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SHARE-BASED AWARDS | 12 Months Ended
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Dec. 31, 2013
SHARE-BASED AWARDS |
SHARE-BASED AWARDS | 12. SHARE-BASED AWARDS 2007 Incentive Compensation Plan: The 2007 Incentive Compensation Plan (the “2007 Plan”) serves as a successor to the 1998 Stock Option/Stock Incentive Plan, the 1998 Non-Employee Director Stock Option Plan, the Restricted Stock Bonus Plan and the Non-Employee Director Stock Retainer Plan (the “Predecessor Plans”). Under the 2007 Plan, approximately 2.2 million shares of common stock were initially reserved for issuance. On January 28, 2010, the Board of Directors adopted an amended and restated 2007 Plan, which, among other things, authorized the issuance of an additional approximately 2.2 million shares of stock under the 2007 Plan. Shareholders approved the amended 2007 Plan at the 2010 Annual Meeting of Shareholders. In connection with the Separation, on June 29, 2012, each stock option held by a Matson employee was converted into an adjusted Matson stock option. The exercise prices of the adjusted Matson stock options and the number of shares subject to each such stock option reflects a mechanism that was intended to preserve the intrinsic value of the original stock option. The modification of the awards did not result in any additional stock compensation expense to be recorded upon Separation. The resulting Matson stock options are subject to substantially the same terms, vesting conditions and other restrictions, if any, that were applicable to the Former Parent Company stock options immediately prior to the Separation. Also, in connection with the Separation, any unvested restricted stock units (“RSUs”) granted to Matson employees were converted into Matson RSUs. The RSU grants were converted in a manner that was intended to preserve the fair market value of the awards. The resulting Matson RSU grants are subject to substantially the same terms, vesting conditions and other restrictions, if any, that were applicable to the grants immediately prior to the Separation. After the Separation was completed, approximately 8.7 million shares of the Company’s common stock were reserved for issuance under the plans, with approximately 6.4 million shares remaining as available for future issuance under all equity compensation plans (excluding 1.2 million shares to be issued upon exercise of outstanding options, warrants and rights as of December 31, 2013. The 2007 Plan consists of four separate incentive compensation programs: (i) the discretionary grant program, (ii) the stock issuance program, (iii) the incentive bonus program and (iv) the automatic grant program for the non-employee members of the Company’s Board of Directors. Share-based compensation is generally awarded under three of the four programs, as more fully described below. Discretionary Grant Program — Under the Discretionary Grant Program, stock options may be granted with an exercise price no less than 100 percent of the fair market value (defined as the closing market price) of the Company’s common stock on the date of the grant. Options generally become exercisable ratably over three years and have a maximum contractual term of 10 years. Stock Issuance Program — Under the Stock Issuance Program, share s of common stock or restricted stock units may be granted. Time-based equity awards vest ratably over three years. Provided certain three-year performance targets are achieved, performance-based equity awards vest on the three-year anniversary date of the grant. During the first quarter of 2013 the Company granted new performance-based awards tied to the Company’s average annual return on invested capital (which the Company refers to as “average ROIC”), as measured over the three-year period beginning January 1, 2013 and ending December 31, 2015. Performance Share awards for the senior leadership team will also be modified based on total shareholder return performance (which the Company refers to as the “TSR modifier”) measured over the same three-year period. The relative TSR is based on the Company’s total shareholder return over the three-year measurement period relative to the shareholder return over the same period for the companies comprising the S&P Transportation Select Industry Index and S&P MidCap 400 Index (with each index weighted 50%). The service-vesting provisions of each performance based award require the award recipient to remain in continuous service with the Company until the end of the three-year measurement period, subject to certain exceptions due to retirement, disability, or death, in order to vest in any shares that become issuable on the basis of the performance-vesting criteria. Automatic Grant Program — The Automatic Grant Program supersedes and replaces the Company’s 1998 Non-Employee Director Stock Option Plan and the Non-Employee Director Stock Retainer Plan. At each annual shareholder meeting, non-employee directors will receive an award of restricted stock units that entitle the holder to an equivalent number of shares of common stock upon vesting. Awards of restricted stock units granted under the program generally vest ratably over three years. The shares of common stock authorized to be issued under the 2007 Plan may be drawn from shares of the Company’s authorized but unissued common stock or from shares of its common stock that the Company acquires, including shares purchased on the open market or in private transactions. Predecessor Plans: Adopted in 1998, the Company’s 1998 Stock Option/Stock Incentive Plan (“1998 Plan”) provided for the issuance of non-qualified stock options and common stock to employees of the Company. Under the 1998 Plan, option prices could not be less than the fair market value of the Company’s common stock on the dates of grant and the options became exercisable over periods determined, at the dates of grant, by the Compensation Committee of the Former Parent Company Board of Directors that administer the plan. Generally, options vested ratably over three years and expired ten years from the date of grant. Payments for options exercised may be made in cash or in shares of the Company’s stock. If an option to