Seaspan Reports Financial Results for the Three and Six Months Ended June 30, 2011
Signs Newbuilding Contracts for Fuel Efficient 10000 TEU Vessels and Secures Ten-Year Time Charters with Hanjin Shipping Newbuilding Contracts Expected to be First in a Series of Orders in Company's Next Phase of Fleet Expansion
(firmenpresse) - HONG KONG, CHINA -- (Marketwire) -- 08/04/11 -- Seaspan Corporation (NYSE: SSW) announced today the financial results for the three and six months ended June 30, 2011. Below is a summary of Seaspan's key financial results:
Gerry Wang, Chief Executive Officer, Co-Chairman, and Co-Founder of Seaspan, commented, "During the second quarter, we continued to grow our fleet, positioning Seaspan to further expand its contracted revenue stream, net earnings and cash available for distribution. In addition to taking delivery of four newbuildings, we capitalized on a compelling ship acquisition environment and commenced our next phase of growth."
Mr. Wang added, "We are pleased to have re-entered the newbuilding market by signing contracts for the construction of three 10000 TEU newbuildings pursuant to our right of first refusal agreement with Greater China Intermodal Investments LLC ("GCI"). In addition to realizing volume discounts and favorable pricing terms, we drew upon our new containership venture to introduce our innovative SAVER design, which we believe will provide significantly improved fuel efficiency and operational savings to customers. The addition of Hanjin, the largest Korean-based liner company, is aligned with Seaspan's strategy of diversifying its high quality customer portfolio."
Mr. Wang concluded, "During the second quarter, we also maintained our focus on strengthening Seaspan's capital structure to fund future growth by completing our second offering of our Series C preferred stock. We intend to pursue attractive growth opportunities that strengthen our leadership position in the industry and to utilize our strong balance sheet to continue to act opportunistically. We expect our most recent newbuilding orders to be the first in a series of orders in our next phase of fleet expansion as we continue to benefit from the scale and buying power of our recently formed containership venture, and to serve as a template for our controlled and balanced growth strategy."
Second Quarter Developments
Issuance of Four Million Series C Preferred Shares
On May 25, 2011, Seaspan completed a public offering of four million shares of its Series C preferred stock at price of $27.15 per share, for net proceeds of $105.2 million, which included accrued dividends to May 25, 2011 of $0.15 per share. The shares were sold at a $2.00 premium per share over the stated liquidation preference of $25 per share. Dividends are payable on the Series C preferred shares at an initial rate of 9.5% per annum of the stated liquidation preference. Seaspan intends to use the net proceeds from this offering for general corporate purposes, including funding the construction of its three new 10000 TEU containerships.
Newbuilding Order and New Customer
Seaspan has signed contracts for the construction of three 10000 TEU newbuilding containerships with Jiangsu New Yangzi Shipbuilding Co., Ltd. and Jiangsu Yangzi Xinfu Shipbuilding Co., Ltd. The contracts were signed pursuant to Seaspan's right of first refusal agreement with GCI, an investment vehicle established by an affiliate of global alternative asset manager, The Carlyle Group, in which Seaspan holds an 11% ownership interest. The vessels will be constructed using Seaspan's fuel efficient New Panamax SAVER design, which was nominated for Nor-Shipping's Next Generation Ship Award, and will be chartered under ten-year, fixed-rate time charters with Hanjin. Hanjin is the largest Korean-based liner company and a new addition to Seaspan's high-quality customer portfolio. After the initial ten-year charter periods, Hanjin will have options to recharter each ship for an additional two years. The three vessels acquired by Seaspan are scheduled for delivery in 2014. Seaspan has options to purchase an additional 18 similar newbuilding vessels, which will also be subject to Seaspan's right of first refusal agreement with GCI. The conflicts committee of Seaspan's board of directors approved the allocation of the vessels between Seaspan and GCI and Seaspan's acquisition of the three vessels.
Seaspan intends to fund the construction of the three new 10000 TEU containerships with existing growth capital, including proceeds from its recent Series C preferred share offerings, and cash from operations.
Subsequent Events
On August 1, 2011, Seaspan accepted delivery of the Budapest Bridge, bringing its operating fleet to 63 vessels.
Results for the Three and Six Months ended June 30, 2011
The following tables summarize vessel utilization and the impact of off-hire time on Seaspan's revenues for the three and six months ended June 30, 2011:
Seaspan accepted delivery of 13 vessels during the year ended December 31, 2010. Seaspan began 2011 with 55 vessels in operation and accepted delivery of seven vessels as at June 30, 2011, bringing its fleet to a total of 62 vessels in operation as at that date. Operating days are the primary driver of revenue, while ownership days are the primary driver for ship operating costs.
