In Seaspan’s latest financial earnings report, CEO Gerry Wang broke the news about having placed a $550 million order for an undisclosed number of new containerships.
In an interview with Mr. Wang last month, Lori Ann LaRocco notes that Seaspan ” has almost doubled its fleet size since 2008 amidst one of the ugliest downturns in shipping history. Seaspan currently owns 69 ships and has another 10 on order.”
During that interview, Wang hinted that a series of deals may be announced from his company over the remaining 6 months of 2013 and that this latest salvo may not be the last we’ll hear out of Seaspan.
The following is the full text of their latest financial report:
HONG KONG, CHINA–(Marketwired – July 29, 2013) – Seaspan Corporation (“Seaspan”) (NYSE:SSW) announced today its financial results for the three and six months ended June 30, 2013. Below is a summary of Seaspan’s key financial results:
Summary of Key Financial Results (in thousands of USD):
Join The Club
Three Months Ended June 30, Change
--------------------------- ----------------------
2013 2012 $ %
------------- ------------- ------------ ---------
Reported net earnings
(loss) $ 127,154 $ (6,749) $ 133,903 1984.0%
Normalized net
earnings(1) $ 25,502 $ 37,779 $ (12,277) (32.5%)
Earnings (loss) per
share, basic $ 1.67 $ (0.38) $ 2.05 539.5%
Earnings (loss) per
share, diluted $ 1.35 $ (0.38) $ 1.73 455.3%
Normalized earnings per
share, converted(1)
(Series A preferred
shares converted at
$15) $ 0.18 $ 0.35 $ (0.17) (48.6%)
Cash available for
distribution to common
shareholders(2) $ 67,236 $ 76,409 $ (9,173) (12.0%)
Adjusted EBITDA(3) $ 118,955 $ 131,940 $ (12,985) (9.8%)
Six Months Ended June 30, Change
------------------------- ----------------------
2013 2012 $ $
------------ ------------ ------------ ---------
Reported net earnings $ 182,760 $ 44,509 $ 138,251 310.6%
Normalized net earnings(1) $ 53,852 $ 71,007 $ (17,155) (24.2%)
Earnings per share, basic $ 2.24 $ 0.17 $ 2.07 1217.6%
Earnings per share,
diluted $ 1.88 $ 0.17 $ 1.71 1005.9%
Normalized earnings per
share, converted(1)
(Series A preferred
shares converted at $15) $ 0.39 $ 0.65 $ (0.26) (40.0%)
Cash available for
distribution to common
shareholders(2) $ 134,051 $ 141,753 $ (7,702) (5.4%)
Adjusted EBITDA(3) $ 240,179 $ 247,766 $ (7,587) (3.1%)
--------------------------
(1) Normalized net earnings and normalized earnings per share, converted,
are non-GAAP measures that are adjusted for items such as interest
expense, change in fair value of financial instruments, interest expense
at the hedged rate, organizational development costs, gain on vessels
and certain other items that Seaspan believes are not representative of
its operating performance. Normalized earnings per share, converted,
reflects normalized earnings per share on a pro-forma basis on the
assumption that Seaspan's outstanding Series A preferred shares are
converted at $15.00 per share. Please read "Reconciliation of Non-GAAP
Financial Measures for the Three and Six Months Ended June 30, 2013 and
2012- Description of Non-GAAP Financial Measures - B. Normalized Net
Earnings and Normalized Earnings per Share" for a description of
normalized net earnings and normalized earnings per share, converted,
and for reconciliations of these measures to net earnings and earnings
per share, respectively.
(2) Cash available for distribution to common shareholders is a non-GAAP
measure that represents net earnings adjusted for depreciation and
amortization, interest expense, amortization of deferred charges, non-
cash share-based compensation, change in fair value of financial
instruments, bareboat charter adjustment, organizational development
costs, amounts paid for dry-docking, cash dividends paid on preferred
shares, gain on vessels, interest expense at the hedged rate and certain
other items that Seaspan believes are not representative of its
operating performance. Please read "Reconciliation of Non-GAAP Financial
Measures for the Three and Six Months Ended June 30, 2013 and 2012 -
Description of Non-GAAP Financial Measures - A. Cash Available for
Distribution to Common Shareholders" for a description of cash available
for distribution to common shareholders and a reconciliation of cash
available for distribution to common shareholders to net earnings.
(3) Adjusted EBITDA is a non-GAAP measure that represents net earnings
before interest expense and other debt-related expenses, interest
income, depreciation and amortization, bareboat charter adjustment,
organizational development costs, gain on vessels, change in fair value
of financial instruments and certain other items that Seaspan believes
are not representative of its operating performance. Please read
"Reconciliation of Non-GAAP Financial Measures for the Three and Six
Months Ended June 30, 2013 and 2012 - Description of Non-GAAP Financial
Measures - C. Adjusted EBITDA" for a description of Adjusted EBITDA and
a reconciliation of Adjusted EBITDA to net earnings.
Summary of Key Highlights
-- Achieved vessel utilization of 99.0% and 97.5% for the three and six
months ended June 30, 2013, respectively, or 99.3% and 99.6% if the
impact of off-charter days is excluded.
-- Paid quarterly dividends of $0.59375 and $0.496875 per Series C
(NYSE:SSW PR C) and Series D (NYSE:SSW PR D) preferred share,
respectively, representing a total distribution of $9.9 million. The
dividends were paid to all Series C and Series D preferred shareholders
of record as of April 29, 2013 for the period from January 30, 2013 to
April 29, 2013.
-- Paid a quarterly dividend for the 2013 first quarter of $0.3125 per
Class A common share on May 30, 2013 to all shareholders of record as of
May 20, 2013.
-- Accepted delivery of one vessel during the quarter, bringing Seaspan's
operating fleet to a total of 70 vessels at June 30, 2013.
Gerry Wang, Chief Executive Officer, Co-Chairman, and Co-Founder of Seaspan, commented, “During the first half of 2013, we generated strong and stable results and once again increased our common share dividend.”
Mr. Wang continued, “Seaspan continues to capitalize on attractive growth opportunities. We are pleased to have commenced the third quarter by signing a major newbuilding contract and are in the process of finalizing long-term time charter agreements for these vessels. Seaspan’s strong balance sheet combined with its technical and operational expertise in large modern containerships position the Company to continue to execute its growth strategy and provide charterers with their desired vessels.”
Second Quarter Developments
Vessel Delivery
On June 13, 2013, Seaspan accepted delivery of the MOL Excellence, bringing its operating fleet to 70 vessels. The 4600 TEU vessel is on charter to Mitsui O.S.K. Lines Ltd. (“MOL”) under a two-year, fixed-rate time charter.
Loan Facility Transactions
On April 25, 2013, Seaspan entered into a term loan facility with an Asian bank for up to $174.0 million to be used to fund the construction of two 14000 TEU newbuilding containerships to be chartered to Yang Ming Marine Transport Corp. (“Yang Ming Marine”).
On June 20, 2013, Seaspan entered into a term loan facility with a U.S. bank and an Australian bank for up to $30.0 million to be used to fund the purchase price of two 4600 TEU containerships on charter to MOL. Seaspan drew the full $30.0 million of this facility on July 9, 2013.
Subsequent Events
Newbuilding Contracts
On July 19, 2013, Seaspan entered into contracts with a major Asian shipbuilder for certain newbuilding containerships. The vessels are scheduled for delivery in 2015 and have an aggregate purchase price of approximately $550 million. Seaspan expects to sign long-term time charters with one of the liner majors shortly.
Vessel Delivery
On July 4, 2013, Seaspan accepted delivery of the MOL Efficiency, bringing its operating fleet to 71 vessels. The 4600 TEU vessel is on charter to MOL under a two-year, fixed-rate time charter.
Time Charters
In July 2013, three vessels were re-delivered to Seaspan and these vessels were subsequently re-chartered. The Seaspan Chiwan commenced a short-term charter for up to seven months. The Seaspan Dalian and Seaspan Felixstowe commenced time charters for up to 30 months with an additional option period of six to 12 months. The Seaspan Ningbo is expected to be re-delivered to Seaspan on July 30, 2013 and will be off-charter until a charter is entered into.
Dividends
On July 16, 2013, Seaspan declared cash dividends of $0.59375 and $0.496875 per Series C and Series D preferred share, respectively, for the period from April 30, 2013 to July 29, 2013. The dividends, representing a total distribution of $9.9 million, will be paid on July 30, 2013 to all Series C and Series D preferred shareholders of record as of July 29, 2013.
On July 24, 2013, Seaspan declared a quarterly dividend of $0.3125 per Class A common share. The dividend is payable on August 21, 2013 to all shareholders of record as of August 12, 2013.
Loan Facility Transaction
On July 25, 2013, Seaspan entered into a term loan facility with a leading European bank for up to $83.0 million to fund the construction of one 14000 TEU newbuilding containership to be chartered to Yang Ming Marine. With this transaction, all three 14000 TEU newbuilding containerships to be chartered to Yang Ming Marine are now financed.
Results for the Three and Six Months Ended June 30, 2013
The following table summarizes vessel utilization for the three and six months ended June 30, 2013:
Year to Date -
First Quarter Second Quarter June 30,
----------------- ----------------- -----------------
2013 2012 2013 2012 2013 2012
-------- -------- -------- -------- -------- --------
Vessel utilization:
Ownership days 5,850 5,591 5,933 5,847 11,783 11,438
Less off-hire days:
Scheduled 5-year
survey - (44) (19) (24) (19) (68)
Unscheduled off-
hire(1) (230) (7) (40) (14) (270) (21)
-------- -------- -------- -------- -------- --------
Operating days 5,620 5,540 5,874 5,809 11,494 11,349
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Vessel utilization 96.1% 99.1% 99.0% 99.4% 97.5% 99.2%
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
----------------------
(1) Unscheduled off-hire includes days related to vessels being off-charter
At the beginning of 2013, Seaspan had 69 vessels in operation and accepted delivery of one vessel during the second quarter of 2013, bringing its fleet to a total of 70 vessels as of June 30, 2013. Revenue is determined primarily by the number of operating days, and ship operating expense is determined primarily by the number of ownership days.
