What changed in this filing

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Item 1. Business

2021-02-26 compared with 2020-02-28 · 166 added, 110 removed, 236 unchanged (54% of the section changed)

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Founded in 1882, MatNav provides a vital lifeline of ocean freight transportation services to the domestic non-contiguous economies of Hawaii, Alaska and Guam, and to other island economies in Micronesia.

MatNav also operates a premium, expedited service from China to Long Beach, California, and provides services to Okinawa, Japan and various islands in the South Pacific.

In addition, subsidiaries of MatNav provide container stevedoring, refrigerated cargo services, inland transportation and other terminal services for MatNav and other ocean carriers on the Hawaiian islands of Oahu, Hawaii, Maui and Kauai, and in the Alaska locations of Anchorage, Kodiak and Dutch Harbor.

MatNav also operates two premium, expedited services from China to Long Beach, California, and provides services to Okinawa, Japan and various islands in the South Pacific, and operates an international export service from Dutch Harbor to Asia.

In addition, subsidiaries of MatNav provide stevedoring, refrigerated cargo services, inland transportation and other terminal services for MatNav and other ocean carriers on the Hawaiian islands of Oahu, Hawaii, Maui and Kauai, and in the Alaska locations of Anchorage, Kodiak and Dutch Harbor.

Matson has a 35 percent ownership interest in SSA Terminals, LLC, a joint venture between Matson Ventures, Inc., a wholly-owned subsidiary of MatNav, and SSA Ventures, Inc., a subsidiary of Carrix, Inc.

SSAT provides terminal and stevedoring services to various carriers at eight terminal facilities on the U.S.

West Coast, including four facilities dedicated for MatNav’s use.

SSAT currently provides terminal and stevedoring services to various carriers at seven terminal facilities on the U.S.

West Coast, including three facilities dedicated for MatNav’s use.

Matson records its share of income from SSAT in costs and expenses in the Consolidated Statements of Income and Comprehensive Income, and within the Ocean Transportation segment due to the nature of SSAT’s operations.

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Matson’s Hawaii service provides ocean carriage (lift-on/lift-off, roll-on/roll-off and conventional services) between the ports of Long Beach and Oakland, California;

Seattle, Washington;

Tacoma, Washington;

and Honolulu, Hawaii.

Matson also operates a network of inter-island barges that provide connecting services from its hub at Honolulu, Oahu to other major Hawaii ports on the islands of Hawaii, Maui and Kauai.

Matson also operates a network of inter-island barges that provide connecting services from its hub at Honolulu to other major Hawaii ports on the islands of Hawaii, Maui and Kauai.

Matson is the largest carrier of ocean cargo between the U.S.

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Matson’s eastbound cargo from Hawaii includes automobiles, household goods, dry containers of mixed commodities and livestock.

The majority of Matson’s Hawaii service revenue is derived from the westbound carriage of containerized freight and automobiles.

The majority of Matson’s Hawaii service revenue is derived from the westbound carriage of containerized freight.

China Service:

Matson’s expedited China-Long Beach Express (“CLX”) is part of an integrated service that carries cargo from Long Beach, California to Honolulu, Hawaii, to Guam, and then to Okinawa, Japan.

The vessels continue to Ningbo and Shanghai, China, where they are loaded with cargo to be discharged primarily in Long Beach, California.

Matson’s expedited China-Long Beach Express (“CLX”) service is part of an integrated service that carries cargo from Long Beach, California to Honolulu, Hawaii, to Guam, and then to Okinawa, Japan.

The vessels continue to Ningbo and Shanghai, China, where they are loaded with cargo to be discharged primarily in Long Beach, California at a Matson-exclusive terminal, operated by SSAT.

These vessels also carry cargo destined for Hawaii which originated in Guam, Micronesia, Japan and China.

Matson provides container transshipment services from many locations in Asia including Hong Kong and Xiamen, China to the ports of Ningbo and Shanghai, China.

Eastbound cargo from China to Long Beach, California consists mainly of garments, footwear, e-commerce and other retail merchandise.

Westbound cargo to China and other destinations in Asia consists mainly of recycling materials.

Matson provides container transshipment services from many locations in Asia including Hong Kong and Xiamen, China to the U.S.

via the ports of Ningbo and Shanghai, China.

In May 2020, as a result of increased market demand, Matson launched its new China-Long Beach Express Plus (“CLX+”) service.

CLX+ vessels operate as a second weekly vessel from China to Long Beach, California, operating back-to-back with the CLX vessels, which together represent Matson’s expedited China service.

Eastbound cargo from China to Long Beach, California consists mainly of garments, e- commerce, consumer electronics, footwear and other merchandise.

On our CLX service, westbound cargo to China and other destinations in Asia consists mainly of recycling materials.

Guam Service:

Matson’s Guam service provides weekly carriage between the U.S West Coast and Guam, as part of its expedited CLX service.

