XML 33 R9.htm IDEA: XBRL DOCUMENT
v3.6.0.2

BUSINESS COMBINATION | 12 Months Ended
--- | ---
Dec. 31, 2016
BUSINESS COMBINATION |
BUSINESS COMBINATION | 3.BUSINESS COMBINATION Span Alaska Acquisition: On August 4, 2016 (the “Effective Date”), Matson Logistics completed the purchase of 100 percent of the membership interests of Span Alaska pursuant to the terms of the Membership Interest Purchase Agreement, dated July 18, 2016. At the Effective Date, Span Alaska became a wholly-owned subsidiary of Matson Logistics. Span Alaska is an asset-light logistics company providing freight forwarding services primarily to the Alaska market. Span Alaska consolidates freight in Auburn, Washington, for shipment to Alaska and distribution through a network of terminals in Anchorage, Fairbanks, Wasilla, Kenai, Juneau and Kodiak. Span Alaska’s operations are recorded within the Logistics segment of the Company. Total consideration paid by the Company on the Effective Date for the membership interests in Span Alaska including the repayment of Span Alaska’s debt and accrued interest, is as follows (in millions):
Span Alaska Consideration |  | Total |
Membership interests |  | $ | 117.0 |
Span Alaska’s debt |  |  | 81.9 |
Total |  | $ | 198.9 |
The Span Alaska Acquisition was accounted for as a business combination in accordance with ASC 805, Business Combinations (“ASU 805”). The assets acquired and liabilities assumed in the Span Alaska Acquisition were recorded based on fair value estimates as of the Effective Date, with the remaining unallocated purchase price recorded as goodwill. Such fair value estimates require significant judgment, and include estimates used in the valuation of property and equipment, and intangible assets. As of December 31, 2016, the Company has finalized the purchase accounting for the Span Alaska Acquisition. The following table summarizes the fair values assigned to Span Alaska’s assets acquired and liabilities assumed at the Effective Date:
Purchase Price Allocation (in millions) |  | Total |
Cash and cash equivalents |  | $ | 4.4 |
Accounts receivable |  |  | 11.1 |
Prepaid and other current assets |  |  | 0.9 |
Property and equipment |  |  | 8.1 |
Intangibles – Customer relationships |  |  | 79.3 |
Intangibles – Trade name |  |  | 27.3 |
Other long-term assets |  |  | 0.1 |
Accounts payable |  |  | (3.3) |
Accruals and other current liabilities |  |  | (6.4) |
Capital lease obligations |  |  | (1.2) |
Span Alaska’s debt |  |  | (81.9) |
Total identifiable assets less liabilities |  |  | 38.4 |
Total consideration for membership interests |  |  | (117.0) |
Goodwill |  | $ | 78.6 |
The amounts above include $0.4 million of purchase price adjustments recorded to the preliminary purchase price allocation initially recorded in the Company’s interim Condensed Consolidated Financial Statements for the three and nine-months ended September 30, 2016. Property and equipment: Property and equipment of $8.1 million includes the fair value of terminal and transportation equipment (trucks, forklifts, trailers and containers) and other warehouse equipment, leasehold improvements and other office equipment. Intangibles - The customer relationships and trade name intangible assets were recorded using information obtained from valuation specialists engaged by the Company to assist management with estimating the fair value of these intangible assets. Customer relationships: Intangibles of $79.3 million related to customer relationships, and are being amortized using the straight-line method over 20 years. In determining the amortization period, the Company considered the historical trends of Span Alaska’s customers and related attrition rates. The Company also considered potential future attrition risks, existing competition, the costs associated with establishing a freight forwarding business including the need to develop a broad base of customer relationships over a period of time. Furthermore, the Company considered existing relationships with ocean transportation service providers in Alaska, and the potential impact of competition. As a result, the Company believes that Span Alaska’s customers are considered less vulnerable to attrition. Trade name: Intangibles of $27.3 million related to the Span Alaska trade name, which was determined to have an indefinite life. Span Alaska has operated for a period in excess of 38 years, and its trade name is widely known in Alaska for high quality and reliable freight forwarding services. The Span Alaska operations will continue to be operated under the Span Alaska trade name, independent of Matson’s ocean transportation operation in Alaska. Span Alaska’s debt: The Company repaid all of Span Alaska’s debt including accrued interest of $81.9 million, as of the Effective Date. Goodwill: The Company recorded goodwill of $78.6 million from the Span Alaska Acquisition, which represents the excess of the fair value of consideration paid by the Company over the fair value of the underlying identifiable assets acquired and liabilities assumed. In accordance with ASC 805, goodwill will not be amortized, but instead will be tested for impairment at least annually, or whenever events or circumstances have occurred that may indicate a possible impairment. Goodwill arises as a result of several factors including: (i) the Span Alaska Acquisition significantly expands Matson’s Logistics’ platform and Matson’s long-term commitment in the Alaska market; (ii) Span Alaska is a leading freight forwarding business and continues to be led by an experienced management team and assembled workforce with knowledge of the Alaska industry and of its customers; and (iii) the additional growth potential of Span Alaska. The Company's Consolidated Statements of Income and Comprehensive Income for the year ended December 31, 2016 include operating revenue of $22.8 million (after elimination of intercompany revenue), and operating income of $3.5 million, respectively, from Span Alaska’s operations, and in the Logistics segment. One-time acquisition related costs of approximately $3.0 million incurred as a result of the Span Alaska Acquisition, is included in selling, general and administrative costs in the Consolidated Statements of Income and Comprehensive Income. Horizon