HONG KONG, CHINA -- (Marketwired) -- 07/28/14 -- Seaspan Corporation ("Seaspan") (NYSE: SSW) announced today its financial results for the three and six months ended June 30, 2014. Below is a summary of Seaspan's key financial results:
Summary of Key Financial Results (in thousands of USD):
Three Months Ended
June 30, Change
------------------------- ------------------------
2014 2013 $ %
------------ ------------ ------------ -----------
Reported net earnings $ 20,004 $ 127,154 $ (107,150) (84.3)%
Normalized net earnings(1) $ 32,088 $ 25,502 $ 6,586 25.8%
Earnings per share, basic $ 0.07 $ 1.67 $ (1.60) (95.8)%
Earnings per share,
diluted $ 0.07 $ 1.35 $ (1.28) (94.8)%
Normalized earnings per
share, converted(1)
(Series A preferred
shares converted at $15) $ 0.19 $ 0.18 $ 0.01 5.6%
Cash available for
distribution to common
shareholders(2) $ 68,034 $ 67,236 $ 798 1.2%
Adjusted EBITDA(3) $ 130,889 $ 125,585 $ 5,304 4.2%
Six Months Ended
June 30, Change
------------------------- ------------------------
2014 2013 $ %
------------ ------------ ------------ -----------
Reported net earnings $ 38,032 $ 182,760 $ (144,728) (79.2)%
Normalized net earnings(1) $ 60,880 $ 53,852 $ 7,028 13.1%
Earnings per share, basic $ 0.10 $ 2.24 $ (2.14) (95.5)%
Earnings per share,
diluted $ 0.10 $ 1.88 $ (1.78) (94.7)%
Normalized earnings per
share, converted(1)
(Series A preferred
shares converted at $15) $ 0.37 $ 0.39 $ (0.02) (5.1)%
Cash available for
distribution to common
shareholders(2) $ 135,942 $ 134,051 $ 1,891 1.4%
Adjusted EBITDA(3) $ 254,704 $ 249,620 $ 5,084 2.0%
________________________
(1)Normalized net earnings and normalized earnings per share 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, refinancing expenses and costs 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, 2014 and 2013- 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, 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,
refinancing expenses and costs 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, 2014 and 2013 - 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 net earnings.
(3) Adjusted EBITDA is a non-GAAP measure that represents net earnings
before interest expense and other debt-related expenses, income tax
expense, interest income, depreciation and amortization, amortization of
deferred charges, share-based compensation, bareboat charter adjustment,
change in fair value of financial instruments, refinancing expenses and
costs 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, 2014 and 2013 - 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 99.3% and 99.1% for the three and six
months ended June 30, 2014, respectively, or 99.3% and 99.5% if the
impact of off-charter days is excluded.
-- Accepted delivery of two vessels during the quarter, bringing Seaspan's
operating fleet to a total of 74 vessels at June 30, 2014.
-- Paid $13.0 million of regular quarterly dividends to preferred
shareholders of record as of April 29, 2014. Dividends per share were:
-- $0.59375 Series C (NYSE: SSW PR C);
-- $0.496875 Series D (NYSE: SSW PR D); and
-- $0.441146 Series E (NYSE: SSW PR E), pro-rated from the February 13,
2014 issuance date.
-- Paid a quarterly dividend for the 2014 first quarter of $0.345 per Class
A common share to all shareholders of record as of April 21, 2014.
-- Raised a total of approximately $475 million through capital market
transactions in the first half of 2014, including Seaspan's first
issuance of unsecured notes.
Gerry Wang, Chief Executive Officer, Co-Chairman and Co-Founder of Seaspan, commented, "During the second quarter, we generated stable cash flow for shareholders, while continuing to execute on our newbuilding program, which is aimed at increasing the size of our fleet and future earnings power. We are pleased to have delivered two 10000 TEU SAVER design containerships to Hanjin Shipping Co. Ltd."