The following table summarizes Seaspan’s consolidated financial results for the three and six months ended June 30, 2013 and 2012:
Three Months Six Months
Ended Ended
June 30, Increase June 30, Increase
--------------- ------------ --------------- ------------
2013 2012 Days % 2013 2012 Days %
------- ------- ------ ----- ------- ------- ------ -----
Operating days 5,874 5,809 65 1.1% 11,494 11,349 145 1.3%
Ownership days 5,933 5,847 86 1.5% 11,783 11,438 345 3.0%
Financial
Summary Three Months Six Months
(in millions of Ended Ended
USD) June 30, Change June 30, Change
-------------- ------------- --------------- -------------
2013 2012 $ % 2013 2012 $ %
------ ------- ------ ------ ------- ------- ------ ------
Revenue $167.8 $ 167.6 $ 0.1 0.1% $ 332.7 $ 321.1 $ 11.6 3.6%
Ship operating
expense 37.3 31.5 5.8 18.5% 74.9 66.1 8.8 13.4%
Depreciation
and
amortization
expense 42.8 42.3 0.6 1.3% 85.6 80.2 5.4 6.7%
General and
administrative
expense 11.8 6.7 5.2 77.4% 19.6 12.5 7.1 56.7%
Operating lease
expense 1.1 - 1.1 100.0% 2.2 - 2.2 100.0%
Interest
expense 15.3 19.2 (3.9) (20.3%) 30.8 36.1 (5.4) (14.9%)
Change in fair
value of
financial
instruments (71.2) 82.1 153.3 186.7% (68.5) 86.8 155.3 179.0%
Revenue
Revenue increased by 0.1% and 3.6% for the three and six months ended June 30, 2013, respectively, over the same periods for 2012. This is due primarily to: the impact of a full period’s contribution of the larger newbuilding vessels delivered in 2012 (and higher time-charter rates associated with such vessels); revenue received from management of third party vessels; a decrease in scheduled off-hire; and the delivery of one vessel in June 2013. These increases over the same periods for 2012 were partially offset by: lower rates for five vessels which were on short-term charters during the period; one less day in 2013 due to the 2012 leap year; and an increase in unscheduled off-hire, which included 238 off-charter days for four of Seaspan’s 4250 TEU vessels for the six months ended June 30, 2013.
The increase in operating days and the related financial impact for the three and six months ended June 30, 2013, relative to the corresponding periods in 2012, is attributable to the following:
Three Months Ended Six Months Ended
June 30, 2013 June 30, 2013
-------------------------- --------------------------
Operating $ impact Operating $ impact
days impact (in millions) days impact (in millions)
------------ ------------- ------------ -------------
2013 vessel deliveries 18 $ 0.4 18 $ 0.4
Full period
contribution for 2012
vessel deliveries 48 2.7 368 20.6
Change in daily
charter hire rate and
re-charters - (3.5) - (5.2)
One less day due to
the 2012 leap year - - (61) (1.7)
Scheduled off-hire 5 0.4 49 1.5
Unscheduled off-hire (26) (0.9) (249) (5.2)
Vessel management
revenue - 0.9 - 1.2
Other 20 0.1 20 -
------------ ------------- ------------ -------------
Total 65 $ 0.1 145 $ 11.6
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
Vessel utilization was 99.0% and 97.5% for the three and six months ended June 30, 2013, respectively, compared to 99.4% and 99.2% for the comparable periods in 2012.
The decrease in vessel utilization for the six months ended June 30, 2013, compared to the same period in 2012, was primarily due to a 249-day increase in unscheduled off-hire, which includes 238 off-charter days for four of Seaspan’s 4250 TEU vessels. During the six months ended June 30, 2013, Seaspan completed two dry-dockings, which resulted in 19 days of scheduled off-hire compared to the completion of five dry-dockings, which resulted in 68 days of scheduled off-hire, during the comparable period in 2012.
The dry-dockings Seaspan completed during the three and six months ended June 30, 2013 involved the following vessels:
Vessel Completed
--------------------------------------
CSCL Montevideo Q2
CSCL Panama Q2
Seaspan’s cumulative vessel utilization since its initial public offering in August 2005 through June 30, 2013 was 99.1%.
Ship Operating Expense
Ship operating expense increased by 18.5% to $37.3 million and by 13.4% to $74.9 million for the three and six months ended June 30, 2013, respectively, compared to the same periods in 2012. The increases are due to 233 and 535, or 4.0% and 4.7%, more ownership and managed days for the three and six months ended June 30, 2013, respectively, related to the addition of four 13100 TEU vessels during the first half of 2012 and management of third party vessels. The larger TEU vessels are more expensive to operate and the increased cost of lubes, insurance and other operating costs associated with these vessels further contributed to higher ship operating expenses in 2013. In addition, spare parts expense increased by $1.2 million and $1.8 million for the three and six months ended June 30, 2013, respectively, compared to the same periods in 2012 primarily due to earlier timing of purchases in 2013 and increased expense due to an expanding and aging fleet.
Ship operating expense for the three and six months ended June 30, 2012 included fixed, daily per vessel fees totalling $9.3 million, paid to the Manager for technical services prior to the acquisition of the Manager on January 26, 2012, and $56.8 million of direct costs incurred during the post-acquisition period from January 27 to June 30, 2012.