Acquisition: On May 29, 2015, Matson completed its acquisition of Horizon whereby MatNav acquired Horizon’s Alaska operations and assumed all of Horizon’s non-Hawaii assets and liabilities (the “Horizon Acquisition”). Immediately before the completion of the Horizon Acquisition, Horizon sold certain of its subsidiaries to the Pasha Group (the “Pasha Transaction”) that: (i) conducted Horizon’s Hawaii operations (including owning the assets used to conduct such Hawaii operations and being responsible for the liabilities related thereto), and (ii) employed the Horizon employees who conducted its Hawaii operations. Horizon also completed the termination of its Puerto Rico operations during the first quarter of 2015. The Alaska operations are recorded within the Ocean Transportation segment of the Company. Total consideration for the Horizon Acquisition was $495.4 million based on the fair value of common shares of $29.4 million, warrants of $37.1 million, and Horizon’s debt including accrued interest and breakage fees of $428.9 million. Immediately following the close of the Horizon Acquisition, the Company repaid the assumed debt and redeemed all of Horizon’s outstanding warrants. The Horizon Acquisition was accounted for as a business combination in accordance with ASC 805. Assets acquired and liabilities assumed were recorded at estimated fair value at May 29, 2015, with the remaining unallocated purchase price of $217.7 million recorded as goodwill. The Company finalized its purchase accounting for the Horizon Acquisition as of June 30, 2016. The following table summarizes the fair values assigned to Horizon's assets acquired and liabilities assumed that were recognized as of the acquisition date, with purchase price allocation adjustments since the preliminary purchase price allocation previously disclosed as of December 31, 2015:
Purchase Price Allocation (in millions) |  | Preliminary Estimates |  | Adjustments |  | Final |
Cash and cash equivalents |  | $ | 0.8 |  | $ | — |  | $ | 0.8 |
Accounts receivable |  |  | 31.7 |  |  | — |  |  | 31.7 |
Other current assets |  |  | 7.2 |  |  | — |  |  | 7.2 |
Deferred tax assets, net |  |  | 45.6 |  |  | 0.7 |  |  | 46.3 |
Property and equipment |  |  | 170.4 |  |  | — |  |  | 170.4 |
Intangibles - Customer relationships |  |  | 140.0 |  |  | — |  |  | 140.0 |
Other long-term assets |  |  | 4.1 |  |  | — |  |  | 4.1 |
Accounts payable |  |  | (22.8) |  |  | — |  |  | (22.8) |
Accruals and other current liabilities |  |  | (32.1) |  |  | 0.7 |  |  | (31.4) |
Multi-employer withdrawal liability |  |  | (60.6) |  |  | (4.9) |  |  | (65.5) |
Capital lease obligations |  |  | (1.6) |  |  | — |  |  | (1.6) |
Horizon's debt and warrants |  |  | (467.5) |  |  | — |  |  | (467.5) |
Total identifiable assets less liabilities |  |  | (184.8) |  |  | (3.5) |  |  | (188.3) |
Total cash paid for common shares |  |  | (29.4) |  |  | — |  |  | (29.4) |
Goodwill |  | $ | 214.2 |  | $ | 3.5 |  | $ | 217.7 |
Purchase price allocation adjustments related primarily to the receipt of additional information that increased the fair value of the Puerto Rico multi-employer withdrawal liability, offset by fair value adjustments to deferred tax assets, and to accruals and other current liabilities. The Company's Consolidated Statements of Income and Comprehensive Income for the year ended December 31, 2016 include operating revenue and operating income from Horizon’s operations of $277.6 million and $20.0 million, respectively. One-time acquisition costs related to the Horizon Acquisition incurred during the year ended December 31, 2016 were not material and were $19.0 million during the year ended December 31, 2015. Pro Forma Financial Information (Unaudited): The following unaudited pro forma financial information presents the combined operating results of the Company, and those of Horizon (excluding its Hawaii operations) and Span Alaska, as if the Horizon and Span Alaska acquisitions had been completed at the beginning of each period presented below. The unaudited pro forma financial information includes the accounting effects of the business combination, including the amortization of intangible assets, depreciation of property and equipment, and interest expense. Unaudited pro forma operating revenue is presented after elimination of intercompany revenue. The unaudited pro forma financial information is presented for informational purposes only and is not indicative of the result of operations that would have been achieved if the Horizon and Span Alaska acquisitions had taken place at the beginning of the periods presented, nor should it be taken as an indication of our future consolidated results of operations.
|  | Years Ended December 31, |
(in millions, except per-share amount) |  | 2016 |  | 2015 |
Pro Forma Combined: |  |  |  |  |  |  |
Operating revenue |  | $ | 1,974.2 |  | $ | 2,076.4 |
Net income |  | $ | 84.9 |  | $ | 107.7 |
Basic Earnings Per-Share: |  | $ | 1.97 |  | $ | 2.48 |
Diluted Earnings Per-Share: |  | $ | 1.95 |  | $ | 2.45 |
Weighted-Average Number of Shares Outstanding: |  |  |  |  |  |  |
Basic |  |  | 43.1 |  |  | 43.5 |
Diluted |  |  | 43.5 |  |  | 44.0 |

X
- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1497-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1490-128463 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1392-128463 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7008-128479 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1486-128463 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6927-128479 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4845-128472 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1500-128463 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1524-128463 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7000-128479 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4922-128472 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4934-128472 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4926-128472 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1383-128463 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6996-128479 + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_BusinessCombinationsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration