Seaspan Reports Financial Results for the Three and Nine Months Ended September 30, 2014
Signed all Newbuildings to Fixed-Rate Time Charters; Total Committed Revenue Increased to $6.6 Billion
(firmenpresse) - HONG KONG, CHINA -- (Marketwired) -- 11/03/14 -- Seaspan Corporation ("Seaspan") (NYSE: SSW) announced today its financial results for the three and nine months ended September 30, 2014. Below is a summary of Seaspan''s key financial results:
Summary of Key Financial Results (in thousands of US dollars):
Summary of Key Highlights
Gerry Wang, Chief Executive Officer, Co-Chairman and Co-Founder of Seaspan, commented, "During the third quarter, we achieved a number of notable accomplishments related to expanding our relationships with premier liner companies, increasing our time charter coverage, and growing our fleet of large fuel efficient containerships. Specifically, we entered into time charter agreements with Maersk for four state-of-the-art 10000 TEU vessels, underscoring the success of our SAVER design. We also extended time charters for five 14000 TEU vessels with Yang Ming and confirmed Seaspan will build and manage a total of 15 SAVER design vessels for Yang Ming under 10+2-year fixed-rate time charters. Finally, we received delivery of the fourth 10000 TEU SAVER design containership scheduled for delivery in 2014."
Mr. Wang continued, "As we progress through the remainder of 2014, we are pleased to have signed all of our newbuildings to fixed-rate time charters, increasing our total committed revenue to $6.6 billion. With a strong balance sheet and capital structure, we remain well positioned to further solidify our position as the largest containership supplier."
Third Quarter Developments
$220.0 Million Lease Financings
On July 11, 2014, Seaspan entered into lease financing agreements with Asian special purpose companies (collectively, the "SPCs") for two 10000 TEU newbuilding vessels that are chartered to Mitsui O.S.K. Lines Ltd. ("MOL") which provided gross proceeds of $220.0 million. Under the lease financing arrangements, Seaspan sold the vessels to the SPCs and, leased the vessels back from the SPCs over a term of approximately 8.5 years, with an option to purchase the vessels at the end of the term for a pre-determined purchase price. On July 16, 2014 and October 29, 2014, Seaspan financed the purchase of the MOL Bravo and MOL Brightness, respectively, through these lease financing arrangements and received the full proceeds. These lease financing arrangements provide financing at market rates.
Vessel Delivery
Seaspan accepted delivery of the MOL Bravo on July 16, 2014, expanding its operating fleet to 75 vessels as of September 30, 2014. The 10000 TEU vessel constructed at Jiangsu Yangzi Xinfu Shipbuilding Co., Ltd. ("Jiangsu Xinfu") using Seaspan''s fuel-efficient SAVER design, commenced an eight-year, fixed-rate time charter with MOL.
Time Charters and Option Agreements
In August 2014, Seaspan entered into five-year, fixed-rate time charter contracts with two one-year options with A.P. Moeller-Maersk A/S ("Maersk") for four fuel-efficient SAVER design 10000 TEU vessels to be constructed at Jiangsu New Yangzi Shipbuilding Co., Ltd. ("New Jiangsu") and Jiangsu Xinfu. Two of the vessels were previously allocated to Seaspan and two were allocated to Greater China Intermodal Investments LLC ("GCI") under the right of first refusal agreement (the "ROFR Agreement") between Seaspan, GCI and Blue Water Commerce, LLC ("Blue Water Commerce").
In August 2014, Seaspan entered into an agreement with New Jiangsu and Jiangsu Xinfu under which Seaspan converted its remaining options to acquire up to four 10000 TEU SAVER design vessels to be constructed at those shipyards into options to acquire up to six 10000 TEU or 14000 TEU SAVER design vessels, with delivery dates in 2017 and 2018. Seaspan anticipates that such options, if exercised, will be subject to the ROFR Agreement.
Extension of Time Charter Terms by Yang Ming and Expiry of Yang Ming''s Purchase Options
In August 2014, Yang Ming Marine Transport Corp ("Yang Ming") confirmed that the term of the fixed-rate time charters for the five 14000 TEU SAVER design containerships currently being constructed at CSBC Corporation, Taiwan will be extended to 10 years with one two-year option. Two of these vessels previously have been allocated to Seaspan and three have been allocated to GCI under the ROFR Agreement.
The option that Yang Ming held to purchase up to five 14000 TEU newbuilding vessels currently being constructed at Hyundai Heavy Industries Co., Ltd. expired, and as a result, all five of these 14000 TEU newbuilding vessels will also be time chartered to Yang Ming for 10 years with one two-year option. Three of these vessels previously have been allocated to Seaspan and two have been allocated to GCI under the ROFR Agreement.