Depreciation and Amortization Expense
The increase in depreciation and amortization for the three and six months ended June 30, 2013 was due to the increase in the size of the fleet. Four vessels were delivered in the first six months of 2012 and a full period of depreciation was taken for these vessels in the three and six months ended June 30, 2013.
General and Administrative Expense
General and administrative expenses increased by 77.4% to $11.8 million and by 56.7% to $19.6 million for the three and six months ended June 30, 2013, respectively, compared to the same periods in 2012. The increases for the three and six months ended June 30, 2013 over the same periods in 2012 were due primarily to increases of $5.8 million and $7.8 million, respectively, in stock-based compensation expense related to the non-cash stock appreciation rights (“SARs”) granted to Seaspan’s Chief Executive Officer in December 2012 and to certain members of management in March 2013. Of the $5.8 million increase in stock-based compensation expense for the three months ended June 30, 2013, $2.6 million resulted from an accelerated recognition of stock-based compensation expense related to the vesting of the first tranche of SARs. During the quarter ended June 30, 2013, the first tranche of SARs vested because the 20 consecutive trading-day average of Seaspan’s common stock exceeded the base price of $21.50 per share for that tranche. The original vesting period that was being used to recognize the stock-based compensation expense was based on a fair value model. Because the first tranche of SARs vested earlier than had been estimated by the fair value model, Seaspan was required to accelerate recognition of $2.6 million of stock-based compensation expense during the three months ended June 30, 2013, which amount otherwise would have been recognized later in 2013.
Operating Lease Expense
On June 27, 2012, Seaspan sold the Madinah to a U.S. bank and since that date has been leasing the vessel back over a nine-year term. Prior to June 27, 2012, Seaspan owned the vessel and financed it with a term loan of $53.0 million, which was repaid using the proceeds from the sale to the bank. During the three and six months ended June 30, 2013, Seaspan incurred operating lease expenses relating to this arrangement of $1.1 million and $2.2 million, respectively. In the comparable periods of 2012, instead of operating lease expense, Seaspan incurred interest expense of $0.5 million and $1.1 million on the $53.0 million loan.
Interest Expense
As at June 30, 2013, the balance of Seaspan’s long-term debt totalled $3.1 billion and Seaspan’s other long-term liabilities totalled $631.7 million. As at June 30, 2013, Seaspan’s operating debt balance was $2.9 billion. Interest expense is comprised primarily of interest incurred on long-term debt and other long-term liabilities relating to operating vessels at the variable rate calculated by reference to LIBOR plus the applicable margin. Interest expense also includes a reclassification of amounts from accumulated other comprehensive loss related to previously designated hedging relationships. Interest incurred on long-term debt and other long-term liabilities for Seaspan’s vessels under construction is capitalized to the cost of the respective vessels under construction.
The decreases in interest expense for the three and six months ended June 30, 2013 of $3.9 million and $5.4 million, respectively, compared to the same periods of 2012 were primarily due to lower operating debt and other long-term liabilities as well as a reduction in average LIBOR. The remaining decreases were due to a lower reclassification of accumulated other comprehensive loss into earnings and repayment of the term loan of $53.0 million in 2012 using the proceeds from the sale of the Madinah. For the six months ended June 30, 2013, the decrease in interest expense is partially offset by less interest capitalized as the average vessel under construction balance for the six months ended June 30, 2013 was lower than for the six months ended June 30, 2012. The average LIBOR charged onSeaspan’s long-term debt for the three months and six months ended June 30, 2013 was 0.2% compared to 0.5% for the comparable periods in 2012. Although Seaspan has entered into fixed interest rate swaps for much of its variable rate debt, the difference between the variable interest rate and the swapped fixed-rate on operating debt is recorded in Seaspan’s change in fair value of financial instruments.
Change in Fair Value of Financial Instruments
The change in fair value of financial instruments resulted in a gain of $71.2 million for the three months ended June 30, 2013, compared to a loss of $82.1 million for the comparable period in 2012. The change in fair value of financial instruments resulted in a gain of $68.5 million for the six months ended June 30, 2013, compared to a loss of $86.8 million for the same period in 2012. The changes for the three and six months ended June 30, 2013, compared to the same periods in 2012 were primarily due to the effect of the passage of time and less discounting of expected future settlements.
The fair value of interest rate swap and swaption agreements is subject to change based on the counterparty and Seaspan’s company-specific credit risk of Seaspan and of the counterparty included in the discount factor and the interest rate implied by the current swap curve, including its relative steepness. In determining the fair value, these factors are based on current information available to Seaspan. These factors are expected to change through the life of the instruments, causing the fair value to fluctuate significantly due to the large notional amounts and long-term nature of Seaspan’s derivative instruments. As these factors may change, the fair value of the instruments is an estimate and may deviate significantly from the actual cash settlements realized over the term of the instruments.Seaspan’s valuation techniques have not changed and remain consistent with those followed by other valuation practitioners.
About Seaspan
Seaspan provides many of the world’s major shipping lines with creative outsourcing alternatives to vessel ownership by offering long-term leases on large, modern containerships combined with industry leading ship management services. With a reputation for safety, quality and innovation, Seaspan provides turnkey services in ship design, cadet development, crewing, and newbuilding supervision.Seaspan’s managed fleet consists of 89 containerships representing a total capacity of over 600,000 TEU, including 16 newbuilding containerships on order scheduled for delivery to Seaspan and third parties by the end of 2015. Seaspan’s current operating fleet of 71 vessels has an average age and remaining lease period (excluding the effect of charterers’ options to extend certain time charters) of approximately six years.
