Seaspan Reports Financial Results for the Quarter and Year Ended December 31, 2015
Generates Strong Revenue and Earnings per Share Growth; Maintains $1.50 Annual Dividend
(firmenpresse) - HONG KONG, CHINA -- (Marketwired) -- 03/07/16 -- Seaspan Corporation ("Seaspan") (NYSE: SSW) announced today its financial results for the quarter and year ended December 31, 2015. 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 2015, we achieved an important milestone by growing Seaspan''s operating and managed fleet to over 100 vessels, complementing our successful execution of the Company''s stable and predictable business model. With the delivery of two 10000 TEU class and six 14000 TEU class state-of-the-art containerships in 2015, Seaspan achieved strong revenue and earnings per share growth for both the year and fourth quarter. We also continued to enter into attractive fixed-rate long-term contracts with high creditworthy counterparties, ending the year with future contracted revenues of nearly $6 billion."
Mr. Wang added, "During 2015 we took important steps to further strengthen Seaspan''s capital structure. Our success raising approximately $1.4 billion of proceeds from capital and financing transactions underscores our strong access to capital and enhances our financial flexibility. As we seek to capitalize on attractive growth opportunities, we remain committed to returning capital to shareholders and paying a stable dividend of $1.50 per share for 2016."
Fourth Quarter Developments
Vessel Deliveries
During the fourth quarter of 2015, Seaspan accepted delivery of one 14000 TEU containership, the YM Warmth, expanding Seaspan''s operating fleet to 85 vessels. The YM Warmth was constructed at Hyundai Heavy Industries Co., Ltd. using Seaspan''s fuel-efficient SAVER design and commenced a 10-year, fixed-rate time charter with Yang Ming Marine Transport Corp. on October 16, 2015.
Financings
On October 2, 2015, Seaspan entered into a lease financing arrangement with a special purpose company ("SPC") for the YM Warmth, which delivered on October 8, 2015. The lease financing arrangement provided gross financing proceeds of $144.0 million upon delivery of the vessel. Under the lease financing arrangement, Seaspan sold the vessel to the SPC and leased the vessel back from the SPC over an initial term of 9.5 years, with an option to purchase the vessel at the end of the lease term for a pre-determined fair value purchase price. If the purchase option is not exercised, the lease term will be automatically extended for an additional 2.5 years. The lease financing arrangement provides financing at market rates.
On December 9, 2015, Seaspan entered into a term loan facility for up to $90.0 million to re-finance four 4250 TEU containerships. The loan bears interest at LIBOR plus a margin.
Common and Preferred Share Repurchase Plans
On April 1, 2015, Seaspan renewed its Rule 10b5-1 share repurchase plan for up to $50.0 million of its Class A common shares which expires in March 2018. Seaspan repurchased 944,524 Class A common shares during the quarter and year ended December 31, 2015 under this plan.
In June 2015, Seaspan''s board of directors authorized the repurchase of up to $150.0 million of its 9.5% Series C preferred shares. In September 2015, Seaspan''s board of directors authorized the repurchase of up to $25.0 million of each of its 7.95% Series D preferred shares and 8.25% Series E preferred shares. In September 2015, Seaspan entered into share repurchase plans for up to $75.0 million of its Series C preferred shares and up to $7.5 million for each of its Series D preferred shares and Series E preferred shares. The share repurchase plans for the preferred shares expired in December 2015. Seaspan repurchased 303,757 Series C preferred shares, 123,971 Series D preferred shares, and 29,400 Series E preferred shares under these plans during the quarter and year ended December 31, 2015.
In addition, during the year ended December 31, 2015, Seaspan repurchased 40,000 of its 9.5% Series C preferred shares at $25.50 per share for a total of approximately $1.0 million, including expenses, in the open market.
Subsequent Events
Dividends
On January 12, 2016, Seaspan declared the following quarterly cash dividends on its common and preferred shares, for a total distribution of $48.7 million:
Seaspan expects the quarterly $0.375 Class A common share dividends for the four quarters ending December 31, 2016 to be paid on May 2, August 1 and October 31 of 2016 and January 30, 2017 for a total dividend of $1.50 per share.
Results for the Quarter and Year Ended December 31, 2015
At the beginning of 2015, Seaspan had 77 vessels in operation. Seaspan accepted delivery of eight newbuilding vessels during the year ended December 31, 2015, bringing its operating fleet to a total of 85 vessels at December 31, 2015. 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 years ended December 31, 2015 and 2014:
The following table summarizes Seaspan''s consolidated financial results for the quarter and years ended December 31, 2015 and 2014:
Revenue
Revenue increased by 15.3% to $218.5 million and 14.2% to $819.0 million for the quarter and year ended December 31, 2015, respectively, over the same periods in 2014. These increases were primarily due to the delivery of eight vessels in 2015 and the full period contribution of six vessels that delivered in 2014. These increases were partially offset by lower average charter rates for vessels which were on short-term charters and an increase in scheduled and unscheduled off-hire.