Matson’s Guam service provides weekly carriage between the U.S West Coast and Guam, as part of its CLX service.

Matson also provides weekly connecting service from Guam to the Commonwealth of the Northern Mariana Islands.

Cargo destined to these markets is similar to that described in the “Hawaii Service” section above.

Cargo destined to these markets is similar to that described under “Hawaii Service” above.

Japan Service:

Matson’s Japan service provides carriage to the port of Naha in Okinawa, Japan, as part of its expedited CLX service.

Matson’s Japan service provides carriage to the port of Naha in Okinawa, Japan, as part of its CLX service.

This service carries mainly general sustenance cargo and household goods supporting the U.S.

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Matson also provides a barge service between Dutch Harbor and Akutan in Alaska, and transportation services to other locations in Alaska including the Kenai Peninsula, Fairbanks and the North Slope.

Northbound cargo to Alaska includes dry containers of mixed commodities, refrigerated commodities, packaged foods and beverages, retail merchandise, household goods and automobiles.

Northbound cargo to Alaska consists mainly of dry containers of mixed commodities, refrigerated commodities, packaged foods and beverages, retail merchandise, household goods and automobiles.

Southbound cargo from Alaska primarily consists of seafood, household goods and automobiles.

In September 2020, Matson launched its new Alaska-Asia Express (“AAX”) service that provides carriage of dry and frozen seafood from Dutch Harbor, Alaska to Ningbo and Shanghai, China.

The AAX service utilizes CLX+ vessels on their westbound trip to China.

Matson also provides transshipment services from Ningbo and Shanghai, China to other locations in Asia.

Other Alaska cargo may be shipped on the AAX service utilizing Matson’s Alaska vessels and transshipment services in Dutch Harbor.

South Pacific Service:

Matson’s New Zealand Express (“NZX”) service provides carriage of general sustenance cargo between Auckland, New Zealand and select islands in the South Pacific, including Fiji (Suva and Lautoka), Samoa (Apia), American Samoa (Pago Pago), the Cook Islands (Rarotonga and Aitutaki), Tonga (Nukualofa and Vava’u), and Niue.

Matson’s NZX service also provides transshipment services to the islands of Nauru and the Solomon Islands

Matson’s NZX service also provides transshipment services to the islands of Nauru and the Solomon Islands (Honiara).

Additionally, Matson provides slot charter arrangements for the transportation of cargo from major ports on the east coast of Australia to ports in the South Pacific islands.

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Cargo destined for other ports including Tonga (Nukualofa) and the Cook Islands (Rarotonga and Aitutaki) is then transshipped in Apia, Samoa to the NZX service for delivery to its final destination.

Northbound SPX cargo originating in the South Pacific is transshipped from the NZX with other carriers to the U.S.

Cargo destined for Hawaii or Seattle is further transshipped in Oakland, California for delivery to its final destination.

Northbound SPX cargo originating in the South Pacific is transshipped from the NZX service with other carriers to the U.S.

Cargo destined for Hawaii or Washington is further transshipped in Oakland, California for delivery to its final destination.

Terminal and Other Related Services:

Matson provides container stevedoring, refrigerated cargo services, inland transportation, container equipment maintenance and other terminal services (collectively, “terminal services”) at terminals located on the Hawaiian islands of Oahu, Hawaii, Maui and Kauai;

Matson provides stevedoring, refrigerated cargo services, inland transportation, container equipment maintenance and other terminal services (collectively, “terminal services”) at terminals located on the Hawaiian islands of Oahu, Hawaii, Maui and Kauai;

and in the Alaska terminal locations of Anchorage, Kodiak and Dutch Harbor.

SSAT provides terminal and stevedoring services to various carriers at eight terminal facilities on the U.S.

West Coast, including four facilities dedicated for MatNav’s use, in Long Beach and Oakland, California;

and in Seattle and Tacoma, Washington.

SSAT currently provides terminal and stevedoring services to various carriers at seven terminal facilities on the U.S.

West Coast, including three facilities dedicated for MatNav’s use, in Long Beach and Oakland, California;

and in Tacoma, Washington.

Matson utilizes the services of other third-party terminal operators at all of the other ports served by its vessels.

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The majority of Matson’s owned vessels are U.S.

flagged and Jones Act qualified vessels, and operate in the Hawaii, China, Guam, Japan, Micronesia and Alaska services.

Details of Matson’s active and reserve vessels, and vessel under construction as of December 31, 2019 are as follows:

flagged and Jones Act qualified vessels,

and operate in the Hawaii, China, Guam, Japan, Micronesia and Alaska services.