Revenue
The increase in operating days and the dollar impact thereof, for the three and six months ended June 30, 2011 was due to the following:
Vessel utilization was 98.9%, for both the three and six months ended June 30, 2011 compared to 99.0% and 98.1% for each of the comparable periods in the prior year.
The increase in vessel utilization for the six months ended June 30, 2011 was primarily due to the 90 days of unscheduled off-hire resulting from the grounding of the CSAV Licanten (formerly the CSCL Hamburg) in the Gulf of Aqaba on December 31, 2009. During the six months ended June 30, 2010 four dry-dockings were completed, which resulted in 62 days of scheduled off-hire for the following vessels:
During the six months ended June 30, 2011 Seaspan completed seven dry-dockings which resulted in a total of 111 days of scheduled off-hire for the following vessels:
Seaspan's cumulative vessel utilization since its initial public offering in August 2005 is 99.1%.
Ship Operating Expense
The increase in ownership days, and the dollar impact thereof, for the three and six months ended June 30, 2011 was due to the following:
Depreciation
The increases in depreciation expense for the three and six months ended June 30, 2011 were due to the additional ownership days from the seven deliveries in 2011 and a full period of ownership for the 13 deliveries in 2010.
General and Administrative Expenses
The increases in general and administrative expenses for the three and six months ended June 30, 2011 were primarily due to the new employment agreement with Seaspan's chief executive officer, additional fees paid to Seaspan's board of directors for an increased number of meetings and increased legal costs and professional fees to support growth transactions.
Interest Expense
Interest expense is comprised of interest at the variable rate plus the applicable margin incurred on debt for operating vessels and a reclassification of amounts from accumulated other comprehensive income related to previously designated hedging relationships. The increases in interest expense for the three and six months ended June 30, 2011, were primarily due to higher average operating debt balances compared to the comparable periods in the prior year. The average LIBOR for the three and six months ended June 30, 2011 was 0.4%, compared to 0.3% for both of the comparable periods of the prior year. Although Seaspan has entered into fixed interest rate swaps, 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 caption as required by financial reporting standards. The interest incurred on long-term debt for Seaspan's vessels under construction is capitalized to the respective vessels under construction.
Change in Fair Value of Financial Instruments
The change in fair value of financial instruments resulted in a loss of $84.7 million for the three months ended June 30, 2011, compared to a loss of $157.7 million for the comparable quarter last year. The change in fair value of financial instruments resulted in a loss of $78.9 million for the six months ended June 30, 2011, compared to a loss of $223.2 million for the comparable period last year. The decreases in change in fair value for the three and six months ended June 30, 2011 were primarily due to decreases in the forward LIBOR curve. The fair value of interest rate swap and swaption agreements is subject to change based on Seaspan's company-specific credit risk 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 the 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.
Dividends Declared:
Class A Common Shares
For the quarter ended June 30, 2011, Seaspan declared a quarterly dividend of $0.1875 per common share, representing a total distribution of $12.9 million. The dividend will be paid on August 22, 2011 to all shareholders of record as of August 15, 2011. Because Seaspan adopted a dividend reinvestment plan, or DRIP, the actual amount of cash dividends paid may be less than $12.9 million based on shareholder participation in the DRIP.
Since Seaspan's initial public offering in August 2005, the company has declared cumulative dividends of $7.34 per common share. Since Seaspan adopted the DRIP in May 2008, a total of 2.4 million shares have been issued through shareholder participation in the DRIP. Since the plan's adoption, participating shareholders have invested $26.5 million in the DRIP.
Series C Preferred Shares
On May 2, 2011, Seaspan paid for the first time, a quarterly dividend of $0.606944 per share on its 9.5% Series C preferred shares, representing a distribution of $6.1 million. The dividend was paid to all 9.5% Series C preferred shareholders of record as of April 29, 2011 for the period from January 28, 2011 to April 29, 2011.
On July 19, 2011, Seaspan declared a quarterly dividend of $0.600347 per share, on its 9.5% Series C preferred shares, representing a distribution of $8.4 million. The dividend was paid on August 1, 2011 to all shareholders of record as July 29, 2011 for the period from April 30, 2011 to July 29, 2011.