Seaspan’s common shares, Series C Preferred Shares and Series D Preferred Shares are listed on The New York Stock Exchange under the symbols “SSW”, “SSW PR C” and “SSW PR D”, respectively.
Conference Call and Webcast
Seaspan will host a conference call and webcast presentation for investors and analysts to discuss its results for the three and six months ended June 30, 2013 on July 30, 2013 at 5:00 a.m. PT / 8:00 a.m. ET. Participants should call 1-877-246-9875 (US/Canada) or 1-707-287-9353 (International) and request the Seaspan call. A telephonic replay will be available for anyone unable to participate in the live call. To access the replay, call 1-855-859-2056 or 1-404-537-3406 and enter the replay passcode: 18697996. The recording will be available from July 30, 2013 at 8:00 a.m. PT / 11:00 a.m. ET through8:59 p.m. PT / 11:59 p.m. ET on August 13, 2013. The conference call will also be broadcast live over the internet and will include a slide presentation. To access the live webcast and slide presentation, go to www.seaspancorp.com and click on “News & Events” and then “Events & Presentations” for the link. The webcast and slides will be archived on the site for one year.
SEASPAN CORPORATION
UNAUDITED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2013
(IN THOUSANDS OF US DOLLARS)
June 30, 2013 December 31, 2012
----------------- -----------------
Assets
Current assets:
Cash and cash equivalents $ 254,564 $ 381,378
Short-term investments 81,696 36,100
Accounts receivable 11,470 9,573
Prepaid expenses 27,144 20,902
Gross investment in lease 19,235 15,977
----------------- -----------------
394,109 463,930
Vessels 4,728,264 4,785,968
Vessels under construction 174,650 77,305
Deferred charges 54,705 43,816
Gross investment in lease 69,323 79,821
Goodwill 75,321 75,321
Other assets 109,541 83,661
Fair value of financial instruments 52,143 41,031
----------------- -----------------
$ 5,658,056 $ 5,650,853
----------------- -----------------
----------------- -----------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued
liabilities $ 51,586 $ 49,997
Current portion of deferred revenue 11,481 25,111
Current portion of long-term debt 150,612 66,656
Current portion of other long-term
liabilities 38,927 38,542
----------------- -----------------
252,606 180,306
Deferred revenue 5,892 7,903
Long-term debt 2,942,746 3,024,288
Other long-term liabilities 592,804 613,049
Fair value of financial instruments 485,995 606,740
----------------- -----------------
4,280,043 4,432,286
Share capital 817 804
Treasury shares (432) (312)
Additional paid in capital 1,887,846 1,859,068
Deficit (466,783) (594,153)
Accumulated other comprehensive loss (43,435) (46,840)
----------------- -----------------
Total shareholders' equity 1,378,013 1,218,567
----------------- -----------------
$ 5,658,056 $ 5,650,853
----------------- -----------------
----------------- -----------------
SEASPAN CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
2013 2012 2013 2012
------------ ------------ ------------ ------------
Revenue $ 167,786 $ 167,637 $ 332,710 $ 321,069
Operating expenses:
Ship operating 37,344 31,515 74,890 66,065
Depreciation and
amortization 42,840 42,284 85,593 80,215
General and
administrative 11,833 6,671 19,624 12,521
Operating lease 1,097 - 2,183 -
Gain on vessel - (9,773) - (9,773)
------------ ------------ ------------ ------------
93,114 70,697 182,290 149,028
------------ ------------ ------------ ------------
Operating earnings 74,672 96,940 150,420 172,041
Other expenses (income):
Interest expense 15,275 19,157 30,759 36,132
Interest income (600) (321) (787) (629)
Undrawn credit
facility fees 748 398 1,145 1,203
Amortization of
deferred charges 2,266 2,205 4,376 3,766
Change in fair value
of financial
instruments (71,193) 82,084 (68,527) 86,760
Equity loss on
investment 35 - 69 134
Other expenses 987 166 625 166
------------ ------------ ------------ ------------
(52,482) 103,689 (32,340) 127,532
------------ ------------ ------------ ------------
Net earnings (loss) $ 127,154 $ (6,749) $ 182,760 $ 44,509
Deficit, beginning of
period (563,770) (591,415) (594,153) (622,406)
Dividends - common
shares (19,992) (15,720) (35,786) (27,455)
Dividends - preferred
shares (9,857) (8,312) (18,976) (16,625)
Amortization of Series C
issuance costs (318) (258) (628) (477)
------------ ------------ ------------ ------------
Deficit, end of period $ (466,783) $ (622,454) $ (466,783) $ (622,454)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Weighted average number
of shares, basic 64,487 62,608 64,129 63,153
Weighted average number
of shares, diluted 86,703 62,608 86,350 64,466
Earnings (loss) per
share, basic $ 1.67 $ (0.38) $ 2.24 $ 0.17
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Earnings (loss) per
share, diluted $ 1.35 $ (0.38) $ 1.88 $ 0.17
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
SEASPAN CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012
(IN THOUSANDS OF US DOLLARS)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
2013 2012 2013 2012
------------ ------------ ------------ ------------
Net earnings (loss) $ 127,154 $ (6,749) $ 182,760 $ 44,509
Other comprehensive
income:
Amounts reclassified to
earnings (loss) during
the period, relating
to cash flow hedging
instruments 1,603 2,412 3,405 5,120
------------ ------------ ------------ ------------
Comprehensive income
(loss) $ 128,757 $ (4,337) $ 186,165 $ 49,629
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
