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SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended
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Dec. 31, 2020
SIGNIFICANT ACCOUNTING POLICIES |
SIGNIFICANT ACCOUNTING POLICIES |
2. | SIGNIFICANT ACCOUNTING POLICIES
​ Principles of Consolidation: The Consolidated Financial Statements include the accounts of Matson, Inc. and all wholly-owned subsidiaries, after elimination of intercompany amounts and transactions. Significant investments in businesses, partnerships, and limited liability companies in which the Company does not have a controlling financial interest, but has the ability to exercise significant influence, are accounted for under the equity method. The Company accounts for its investment in SSAT using the equity method of accounting (see Note 4). ​ Fiscal Year: The year end for Matson is December 31. The period end for MatNav occurred on the last Friday in December, except for Matson Logistics Warehousing, Inc. and Matson South Pacific Holdco Limited whose period closed on December 31. Included in these Consolidated Financial Statements are 52 weeks in the 2020, 2019 and 2018 fiscal years for MatNav. ​ Foreign Currency Transactions: The United States (U.S.) dollar is the functional currency for substantially all of the financial statements of the Company’s foreign subsidiaries. Foreign currency denominated assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars at exchange rates existing at the respective balance sheet dates. Translation adjustments resulting from fluctuations in exchange rates are recorded as a component of accumulated other comprehensive loss (gain) within shareholders’ equity. The Company translates the result of operations of its foreign subsidiaries at the average exchange rate during the respective periods. Gains and losses resulting from foreign currency transactions are included in Costs and Expenses in the Consolidated Statements of Income and Comprehensive Income. ​ Use of Estimates: The preparation of the Consolidated Financial Statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts reported. Estimates and assumptions are used for, but not limited to: impairment of investments; impairment of long-lived assets, intangible assets and goodwill; capitalized interest; allowance for doubtful accounts; legal contingencies; insurance reserves and other related liabilities; accrual estimates; pension and post-retirement estimates; multi-employer withdrawal liabilities; operating lease assets and liabilities; and income taxes. Future results could be materially affected if actual results differ from these estimates and assumptions. ​ Cash, Cash Equivalents and Restricted Cash: Cash equivalents consist of highly-liquid investments with original maturities of three months or less. The Company carries these investments at cost, which approximates fair value. Outstanding checks in excess of funds on deposit totaled $19.9 million and $13.8 million at December 31, 2020 and 2019, respectively, and are included in current liabilities in the Consolidated Balance Sheets. Restricted cash relates to amounts that are subject to contractual restrictions and are not readily available. At December 31, 2020 and 2019, restricted cash was $5.3 million and $7.2 million, respectively, and are included in prepaid expenses and other assets in the Consolidated Balance Sheets. ​ Accounts Receivable, net: Accounts receivable represent amounts due from trade customers arising in the normal course of business. Accounts receivable are shown net of allowance for doubtful accounts receivable in the Consolidated Balance Sheets. Allowance for doubtful accounts receivable is established by management based on estimates of collectability. Estimates of collectability are principally based on an evaluation of the current financial condition of the customer and the potential risks to collection, the customer’s payment history, expected future credit losses and other factors which are regularly monitored by the Company. ​ Changes in the allowance for doubtful accounts receivable for the three years ended December 31, 2020, 2019 and 2018 were as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Balance at |  | ​ |  | Write-offs |  | Balance at |
Year (in millions) |  | Beginning of Year |  | Expense (1) |  | and Other |  | End of Year |
2020 | ​ | $ | 4.3 | ​ | $ | 2.9 | ​ | $ | (0.9) | ​ | $ | 6.3 | ​
2019 | ​ | $ | 4.8 | ​ | $ | 0.6 | ​ | $ | (1.1) | ​ | $ | 4.3 | ​
2018 | ​ | $ | 4.6 | ​ | $ | 0.8 | ​ | $ | (0.6) | ​ | $ | 4.8 | ​
(1) | Expense is shown net of amounts recovered from previously reserved doubtful accounts.