Vessel Reallocation with GCI
On September 29, 2014, Seaspan and GCI agreed to reallocate four 10000 TEU vessels under construction by exchanging two vessels that Seaspan was scheduled to receive with two vessels GCI was scheduled to receive. As a result, the revised allocation of these vessels between Seaspan and GCI is as follows:
Subsequent Events
Dividends
On October 14, 2014, Seaspan declared the following quarterly cash dividends on its common and preferred shares, for a total distribution of $46.5 million:
Vessel Delivery
On October 29, 2014, Seaspan accepted delivery of a 10000 TEU containership, the MOL Brightness, expanding the Company''s operating fleet to 76 vessels. The newbuilding containership was constructed at Jiangsu Xinfu using Seaspan''s fuel-efficient SAVER design. The MOL Brightness commenced an eight-year, fixed-rate time charter with MOL.
Results for the Three and Nine Months Ended September 30, 2014
At the beginning of 2014, Seaspan had 71 vessels in operation. Seaspan accepted delivery of four newbuilding vessels during the nine months ended September 30, 2014, bringing its operating fleet to a total of 75 vessels as at September 30, 2014. Revenue from time charters 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 vessel utilization by quarter and for the nine months ended September 30, 2014 and 2013:
The following table summarizes Seaspan''s consolidated financial results for the three and nine months ended September 30, 2014 and 2013:
Revenue
Revenue increased by 7.8% to $185.9 million and 4.5% to $527.7 million for the three and nine months ended September 30, 2014, respectively, over the same periods for 2013. These increases were due primarily to the delivery of four 10000 TEU vessels in 2014, the delivery of two 4600 TEU secondhand vessels in mid-2013 and a decrease in unscheduled off-hire. These increases were partially offset by lower charter rates for three of Seaspan''s vessels which were on short-term charters and a decrease in vessel management revenue.
The increases in operating days and the related financial impact thereof for the three and nine months ended September 30, 2014 relative to the same periods in 2013, are attributable to the following:
Vessel utilization was 99.2% and 99.1% for the three and nine months ended September 30, 2014, respectively, compared to 98.5% and 97.9% for the same periods in 2013.
The increase in vessel utilization for the nine months ended September 30, 2014, compared to the same period in 2013, was primarily due to a 240-day decrease in unscheduled off-hire. In the nine months ended September 30, 2014, there were 96 days of unscheduled off-hire, which included 72 off-charter days, compared to 336 days of unscheduled off-hire, which included 300 off-charter days, in the same period of 2013. During the nine months ended September 30, 2014, Seaspan completed five scheduled dry-dockings that resulted in 68 days of scheduled off-hire, compared to five scheduled dry-dockings that resulted in 48 days of scheduled off-hire in the same period of 2013.
Seaspan completed dry-dockings for the following five vessels during the three and nine months ended September 30, 2014:
Seaspan''s cumulative vessel utilization since its initial public offering in August 2005 through September 30, 2014 is approximately 99.0%, or 99.3% if the impact of off-charter days is excluded.
Ship Operating Expense
Ship operating expense increased by 13.1% to $41.5 million and by 11.0% to $123.9 million for the three and nine months ended September 30, 2014, respectively, compared to the same periods in 2013.
Ownership days increased by 5.7% and 4.6% for the three and nine months ended September 30, 2014, respectively, compared to the same periods in 2013. The increase in ownership days was due to the delivery of four 10000 TEU vessels in 2014. In addition, the two 4600 TEU second-hand vessels delivered in mid-2013 contributed to the increased ownership days for the nine months ended September 30, 2014 compared to the same period in 2013.
Ship operating expenses also rose due to an increase in crew wages that occurred in the first quarter of 2014 compared to the third quarter of 2013. Seaspan also purchased more stores and spares and incurred more repairs and maintenance for its older vessels. Seaspan expects ship operating expense to increase as its fleet ages. Seaspan also incurred higher ship management infrastructure costs to support its expanding fleet.
Depreciation and Amortization Expense
The increase in depreciation and amortization expense for the three and nine months ended September 30, 2014 was primarily due to the increase in the size of the fleet from the 2014 deliveries and the full period of depreciation for the vessels delivered in mid-2013.
General and Administrative Expense
General and administrative expense increased by 4.3% to $8.1 million for the three months ended September 30, 2014 compared to the same period in 2013. There were no significant changes in Seaspan''s general and administrative expenses for the three months ended September 30, 2014 compared to the same period in 2013.
General and administrative expense decreased by 13.7% to $23.7 million for the nine months ended September 30, 2014, compared to the same period in 2013. The decrease of $3.8 million for the nine months ended September 30, 2014 compared to the same period in 2013 was primarily due to a net reduction in stock-based compensation expense of $5.1 million. The majority of this reduction was due to a decrease in non-cash stock appreciation rights ("SARs") expense of $5.9 million, partially offset by an increase in other non-cash stock-based awards of $0.8 million. During the nine months ended September 30, 2013, $2.6 million of accelerated stock-based compensation was recognized relating to the vesting of the first tranche of SARs. The decrease for the nine months ended September 30, 2014 was partially offset by an increase in general corporate expenses and executive compensation of $1.1 million.
Interest Expense
At September 30, 2014, Seaspan had total borrowings of $3.8 billion, which consisted of long-term debt of $3.3 billion and other long-term liabilities, excluding deferred gains, of $0.6 billion. At September 30, 2013, Seaspan had total borrowings of $3.7 billion, which consisted of long-term debt of $3.1 billion and other long-term liabilities, excluding deferred gains, of $0.6 billion. Seaspan''s operating borrowings were $3.5 billion at September 30, 2014 and September 30, 2013.