The increases in operating days and the related financial impact thereof for the quarter and year ended December 31, 2015, relative to the same periods in 2014, are attributable to the following:
Vessel utilization was 97.9% and 98.5% for the quarter and year ended December 31, 2015, respectively, compared to 98.7% and 99.0% for the same periods in 2014.
The decrease in vessel utilization for the year ended December 31, 2015, compared to the same period in 2014, was primarily due to a 134-day increase in scheduled off-hire as a result of an increase in scheduled five-year dry-dockings and a 31-day increase in unscheduled off-hire. During the year ended December 31, 2015, Seaspan completed 26 scheduled dry-dockings that resulted in 266 days of scheduled off-hire, compared to 10 scheduled dry-dockings that resulted in 132 days of scheduled off-hire in 2014. During the year ended December 31, 2015, there were 150 days of unscheduled off-hire, which included 73 off-charter days, compared to 119 days of unscheduled off-hire, which included 86 off-charter days, in the same period of 2014.
Seaspan completed dry-dockings for 26 vessels during the year ended December 31, 2015:
During 2016, Seaspan expects 14 vessels to undergo their scheduled dry-docking.
Ship Operating Expense
Ship operating expense increased by 19.6% to $50.5 million and 16.7% to $193.8 million for the quarter and year ended December 31, 2015, respectively, compared to the same periods in 2014 due primarily to increases in ownership days of 12.0% and 10.7% for the quarter and year ended December 31, 2015, respectively. The increases in ownership days are due to eight vessel deliveries in 2015 and the delivery of six vessels in 2014 resulting in a full period of ownership days for the year ended December 31, 2015. Seaspan also purchased more stores and spares and incurred higher repair and maintenance expense for its older vessels. Seaspan expects ship operating expense to continue to increase as its fleet expands and ages and as the average size of its vessels increases.
Depreciation and Amortization Expense
Depreciation and amortization expense increased by 16.8% to $54.4 million and by 12.9% to $204.9 million for the quarter and year ended December 31, 2015, respectively, compared to the same periods in 2014, primarily due to an increase in fleet size from the vessels delivered in 2014 and 2015, write-offs of replaced vessel equipment and an increase in dry-dock amortization from an increase in the number of vessels dry-docking.
General and Administrative Expense
General and administrative expense increased by 6.0% to $7.2 million for the quarter ended December 31, 2015, compared to the same period in 2014.
General and administrative expense decreased by 10.3% to $27.3 million for the year ended December 31, 2015, compared to the same period in 2014. The decrease of $3.1 million was primarily due to a $4.9 million decrease in share-based compensation primarily relating to the grants of share appreciation rights and restricted stock units of $4.2 million. This decrease was partially offset by increased costs relating to general corporate expenditures.
Operating Lease Expense
Operating lease expense increased to $14.4 million and $40.3 million for the quarter and year ended December 31, 2015, respectively, from $5.0 million and $9.5 million in the same periods in 2014. The increases were due to the purchase of three vessels in 2014 and four vessels in 2015 that were financed through new lease financing arrangements. Under these lease financing arrangements, Seaspan sold the vessels to the SPCs and are leasing the vessels back over an initial term of approximately 8.5 or 9.5 years, with an option to purchase the vessels at the end of the lease term for a pre-determined fair value purchase price. If the purchase option is not exercised, the lease terms will be automatically extended for an additional two or 2.5 years. The sale of these seven vessels resulted in a deferred gain totaling $174.8 million, which is being recorded as a reduction of operating lease expense over 10.5 or 12 years, representing the initial lease term plus extensions.
Interest Expense
The following table summarizes Seaspan''s borrowings:
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. Interest expense also includes a non-cash 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.
Interest expense increased by $1.8 million to $25.2 million and by $8.8 million to $97.0 million for the quarter and year ended December 31, 2015, respectively, compared to the same periods in 2014. These increases were primarily due to the increase in fleet size from vessels delivered in 2014 and 2015, as the interest incurred on these vessels in 2014 was capitalized to vessels under construction. These increases were partially offset by net repayments made on operating borrowings. For the year ended December 31, 2015, the increase in interest expense was also due to the issuance of Seaspan''s fixed-rate senior unsecured notes issued in April 2014, which have a higher interest rate than Seaspan''s other borrowings, partially offset by the repayment of a fixed-rate term loan in the second quarter of 2014 and the termination of the lease financing structure related to five 4500 TEU vessels which were refinanced in December 2014 and March 2015.