Details of Matson’s active and reserve vessels as of December 31, 2020 are as follows:

Usable Cargo Capacity

Name of Vessels

Diesel-Powered

Vessels-Owned:

KAIMANA HILA (3)

LURLINE (3)(8)

MANULANI (3)(8)

MAUNAWILI (3)(8)

MANUKAI (3)(8)

PFEIFFER (3)(8)

MATSON KODIAK (3)(8)

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KAMOKUIKI (4)

IMUA II (5)(10)

MAUNA LOA (3)

ISLAND CHIEF (5)

Vessels-Chartered:

CO OSAKA (5)(9)

NAVIOS FELICITAS (5)(9)

NAVIOS AMARANTH (5)(9)

NAVIOS VERANO (5)(9)

THANASIS (5)(9)

BOMAR BELLINI (5)(9)

MAUNALEI (3)(8)

Barges-Owned:

HALEAKALA (3)(6)

ILIULIUK BAY (3)(6)

WAIALEALE (3)(7)

Vessel under Construction

MATSONIA (3)(9)

(1) Excludes inactive vessels ( SS Lihue , SS Kauai and SS Matsonia ).

Barges-Chartered:

MAUNA LOA (3)

ILIULIUK BAY (3)(6)

(1) Twenty-foot Equivalent Units (“TEU”) is a standard measure of cargo volume correlated to a standard 20-foot dry cargo container.

(2) Vessel Design Speed may vary from the operating speed of the vessel.

flagged and Jones Act qualified vessel or barge.

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(7) Roll-on/roll-off barge.

(8) Commenced active service in January 2020.

(9) Expected delivery date during the fourth quarter of 2020.

(10) Vessel is sub-chartered to another shipping company commencing January 2020.

(8) Vessel installed with exhaust gas cleaning systems (commonly referred to as “scrubbers”).

(9) Vessels used in the CLX+ service are chartered and may be replaced by other similar vessels.

Fleet Renewal Program:

Matson has invested approximately $0.9 billion in the construction of four new vessels.

Matson has completed its investment of $1,024 million in the construction of four new vessels, including owner’s items and capitalized interest.

The two Aloha Class containerships, Daniel K.

Inouye and Kaimana Hila , commenced active service in November 2018 and April 2019, respectively.

The first of two Kanaloa Class combination container and roll-on/roll-off vessels, Lurline , commenced active service in January 2020.

Delivery of the second Kanaloa Class vessel, Matsonia , is expected during the fourth quarter of 2020.

With the delivery of Lurline , Matson returned to a nine-ship deployment serving the Hawaii market commencing in early January of 2020.

The two Kanaloa Class combination container and roll-on/roll-off vessels, Lurline and Matsonia commenced active service in January 2020 and December 2020, respectively.

Vessel Emission Regulations:

Being a leader in environmental stewardship is one of Matson’s core values.

Matson vessels transit through some of the most environmentally sensitive areas in the United States including the Hawaiian Islands and the coasts of California, Oregon, Washington and Alaska.

Matson’s vessels transit through some of the most environmentally sensitive areas in the United States including the Hawaiian Islands and the coasts of California, Oregon, Washington and Alaska.

Matson is focused in particular on reducing transportation emissions, including carbon dioxide, nitrous oxide, particulate matter and sulfur dioxide through improvements in vessel fuel consumption and the development of more fuel-efficient transportation solutions.

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and over 100 other countries are signatories, is a specialized agency of the United Nations that sets international environmental standards applicable to vessels operating under the flag of any signatory country.

Effective January 1, 2020, the IMO has imposed regulations that generally require all vessels to burn fuel oil with a maximum sulfur content of ≤0.5 percent (“IMO 2020”).

There are three main options for a vessel to meet the new IMO 2020 requirements:

(1) burn low sulfur fuel oil (“LSFO”), (2) install exhaust gas cleaning systems (commonly referred to as “scrubbers”) on vessels to purify high sulfur fuel oil (“HSFO”), or (3) switch to lower emission fuels such as liquefied natural gas (“LNG”), which requires converting existing vessels or constructing new vessels with LNG-compatible engines and fuel tanks.

Effective January 1, 2020, the IMO imposed regulations that generally require all vessels to burn fuel oil with a maximum sulfur content of ≤0.5 percent (“IMO 2020”).

There are three main options for a vessel to meet the IMO 2020 requirements:

(1) burn low sulfur fuel oil (“LSFO”), (2) install exhaust gas cleaning systems (commonly referred to as “scrubbers”) on vessels to reduce sulfur emissions from high sulfur fuel oil (“HSFO”), or (3) switch to lower emission fuels such as liquefied natural gas (“LNG”), which requires converting existing vessels or constructing new vessels with LNG-compatible engines and fuel tanks.

With respect to North America, all waters, with certain limited exceptions, within 200 nautical miles of U.S.

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Since January 1, 2015, U.S.

Environmental Protection Agency regulations have reduced the fuel oil maximum sulfur content in designated ECAs to ≤0.1 percent.