Mr. Wang continued, "During the second quarter, we successfully accessed the capital markets, completing a $345 million unsecured notes offering and entering into an equity distribution agreement for up to $75 million of our common shares. With significant financial strength and flexibility, we remain well positioned to continue to capitalize on compelling growth opportunities, complementing the value we create for shareholders through our dividend policy."
Second Quarter Developments
Vessel Deliveries
Seaspan accepted delivery of the Hanjin Namu and the Hanjin Tabul on May 30, 2014 and June 30, 2014, respectively, bringing its operating fleet to a total of 74 vessels as of June 30, 2014. Both 10000 TEU vessels, constructed using Seaspan's fuel-efficient SAVER design, commenced ten-year, fixed-rate time charters with Hanjin Shipping Co. Ltd.
Issuance of $345.0 Million 6.375% Senior Unsecured Notes Due 2019
On April 3, 2014, Seaspan issued in a registered public offering 13,800,000 senior unsecured notes (the "Notes") at a price of $25.00 per note for net proceeds of approximately $340.4 million, including the full exercise of the underwriters' option to purchase an additional 1,800,000 Notes. The Notes mature on April 30, 2019 and bear interest at a rate of 6.375% per year, payable quarterly. Seaspan used a portion of the net proceeds from the offering to repay its $125.0 million credit facility, and intends to use the remaining net proceeds from the offering for general corporate purposes, which may include funding vessel acquisitions and repaying indebtedness under other outstanding credit facilities.
Loan Facility Transactions
On May 1, 2014, Seaspan entered into a 364-day unsecured revolving loan facility with various banks for up to $100.0 million to be used to fund vessels under construction and for general corporate purposes. The facility bears interest at market rates.
On June 30, 2014, Seaspan entered into a five-year term loan facility with a leading European bank for up to $83.0 million to fund the construction of one 14000 TEU newbuilding containership. The facility bears interest at market rates.
At-the-Market Offering of Class A Common Shares
On May 22, 2014, Seaspan announced that it had entered into an equity distribution agreement with sales agents under which Seaspan may, from time to time, issue Class A common shares in one or more at-the-market ("ATM") offerings up to an aggregate of $75.0 million in gross sales proceeds. Sales of such Class A common shares will be made by means of ordinary brokers' transactions on the New York Stock Exchange at market prices, in block transactions, or as otherwise agreed between Seaspan and the sales agents. During the three months ended June 30, 2014, Seaspan issued 206,600 Class A common shares under the ATM program for gross proceeds of approximately $4.7 million.
Subsequent Events
Dividends
On July 15, 2014, Seaspan declared the following quarterly cash dividends on its common and preferred shares, for a total distribution of $46.2 million:
----------------------------------------------------------------------------
Security Ticker Dividend Period Record Payment
per Share Date Date
----------------------------------------------------------------------------
Class A common April 1, 2014 to July 21, July 30,
shares SSW $ 0.345 June 30, 2014 2014 2014
----------------------------------------------------------------------------
Series C April 30, 2014
preferred to July 29, July 30,
shares SSW PR C $ 0.59375 July 29, 2014 2014 2014
----------------------------------------------------------------------------
Series D April 30, 2014
preferred to July 29, July 30,
shares SSW PR D $ 0.496875 July 29, 2014 2014 2014
----------------------------------------------------------------------------
Series E April 30, 2014
preferred to July 29, July 30,
shares SSW PR E $ 0.515625 July 29, 2014 2014 2014
----------------------------------------------------------------------------
Vessel Delivery
On July 16, 2014, Seaspan accepted delivery of a 10000 TEU containership, the MOL Bravo, expanding the Company's operating fleet to 75 vessels. The newbuilding containership was constructed at Jiangsu Yangzi Xinfu Shipbuilding Co., Ltd. using Seaspan's fuel-efficient SAVER design. The MOL Bravo commenced an eight-year, fixed-rate time charter with Mitsui O.S.K. Lines Ltd. ("MOL").
