What changed in this filing

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Item 1. Financial Statements

2021-07-30 compared with 2021-04-28 · 104 added, 70 removed, 375 unchanged (32% of the section changed)

3 unchanged sentences

Three Months Ended

Six Months Ended

(In millions, except per share amounts)

61 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

(In millions)

24 unchanged sentences

Cash Flows From Financing Activities:

Proceeds from issuance of debt

Repayments of debt

2 unchanged sentences

Payment of financing costs

Proceeds from issuance of capital stock

Dividends paid

1 unchanged sentence

Net cash used in financing activities

Net Decrease in Cash, Cash Equivalents and Restricted Cash

Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash

Cash, Cash Equivalents and Restricted Cash, Beginning of the Period

6 unchanged sentences

Interest paid, net of capitalized interest

Income tax (refunds) and payments, net

Income tax payments and (refunds), net

Non-cash Information:

Capital expenditures included in accounts payable, accruals and other liabilities

Accrued dividends

See Notes to Condensed Consolidated Financial Statements.

10 unchanged sentences

Balance at March 31, 2021

Other comprehensive income, net of tax

Share-based compensation

Shares issued, net of shares withheld for employee taxes

Dividends ( $ 0.23 per share and $ 0.30 per share)

Balance at June 30, 2021

Comprehensive

8 unchanged sentences

Balance at March 31, 2020

Other comprehensive loss, net of tax

Share-based compensation

Shares issued, net of shares withheld for employee taxes

Dividends ( $ 0.22 per share and $ 0.23 per share)

Balance at June 30, 2020

See Notes to Condensed Consolidated Financial Statements.

8 unchanged sentences

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 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.

MatNav also operates 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.

5 unchanged sentences

(“Matson Logistics”), a wholly-owned subsidiary of MatNav.

Established in 1987, Matson Logistics is an asset-light business that provides a variety of logistics services to its customers including:

Matson Logistics, established in 1987, extends the geographic reach of Matson’s transportation network throughout North America, and is an asset-light business that provides a variety of logistics services to its customers including:

(i) multimodal transportation brokerage of domestic and international rail intermodal services, long-haul and regional highway trucking services, specialized hauling, flat-bed and project services, less-than-truckload services, and expedited freight services (collectively, “Transportation Brokerage” services);

13 unchanged sentences

Fiscal Period:

The period end for Matson covered by this report is March 31, 2021.

The period end for MatNav and its subsidiaries covered by this report occurred on the last Friday in March, or March 26, 2021.

The period end for Matson covered by this report is June 30, 2021.

The period end for MatNav and its subsidiaries covered by this report occurred on the last Friday in June, or June 25, 2021.

Significant Accounting Policies:

19 unchanged sentences

The following is a description of the Company’s principal revenue generating activities by segment, and the Company’s revenue recognition policy for each activity for the periods presented:

Three Months Ended

Six Months Ended

Ocean Transportation (in millions) (1)

11 unchanged sentences

Related costs are recognized as incurred.

Three Months Ended

Six Months Ended

Logistics (in millions) (1)

8 unchanged sentences

Labor, agent commissions, and other operating costs are expensed as incurred.

The Company reports revenue on a gross basis as the Company serves as the principal in these transactions because it is responsible for fulfilling the contractual arrangements with the customer and has latitude in establishing prices.

The Company reports revenue on a gross basis as

the Company serves as the principal in these transactions because it is responsible for fulfilling the contractual arrangements with the customer and has latitude in establishing prices.

◾ Warehousing and distribution services revenue consist of amounts billed to customers for storage, handling, and value-added packaging of customer merchandise.

Storage revenue is recognized in the month the service is

provided to the customer.

Storage revenue is recognized in the month the service is provided to the customer.

Storage related costs are recognized as incurred.

8 unchanged sentences

The Company’s Capital Construction Fund (“CCF”) is described in Note 7 to the Consolidated Financial Statements included in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

As of March 31, 2021 and December 31, 2020, $ 1.7 million of eligible accounts receivable was assigned to the CCF.

As of June 30, 2021 and December 31, 2020, $ 1.7 million of eligible accounts receivable was assigned to the CCF.

Due to the nature of the assignment of eligible accounts receivable into the CCF, such assigned amounts are classified as part of accounts receivable in the Condensed Consolidated Balance Sheets.