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 rather than in interest expense.
Refinancing Expenses and Recoveries
Refinancing expenses increased by $4.6 million to $1.9 million and by $5.7 million to $5.8 million for the quarter and year ended December 31, 2015, respectively, compared to the same periods in 2014. In 2015, Seaspan wrote-off deferred financing fees related to the termination and repayment of term loans. In 2014, Seaspan wrote-off deferred financing fees related to the repayment of a fixed-rate loan and recognized a net gain of $3.8 million realized on the early termination of the lease financing structure related to five 4500 TEU vessels.
Change in Fair Value of Financial Instruments
The change in fair value of financial instruments resulted in a gain of $10.1 million and a loss of $54.6 million for the quarter and year ended December 31, 2015, respectively, compared to losses of $39.4 million and $105.7 million for the same periods in 2014. The gain of $10.1 million for the three months ended December 31, 2015 was primarily due to increases in the forward LIBOR curve. The loss of $54.6 million for the year ended December 31, 2015 was due primarily to the effect of the passage of time.
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 during 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 118 containerships representing a total capacity of over 935,000 TEU, including 18 newbuilding containerships on order scheduled for delivery to Seaspan and third parties by the end of 2017. Seaspan''s current operating fleet of 85 vessels has an average age of approximately eight years and an average remaining lease period of approximately four 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 quarter and year ended December 31, 2015 on March 8, 2016 at 6:30 a.m. PT / 9:30 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: 61034463. The recording will be available from March 8, 2016 at 9:30 a.m. PT / 12:30 p.m. ET through 8:59 p.m. PT / 11:59 p.m. ET on March 22, 2016. The conference call will also be broadcast live over the Internet and will include a slide presentation. To access the live webcast of the conference call, go to and click on "News & Events" then "Events & Presentations" for the link. The webcast 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 recoveries, share-based compensation, change in fair value of financial instruments, bareboat charter adjustment, gain on sales, amortization of deferred gain, foreign exchange gain, dry-dock reserve adjustment, 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.
In the second quarter of 2015, the definition of cash available for distribution to common shareholders was revised to include the gain and exclude the amortization of the deferred gain on Seaspan''s sale-leaseback financings. Accordingly, the comparative figures for the prior periods have been adjusted to reflect this change. The impact of this change resulted in increases in cash available for distribution to common shareholders for the quarter and year ended December 31, 2014 of approximately 48.1% and 19.8%, respectively.
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, refinancing expenses and recoveries, foreign exchange gain, write-off of vessel equipment, change in fair value of financial instruments, interest expense at the hedged rate, 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 reflected Seaspan''s ability to control the conversion if the share price had been less than $15.00 and reflects 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.
C. Adjusted EBITDA
Adjusted EBITDA is defined as net earnings adjusted for interest expense and other debt-related expenses, income tax expense, interest income, depreciation and amortization, amortization of deferred charges, refinancing expenses and recoveries, share-based compensation, gain on sales, amortization of deferred gain, foreign exchange gain, bareboat charter adjustment, change in fair value of financial instruments and certain other items that Seaspan believes are not representative of its operating performance.
In the second quarter of 2015, the definition of Adjusted EBITDA was revised to include the gain and exclude the amortization of the deferred gain on Seaspan''s sale-leaseback financings. Accordingly, the comparative figures for the prior periods have been adjusted to reflect this change. The impact of this change resulted in increases in Adjusted EBITDA for the quarter and year ended December 31, 2014 of approximately 26.8% and 10.8%, respectively.
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; ship operating expense; vessel dry-docking schedules; future contracted revenues; Seaspan''s access to capital and financial strength and flexibility; the repurchase plan for Seaspan''s common shares and repurchases under such plan; vessel deliveries and dividends, including the amount and timing of payment thereof for the four quarters of 2016. 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 or construction 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 capital markets and the price of Seaspan''s shares; the declaration of dividends and related payment dates by Seaspan''s board of directors; the allocation of vessels pursuant to Seaspan''s right of first refusal agreement with GCI; 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, 2014. 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:
Mr. Michael Sieffert
Associate Director, Corporate Finance
Seaspan Corporation
778-328-6490
For Media Inquiries:
Mr. Leon Berman
The IGB Group
212-477-8438
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Datum: 07.03.2016 - 18:49 Uhr
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