18.BUSINESS COMBINATIONS

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:


Consideration (in millions)	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 (“ASC 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. The Company finalized its purchase accounting for the Span Alaska Acquisition as of December 31, 2016.

The following table summarizes the final fair values assigned to Span Alaska’s assets acquired and liabilities assumed at the Effective Date:


Purchase Price Allocation (in millions)	Final
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 Company's Consolidated Statements of Income and Comprehensive Income for the year ended December 31, 2017 and 2016 include operating revenue of $59.1 million and $22.8 million (after elimination of intercompany revenue), and operating income of $12.8 million and $3.5 million, respectively, from Span Alaska’s operations. 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 for the year ended December 31, 2016. One-time acquisition related costs incurred post December 31, 2016 were not material.

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 final fair values assigned to Horizon's assets acquired and liabilities assumed that were recognized as of the acquisition date:


Purchase Price Allocation (in millions)	Final
Cash and cash equivalents	$	0.8
Accounts receivable		31.7
Other current assets		7.2
Deferred tax assets, net		46.3
Property and equipment		170.4
Intangibles - Customer relationships		140.0
Other long-term assets		4.1
Accounts payable		(22.8)
Accruals and other current liabilities		(31.4)
Multi-employer withdrawal liability		(65.5)
Capital lease obligations		(1.6)
Horizon's debt and warrants		(467.5)
Total identifiable assets less liabilities		(188.3)
Total cash paid for common shares		(29.4)
Goodwill	$	217.7

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 combinations, 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 after income taxes	$	86.0	$	107.7
Basic Earnings Per-Share:	$	2.00	$	2.48
Diluted Earnings Per-Share:	$	1.98	$	2.45
Weighted-Average Number of Shares Outstanding:
Basic		43.1		43.5
Diluted		43.5		44.0