Cash on deposit in the CCF is held in a money market account and classified as a long-term asset in the Company’s Condensed Consolidated Balance Sheets, as the Company intends to use qualified cash withdrawals to fund long-term investment in the construction of new vessels.

The Company made no qualifying cash deposits into or withdrawals from the CCF during the three months ended March 31, 2021.

The balance of cash on deposit at March 31, 2021 and December 31, 2020 was nominal.

During the three and six months ended June 30, 2021, the Company deposited $ 31.2 million into the CCF and made qualifying cash withdrawals of $ 31.2 million from the CCF.

The balance of cash on deposit at June 30, 2021 and December 31, 2020 was nominal.

Investment in SSAT:

Condensed income statement information for SSAT for the three months ended March 31, 2021 and 2020 consisted of the following:

Condensed income statement information for SSAT for the three and six months ended June 30, 2021 and 2020 consisted of the following:

Three Months Ended

Six Months Ended

(In millions)

6 unchanged sentences

(2) The Company records its share of net income from SSAT in costs and expenses in the Condensed Consolidated Statement of Income and Comprehensive Income due to the nature of SSAT’s operations.

The Company’s investment in SSAT was $ 47.5 million and $ 48.7 million at March 31, 2021 and December 31, 2020, respectively.

The Company’s investment in SSAT was $ 50.1 million and $ 48.7 million at June 30, 2021 and December 31, 2020, respectively.

Contingencies:

4 unchanged sentences

The Company and its subsidiaries are parties to, or may be contingently liable in connection with other legal actions arising in the normal course of their businesses, the outcomes of which, in the opinion of management after consultation with counsel, would not have a material effect on the Company’s financial condition, results of operations, or cash flows.

The Company’s first quarter 2021 cash dividend of $ 0.23 per share was paid on March 4, 2021.

On April 22, 2021, the Company’s Board of Directors declared a cash dividend of $ 0.23 per share payable on June 3, 2021.

The Company’s second quarter 2021 cash dividend of $ 0.23 per share was paid on June 3, 2021.

On June 24, 2021, the Company’s Board of Directors declared a cash dividend of $ 0.30 per share payable on September 2, 2021.

REPORTABLE SEGMENTS

6 unchanged sentences

The Company’s Ocean Transportation segment provides ocean transportation services to the Logistics segment, and the Logistics segment provides logistics services to the Ocean Transportation segment in certain transactions.

Accordingly, inter-segment revenue of $ 33.7 million and $ 19.4 million for the three months ended March 31, 2021 and 2020, respectively, have been eliminated from operating revenues in the table below.

Reportable segment financial information for the three months ended March 31, 2021 and 2020 are as follows:

Accordingly, inter-segment revenue of $ 49.0 million and $ 24.2 million for the three months ended June 30, 2021 and 2020, and $ 82.7 million and $ 43.6 million for the six months ended June 30, 2021 and 2020, respectively, have been eliminated from operating revenues in the table below.

Reportable segment financial information for the three and six months ended June 30, 2021 and 2020 are as follows:

Three Months Ended

Six Months Ended

(In millions)

9 unchanged sentences

Income before Income Taxes

(1) Ocean Transportation operating revenue excludes inter-segment revenue of $ 15.1 million and $ 9.4 million for the three months ended March 31, 2021 and 2020, respectively.

(2) Logistics operating revenue excludes inter-segment revenue of $ 18.6 million and $ 10.0 million for the three months ended March 31, 2021 and 2020, respectively.

(3) Ocean Transportation segment information includes $ 9.2 million and $ 4.0 million of equity in income from the Company’s equity investment in SSAT for the three months ended March 31, 2021 and 2020, respectively.

(1) Ocean Transportation operating revenue excludes inter-segment revenue of $ 18.7 million and $ 11.9 million for the three months ended June 30, 2021 and 2020, and $ 33.8 million and $ 21.3 million for the six months ended June 30, 2021 and 2020, respectively.

(2) Logistics operating revenue excludes inter-segment revenue of $ 30.3 million and $ 12.3 million for the three months ended June 30, 2021 and 2020, and $ 48.9 million and $ 22.3 million for the six months ended June 30, 2021 and 2020, respectively.

(3) Ocean Transportation segment information includes $ 12.8 million and $ 3.7 million of equity in income from the Company’s equity investment in SSAT for the three months ended June 30, 2021 and 2020, and $ 22.0 million and $ 7.7 million for the six months ended June 30, 2021 and 2020, respectively.

