Matson said Tuesday that its earnings in the fourth quarter were reduced because of a $9.95 million charge to reflect a proposed settlement in a whistleblower lawsuit.
The lawsuit, filed in 2010, accused carriers and transportation service providers or forwarders of violations of the federal False Claims Act because ocean freight fuel surcharges were imposed on portions of military household good shipments that moved in part by rail or truck.
Pasha Hawaii and forwarders were later dismissed from the lawsuit. The two remaining defendants, Matson and Horizon Lines, participated in a mediation earlier this month.
Matson said it reached full settlement of all plaintiffs' claims during the non-binding mediation, and that the settlement was approved by the Matson’s board of directors on Feb. 23.
Matson said, “The settlement is contingent upon approval of the United States government, and the dismissal of the case with prejudice by the district court.”
While Horizon participated in the mediation, it has not announced any settlement. Its last public statement on the case was in November when it filed its last quarterly earnings report with the Securities and Exchange Commission. Horizon said it had "filed responsive pleadings and intends to vigorously defend against the allegations set forth in the complaint.”
Matt Cox, Matson's president and chief executive officer, said the settlement and charge “while a very difficult decision, was the most prudent path forward.”
Cox said, "Excluding the litigation charge, our operating income results were in line with our outlook, as we had another solid quarter of core operational performance driven by continued stability in our Ocean Transportation business and marked improvement in our Logistics unit warehouse operations.”
After accounting for the litigation charge, Matson reported a profit of $7.3 million in the fourth quarter of 2013, compared to $15.6 million in the fourth quarter of 2012. Consolidated revenue for the fourth quarter 2013 was $410.9 million, compared with $398.3 million reported for the fourth quarter 2012.
For the full year, Matson had a profit of $53.7 million in 2013, compared with $45.9 million in 2012. Revenue in 2013 was $1.64 billion, compared with $1.56 billion in 2012.
In 2013, Cox said Matson “achieved improved operating results, attributable to Hawaii freight volume growth in the first half of the year, continued strong demand
for our expedited China service, and improvements in Logistics operations.
"Looking out to 2014, we expect Ocean Transportation operating income to be near or slightly above 2013 levels and Logistics operating income to show modest improvement,” Cox continued. "We expect our core businesses to continue to generate significant cash flow to support our dividend, fund construction of new vessels and pursue attractive growth opportunities. We remain focused on continued operational excellence, maintaining a strong, flexible balance sheet, and growing shareholder value through strong returns from the capital we put to use. We are ready for the year ahead."
Matson said, "Despite the lull in container volume that has continued into early 2014, the company believes that the Hawaii economy is in a multi-year recovery and is anticipating modest market growth in the trade in 2014.
It noted that containership capacity is projected to increase in the second half of 2014 when Pasha is expected to launch an additional, new vessel into the trade.
Matson said it "anticipates a slight year over year increase in its Hawaii container volume for 2014.
"In the China trade, freight rates eroded in the fourth quarter 2013, a reflection of the ongoing vessel overcapacity in the market and the international carriers' inability to sustain general rate increases. In 2014, overcapacity is expected to continue, with vessel deliveries outpacing demand growth, leading to modest freight rate erosion. However, the company expects its ships will remain at high utilization levels, and its service will continue to realize a premium to market rates for its expedited service in 2014."
In Guam, Matson said, container volume contracted in the fourth quarter due to general market conditions. Muted growth is expected in Guam for 2014, and therefore, the company expects its volume to be relatively flat compared to 2013, assuming no new competitors enter the market."