​ Prepaid Expenses and Other Assets: Prepaid expenses and other assets consist of the following at December 31, 2020 and 2019: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | As of December 31, |
Prepaid Expenses and Other Assets (in millions) |  | 2020 |  | 2019 |
Prepaid fuel | ​ | $ | 10.8 | ​ | $ | 13.7 | ​
Prepaid insurance and insurance related receivables | ​ |  | 7.5 | ​ |  | 13.4 | ​
Prepaid operating expenses | ​ | ​ | 5.4 | ​ | ​ | 5.7 | ​
Restricted cash - vessel construction obligations | ​ | ​ | 5.3 | ​ | ​ | 7.2 | ​
Income tax receivables | ​ | ​ | 0.3 | ​ | ​ | 12.8 | ​
Other | ​ |  | 8.8 | ​ |  | 9.7 | ​
Total | ​ | $ | 38.1 | ​ | $ | 62.5 | ​
​ Deferred Loan Fees: The Company records deferred loan fees, excluding those related to the revolving credit facility, as a reduction to Total Debt in the Company’s Consolidated Balance Sheets in accordance with Accounting Standards Update (“ASU”) 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). These costs are being amortized over the life of the related debt using the effective interest method (see Note 8). ​ Deferred loan fees related to the Company’s revolving credit facility are recorded in other long-term assets in the Company’s Consolidated Balance Sheets, and are amortized using the straight-line method as the difference between that and the use of the effective interest method is not material. Other Long-Term Assets: Other long-term assets consist of the following at December 31, 2020 and 2019: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | As of December 31, |
Other Long-Term Assets (in millions) |  | 2020 |  | 2019 |
Vessel and equipment spare parts | ​ | $ | 11.5 | ​ | $ | 12.4 | ​
Insurance related receivables | ​ | ​ | 10.5 | ​ | ​ | 10.6 | ​
Deferred loan fees | ​ |  | 2.7 | ​ |  | 2.1 | ​
Cloud computing software costs | ​ |  | 2.4 | ​ |  | — | ​
Income tax receivables | ​ | ​ | 2.1 | ​ | ​ | 11.5 | ​
Other | ​ | ​ | 3.8 | ​ | ​ | 1.2 | ​
Total | ​ | $ | 33.0 | ​ | $ | 37.8 | ​
​ Property and Equipment: Property and equipment is stated at cost. Property and equipment is depreciated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives of property and equipment range up to the following maximum life: ​
​ | ​ | ​ | ​
Classification |  | Life |
Vessels |  | 40 years | ​
Machinery and equipment |  | 30 years | ​
Terminal facilities |  | 35 years | ​
​ Capitalized Interest: The Company capitalizes interest costs during the period the qualified assets are being readied for their intended use. The Company determined that the vessel construction costs are considered qualifying assets for the purposes of capitalizing interest on these assets. The amount of capitalized interest is calculated based on the amount of payments incurred related to the construction of these vessels using a weighted average interest rate. The weighted average interest rate is determined using the Company’s average borrowings outstanding during the period. Capitalized interest is included in vessel construction in progress in property and equipment in the Company’s Consolidated Balance Sheets (see Note 5). During the years ended December 31, 2020, 2019 and 2018, the Company capitalized $7.4 million, $15.6 million and $18.7 million of interest related to the construction of new vessels, respectively. ​ Leases: The Company adopted Accounting Standards Codification (“ASC”) 842, Leases (“ASC 842”) on January 1, 2019. ASC 842 requires lessees to record leases on their balance sheets but recognize the expenses in their income statements in a manner similar to pre-adoption practice. ASC 842 states that a lessee would recognize a lease liability for the obligation to make lease payments, and a right-of-use asset for the underlying leased asset for the period of the lease term. Refer to Note 9 for additional information on the Company’s lease related disclosures. ​ Deferred Dry-docking Costs: U.S. flagged vessels must meet specified seaworthiness standards established by U.S. Coast Guard rules and classification society rules. These standards require U.S. flagged vessels to undergo two dry-docking inspections within a five-year period, with a maximum of 36 months between them. However, U.S. flagged vessels that are enrolled in the U.S. Coast Guard’s Underwater Survey in Lieu of Dry-docking (“UWILD”) program are allowed to have their Intermediate Survey dry-docking requirement met with a less costly underwater inspection. Non-U.S. flagged vessels are required to meet applicable classification society rules and their own local standards for seaworthiness, which also mandate vessels to undergo two dry-docking inspections every five years. ​ The Company is responsible for maintaining its vessels in compliance with U.S. and international standards. As costs associated with dry-docking inspections provide future economic benefits to the Company through continued operation of the vessels, the costs are