All of Matson’s vessels in the Alaska and Hawaii services are compliant with IMO 2020 and ECA regulations and can use LSFO.

In the Alaska service, Matson has installed scrubbers on its three diesel-powered vessels to allow them to use HSFO and still comply with IMO 2020 and ECA regulations.

In the Hawaii service, Matson has announced plans to install scrubbers on six diesel-powered vessels to allow them to use HSFO and comply with IMO 2020 and ECA regulations.

Installation of scrubbers on the first two of these vessels was completed during 2019, with the remaining four expected to be completed during 2020.

Environmental Protection Agency regulations have reduced the fuel oil maximum sulfur content in designated ECAs to ≤0.1 percent or the equivalent emissions by the use of scrubbers.

In addition, since August 1, 2012, the California Air Resource Board and U.S.

Environmental Protection Agency under the Vessel General Permit regulations have reduced the fuel oil maximum sulfur content to ≤0.1 percent within 24 miles of the California coastline and within Puget Sound.

All of Matson’s vessels in the Alaska and Hawaii services are operating in compliance with IMO 2020 and ECA regulations as applicable, and can use LSFO.

In the Alaska and Hawaii services, Matson installed scrubbers on nine diesel-powered vessels to allow them to use HSFO and still comply with IMO 2020 and ECA regulations.

Matson also maintains two reserve vessels which may operate as dry-dock relief or for emergency activation purposes under an approved ECA permit enabling the use of fuel oil with a maximum sulfur content of ≤0.5 percent within the North America ECA.

Matson’s new Aloha and Kanaloa Class vessels burn compliant LSFO.

These new vessels are also equipped with dual-fuel engines and can be converted to run on LNG.

All of Matson’s other vessels will use LSFO to meet IMO 2020 and ECA emission standards.

Hawaii Terminal Expansion and Modernization Program:

During 2020, Matson expects to complete the first phase of renovating its terminal facility at Sand Island, Honolulu, Hawaii.

The first phase involves the investment of approximately $60 million and includes the installation of three new 65 long-ton capacity gantry cranes and modifications to upgrade three existing cranes.

The first phase also includes upgrades in electrical infrastructure and other modifications to the Sand Island terminal.

Additional phases are expected to be completed from 2021 through 2024 as part of a broader terminal expansion and modernization program at Matson’s Sand Island terminal.

All of Matson’s other vessels use LSFO to meet IMO 2020 and ECA emission standards.

Hawaii Terminal Modernization and Expansion Program:

Matson has completed the first phase of modernizing and renovating its terminal facility at Sand Island, Honolulu, Hawaii, an investment of approximately $60 million.

In 2020, Matson completed the installation of three new 65 long- ton capacity gantry cranes, upgraded and renovated three existing cranes, demolished four outdated cranes, and installed upgrades to the electrical infrastructure at the terminal.

As part of the second phase, Matson expects to install a new redundant main switchgear, complete the augmentation of its existing backup power generators, install new fuel storage tanks and a battery energy storage system, and perform other upgrades at the terminal.

Matson expects to begin the second phase during the second half of 2021 and to complete it within two years.

The final phase is expected to begin in 2024 as part of a broader terminal expansion and modernization program at the terminal.

Ocean Transportation Equipment:

As a complement to its fleet of vessels, Matson has a variety of equipment including cranes, containers and chassis which represents an investment of approximately $0.5 billion as of December 31, 2019.

As a complement to its fleet of vessels, Matson owns a variety of equipment including cranes, terminal equipment, containers and chassis, which represents an investment of approximately $0.6 billion as of December 31, 2020.

Matson also leases containers, chassis and other equipment under various operating lease agreements.

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Major components of Matson’s Ocean Transportation operating costs are as follows:

Direct Cargo Expense includes terminal handling costs, purchased outside transportation and other related costs.

Direct Cargo Expense includes terminal handling costs including labor, purchased outside transportation and other related costs.

Vessel Operating Expense includes crew wages and related costs;

fuel consumption, pilot, tugs and line related costs;

fuel, pilots, tugs and line related costs;

vessel charter expenses;

and other vessel related expenses.

and other vessel operating related expenses.

Matson purchases fuel oil, lubricants and gasoline for its operations and also pays fuel-related surcharges to other third party transportation providers.

Operating Overhead includes equipment repair costs, equipment operating lease and repositioning expenses, vessel repair and maintenance costs, dry-docking amortization, insurance, port engineers and other maintenance costs, and other vessel and shoreside related overhead.

Operating Overhead includes equipment repair costs, equipment lease and repositioning expenses, vessel repair and maintenance costs, depreciation and dry-docking amortization, insurance, port engineers and other maintenance costs, and other vessel and shoreside related overhead.

The following is a summary of major competitors in Matson’s Ocean Transportation segment:

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Matson’s Hawaii service has one major U.S.

flag Jones Act ocean carrier competitor, Pasha Hawaii (“Pasha”), which operates container and roll-on/roll-off services between the ports of Long Beach, Oakland and San Diego, California to Hawaii.

There also are two U.S.

flag Jones Act barge operators, Aloha Marine Lines and Sause Brothers, which offer barge service between the Pacific Northwest and Hawaii.

Foreign-flag vessels carrying cargo to Hawaii from non-U.S.

flagged Jones Act competitor, Pasha Hawaii (“Pasha”), which operates container and roll-on/roll-off services between the ports of Long Beach, Oakland and San Diego, California to Hawaii.

flagged Jones Act barge operator, Aloha Marine Lines, also offers barge service between the Pacific Northwest and Hawaii.

Foreign-flagged vessels carrying cargo to Hawaii from non-U.S.

locations also provide alternatives for companies shipping to Hawaii.

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however, cargo volume has been limited primarily due to the cost of airfreight transportation.

Matson vessels are operated on schedules that provide customers, shippers and consignees fixed day-of-the-week sailings from the U.S.

West Coast as well as fixed day-of-the-week arrivals in Hawaii.

Matson offers five westbound departures per week, though this amount may be adjusted according to market conditions.

One of Matson’s westbound sailings each week continues from Honolulu on to Guam, Japan and China.

Matson offers two weekly eastbound departures from Honolulu to the U.S.

These sailings call on three U.S.

West Coast ports each week.

Matson’s frequent sailings permit customers to reduce inventory carrying costs.

Matson also competes by offering a more comprehensive service to customers, including:

service to and from the three largest U.S.

Matson operates three strings of vessels to Hawaii.

These strings provide customers an industry-leading five departures from ports on the U.S.

West Coast to Hawaii every week – two each from Long Beach and Oakland, California and one from Tacoma, Washington.

Each of these strings operates on a fixed day-of-the-week schedule.

One of the vessel strings continues from Honolulu on to Guam, Japan and China before returning to Long Beach.

The remaining two strings offer eastbound Hawaii shippers twice weekly departures from Honolulu to the U.S.

Mainland, providing customers service to the same three U.S.

West Coast ports.

Matson’s frequent sailings and punctuality permit customers to reduce inventory carrying costs.

Matson also competes by offering the most comprehensive service to customers, including:

the only container service to and from the three largest U.S.

West Coast ports;

the most efficient terminal network on the U.S.

West Coast provided by SSAT;

a dedicated inter-island barge network;

a dedicated inter-island barge network which is integrated with Matson’s line haul schedule;

weekly roll-on roll-off service from Long Beach and Oakland;

a world-class customer service team;

and its efficiency and experience in handling cargo of all types.

and efficiency and experience in handling cargo of all types.

Alaska Service:

Matson’s Alaska service has one major U.S.

flag Jones Act competitor, Totem Ocean Trailer Express, Inc., which operates a roll-on/roll off service between Tacoma, Washington and Anchorage, Alaska.

flagged Jones Act competitor, Totem Ocean Trailer Express, Inc., which operates a roll-on/roll off service between Tacoma, Washington and Anchorage, Alaska.

There are also two U.S.

flag Jones Act barge operators, Alaska Marine Lines, which mainly provides services from Seattle, Washington to the ports of Anchorage and Dutch Harbor, and other locations in Alaska, and Samson Tug & Barge, which mainly serves Western Alaska and other locations.

flagged Jones Act barge operators, Alaska Marine Lines, which mainly provides services from Seattle, Washington to the ports of Anchorage and Dutch Harbor, and other locations in Alaska, and Samson Tug & Barge, which mainly serves Western Alaska and other locations.

The barge operators have historically shipped lower value commodities that can accommodate a longer transit time, as well as construction materials and other cargo that are not conducive to movement in containers.

Foreign-flag vessels provide alternatives for companies shipping cargo (mainly seafood) from the Alaska ports of Kodiak and Dutch Harbor.

Foreign-flagged vessels provide alternatives for companies shipping cargo (mainly seafood) from the Alaska ports of Kodiak and Dutch Harbor.

Matson’s AAX service has two major competitors, CMA CGM and Maersk Lines, which provide services between Dutch Harbor, Alaska and Asia.

Matson offers customers twice weekly scheduled service from Tacoma, Washington to Anchorage and Kodiak, Alaska and weekly service to Dutch Harbor, Alaska.

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China Service:

Major competitors to Matson’s China service include large international carriers such as ONE (formerly “K” Line, NYK Line and MOL), Maersk, CMA CGM and its subsidiary APL, Evergreen, COSCO and SM Line.

Matson competes by offering a fast and reliable service from the ports of Ningbo and Shanghai in China to Long Beach, California, providing fixed day arrivals and next-day cargo availability.

Matson’s service is further differentiated by offering a dedicated marine terminal in Long Beach, California operated by SSAT, an off-dock container yard providing fast truck turn times, dedicated chassis, one-stop intermodal connections, and providing world-class customer service.

Major competitors to Matson’s China service include large international carriers such as ONE (formerly “K” Line, NYK Line and MOL), Maersk, CMA CGM, Evergreen, COSCO, and ZIM.

Matson’s China service competes by offering fast and reliable service from the ports of Ningbo and Shanghai in China to Long Beach, California, and providing fixed day arrivals and next-day cargo availability.

Matson’s service is further differentiated by SSAT’s best-in-class stevedoring services, access to Shippers Transport Express and off-dock container

yards enabling fast truck turn times, Matson-dedicated equipment including chassis to speed cargo availability, one-stop intermodal connections, and providing world-class customer service.

Matson has offices located in Hong Kong, Shenzhen, Xiamen, Ningbo and Shanghai, and has contracted with terminal operators in Ningbo and Shanghai.

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flagged container feeder service connecting the U.S.

West Coast to Guam and Saipan, via transshipments over Yokohama, Japan.

West Coast to Guam and Saipan, via transshipments primarily over Busan, South Korea.

Waterman operates a roll-on/roll-off service, which periodically calls at Guam.

There are also several foreign carriers, including APL, that call at Guam from foreign origin ports.

There are also several foreign carriers, including CMA CGM, that call at Guam from foreign origin ports.

Japan Service:

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As a result, earnings tend to follow a similar pattern, offset by periodic vessel dry-docking and other episodic cost factors, which can lead to earnings variability.

In addition, in the China trade, volume is driven primarily by U.S.

consumer demand for goods during key retail selling seasons while freight rates are impacted mainly by macro supply and demand variables.

In addition, in the China trade, volume is typically driven primarily by U.S.

consumer demand for goods during key retail selling seasons.

Freight rates are impacted mainly by macro supply and demand variables.

Maritime Laws and the Jones Act :

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West Coast, Hawaii and Alaska on foreign-built or foreign-documented vessels is prohibited.

During the years ended December 31, 2019, 2018 and 2017, approximately 72 percent of Matson’s Ocean Transportation revenues came from the Hawaii and Alaska trades that were subject to the Jones Act.

During the years ended December 31, 2020, 2019 and 2018, approximately 62 percent, 72 percent and 72 percent, respectively, of Matson’s Ocean Transportation revenues came from the Hawaii and Alaska trades that were subject to the Jones Act.

Matson’s Hawaii and Alaska trade routes are included within the non-contiguous Jones Act market.

Hawaii, as an island economy, and Alaska due to its geographical location, are both dependent on ocean transportation.

The commerce of both Hawaii, as an island economy, and Alaska, due to its geographical location, are dependent on ocean transportation.

The Jones Act ensures frequent, reliable, roundtrip service to these locations.

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Matson is a member of the American Maritime Partnership (“AMP”) which supports the retention of the Jones Act and similar cabotage laws.

The Jones Act has broad support from both houses of Congress.

The Jones Act has broad support from both houses of Congress and the Executive Branch.

Matson believes that the ongoing war on terrorism and geopolitical environment have further solidified political support for U.S.

flagged vessels

because a vital and dedicated U.S.

flagged vessels because a vital and dedicated U.S.

merchant marine is a cornerstone for a strong homeland defense, as well as a critical source of trained U.S.

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AMP seeks to inform elected officials and the public about the economic, national security, commercial, safety and environmental benefits of the Jones Act and similar cabotage laws.

Repeal of the Jones Act would allow foreign-flag vessel operators that do not have to abide by all U.S.

Repeal of the Jones Act would allow foreign-flagged vessel operators that do not have to abide by all U.S.

laws and regulations to sail between U.S.

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Any changes in such laws may have an impact on the services provided by Matson in those regions.

For a discussion of the risks arising from the Jones Act and other regulations, see Part I, Item 1A of this Form 10-K.

Rate Regulations and Fuel-Related Surcharges:

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Matson’s Ocean Transportation services engaged in U.S.-foreign commerce are subject to the jurisdiction of the Federal Maritime Commission (“FMC”).

The FMC is a federal independent regulatory agency that is responsible for the regulation of international oceanborne transportation to and from the U.S.

The FMC is a federal independent regulatory agency that is responsible for the regulation of international ocean-borne transportation to and from the U.S.

Matson applies a fuel-related surcharge rate to its Ocean Transportation customers.

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Other Environmental Regulations:

In addition to the vessel emission regulations discussed above, Matson’s operations are required to comply with other environmental regulations and requirements including the O il Pollution Act of 1990, the Comprehensive Environmental Response Compensation & Liability Act of 1980, the Rivers and Harbors Act of 1899, the Clean Water Act, the Invasive Species Act and the Clean Air Act.