PROPERTY AND EQUIPMENT

Property and equipment as of March 31, 2021 and December 31, 2020 consisted of the following:

Property and equipment as of June 30, 2021 and December 31, 2020 consisted of the following:

(In millions)

6 unchanged sentences

GOODWILL AND INTANGIBLES

Goodwill by segment as of March 31, 2021 and December 31, 2020 consisted of the following:

Goodwill by segment as of June 30, 2021 and December 31, 2020 consisted of the following:

(In millions)

Transportation

Intangible assets as of March 31, 2021 and December 31, 2020 consisted of the following:

Intangible assets as of June 30, 2021 and December 31, 2020 consisted of the following:

(In millions)

8 unchanged sentences

The Company considered the general economic and market conditions due to the COVID-19 pandemic and its impact on the performance of each of the Company’s reporting units.

Based on the Company’s assessment of its market capitalization, future forecasts and the amount of excess of fair value over the carrying value of the reporting units in the 2020 annual impairment tests, the Company concluded that an impairment triggering event did not occur during the quarter ended March 31, 2021.

The Company will monitor events and changes in circumstances that could negatively impact the key assumptions used in determining the fair value, including the amount and timing of estimated future cash flows generated by the reporting units, long-term growth and discount rates, comparable company market valuations, and industry and economic trends.

It is possible that future changes in such circumstances, including a more prolonged and/or severe COVID-19 pandemic, or future changes in the assumptions and estimates used in assessing the fair value of the reporting unit, could require the Company to record a non-cash impairment charge.

As of March 31, 2021 and December 31, 2020, the Company’s debt consisted of the following:

As of June 30, 2021 and December 31, 2020, the Company’s debt consisted of the following:

(In millions)

15 unchanged sentences

Total Long-term Debt, net of deferred loan fees

Revolving Credit Facility Amendment:

On March 31, 2021, the Company entered into the Second Amended and Restated Credit Agreement (the “Credit Agreement”).

The Credit Agreement extends the maturity date to March 31, 2026, and retains the existing committed aggregate borrowings of up to $ 650 million, with an uncommitted option to increase the aggregate borrowings by up to $ 250 million.

The Credit Agreement amended certain covenants and other terms set forth in the prior credit agreement, including (i) amending the pricing grid to provide for pricing ranging from, at the Company’s election, LIBOR plus a margin between 1.00 percent and 1.75 percent depending on the Company’s consolidated net leverage ratio, or base rate plus a margin between 0.00 percent and 0.75 percent depending on the Company’s consolidated net leverage ratio;

(ii) reducing the maximum permitted consolidated leverage ratio to 3.50 to 1.0, with an option for a one-time increase to 4.0 to 1.0 in connection with a material acquisition;

and (iii) removing certain limitations on stock redemptions and repurchases, sale leaseback transactions and asset sales, and the incurrence of priority debt.

The Company may prepay any amounts outstanding under the Credit Agreement without premium or penalty.

The Credit Agreement contains affirmative, negative and financial covenants customary for financings of this type, including, among other things, limitations on certain other indebtedness, loans and investments, liens, mergers, asset sales, and transactions with affiliates.

The Credit Agreement also contains customary events of default.

The Company paid fees of approximately $ 2.2 million in connection with the closing of the Credit Agreement which is included in other long-term assets in the Condensed Consolidated Balance Sheet as of March 31, 2021.

As of March 31, 2021, the Company had $ 616.9 million of remaining borrowing availability under the revolving credit facility.

The Company used $ 8.1 million of the sublimit for letters of credit outstanding as of March 31, 2021.

Based on the Company’s consolidated net leverage ratio, which stipulates borrowing margins, the interest rate applicable to revolving credit facility was approximately 1.58 percent at March 31, 2021.

Except as described below, the Company’s debt is described in Note 8 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and in Note 6 to the Condensed Consolidated Financial Statements included in the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2021.

Revolving Credit Facility:

As of June 30, 2021, the Company had $ 641.9 million of remaining borrowing availability under the revolving credit facility.

The Company used $ 8.1 million of the sublimit for letters of credit outstanding as of June 30, 2021.

Although there were no outstanding borrowings under the facility at June 30, 2021, based on the Company’s consolidated net leverage ratio, which stipulates borrowing margins, the interest rate applicable to the revolving credit facility would have been approximately 1.10 percent at June 30, 2021.