deferred and amortized until the scheduled date of the next required dry-docking, which is usually over a two to five-year period. Amortization of deferred dry-docking costs are charged to operating expenses of the Ocean Transportation segment in the Consolidated Statements of Income and Comprehensive Income. Routine vessel maintenance and repairs are charged to expense as incurred. ​ Goodwill and Intangible Assets: Goodwill and intangible assets arise as a result of acquisitions made by the Company (see Note 6). Intangible assets consist of customer relationships which are being amortized using the straight-line method over the expected useful lives ranging up to 21 years, and a trade name that has an indefinite life. ​ Impairment Evaluation of Long-Lived Assets, Intangible Assets and Goodwill: The Company evaluates its long-lived assets, intangible assets and goodwill for possible impairment in the fourth quarter, or whenever events or changes in circumstances indicate that it is more likely than not that the fair value is less than its carrying amount. The Company has reporting units within the Ocean Transportation and Logistics reportable segments. ​ Long-lived assets and finite-lived intangible assets are grouped at the lowest level reporting unit for which identifiable cash flows are available. In evaluating for impairment, the estimated future undiscounted cash flows generated by each of these asset groups are compared with the carrying value recorded for each asset group to determine if its carrying value is recoverable. If this review determines that the amount recorded will not be recovered, the amount recorded for the asset group is reduced to its estimated fair value. No impairment charges of long-lived assets and finite-lived intangible assets were recorded for the years ended December 31, 2020, 2019 and 2018. ​ Indefinite-life intangible assets and goodwill are grouped at the lowest level reporting unit for which identifiable cash flows are available. In estimating the fair value of a reporting unit, the Company uses a combination of a discounted cash flow model and fair value based on market multiples of earnings before interest, taxes, depreciation and amortization. Based upon the Company’s evaluation of its indefinite-life intangible assets and goodwill for impairment, the Company determined that the fair value of each reporting unit exceeds book value. No impairment charges of indefinite-life intangible assets and goodwill were recorded for the years ended December 31, 2020, 2019 and 2018. ​ Impairment Evaluation of SSAT: The Company’s investment in SSAT, a related party, is evaluated for impairment whenever there is evidence of impairment during the reporting period. If any impairment is identified, the Company evaluates if the decrease in the fair value of the investment below its carrying value is other-than-temporary. No impairment was identified during the years ended December 31, 2020, 2019 and 2018. ​ Other Liabilities: Other liabilities consist of the following at December 31, 2020 and 2019: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | As of December 31, |
Other Liabilities (in millions) |  | 2020 |  | 2019 |
Payroll and vacation | ​ | $ | 29.2 |  | $ | 28.5 | ​
Employee incentives and other | ​ | ​ | 25.9 | ​ | ​ | 14.7 | ​
Multi-employer withdrawal liabilities - short term (see Note 12) | ​ | ​ | 10.6 | ​ | ​ | 10.8 | ​
Income tax liabilities | ​ | ​ | 11.7 | ​ | ​ | 2.3 | ​
Insurance reserves and other related liabilities - short term | ​ | ​ | 7.0 | ​ | ​ | 12.6 | ​
Deferred revenues | ​ | ​ | 4.2 | ​ | ​ | 6.9 | ​
Interest on debt | ​ | ​ | 3.4 | ​ | ​ | 4.9 | ​
Pension and post-retirement liabilities - short term (see Note 11) | ​ | ​ | 2.7 | ​ | ​ | 3.1 | ​
Other short-term liabilities | ​ | ​ | 2.1 | ​ | ​ | 2.2 | ​
Total | ​ | $ | 96.8 |  | $ | 86.0 | ​
​ Other Long-Term Liabilities: Other long-term liabilities consist of the following at December 31, 2020 and 2019: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | As of December 31, |
Other Long-Term Liabilities (in millions) |  | 2020 |  | 2019 |
Pension and post-retirement liabilities (see Note 11) | ​ | $ | 82.0 | ​ | $ | 73.4 | ​
Multi-employer withdrawal liability (see Note 12) | ​ | ​ | 52.8 | ​ | ​ | 54.8 | ​
Insurance reserves and other related liabilities | ​ | ​ | 25.4 | ​ | ​ | 26.6 | ​
Other long-term liabilities | ​ |  | 5.6 | ​ |  | 2.6 | ​
Total | ​ | $ | 165.8 | ​ | $ | 157.4 | ​
​ Pension and Post-Retirement Plans: The Company is a member of the Pacific Maritime Association (“PMA”) and the Hawaii Stevedoring Industry Committee, which negotiate multi-employer pension plans covering certain shoreside bargaining unit personnel. The Company directly negotiates multi-employer pension plans covering other bargaining unit personnel. Pension costs are accrued in accordance with contribution rates established by the PMA, the parties to a plan or the trustees of a plan. Several trusteed, non-contributory, single-employer defined benefit plans and defined contribution plans cover substantially all other employees. ​ The estimation of the Company’s pension and post-retirement benefit expenses and liabilities requires that the Company make various assumptions. These assumptions include factors such as discount rates, expected long-term rates of return on pension plan assets, salary growth, health care cost trend rates, inflation, retirement rates, mortality rates, and expected contributions. Actual results that differ from the assumptions made could materially affect the Company’s financial condition or its future operating results. Additional information about the Company’s pension and post-retirement plans is included in Note 11. ​ Insurance Related Liabilities: The Company is uninsured for certain risks but when feasible, many of these risks are mitigated by insurance. The Company purchases insurance with deductibles or self-insured retentions. Such insurance includes, but is not limited to, employee health, workers’ compensation, marine liability, cybersecurity, auto liability and physical damage to property and equipment. For certain risks, the Company elects to not purchase insurance because of the excessive cost of insurance or the perceived remoteness of the risk. In addition, the Company retains all risk of loss that exceeds the limits of the Company’s insurance policies, or for other risks where insurance is not commercially available. ​ When estimating its reserves for retained risks and related liabilities, the Company considers a number of factors, including historical claims experience, demographic factors, current trends, and analyses provided by independent third-parties. Periodically, management reviews its assumptions and estimates used to determine the adequacy of the Company’s reserves for retained risks and other related liabilities. ​ Recognition of Revenues and Expenses: Revenue in the Company’s Consolidated Financial Statements is presented net of elimination of intercompany transactions. 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: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Year Ended December 31,
Ocean Transportation (in millions) (1) | ​ | 2020 | ​ | 2019 | ​ | 2018
Ocean Transportation services | ​ | $ | 1,821.7 | ​ | $ | 1,625.8 | ​ | $ | 1,599.3
Terminal and other related services | ​ | ​ | 19.1 | ​ | ​ | 24.8 | ​ | ​ | 23.0
Fuel sales | ​ | ​ | 7.3 | ​ | ​ | 10.1 | ​ | ​ | 12.2
Vessel management and related services | ​ | ​ | 5.8 | ​ | ​ | 5.9 | ​ | ​ | 6.8
Total | ​ | $ | 1,853.9 | ​ | $ | 1,666.6 | ​ | $ | 1,641.3
(1) | Ocean Transportation revenue transactions are primarily denominated in U.S. dollars except for less than 3 percent of Ocean Transportation services revenue and fuel sales revenue categories which are denominated in foreign currencies.
​
◾ | Ocean Transportation services revenue is recognized ratably over the duration of a voyage based on the relative transit time completed in each reporting period. Vessel operating costs and other ocean transportation operating costs, such as terminal operating overhead and selling, general and administrative expenses, are charged to operating costs as incurred.
◾ | Terminal and other related services revenue is recognized as the services are performed. Related costs are recognized as incurred.
◾ | Fuel sales revenue and related costs are recognized when the Company has completed delivery of the product to the customer in accordance with the terms and conditions of the contract.
◾ | Vessel management and related services revenue is recognized in proportion to the services completed. Related costs are recognized as incurred.
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Year Ended December 31,
Logistics (in millions) (1) | ​ | 2020 | ​ | 2019 (2) | ​ | 2018 (2)
Transportation Brokerage and Freight Forwarding services | ​ | $ | 477.0 | ​ | $ | 489.0 | ​ | $ | 532.5
Warehouse and distribution services | ​ | ​ | 36.2 | ​ | ​ | 34.1 | ​ | ​ | 33.8
Supply chain management and other services | ​ |  | 16.2 | ​ |  | 13.4 | ​ |  | 15.2
Total | ​ | $ | 529.4 | ​ | $ | 536.5 | ​ | $ | 581.5
(1) | Logistics revenue transactions are primarily denominated in U.S. dollars except for approximately 3 percent of transportation brokerage and freight forwarding services revenue, and supply chain management and other services revenue categories which are denominated in foreign currencies.
(2) | The Company has reclassified $15.8 million and $16.6 million from transportation brokerage and freight forwarding services to warehouse and distribution services, and supply chain management and other services for the years ended December 31, 2019 and 2018, respectively, to be consistent with its current period presentation. There was no change in total Logistics revenue for the years ended December 31, 2019 and 2018.
​
◾ | Transportation Brokerage and Freight Forwarding services revenue consists of amounts billed to customers for services provided. The primary costs include third-party purchased transportation services, agent commissions, labor and equipment. Revenue and the related purchased third-party transportation costs are recognized over the duration of a delivery based upon the relative transit time completed in each reporting period. 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.
◾ | 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 related costs are recognized as incurred. Other warehousing and distribution services revenue and related costs are recognized in proportion to the services performed.
◾ | Supply chain management and other services revenue, and related costs are recognized in proportion to the services performed.
​ The Company generally invoices its customers at the commencement of the voyage or the transportation service being provided, or as other services are being performed. Revenue is deferred when services are invoiced in advance to the customer. The Company’s receivables are classified as short-term as collection terms are for periods of less than one year. The Company expenses sales commissions and contract acquisition costs as incurred because the amounts are generally immaterial. These expenses are included in selling, general and administration expenses in the Consolidated Statements of Income and Comprehensive Income. ​ Customer Concentration: The Ocean Transportation segment serves customers in numerous industries and carries a wide variety of cargo, mitigating its dependence upon any single customer or single type of cargo. In 2020, 2019 and 2018, the 10 largest Ocean Transportation customers accounted for approximately 22 percent, 23 percent and 24 percent of Ocean Transportation revenue, respectively. None of these customers individually account for more than 10 percent of Ocean Transportation operating revenues. ​ The Logistics segment serves customers in numerous industries and geographical locations. In 2020, 2019 and 2018, the 10 largest Logistics customers accounted for approximately 19 percent, 21 percent and 23 percent of Logistics revenue, respectively. None of these customers individually account for more than 10 percent of Logistics operating revenues. ​ Dividends: The Company recognizes dividends as a liability when approved by the Board of Directors. ​ Share-Based Compensation: The Company records compensation expense for all share-based awards made to employees and directors. The Company’s various stock-based compensation plans are more fully described in Note 15. ​ Income Taxes: The estimate of the Company’s income tax expense requires the Company to make various estimates and judgments. These estimates and judgments are applied in the calculation of taxable income, tax credits, tax benefits and deductions, and in the calculation of certain deferred tax assets and liabilities, which arise from differences in the timing of recognition of revenue, costs and expenses for tax purposes. Deferred tax assets and liabilities are adjusted to the extent necessary to reflect tax rates expected to be in effect when the temporary differences reverse. ​ The Company records a valuation allowance if, based on the weight of available evidence, management believes that it is more likely than not that some portion or all of a recorded deferred tax asset would not be realized in future periods. The Company’s income taxes are more fully described in Note 10. ​ Rounding: Amounts in the Consolidated Financial Statements and Notes to the Consolidated Financial Statements are rounded to millions, except for per share calculations and percentages which were determined based on amounts before rounding. Accordingly, a recalculation of some per-share amounts and percentages, if based on the reported data, may be slightly different. ​ New Accounting Pronouncements: ​ Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”): In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13 which amends the current approach to estimate credit losses on certain financial assets, including trade and other receivables, available-for-sale securities and other financial instruments. ASU 2016-13 requires entities to establish a valuation allowance for the expected lifetime losses of certain financial instruments. Subsequent changes in the valuation allowance are recorded in current earnings and reversal of previous losses is permitted. The new standard was effective for interim and annual periods beginning on or after December 15, 2019. ​ The Company adopted ASU 2016-13 effective January 1, 2020 using the modified retrospective approach. Upon adoption, the Company included an evaluation of expected future credit losses as part of its estimate for determining the allowance for doubtful accounts. The impact of this change was not material to the Company’s allowance for doubtful accounts receivable in the Consolidated Financial Statements. ​ Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (“ASU 2018-15”): In August 2018, FASB issued ASU 2018-15 which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing costs incurred to develop or obtain internal-use software. The Company adopted ASU 2018-15 on a prospective basis effective January 1, 2020. During the year ended December 31, 2020, the Company capitalized costs of $2.4 million related to cloud computing arrangements and which were included in other long-term assets on the Company’s Consolidated Balance Sheets as of December 31, 2020.

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- Definition The entire disclosure for the general note to the financial statements for the reporting entity which may include, descriptions of the basis of presentation, business description, significant accounting policies, consolidations, reclassifications, new pronouncements not yet adopted and changes in accounting principles. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI http://asc.fasb.org/topic&trid=2197479 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -URI http://asc.fasb.org/topic&trid=2134479 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 250 -URI http://asc.fasb.org/topic&trid=2122394 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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