in the second half of 2014 are going to -- we lowered our fuel surcharge and we did get behind in early 2014 and cut off at the end of 2014 in terms of our expectations. We have since lowered our fuel surcharges four times since we've seen this dramatic reduction in bunker prices. I think, if you look at China we have just seen an extraordinary expansion of our premium relative to the market. Obviously it has been a great multi-year story for us, but some of the congestion that we saw around the contract renewal allowed in a very strong rate environment. But having said that, we do expect as we go to 2015, for us to sustain those average freight rates moving and volumes in China. So there's a lot of things that are moving around a lot of factors which really result in, just thinking our year of 2015 is going to be more frontloaded then rearloaded. And I don't know, did I miss anything, Joel?

Now, that's exactly right. If you just look at the third and fourth quarter of last year, on the operating income level it was $88.9 million out of 131.1 for the whole year. So we had half of the year that over two third, and all we're saying is we don't expect to see that much in the backend of this year and we did talk about this first quarter being substantially from last year, so it just means that backend year might be less favorable.

Right, so I mean, I know you can't get too much more granular with that but you said during Q3 and Q4, the second half '14, 88.9, roughly two thirds profitability. It's somewhere in that kind of ballpark maybe for the first half and then trailing into the second half of '15.

We weren't really breaking it down. We said for the year, we expect modestly and for the first quarter it should approach the levels we just achieved in the fourth quarter. So we having really broken it by half. So we have given you updated outlook for this quarter and for the year. The rest you have to extrapolate.

Okay, fair enough, I appreciate it. And going back to the West Coast port issues for a second, you can maybe talk about how over the past six months or so your customer concentration has shifted, if it has it all. And then secondly looking forward your normal operations are trying to resume in the deep bottleneckings occurring, what's your outlook for the service in the medium to long-term as in terms of balancing new customer interest with your legacy relationships?

It's a great question. I would say that we did not see a dramatic shift in our customer base. Historically, what we have tried to do is to balance our annual contracted freight with participating in the freight forwarders spot market. And we have done, historically we have tried to seek a balance between those two submarkets or subsegments of the transpacific market. On the margin we did see sports rates very high, and whatsoever we saw as probably a little bit of migration towards the spot market, but we did protect our existing customers who we had in many cases multi-your relationships with that needed protection during this period of significant disruption. And so we're obviously going to participate in these markets for the long haul but at the same time you're going to take advantage on the margin of the market that we find ourselves in. So I would expect that what we would see in China in 2015 is that the annual contracted freight rates for our customers to go up as we go through our May 1 renewals. And what we probably expect to see is that peak rates for the spot market to not achieve the same levels that we saw in the third and fourth quarters of 2014. But on balance the average rates should approximate. That's kind of the way we are thinking about it.

Okay, that's helpful, I appreciate that Matt. And the last one, and I will turn it over. I know you touched on this in your prepared remarks in last quarter, but in terms of the decline in auto volumes and the customer loss, can you refresh us on the traverse behind that? I think that it was a piece of low-margin business that you are locked away from, and I just want to make sure that I'm understanding that correctly?

Yes, you are. We participated in several submarkets for the autos, the military vehicles, we have privately owned vehicles, and we have manufactured cars, and did the manufactured car segments the auto manufacturers had done a good job of leveraging Matson and our other competitors during the renewal process over the years to a point where there was not a lot of profit left in those cars for us and we took the difficult, but that's our decision to separate ways with some of the manufacture red car business. And what happens for Matson is as you may know we move some of the cars and roll-on roll-off platform. Those were the most cost-effective way for us to do it. We also moved cars in a specially designed auto frames which are more expensive to use. And so what we were able to do was to part ways with some manufactured car business which is the lowest yielding revenue, and eliminate some of our highest cost -- by moving some of the highest cost ways and so at the end of the day there was not a lot of margin loss. And that's what we're trying to point out.

We have a follow-up question from the line of Jack Atkins with Stephens; your line is now opened. Please proceed with your follow-up.

Just a couple of quick follow-up questions here. In the press release you called out expenses in the fourth quarter related to the Horizon transaction, would you be willing to quantify that for us just so we sort of know what underlying operating performance was in the quarter?

It's below our thresholds, commenting on specifically Jack, so we are not quoting a number.

Okay, that's fine. And then Joel as far as the tax rate we should be assuming for 2015, do you have something we can plug-in for a model there?

13.5% is what we think our average should be over time, so that's still the number that we think is best to use.

Okay, and then the last question, just sort of going back to this, not I mean to believe over that, the issue by sort of the Long Beach LA condition, and part of that 2014 was tied to labor unrest, but the other part was tied to lack of chassis assets out there. So I know you guys own your own chassis, you point out that in the prepared comments. It feels like we're getting some resolution on the labor side but when do you think we're going to see some resolution to the chassis issue and does that give you guys the competitive advantage because you own your own equipment out there?

I think to answer your questions, I would say your last one first. We do think that Matson's operation and owning our own chassis allows us to have more control and the other thing is that of course the losses to do as part of that is we operate a wheeled operation. That is all of our loads are discharged directly on to wheels as opposed to discharging to bomb carts and put on the ground where there is a second flip. So we continue to believe that we will continue to enjoy a service advantage. We do think that eventually the chassis pools most of the international container lines in Southern California have divested of their chassis fleets and sold them into leasing pools. The hope, at least as we understand it from the international ocean carriers is that they have applied to the Federal Maritime Commission to allow for some cooperation between the pools, so that there are fewer chassis in the wrong place if you will, however the further interchanges are allowed to have those international terminals operate more effectively, acknowledging that they continue to be grounded operations and will never be as free-flowing as Matson's terminal. But I expect the congestion due to the lack of the arrangement for chassis pooling to take a number of months. I think eventually we will get better, but it's credited a while and the fact that they have divested from their chassis in the long run while it may have saved the money would further differentiate Matson's good service relative to their more commodity like service offerings that everyone else offers in Southern California.

And for the time we have no questions for today. I would like to turn the call back over to Matt Cox for closing remarks.

Okay, well thanks everybody for your interest and we look forward to catching up with you with the first quarter call, Aloha.