SEASPAN CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012
(IN THOUSANDS OF US DOLLARS)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2013 2012 2013 2012
----------- ----------- ----------- -----------
Cash from (used in):
Operating activities:
Net earnings (loss) $ 127,154 $ (6,749) $ 182,760 $ 44,509
Items not involving cash:
Depreciation and
amortization 42,840 42,284 85,593 80,215
Share-based compensation 6,630 1,943 9,441 2,529
Amortization of deferred
charges 2,266 2,205 4,376 3,766
Amounts reclassified
from other
comprehensive loss to
interest expense 1,384 2,194 2,963 4,736
Unrealized change in
fair value of financial
instruments (102,988) 51,354 (131,857) 25,571
Equity loss on
investment 35 - 69 134
Gain on vessel - (9,773) - (9,773)
Changes in assets and
liabilities 24,240 8,737 (17,501) (9,733)
----------- ----------- ----------- -----------
Cash from operating
activities 101,561 92,195 135,844 141,954
----------- ----------- ----------- -----------
Financing activities:
Draws on credit facilities - 69,997 9,000 115,487
Repayment of credit
facilities (12,219) (2,760) (33,226) (12,802)
Repayment of other long-
term liabilities (9,787) (8,335) (19,860) (32,984)
Shares repurchased,
including related
expenses - (329) - (170,938)
Financing fees (2,903) 198 (14,780) 182
Dividends on common shares (11,266) (14,811) (20,438) (22,178)
Dividends on preferred
shares (9,857) (8,312) (18,976) (16,625)
----------- ----------- ----------- -----------
Cash from (used in)
financing activities (46,032) 35,648 (98,280) (139,858)
----------- ----------- ----------- -----------
Investing activities:
Expenditures for vessels (33,065) (77,640) (92,294) (164,275)
Short-term investments (15,323) 141 (45,596) (10,073)
Cash acquired on
acquisition of Manager - - - 23,910
Other assets (24,595) (6,511) (23,477) 530
Restricted cash (500) 2,100 (1,900) (3,900)
Investment in affiliate - - (1,111) -
----------- ----------- ----------- -----------
Cash used in investing
activities (73,483) (81,910) (164,378) (153,808)
----------- ----------- ----------- -----------
Increase (decrease) in cash
and cash equivalents (17,954) 45,933 (126,814) (151,712)
Cash and cash equivalents,
beginning of period 272,518 283,478 381,378 481,123
----------- ----------- ----------- -----------
Cash and cash equivalents,
end of period $ 254,564 $ 329,411 $ 254,564 $ 329,411
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
SEASPAN CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012
(IN THOUSANDS OF US DOLLARS)
Description of Non-GAAP Financial Measures
A. Cash Available for Distribution to Common Shareholders
Cash available for distribution to common shareholders is defined as net earnings adjusted for depreciation and amortization, interest expense, amortization of deferred charges, non-cash share-based compensation, change in fair value of financial instruments, bareboat charter adjustment, organizational development costs, amounts paid for dry-docking, cash dividends paid on preferred shares, gain on vessels, interest expense at the hedged rate and certain other items that Seaspan believes are not representative of its operating performance.
Cash available for distribution to common shareholders is a non-GAAP measure used to assist in evaluating Seaspan’s ability to make quarterly cash dividends before reserves for replacement capital expenditures. Cash available for distribution to common shareholders is not defined by United States generally accepted accounting principles (“GAAP”) and should not be considered as an alternative to net earnings or any other indicator of Seaspan’s performance required to be reported by GAAP.
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2013 2012 2013 2012
----------- ----------- ----------- -----------
Net earnings (loss) $ 127,154 $ (6,749) $ 182,760 $ 44,509
Add:
Depreciation and
amortization 42,840 42,284 85,593 80,215
Interest expense 15,275 19,157 30,759 36,132
Amortization of deferred
charges 2,266 2,205 4,376 3,766
Share-based compensation 6,630 1,943 9,441 2,529
Change in fair value of
financial instruments (71,193) 82,084 (68,527) 86,760
Bareboat charter
adjustment, net(1) 2,465 2,324 4,860 4,621
Organizational development
costs(2) - 331 - 962
Less:
Amounts paid for dry-
docking (2,610) (1,814) (5,095) (3,760)
Series C preferred share
dividends paid and
accumulated(3) (8,312) (8,312) (16,625) (16,625)
Series D preferred share
dividends paid and
accumulated(3) (1,545) - (2,351) -
Gain on vessel(4) - (9,773) - (9,773)
----------- ----------- ----------- -----------
Net cash flows before
interest payments 112,970 123,680 225,191 229,336
Less:
Interest expense at the
hedged rate(5) (45,734) (47,271) (91,140) (87,583)
----------- ----------- ----------- -----------
Cash available for
distribution to common
shareholders $ 67,236 $ 76,409 $ 134,051 $ 141,753
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
SEASPAN CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
B. Normalized Net Earnings and Normalized Earnings per Share
Normalized net earnings is defined as net earnings adjusted for items such as interest expense, change in fair value of financial instruments, interest expense at the hedged rate, organizational development costs, gain on vessels and certain other items Seaspan believes affect the comparability of operating results. Normalized net earnings is a useful measure because it excludes those items that Seaspan believes are not representative of its operating performance.