$220 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 MOL. The lease financing agreements (the "Lease Financing Arrangements") are expected to provide gross proceeds of approximately $110 million per vessel, or $220 million in total. Under the Lease Financing Arrangements, Seaspan will sell the vessels to the SPCs, lease the vessels back from the SPCs over a term of approximately 8.5 years, and have an option to purchase the vessels at the end of the term for a pre-determined purchase price. On July 16, 2014, Seaspan financed the purchase of the MOL Bravo through the Lease Financing Arrangements and received gross proceeds of $110 million. Seaspan expects to finance the purchase of the MOL Brightness, scheduled for delivery during the fourth quarter of 2014 through the Lease Financing Arrangements. These Lease Financing Arrangements will provide financing at market rates.
Proposed Extensions of GCI Right of First Refusal Agreement, CEO Employment Agreement and Related Agreements
Greater China Intermodal Investments LLC ("GCI") is an investment vehicle established with an affiliate of global asset manager The Carlyle Group, and others, including affiliates of Seaspan's director Graham Porter and of Seaspan's largest shareholder, Dennis R. Washington. Seaspan has a right of first refusal (the "ROFR") on containership investment opportunities available to GCI and a right of first offer (the "ROFO") for certain containerships GCI may propose to sell. The ROFR and ROFO expire on March 31, 2015. The investors in GCI intend to extend the terms of the ROFR and ROFO by one year to March 31, 2016. By extending the ROFR, Seaspan believes it will continue to have increased buying power and scale by which it can selectively and cost effectively grow its fleet as well as better serve its customers. In addition, through this venture, Seaspan believes that it will continue to realize better volume discounts and obtain more attractive financing than it would otherwise be able to achieve on its own. Since GCI was formed, Seaspan has expanded its managed fleet by 40 containerships, including 30 newbuilding vessels on order or under construction.
In connection with the planned extension of the ROFR and ROFO, Seaspan intends to extend through March 31, 2016 its employment and transaction services agreements with Gerry Wang and its financing services agreement with Tiger Ventures Limited ("Tiger Ventures"), an affiliate of Mr. Porter.
For additional information about GCI, the ROFR, the ROFO and the terms of the employment and transaction services agreements with Mr. Wang and the financing services agreement with Tiger Ventures, please read "Certain Relationships and Related Party Transactions" in Seaspan's Annual Report on Form 20-F for the year ended December 31, 2013. The proposed transactions described above remain subject to negotiation of mutually acceptable terms and documentation and approval of the conflicts committee of Seaspan's board of directors, and such transactions may not happen pursuant to the terms described above, if at all.
Time Charters
The Madinah is expected to re-deliver to Seaspan on August 4, 2014 and will be off-charter until a charter is entered into.
Results for the Three and Six Months Ended June 30, 2014
The following table summarizes vessel utilization for the three and six months ended June 30, 2014:
Year to Date -
First Quarter Second Quarter June 30,
---------------- ----------------- -------------------
2014 2013 2014 2013 2014 2013
------- -------- -------- -------- --------- ---------
Vessel utilization:
Ownership Days 6,037 5,850 6,214 5,933 12,251 11,783
Less Off-hire Days:
Scheduled 5-Year
Survey (10) - (43) (19) (53) (19)
Unscheduled Off-
hire(1) (58) (230) (3) (40) (61) (270)
------- -------- -------- -------- --------- ---------
Operating Days 5,969 5,620 6,168 5,874 12,137 11,494
------- -------- -------- -------- --------- ---------
------- -------- -------- -------- --------- ---------
Vessel Utilization 98.9% 96.1% 99.3% 99.0% 99.1% 97.5%
------- -------- -------- -------- --------- ---------
------- -------- -------- -------- --------- ---------
----------------------
(1) Unscheduled off-hire includes days related to vessels off-charter.