Borrowings under the revolving credit facility are classified as long-term debt in the Condensed Consolidated Balance Sheets, as principal payments are not required until the maturity date.

Private Placement Term Loans Amendments:

On March 31, 2021, the Company and the holders of the private placement term loans entered into amendments (collectively, the “2021 Note Amendments”) to each of (i) the Third Amended and Restated Note Purchase Agreement and Private Shelf Agreement dated as of September 14, 2016, among the Company and the holders of the notes issued thereunder, as amended;

and (ii) the Note Purchase Agreement dated December 21, 2016 among the Company and the holders of the notes issued thereunder, in each case as amended prior to such date.

The 2021 Note Amendments amended certain covenants and other terms, including (i) eliminating the Leverage Relief Period and associated quarterly interest enhancement payments;

(ii) removing certain other fees and increases to interest rate;

(iii) reducing the maximum permitted consolidated leverage ratio to 3.50 to 1.0, with an option for a one-time increase to 4.0 to 1.0 in connection with a material acquisition, with potential interest enhancement payments if leverage is over 3.25 to 1.0;

and (iv) removing certain additional limitations on stock redemptions and repurchases, sale leaseback transactions and asset sales, and the incurrence of priority debt.

The Company paid fees of approximately $ 0.8 million related to the 2021 Note Amendments which is included in deferred loan fees in debt in the Condensed Consolidated Balance Sheet as of March 31, 2021.

Debt Security and Guarantees:

All of the debt of the Company and MatNav, including related guarantees, as of March 31, 2021 was unsecured, except for the Title XI debt.

All of the debt of the Company and MatNav, including related guarantees, as of June 30, 2021 was unsecured, except for the Title XI debt.

Debt Maturities:

As of March 31, 2021, debt maturities during the next five years and thereafter are as follows:

As of June 30, 2021, debt maturities during the next five years and thereafter are as follows:

Year (in millions)

March 31, 2021

June 30, 2021

Remainder of 2021

1 unchanged sentence

Components of Lease Cost:

Components of lease cost recorded in the Company’s Condensed Consolidated Statement of Income and Comprehensive Income for the three months ended March 31, 2021 and 2020 consisted of the following:

Components of lease cost recorded in the Company’s Condensed Consolidated Statement of Income and Comprehensive Income for the three and six months ended June 30, 2021 and 2020 consisted of the following:

Three Months Ended

Six Months Ended

(In millions)

4 unchanged sentences

Sale and Leaseback of Equipment:

There were no sale and leaseback transactions during the three months ended March 31, 2021.

On March 25, 2020, the Company entered into an agreement for the sale and leaseback of multiple tranches of chassis and container equipment.

There were no sale and leaseback transactions during the three and six months ended June 30, 2021.

During the three months ended March 31, 2020, the Company entered into an agreement for the sale and leaseback of multiple tranches of chassis and container equipment.

The net proceeds from the sales were $ 14.3 million, and the gain on the disposal of the equipment was not material to the Company’s Condensed Consolidated Financial Statements.

The Company subsequently leased back the equipment under a five-year operating lease agreement that includes purchase options exercisable at fair market value.

There were no sale and leaseback transactions during the three months ended June 30, 2020.

Termination of Vessel Charter:

On July 7, 2021, a wholly-owned subsidiary of the Company entered into an agreement to terminate a Bareboat Charter Agreement (the “Charter”) on the vessel, Maunalei, for approximately $ 95.8 million thereby acquiring the vessel.

The Company paid the termination payment with a combination of cash on hand and borrowing on the revolving credit facility.

Concurrent with the termination of the Charter, the Company was released from obligations under a Guaranty related to the Charter.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Changes in accumulated other comprehensive income (loss) by component, net of tax, for the three months ended March 31, 2021 are as follows:

Changes in accumulated other comprehensive income (loss) by component, net of tax, for the six months ended June 30, 2021 consisted of the following:

Comprehensive

6 unchanged sentences

Balance at March 31, 2021

Changes in accumulated other comprehensive income (loss) by component, net of tax, for the three months ended March 31, 2020 consisted of the following:

Amortization of prior service cost

Amortization of net loss

Foreign currency exchange

Other adjustments

Balance at June 30, 2021

Changes in accumulated other comprehensive income (loss) by component, net of tax, for the six months ended June 30, 2020 consisted of the following:

Comprehensive

7 unchanged sentences

Balance at March 31, 2020

Amortization of prior service cost

Amortization of net loss

Foreign currency exchange

Other adjustments

Balance at June 30, 2020

FAIR VALUE OF FINANCIAL INSTRUMENTS

7 unchanged sentences

The fair value of fixed rate debt is calculated based upon interest rates available for debt with terms and maturities similar to the Company’s existing debt arrangements.