The Company actively monitors its operations to ensure compliance with these and other regulations.

For more information on Matson’s environmental stewardship initiatives, including its environmental goals, see https://www.matson.com/corporate/about_us/environmental.html .

The contents of our website are not incorporated by reference into this Form 10-K.

In addition to the vessel emission regulations discussed above, Matson’s operations are required to comply with other environmental regulations and requirements including the Oil Pollution Act of 1990, the Comprehensive Environmental Response Compensation & Liability Act of 1980, the Rivers and Harbors Act of 1899, the Clean Water Act, the Invasive Species Act and the Clean Air Act.

Matson is also subject to state regulations affecting terminal and vessel emissions, such as the requirement to shut down vessel auxiliary engines while at berth at California ports and switch to electrical power.

The Company actively monitors its operations to address compliance with these and other regulations.

For more information on Matson’s environmental stewardship initiatives, including its environmental goals, see Matson’s Sustainability Report and other information available at www.matson.com/sustainability.

The website is provided for convenience only, and the contents of our website do not constitute a part of and are not incorporated by reference into this Form 10-K.

LOGISTICS SEGMENT

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Matson Logistics provides intermodal rail, highway, and other third-party logistics services for North American customers and international ocean carrier customers, including MatNav.

Matson Logistics strives to reduce transportation costs for its customers through volume purchases of rail, motor carrier and ocean transportation services, augmented by services such as shipment tracking and tracing, and single-vendor invoicing.

Matson Logistics strives to reduce transportation costs for its customers through volume purchases of rail, motor carrier and ocean

transportation services, augmented by services such as shipment tracking and tracing, and single-vendor invoicing.

Matson Logistics operates customer service centers and has sales offices throughout North America.

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Matson Logistics provides LCL consolidation and freight forwarding services primarily to the Alaska market through its wholly owned subsidiary, Span Intermediate, LLC (“Span Alaska”).

Span Alaska’s business aggregates LCL freight at its cross-dock facility in Auburn, Washington for consolidation and shipment to a network of cross-dock facilities in Alaska.

Span Alaska’s business aggregates LCL freight at its cross-dock facility in Auburn, Washington for consolidation and shipment to its service center in Anchorage and a network of other facilities in Alaska.

Span Alaska also provides trucking services to its Auburn cross-dock facility and from its Alaska based cross-dock facilities to final customer destinations in Alaska.

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Matson Logistics provides customers with a variety of logistics services including purchase order management, customs brokerage, LCL and full container load NVOCC freight forwarding services.

Matson Logistics operates a customer service center in Shanghai, China to support its supply chain operations in North America, China and other locations.

Investment in Anchorage Service Center:

During the fourth quarter of 2019, Span Alaska completed the construction of a new 54,000 square foot cross-dock facility (“Anchorage Service Center”) to consolidate its Anchorage operations that previously operated from two smaller leased facilities.

The Anchorage Service Center is expected to improve Span Alaska’s operating efficiency while providing additional capacity for long-term growth.

Matson Logistics has supply chain operations in North America, China and other locations.

Operating Costs:

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The industry is highly fragmented and, therefore, competition varies by geography and areas of service.

Matson Logistics’ transportation brokerage services competes most directly with C.H.

Matson Logistics’ transportation brokerage services compete most directly with C.H.

Robinson Worldwide, the Hub Group, XPO and other freight brokers and intermodal marketing companies, and asset-invested market leaders such as J.B.

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For additional information on Logistics revenues for the years ended December 31, 2020, 2019 and 2018, see Note 2 to the Consolidated Financial Statements in Item 8 of Part II below.

Matson Logistics’ services are generally not significantly impacted by seasonality factors, except for its freight forwarding service to Alaska which is affected by the winter weather, the cyclical nature of the oil and construction industries, and the seasonal nature of the tourism industry.

In general, Matson Logistics’ services are not significantly impacted by seasonality factors, with the exception of its freight forwarding service to Alaska which may be affected by winter weather and the seasonal nature of the tourism industry.

EMPLOYEES AND LABOR RELATIONS

As of December 31, 2019, Matson and its subsidiaries had 1,988 employees, of which 794 employees were covered by collective bargaining agreements with shoreside unions.

These numbers do not include billets on vessels discussed below, employees of SSAT, or other non-employees, such as agents, temporary workers and contractors.

Matson’s fleet of active vessels require 298 billets to operate these vessels.

Human Capital Strategy:

In support of Matson’s vision to be a great place to work for all employees, the Company focuses on a variety of human capital programs that have been developed to attract, retain and motivate its employee workforce.

As a company that

operates in various global locations, the Company’s human capital programs are designed to reflect the unique market practices in each geographic location.