At the beginning of 2014, Seaspan had 71 vessels in operation. Seaspan accepted delivery of three newbuilding vessels during the six months ended June 30, 2014, bringing its fleet to a total of 74 vessels in operation as at June 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 consolidated financial results for the three and six months ended June 30, 2014 and 2013:
Three Months Six Months
Ended Ended
June 30, Increase June 30, Increase
--------------- --------------- ----------------- -------------
2014 2013 Days % 2014 2013 Days %
------- ------- ------- ------- -------- -------- ------ ------
Operating
days 6,168 5,874 294 5.0% 12,137 11,494 643 5.6%
Ownership
days 6,214 5,933 281 4.7% 12,251 11,783 468 4.0%
Financial
Summary Three Months Six Months
(in millions of Ended Ended
USD) June 30, Change June 30, Change
-------------- -------------- ------------- ----------------
2014 2013 $ % 2014 2013 $ %
------- ------ ------- ----- ------ ------ ------- --------
Revenue $173.9 $167.8 $ 6.1 3.6% $341.9 $332.7 $ 9.1 2.7%
Ship operating
expense 41.1 37.3 3.7 10.0% 82.3 74.9 7.4 9.9%
Depreciation
and
amortization
expense 44.6 42.8 1.8 4.1% 88.3 85.6 2.7 3.2%
General and
administrative
expense 7.5 11.8 (4.4) (36.8)% 15.5 19.6 (4.1) (20.9)%
Operating lease
expense 1.1 1.1 - 1.1% 2.2 2.2 - 1.3%
Interest
expense 23.0 15.3 7.7 50.6% 40.6 30.8 9.8 31.9%
Refinancing
expenses and
costs 2.8 - 2.8 100.0% 2.8 - 2.8 100.0%
Change in fair
value of
financial
instruments 33.0 (71.2) 104.2 146.3% 69.3 (68.5) 137.8 201.1%
Revenue
Revenue increased by 3.6% and 2.7% for the three and six months ended June 30, 2014, respectively, over the same periods for 2013. These increases were due primarily to the two 10000 TEU vessels which commenced time charters in the first half of 2014, the impact of a full quarter of revenue contribution from the two 4600 TEU secondhand vessels delivered in mid-2013 and a decrease in unscheduled off-hire. These increases were partially offset by lower charter rates for three vessels which were on short-term charters during the three and six months ended June 30, 2014, an increase in scheduled off-hire, and a decrease in vessel management revenue.
The increases in operating days and the related financial impact thereof for the three and six months ended June 30, 2014 relative to the corresponding periods in 2013, are attributable to the following:
Three Months Ended Six Months Ended
June 30, 2014 June 30, 2014
----------------------- ------------------------
Operating $ Impact Operating $ Impact
Days (in Days (in
Impact millions) Impact millions)
---------- ------------ ---------- -------------
2014 vessel deliveries 117 $ 5.0 124 $ 5.3
Full period contribution for
2013 vessel deliveries 164 3.2 344 6.8
Change in daily charter hire
rate and re-charters - (1.5) - (3.3)
Scheduled off-hire (24) (0.7) (34) (1.0)
Unscheduled off-hire 37 1.0 209 2.4
Vessel management revenue - (0.8) - (0.8)
Other - (0.1) - (0.3)
---------- ------------ ---------- -------------
Total 294 $ 6.1 643 $ 9.1
---------- ------------ ---------- -------------
---------- ------------ ---------- -------------
Vessel utilization was 99.3% and 99.1% for the three and six months ended June 30, 2014, respectively, compared to 99.0% and 97.5% for the same periods in 2013.
The increase in vessel utilization for the six months ended June 30, 2014, compared to the same period in 2013, was primarily due to a 209-day decrease in unscheduled off-hire. In the six months ended June 30, 2014, there were 61 days of unscheduled off-hire which included 50 off-charter days compared to 270 days of unscheduled off-hire in the six months ended June 30, 2013, which included 238 off-charter days. However, during the six months ended June 30, 2014, Seaspan completed four scheduled dry-dockings that resulted in 53 days of scheduled off-hire, compared to two scheduled dry-dockings that resulted in 19 days of scheduled off-hire in the same period of 2013.