About Seaspan
Seaspan is a leading independent charter owner of containerships, which it charters primarily pursuant to long-term fixed-rate time charters to major container liner companies. Seaspan's contracted fleet of 72 containerships consists of 63 containerships in operation and nine containerships scheduled for delivery through 2014. Seaspan's operating fleet of 63 vessels has an average age of approximately five years and an average remaining charter period of approximately seven years. All of the nine vessels to be delivered to Seaspan are already committed to fixed-rate time charters of between 10 and 12 years in duration from delivery. Seaspan's customer base consists of nine of the world's largest liner companies, including A.P. Moller-Maersk A/S, China Shipping Container Lines (Asia) Co., Ltd., Compania Sud Americana de Vapores S.A., COSCO Container Lines Co., Ltd., Hanjin Shipping Co., Ltd., Hapag-Lloyd USA, LLC, Kawasaki Kisen Kaisha Ltd., Mitsui O.S.K. Lines, Ltd., and United Arab Shipping Company (S.A.G.).
Seaspan's common shares are listed on the New York Stock Exchange under the symbol "SSW".
Seaspan's Series C preferred shares are listed on the New York Stock Exchange under the symbol "SSW PR C".
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, 2011 on Thursday August 4, 2011 at 7:00 a.m. PT / 10:00 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: 86799304. The recording will be available from August 4, 2011 at 10:00 a.m. PT / 1:00 p.m. ET through 8:59 p.m. PT / 11:59 p.m. ET on August 18, 2011. 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 and click on "News & Events" then "Events & Presentations" for the link. The webcast and slides will be archived on the site for one year.
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, amortization of deferred charges, non-cash share-based compensation, amounts paid for dry-docking, change in fair value of financial instruments, interest expense(9), interest expense at the hedged rate(11), cash dividends paid on preferred shares and certain other items that the Company believes affect the comparability of its operating results. 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. 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.
Seaspan has changed the definition of cash available for distribution to common shareholders for comparative figures to reflect adjustments to the definition in the prior year. The following items are now excluded as adjustments: non-cash undrawn credit facility fees and non-cash interest income. In addition, cash interest paid at the hedged rate is replaced with interest expense at the hedged rate(11). This change resulted in decreases of approximately 5% and 3% in cash available for distribution to common shareholders for the three and six months ended June 30, 2010.
Description of Non-GAAP Financial Measures
B. Normalized Net Earnings and Normalized Earnings per Share
Normalized net earnings is defined as net earnings adjusted for items such as the change in fair value of financial instruments, interest expense(9), interest expense at the hedged rate(11) and certain other items Seaspan believes affect the comparability of operating results. With these adjustments, normalized net earnings reflects interest expense on Seaspan's operating debt at the fixed rate on its interest rate swaps plus the applicable margin on the related credit facilities. Normalized net earnings is useful because it excludes the change in fair value of financial instruments that affect the comparability of Seaspan's operating results and includes interest at the hedged rate, which includes the effect of the interest rate swaps on Seaspan's operating debt.
Normalized net earnings 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.
Normalized earnings per share, converted, is calculated as normalized net earnings, less dividends on Series B preferred shares, less dividends on Series C 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, and the impact of the Series A preferred shares converted at $15.00 per share. This method is reflective of 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 earnings per share, basic can be computed as normalized net earnings attributable to common shareholders divided by the weighted average number of shares used to compute reported earnings per share, basic.
Normalized earnings per share, converted, diluted, and basic are not defined by GAAP and should not be considered as an alternative to earnings per share or any other indicator of Seaspan's performance required to be reported by GAAP.
C. Adjusted EBITDA
Adjusted EBITDA is defined as net earnings (loss) before interest expense(9) and other debt-related expenses, interest income, income tax expense, depreciation and amortization expense, change in fair value of financial instruments, and certain non-cash charges and selected items that are generally unusual or non-recurring.
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 (loss) or any other indicator of Seaspan's performance required to be reported by GAAP.
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 results; expansion of Seaspan's business; Seaspan's arrangement with GCI and its effects on its growth and business; vessel deliveries; and Seaspan's future 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 and GCI of containership acquisition opportunities; the availability and cost to Seaspan and GCI of financing to pursue growth opportunities; chartering rates; conditions in the containership market; increased operating expenses; the number of off-hire days; dry-docking requirements; 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; 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; 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 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, 2010. 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.
Contacts:
For Investor Relations Inquiries:
Seaspan Corporation
Mr. Sai W. Chu
Chief Financial Officer
604-638-2575
For Media Inquiries:
The IGB Group
Mr. Leon Berman
212-477-8438
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Datum: 04.08.2011 - 05:00 Uhr
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