The Company’s success depends on employing a diverse, talented and engaged workforce that reflects its local communities, supports an environment of high standards and performance, and thrives in the Company’s collaborative and respectful culture.

During 2020, Matson had 4,149 employees worldwide, of which 128 employees were based in international locations and 2,953 employees were covered by collective bargaining agreements with unions.

These numbers include seagoing personnel who rotate through billets (as described below) and temporary employees, but do not include employees of SSAT or other non-employee affiliates such as agents and contractors.

In prior years, Matson reported the number of regular shoreside employees only and excluded seagoing personnel and temporary employees.

The composition of Matson’s workforce by geography is as follows:

Matson’s fleet of active vessels requires 317 billets to operate.

Each billet corresponds to a position on a vessel that typically is filled by two or more employees because seagoing personnel rotate between active sea-duty and time ashore.

These amounts exclude billets related to Matson’s foreign flagged chartered vessels where the vessel owner is responsible for its seagoing personnel.

Matson’s vessel management services also employed personnel in 28 billets to manage three vessels.

Matson’s vessel management services also employed personnel in 32 billets to manage three U.S.

government vessels.

Diversity, Equity and Inclusion:

For many years, Matson has been committed to improving diversity, providing equal pay for equal work and creating an inclusive culture.

According to the U.S.

Bureau of Labor Statistics, traditionally the shipping industry's workforce has been predominately represented by white males.

While Matson’s workforce is representative of many of the communities where it operates, the Company believes it can do more to change the status quo within the Company and industry.

The composition of Matson’s domestic shoreside workforce by gender and race in 2020 is as follows (data for seagoing personnel is not available to the Company):

The composition of management positions within Matson’s domestic shoreside workforce by gender and race in 2020 is as follows (data for seagoing personnel is not available to the Company):

In 2020, the Company continued to advance many of its diversity, equity and inclusion efforts.

This includes continuing its efforts to analyze pay among various employee groups to confirm pay equity across the Company.

Externally, the Company is supporting programs intended to help build a diverse talent pool for Matson and its industry.

In 2020, the Company committed $100,000 toward creation of new Matson scholarships to be offered in conjunction with

approximately 15 higher education institutions and maritime academies in its communities with the goal of increasing diversity among those pursuing studies in transportation and logistics.

Separately, the Company has committed more than $200,000 to expand its paid internship program with the goal of increasing exposure to the Company and industry among a diverse group of students in its various regional locations.

Total Rewards Programs:

Matson provides a highly competitive and balanced total rewards program designed to attract, retain and motivate its employees .

While factors such as job, location and business unit ultimately determine which plans an employee may be eligible for participation, the Company’s total rewards offering includes market competitive base salaries, cash and equity incentives, recognition awards, health and welfare benefits, and employee and employer funded retirement plans.

The Company believes that management level positions should have a portion of pay aligned with its short- and long-term business objectives.

Accordingly, the Company’s total rewards program contains several pay-for-performance components tied to individual, business unit and company performance, as well as Matson stock price performance.

Succession and Career Planning:

Matson’s workforce is characterized by uniquely skilled, long-tenured employees.

To create career pathways for future leaders while planning for the loss of retiring employees, the Company takes a proactive approach to succession and career planning.

The Company focuses on providing the next generation of promising talent with the tools they need to build their own careers at Matson.

In 2019 and 2020, 40 percent and 53 percent of open positions, respectively, were filled through internal promotions.

The Company also provided more than 2,250 hours of employee training and development, while giving regular performance reviews to its non-union workforce.

For more information on Matson’s human capital programs, please see our Sustainability Report which is available at www.matson.com/sustainability .

This website is provided for convenience only, and the contents of our website do not constitute a part of and are not incorporated by reference into this Form 10-K.

Bargaining Agreements:

Matson’s shoreside and seagoing employees are represented by a variety of unions.

As shown in the chart below, union employees comprise 71% of Matson’s global workforce.

Matson has collective bargaining agreements with these unions that expire at various dates in the future.

While Matson believes that it will be able to renegotiate these collective bargaining agreements with its various unions as they expire without any significant impact on its operations, no assurance can be given that such agreements will be reached without slow-downs, strikes, lockouts or other disruptions that may adversely impact Matson’s operations.

For a discussion of the risks arising from the negotiation of collective bargaining agreements, see Part I, Item 1A of this Form 10-K.

Additionally, Matson and SSAT are members of the Pacific Maritime Association (“PMA”), which on behalf of its members negotiates collective bargaining agreements with the International Longshore and Warehouse Union (“ILWU”) on the U.S.

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The address of Matson’s Internet website is www.matson.com.

The contents of our website are not incorporated by reference into this Form 10-K.

This website is provided for convenience only, and the contents of our website do not constitute a part of and are not incorporated by reference into this Form 10-K.

The SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding Matson and other issuers that file electronically with the SEC.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business