Normalized earnings per share, converted, is calculated as normalized net earnings, less dividends on Series C and Series D preferred shares, divided by the “converted” number of shares outstanding for the period. The Series A preferred shares automatically convert to Class A common shares at a price of $15.00 per share at any time on or after January 31, 2014 if the trailing 30-day average trading price of the common shares is equal to or above $15.00. If the share price is less than $15.00, Seaspan can choose to not convert the preferred shares and to increase the annual increase in the liquidation preference to 15% per annum from 12%. The “converted” number of shares includes: basic weighted average number of shares, share-based compensation, contingent consideration, shares held in escrow and the impact of the Series A preferred shares converted at $15.00 per share. This method reflects Seaspan’s ability to control the conversion if the share price is less than $15.00 and the per share impact of the preferred shares conversion at $15.00.
Normalized net earnings and normalized earnings per share, converted, are not defined by GAAP and should not be considered as an alternative to net earnings, earnings per share or any other indicator ofSeaspan’s performance required to be reported by GAAP.
SEASPAN CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
B. Normalized Net Earnings and Normalized Earnings per Share (continued)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2013 2012 2013 2012
----------- ----------- ----------- -----------
Net earnings (loss) $ 127,154 $ (6,749) $ 182,760 $ 44,509
Adjust:
Interest expense 15,275 19,157 30,759 36,132
Change in fair value of
financial instruments (71,193) 82,084 (68,527) 86,760
Interest expense at the
hedged rate(5) (45,734) (47,271) (91,140) (87,583)
Organizational development
costs(2) - 331 - 962
Gain on vessel(4) - (9,773) - (9,773)
----------- ----------- ----------- -----------
Normalized net earnings $ 25,502 $ 37,779 $ 53,852 $ 71,007
----------- ----------- ----------- -----------
Less: preferred share
dividends
Series A 9,423 8,371 18,473 16,499
Series C (including
amortization of issuance
costs) 8,631 8,569 17,251 17,102
Series D 1,545 - 3,088 -
----------- ----------- ----------- -----------
19,599 16,940 38,812 33,601
----------- ----------- ----------- -----------
Normalized net earnings
attributable to common
shareholders $ 5,903 $ 20,839 $ 15,040 $ 37,406
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number of
shares used to compute
earnings per share
Reported and normalized,
basic 64,487 62,608 64,129 63,153
Share-based compensation 399 210 382 204
Contingent consideration 508 703 743 605
Shares held in escrow - 586 95 504
Series A preferred shares
liquidation preference
converted at $15 21,309 18,933 21,001 18,658
----------- ----------- ----------- -----------
Reported, diluted(6) 86,703 83,040 86,350 83,124
Series A preferred shares
115% premium (30-day
trailing average) - - - -
----------- ----------- ----------- -----------
Normalized, converted 86,703 83,040 86,350 83,124
----------- ----------- ----------- -----------
Earnings (loss) per share:
Reported, basic $ 1.67 $ (0.38) $ 2.24 $ 0.17
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Reported, diluted $ 1.35 $ (0.38) $ 1.88 $ 0.17
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Normalized, converted -
preferred shares
converted at $15(7) $ 0.18 $ 0.35 $ 0.39 $ 0.65
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
SEASPAN CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012
(IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE AMOUNTS)
C. Adjusted EBITDA
Adjusted EBITDA is defined as net earnings before interest expense and other debt-related expenses, income tax expense, interest income, depreciation and amortization, bareboat charter adjustment, organizational development costs, gain on vessels, change in fair value of financial instruments and certain other items that Seaspan believes are not representative of its operating performance.
Adjusted EBITDA provides useful information to investors in assessing Seaspan’s results of operations. Seaspan believes that this measure is useful in assessing performance and highlighting trends on an overall basis. Seaspan also believes that this measure can be useful in comparing its results with those of other companies. The GAAP measure most directly comparable to Adjusted EBITDA is net earnings. Adjusted EBITDA is not defined by GAAP and should not be considered as an alternative to net earnings or any other indicator of Seaspan’s performance required to be reported by GAAP.
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2013 2012 2013 2012
----------- ----------- ----------- -----------
Net earnings (loss) $ 127,154 $ (6,749) $ 182,760 $ 44,509
Add:
Interest expense 15,275 19,157 30,759 36,132
Interest income (600) (321) (787) (629)
Undrawn credit facility
fees 748 398 1,145 1,203
Depreciation and
amortization 42,840 42,284 85,593 80,215
Amortization of deferred
charges 2,266 2,205 4,376 3,766
Bareboat charter
adjustment, net(1) 2,465 2,324 4,860 4,621
Organizational development
costs(2) - 331 - 962
Gain on vessel(4) - (9,773) - (9,773)
Change in fair value of
financial instruments (71,193) 82,084 (68,527) 86,760
----------- ----------- ----------- -----------
Adjusted EBITDA $ 118,955 $ 131,940 $ 240,179 $ 247,766
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
(1) In the second half of 2011, Seaspan entered into agreements to bareboat
charter four 4800 TEU vessels to Mediterranean Shipping Company S.A.