Interest expense is comprised primarily of interest incurred on long-term debt and other long-term liabilities, excluding deferred gains, relating to operating vessels at either the variable rate calculated by reference to LIBOR plus the applicable margin or at fixed rates. 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. Interest expense also includes a non-cash reclassification of amounts from accumulated other comprehensive loss related to previously designated hedging relationships. Interest incurred on Seaspan''s borrowings related to vessels under construction is capitalized to the cost of the respective vessels under construction.
Interest expense increased by $9.1 million to $24.2 million and by $18.9 million to $64.8 million for the three and nine months ended September 30, 2014, respectively, compared to the same periods in 2013. The increase in interest expense was primarily due to an increase in the cost of borrowings. The increase in the cost of borrowings is due to the refinancing of Seaspan''s $1.0 billion credit facility in January 2014 at a higher margin than under the original facility, certain of Seaspan''s term loans which have higher margins than the facilities outstanding for the comparative prior periods and higher interest rates under Seaspan''s fixed-rate unsecured senior notes that were issued in April 2014.
Change in Fair Value of Financial Instruments
The change in fair value of financial instruments resulted in a gain of $3.0 million and a loss of $66.3 million for the three and nine months ended September 30, 2014, respectively, compared to a loss of $16.7 million and a gain of $51.8 million for the same periods in 2013. The gain of $3.0 million for the three months ended September 30, 2014 was primarily due to increases in the forward LIBOR curve. The loss of $66.3 million for the nine months ended September 30, 2014 was due primarily to significant decreases in the forward LIBOR curve for instruments with terms greater than six years and the effect of the passage of time. In addition, during the first quarter of 2014 there was an early termination of one of Seaspan''s swaps in connection with the refinancing of its $1.0 billion credit facility that resulted in a loss of $4.5 million.
The fair value of interest rate swap and swaption agreements is subject to change based on the 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. Because 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. Seaspan''s managed fleet consists of 109 containerships representing a total capacity of over 840,000 TEU, including 28 newbuilding containerships on order scheduled for delivery to Seaspan and third parties by the end of 2016. Seaspan''s current operating fleet of 76 vessels has an average age of approximately seven years and an average remaining lease period of approximately five years.
Seaspan has the following securities listed on The New York Stock Exchange:
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 nine months ended September 30, 2014 on November 4, 2014 at 6:00 a.m. PT / 9:00 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: 25778812. The recording will be available from November 4, 2014 at 9:00 a.m. PT / 12:00 p.m. ET through 8:59 p.m. PT / 11:59 p.m. ET on November 18, 2014. 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" and 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 and amortization, interest expense, amortization of deferred charges, refinancing expenses and costs, share-based compensation, change in fair value of financial instruments, bareboat charter adjustment, amounts paid for dry-docking, cash dividends paid on preferred shares, 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.
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, refinancing expenses and costs 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 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 C (excluding the retained earnings impact of any repurchases), Series D and Series E preferred shares, divided by the "converted" number of Class A common shares outstanding for the period. On January 30, 2014, Seaspan''s outstanding 200,000 Series A preferred shares automatically converted into a total of 23,177,175 Class A common shares pursuant to Seaspan''s articles of incorporation. The conversion provisions provided for automatic conversion to Class A common shares at a price of $15.00 per share (and based on the applicable liquidation preference of the Series A preferred shares), if the conversion occurred on or after January 30, 2014 and the trailing 30-day average trading price of the Class A common shares was equal to or above $15.00. If the Class A common share price was less than $15.00, then Seaspan could choose to not convert the Series A preferred shares and to increase the annual increase in the liquidation preference to 15% per annum from 12%. The "converted" number of Series A preferred 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 had been less than $15.00 and the per share impact of the actual Series A preferred share 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 of Seaspan''s performance required to be reported by GAAP.
B. Normalized Net Earnings and Normalized Earnings per Share (continued)
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, amortization of deferred charges, refinancing expenses and costs, share-based compensation, bareboat charter adjustment, 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, even though other companies may not calculate this measure in the same way as Seaspan. 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.
Notes to Non-GAAP Financial Measures
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; time charters and dividends; and vessel deliveries. 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; general market conditions and shipping market trends, including, chartering rates; 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 enter into, renew or replace long-term contracts; conditions in the public equity markets and the price of Seaspan''s shares; approval of any such transaction by the conflicts committee of Seaspan''s board of directors and other factors detailed from time-to-time in Seaspan''s periodic reports and filings with the Securities and Exchange Commission, including Seaspan''s Annual Report on Form 20-F for the year ended December 31, 2013. 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:
Seaspan Corporation - Investor Relations Inquiries:
Mr. Sai W. Chu
Chief Financial Officer
604-638-2575
Seaspan Corporation - Media Inquiries:
Mr. Leon Berman
The IGB Group
212-477-8438
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Datum: 03.11.2014 - 16:15 Uhr
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