The carrying value and fair value of the Company’s financial instruments as of March 31, 2021 and December 31, 2020 are as follows:

The carrying value and fair value of the Company’s financial instruments as of June 30, 2021 and December 31, 2020 are as follows:

Quoted Prices in

4 unchanged sentences

(In millions)

March 31, 2021

Fair Value Measurements at March 31, 2021

June 30, 2021

Fair Value Measurements at June 30, 2021

Cash and cash equivalents

12 unchanged sentences

The calculation of diluted earnings per share includes the dilutive effect of unexercised non-qualified stock options and non-vested restricted stock units.

The computation of weighted average common shares outstanding excluded a nominal amount of anti-dilutive non-qualified stock options for each period ended March 31, 2021 and 2020.

The denominators used to compute basic and diluted earnings per share for the three months ended March 31, 2021 and 2020 are as follows:

Three Months Ended March 31, 2021

Three Months Ended March 31, 2020

The computation of weighted average common shares outstanding excluded a nominal amount of anti-dilutive non-qualified stock options for each period ended June 30, 2021 and 2020.

The computations for basic and diluted earnings per share for the three and six months ended June 30, 2021 and 2020 are as follows:

Three Months Ended June 30, 2021

Six Months Ended June 30, 2021

(In millions, except per share amounts)

Effect of Dilutive Securities

Three Months Ended June 30, 2020

Six Months Ended June 30, 2020

(In millions, except per share amounts)

Effect of Dilutive Securities

SHARE-BASED COMPENSATION

During the three months ended March 31, 2021, the Company granted approximately 225,600 in total of time-based restricted stock units and performance-based shares to certain of its employees at a weighted average grant date fair value of $ 68.41 .

Total share-based compensation cost recognized in the Condensed Consolidated Statements of Income and Comprehensive Income as a component of selling, general and administrative expenses was $ 4.8 million and $ 3.1 million for the three months ended March 31, 2021 and 2020, respectively.

Total unrecognized compensation cost related to unvested share-based compensation arrangements was $ 35.7 million at March 31, 2021, and is expected to be recognized over a weighted average period of approximately 2.3 years.

During the three and six months ended June 30, 2021, the Company granted approximately 11,900 and 237,500 in total of time-based restricted stock units and performance-based shares to certain of its employees at a weighted average grant date fair value of $ 67.47 and $ 68.36 , respectively.

Total share-based compensation cost recognized in the Condensed Consolidated Statements of Income and Comprehensive Income as a component of selling, general and administrative expenses was $ 4.7 million and $ 3.0 million for the three months ended June 30, 2021 and 2020, and $ 9.5 million and $ 6.1 million for the six months ended June 30, 2021 and 2020, respectively.

Total unrecognized compensation cost related to unvested share-based compensation arrangements was $ 30.6 million at June 30, 2021, and is expected to be recognized over a weighted average period of approximately 1.7 years.

Total unrecognized compensation cost may be adjusted for any unearned performance shares or forfeited shares.

1 unchanged sentence

The Company’s pension and post-retirement plans are described in Note 11 to the Consolidated Financial Statements included in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 .

Components of net periodic benefit cost and other amounts recognized in Other Comprehensive Income (Loss) for the qualified pension plans and the post-retirement benefit plans for the three months ended March 31, 2021 and 2020 consisted of the following:

Components of net periodic benefit cost and other amounts recognized in Other Comprehensive Income (Loss) for the qualified pension plans and the post-retirement benefit plans for the three and six months ended June 30, 2021 and 2020 consisted of the following:

Pension Benefits

Post-retirement Benefits

Three Months Ended March 31,

Three Months Ended June 30,

(In millions)

5 unchanged sentences

Net periodic benefit cost (benefit)

Pension Benefits

Post-retirement Benefits

Six Months Ended June 30,

(In millions)

Components of net periodic benefit cost (benefit):

Interest cost

Expected return on plan assets

Amortization of net loss

Amortization of prior service credit

Net periodic benefit cost (benefit)

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-Q

Item 1. Financial Statements