("MSC") for a five year term, beginning from vessel delivery dates that
occurred in 2011. Upon delivery of the vessels to MSC, the transactions
were accounted for as sales-type leases. The vessels were disposed of
and a gross investment in lease was recorded, which is being amortized
to income through revenue. The bareboat charter adjustment is included
to reverse the GAAP accounting treatment and reflect the transaction as
if the vessels had not been disposed of. Therefore, the bareboat charter
fees are added back and the interest income from leasing, which is
recorded in revenue, is deducted resulting in a net bareboat charter
adjustment.
(2) Organizational development costs include professional fees and
integration costs related to the acquisition of the Manager.
(3) Dividends related to the Series C and Series D preferred shares have
been deducted as they reduce cash available for distribution to common
shareholders.
(4) Gains or losses on disposal of vessels are excluded from the
calculation. The gain on vessel results from the sale of the Madinah to
a U.S. bank on June 27, 2012.
(5) Interest expense at the hedged rate is calculated as the interest
incurred on operating debt at the fixed rate on the related interest
rate swaps plus the applicable margin on the related credit facilities
and variable rate leases, on an accrual basis. Interest expense on fixed
rate leases is calculated on the effective interest rate.
(6) If the effect of Series A preferred shares is anti-dilutive, their
effect is excluded from the computation of reported diluted earnings per
share.
(7) Normalized earnings per share, converted, decreased for the three and
six months ended June 30, 2013 as detailed in the table below:
Three Months Six Months
Ended, Ended,
June 30 June 30
-------------------------------
Normalized earnings per share, converted-
preferred shares converted at $15, June 30,
2012 $ 0.35 $ 0.65
Excluding share count changes:
Decrease in normalized net earnings(1) (0.14) (0.20)
Decrease from impact of Series C and D
preferred shares (0.02) (0.03)
Share count changes:
Increase in converted share count (from
83,040 to 86,703 and from 83,124 to
86,350 for the three and six months
ended, respectively) (0.01) (0.03)
--------------- ---------------
Normalized earnings per share, converted-
preferred shares converted at $15, June 30,
2013 $ 0.18 $ 0.39
--------------- ---------------
--------------- ---------------
(1) The decreases in normalized net earnings are primarily due to the
increases in ship operating expenses of $5.8 million and $8.8 million
and general and administrative expenses of $5.2 million and $7.1 million
for the three and six months ended June 30, 2013. Please read "Results
for the Three and Six Months Ended June 30, 2013" for a description of
the increases in ship operating expenses and general and administrative
expenses.
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This release contains certain forward-looking statements (as such term is defined in Section 21E of the Securities Exchange Act of 1934, as amended), which reflect management’s current views with respect to certain future events and performance, including, in particular, statements regarding: future operating or financial results; expansion of Seaspan’s business; future time charters, including the obtaining of charters for the vessels recently ordered by Seaspan; future dividends; the effects of grants of stock appreciation rights on Seaspan’s general and administrative expenses; vessel deliveries; vessel financing arrangements; and Seaspan’s capital requirements. Although these statements are based upon assumptions Seaspan believes to be reasonable, they are subject to risks and uncertainties.
These risks and uncertainties include, but are not limited to: the availability to Seaspan of containership acquisition opportunities; the availability and cost to Seaspan of financing to pursue growth opportunities; the number of additional vessels managed by the Manager in the future; the amounts of any payments to the former owners of our Manager related to fleet growth; the timing of recognition of compensation expenses related to stock appreciation rights; general market conditions and shipping market trends, including chartering rates; conditions in the containership market; increased operating expenses; the number of off-hire days; dry-docking requirements; availability of crew; insurance costs; Seaspan’s ability to borrow funds under its credit facilities and to obtain additional financing in the future; Seaspan’s future cash flows and its ability to make dividend and other payments; the time that it may take to construct new ships; Seaspan’s continued ability to enter into primarily long-term, fixed-rate time charters with customers, including charters for the vessels recently ordered by Seaspan; Seaspan’s ability to leverage to its advantage its relationships and reputation in the containership industry; changes in governmental rules and regulations or actions taken by regulatory authorities; the financial condition of shipyards, charterers, lenders, refund guarantors and other counterparties and their ability to perform their obligations under their agreements with Seaspan; taxation of Seaspan and of distributions to its shareholders; potential liability from future litigation; the potential for early termination of long-term contracts and Seaspan’s potential inability to renew or replace long-term contracts; conditions in the public equity markets and the price of Seaspan’s shares; and other factors detailed from time to time in Seaspan’s periodic reports and filings with the Securities and Exchange Commission, including Seaspan’s Report on Form 20-F for the year ended December 31, 2012.Seaspan expressly disclaims any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in Seaspan’s views or expectations, or otherwise.
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