Seaspan completed dry-dockings for the following vessels during the three and six months ended June 30, 2014:
Vessel Completed
-------------------- ---------------
MOL Emerald Q2
CSAV Loncomilla Q2
CSAV Lumaco Q2
CSCL Callao Q2
Seaspan's cumulative vessel utilization since its initial public offering in August 2005 through June 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 10.0% to $41.1 million and by 9.9% to $82.3 million for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013, due primarily to an increase in crew wages, stores, spares, repairs and ship management infrastructure costs. Ownership and managed days also increased by 2.2% and by 2.6% for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013, which contributed to the increase in ship operating expense. The increase in ownership days was due to the newbuilding vessel deliveries in 2014 and a full period of ownership for the vessels delivered in mid-2013. Crew wages increased due to an increase in the number of crew as well as the earlier timing of wage increases that occurred in the first quarter of 2014 compared to the third quarter of 2013. In addition, the purchase of stores and spare parts occurred earlier in 2014 than in 2013. Seaspan expects ship operating expense to increase as the average size of its vessels increases and as its fleet ages.
Depreciation and Amortization Expense
The increase in depreciation and amortization expense for the three and six months ended June 30, 2014 was due to the increase in the size of the fleet from the 2014 deliveries. In addition, two vessels were delivered in mid-2013 and a full period of depreciation for these vessels was expensed in the three and six months ended June 30, 2014.
General and Administrative Expense
General and administrative expense decreased by 36.8% to $7.5 million and by 20.9% to $15.5 million for the three and six months ended June 30, 2014, compared to the same periods in 2013.
The decreases were primarily due to decreases of $4.5 million and $4.8 million for the three and six months ended, respectively, in stock-based compensation expense related to 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. During the three and six months ended June 30, 2013, $2.6 million of accelerated stock-based compensation was recognized related to the vesting of the first tranche of SARs.
The decrease for the six months ended June 30, 2014 was partially offset by an increase in executive compensation and general corporate expenses of $0.7 million.
Interest Expense
At June 30, 2014, Seaspan had total borrowings of $3.9 billion, which consisted of long-term debt of $3.3 billion and other long-term liabilities of $0.6 billion. At June 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 of $0.6 billion. At June 30, 2014, Seaspan's operating borrowings were $3.62 billion compared to $3.55 billion at June 30, 2013. Interest expense is comprised primarily of interest incurred on long-term debt and other long-term liabilities 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 $7.7 million to $23.0 million and by $9.8 million to $40.6 million for the three and six months ended June 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 cost of borrowings is related to the refinancing of Seaspan's $1.0 billion credit facility in January 2014 and certain of its term loans which have higher margins than the facilities outstanding for the comparative periods, in addition to higher interest rates under the fixed-rate Notes.
Change in Fair Value of Financial Instruments
The change in fair value of financial instruments resulted in losses of $33.0 million and $69.3 million for the three and six months ended June 30, 2014, respectively, compared to gains of $71.2 million and $68.5 million for the same periods in 2013, respectively. The change in fair value for the three and six months ended June 30, 2014 was primarily due to decreases in the forward LIBOR curve 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.
