C. Terminal Cash Flow - Base Case
Exhibit 4 presents the projected operating results of T18, before income driven taxes and operator corporate overhead, assuming typical revenues and expenses, as discussed above (Base Case). Exhibit 4 shows that T18 is forecast to achieve positive net cash flow in all years of the Forecast Period. Beginning in 2002, the Terminal 18 Lease Rent is forecast to increase substantially (beginning February 25, 2002) to reflect the increased acreage of the completed terminal. Revenue increases as well, reflecting the addition of the Matson volume beginning once the expansion is complete. The overall result is a slight drop in annual net cash flow. In the year 2003, T18 annual net cash flow, before income driven taxes and operator corporate overhead, is forecast to remain at approximately the same level as in the year 2002, reflecting another scheduled increase in the Terminal 18 Lease Rent as outlined in the Terminal 18 Lease. In each year following the date of Project Completion, total container volume continues to grow, resulting in increased total revenues and improved net cash flow,
Exhibit 4: Terminal Cash Flow - Base Case
Pro forma Analysis of T18 Operations
Calendar year ending December 31
(in thousands)
The forecasts presented in this exhibit were prepared using information from the sources indicated and assumption provided by,or reviewed with and agreed to by,Port management,as described in the accompanying text inevitably,some of the assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore,there are likely to be differences between the forecast and actual results,and those differences may be material.
(a) Before income driven taxes and operator corporate overhead.
D. Sensitivity Analysis
The operating results for a terminal are highly dependent upon many factors, including (1) container volumes, (2) throughput revenue ($/container), and (3) operating expenses. While operating results will vary with any of these factors, throughput volume is the major driver of financial results for a container terminal. In order to evaluate the response of operations results to variations in throughput volume, a sensitivity analysis was conducted.
Since the primary source of revenue to an operator is throughput, any changes in container volume will result in a direct impact to the revenues. The pro forma analysis presented in Exhibit 4 reflects the Base Forecast for throughput volume presented in Table 12 . The Base Forecast is based on assumed growth of existing customers and the addition of Matson upon achieving Project Completion, and does not include the incremental addition of a potential new customer.
In order to assess the sensitivity of operating results to variations in throughput volume, pro forma analyses were prepared based on both the High Forecast and Low Forecast described in Section V.D.3 and presented in Table 12 . All other variables were held constant for the sensitivity analyses.
As discussed in Section V.D.3, the Low Forecast incorporates slightly lower growth rate and market share than the Base Forecast. It also excludes the additional volume from Matson, as there is some possibility that the Lessee could choose to continue to handle Matson volume at T25. Exhibit 5 presents the forecast results assuming the Low Container Forecast. As expected, net cash flows, before income driven taxes and operator corporate overhead are lower than under the Base Case, and in 2003, net cash flow is reduced to a negative level. However the results indicate a return to positive net cash flow the following year, and in all years of the Forecast Period,cumulative net cash flow is maintained.