purchase shares is exercised within five years of the date of grant and if payment is made in shares of the Company’s stock, the option holder may receive, under a reload feature, a new stock option grant for such number of shares as is equal to the number surrendered, with an option price not less than the greater of the fair market value of the Company’s stock on the date of exercise or one and one-half times the original option price. The 1998 Plan also permitted the issuance of shares of the Company’s common stock. Generally, grants of time-based, non-vested stock vested ratably over three years and performance-based, non-vested stock vested in one year, provided that certain performance targets were achieved. The 1998 Plan was superseded by the 2007 Plan, and no further grants have been or will be made under the 1998 Plan. Director Stock Option Plans: The 1998 Non-Employee Director Stock Option Plan (“1998 Director Plan”) was superseded by the 2007 Plan. Under the 1998 Director Plan, each non-employee Director of the Company, elected at an Annual Meeting of Shareholders, was automatically granted, on the date of each such Annual Meeting, an option to purchase 8,000 shares of the Company’s common stock at the fair market value of the shares on the date of grant. Each option to purchase shares generally became exercisable ratably over three years following the date granted. The Company estimates the grant-date fair value of its stock options using a Black-Scholes-Merton option-pricing model. The weighted average grant-date fair values, prior to the Separation, of the options granted during 2012, and 2011, were $10.74 and $8.92, respectively, per option. No options were granted after the Separation; therefore all weighted average assumptions provided in the table below are prior to the Separation:
|  | Years Ended December 31, |
|  | 2012 |  | 2011 |
Expected volatility (1) |  | 31.8 | % | 29.2 | %
Expected term (in years) (2) |  | 6.1 |  | 6.0 |
Risk-free interest rate (3) |  | 1.2 | % | 2.3 | %
Dividend yield (4) |  | 2.7 | % | 3.1 | %
(1) Expected volatility was primarily determined using the historical volatility of the Company’s common stock over the expected term, but the Company could also consider future events and other factors that it reasonably concluded marketplace participants might consider. (2) The expected term of the awards represents expectations of future employee exercise and post-vesting termination behavior and was primarily based on historical experience. The Company analyzed various groups of employees and considers expected or unusual trends that would likely affect this assumption. (3) The risk free interest rate was based on U.S. Government treasury yields for periods equal to the expected term of the option on the grant date. (4) The expected dividend yield was based on the Company’s current and historical dividend policy. Application of alternative assumptions could produce significantly different estimates of the fair value of share-based compensation and, consequently, significantly affect the related amounts recognized in the consolidated statements of income and comprehensive income. Activity in the Company’s stock option plans for the year ended December 31, 2013, was as follows (in thousands, except weighted average exercise price and weighted average contractual life):
|  |  |  |  |  |  |  |  |  | Weighted |  | Weighted |  |  |
|  |  |  |  |  | 1998 |  |  |  | Average |  | Average |  | Aggregate |
|  | 2007 |  | 1998 |  | Director |  | Total |  | Exercise |  | Contractual |  | Intrinsic |
|  | Plan |  | Plan |  | Plan |  | Shares |  | Price |  | Life |  | Value |
Outstanding, January 1, 2013 |  | 954 |  | 253 |  | 146 |  | 1,353 |  | $ | 21.15 |  |  |  |  |
Granted |  | — |  | — |  | — |  | — |  |  |  |  |  |  |
Exercised |  | (106 | ) | (43 | ) | (6 | ) | (155 | ) | $ | 20.48 |  |  |  |  |
Forfeited and expired |  | (4 | ) | (2 | ) | — |  | (6 | ) | $ | 21.05 |  |  |  |  |
Outstanding, December 31, 2013 |  | 844 |  | 208 |  | 140 |  | 1,192 |  | $ | 21.24 |  | 4.7 |  | $ | 6,033 |
Exercisable, December 31, 2013 |  | 662 |  | 208 |  | 140 |  | 1,010 |  | $ | 21.08 |  | 4.2 |  | $ | 5,273 |
The following table summarizes non-vested restricted stock unit activity through December 31, 2013, (in thousands, except weighted average grant-date fair value amounts):
|  | 2007 Plan Restricted Stock Units |  | Weighted Average Grant- Date Fair Value |
Outstanding, January 1, 2013 |  | 356 |  | $ | 17.97 |
Granted |  | 370 |  | 26.66 |
Exercised |  | (166 | ) | 21.09 |
Canceled |  | (5 | ) | 27.24 |
Outstanding, December 31, 2013 |  | 555 |  | $ | 25.61 |
A summary of compensation cost related to share-based payments for each of the three years in the period ended December 31, 2013, exclusive of A&B related compensation prior to the Separation, is as follows (in millions):
|  | Years Ended December 31, |
|  | 2013 |  | 2012 |  | 2011 |
Share-based expense (net of estimated forfeitures): |  |  |  |  |  |  |
Stock options |  | $ | 0.4 |  | $ | 0.9 |  | $ | 0.8 |
Non-vested stock and restricted stock units |  | 5.5 |  | 3.1 |  | 1.9 |
Total share-based expense |  | 5.9 |  | 4.0 |  | 2.7 |
Total recognized tax benefit |  | (2.2 | ) | (1.6 | ) | (0.9 | )
Share-based expense (net of tax) |  | $ | 3.7 |  | $ | 2.4 |  | $ | 1.8 |
Cash received by Matson upon option exercise |  | $ | 1.7 |  | $ | 3.5 |  | $ | 2.0 |
Intrinsic value of options exercised |  | $ | 1.1 |  | $ | 5.2 |  | $ | 1.1 |
Tax benefit realized upon option exercise |  | $ | 1.7 |  | $ | 1.5 |  | $ | 0.4 |
Fair value of stock vested |  | $ | 4.4 |  | $ | 3.8 |  | $ | 2.5 |
As of December 31, 2013, there was $0.1 million of total unrecognized compensation cost related to unvested stock options. That cost is expected to be recognized over a weighted average period of approximately 0.8 years. As of December 31, 2013, unrecognized compensation cost related to non-vested stock and restricted stock units was $9.0 million. The unrecognized cost for non-vested stock and restricted stock units is expected to be recognized over a weighted average period of 1.9 years.

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 + Details
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