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 30 newbuilding containerships on order scheduled for delivery to Seaspan and third parties by the end of 2016. Seaspan's current operating fleet of 75 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:
Symbol: Description: SSW Class A common shares SSW PR C Series C preferred shares SSW PR D Series D preferred shares SSW PR E Series E preferred shares SSWN 6.375% senior unsecured notes due 2019
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, 2014 on July 29, 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: 77152393. The recording will be available from July 29, 2014 at 9:00 a.m. PT / 12:00 p.m. ET through 8:59 p.m. PT / 11:59 p.m. ET on August 12, 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 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, 2014
(IN THOUSANDS OF US DOLLARS)
June 30, 2014 December 31, 2013
------------------ ------------------
Assets
Current assets:
Cash and cash equivalents $ 285,951 $ 476,380
Short-term investments 83,188 11,675
Accounts receivable 21,181 14,149
Loans to affiliate 172,708 54,068
Prepaid expenses 33,863 22,671
Gross investment in lease 21,170 21,170
------------------ ------------------
618,061 600,113
Vessels 4,896,572 4,670,899
Vessels under construction 277,434 321,372
Deferred charges 58,025 53,971
Gross investment in lease 48,455 58,953
Goodwill 75,321 75,321
Other assets 99,359 106,944
Fair value of financial instruments 48,882 60,188
------------------ ------------------
$ 6,122,109 $ 5,947,761
------------------ ------------------
------------------ ------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued
liabilities $ 63,664 $ 65,634
Current portion of deferred revenue 24,615 27,683
Current portion of long-term debt 170,201 388,159
Current portion of other long-term
liabilities 40,101 38,930
------------------ ------------------
298,581 520,406
Deferred revenue 5,800 4,143
Long-term debt 3,137,709 2,853,459
Other long-term liabilities 550,875 572,673
Fair value of financial instruments 427,252 425,375
------------------ ------------------
4,420,217 4,376,056
Share capital 1,188 882
Treasury shares (379) (379)
Additional paid in capital 2,198,122 2,023,622
Deficit (459,154) (411,792)
Accumulated other comprehensive loss (37,885) (40,628)
------------------ ------------------
Total shareholders' equity 1,701,892 1,571,705
------------------ ------------------
$ 6,122,109 $ 5,947,761
------------------ ------------------
------------------ ------------------
SEASPAN CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2014 2013 2014 2013
----------- ----------- ----------- -----------
Revenue $ 173,873 $ 167,786 $ 341,856 $ 332,710
Operating expenses:
Ship operating 41,087 37,344 82,339 74,890
Depreciation and
amortization 44,603 42,840 88,335 85,593
General and administrative 7,481 11,833 15,524 19,624
Operating lease 1,109 1,097 2,212 2,183
----------- ----------- ----------- -----------
94,280 93,114 188,410 182,290
----------- ----------- ----------- -----------
Operating earnings 79,593 74,672 153,446 150,420
Other expenses (income):
Interest expense 23,007 15,275 40,568 30,759
Interest income (2,683) (600) (3,789) (787)
Undrawn credit facility
fees 672 748 1,238 1,145
Amortization of deferred
charges 2,462 2,266 4,465 4,376
Refinancing expenses and
costs 2,824 - 2,824 -
Change in fair value of
financial instruments 32,960 (71,193) 69,303 (68,527)
Equity loss on investment 43 35 275 69
Other expenses 304 987 530 625
----------- ----------- ----------- -----------
59,589 (52,482) 115,414 (32,340)
----------- ----------- ----------- -----------
Net earnings $ 20,004 $ 127,154 $ 38,032 $ 182,760
Deficit, beginning of period (433,576) (563,770) (411,792) (594,153)
Dividends - common shares (32,263) (19,992) (61,256) (35,786)
Dividends - preferred shares (13,033) (9,857) (23,573) (18,976)
Amortization of Series C
issuance costs (286) (318) (565) (628)
----------- ----------- ----------- -----------
Deficit, end of period $ (459,154) $ (466,783) $ (459,154) $ (466,783)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number of
shares, basic 94,791 64,487 90,342 64,129
Weighted average number of
shares, diluted 95,001 86,703 90,729 86,350
Earnings per share, basic $ 0.07 $ 1.67 $ 0.10 $ 2.24
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Earnings per share, diluted $ 0.07 $ 1.35 $ 0.10 $ 1.88
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
SEASPAN CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013
(IN THOUSANDS OF US DOLLARS)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2014 2013 2014 2013
----------- ----------- ----------- -----------
Net earnings $ 20,004 $ 127,154 $ 38,032 $ 182,760
Other comprehensive income:
Amounts reclassified to
earnings during the
period, relating to cash
flow hedging instruments 1,338 1,603 2,743 3,405
----------- ----------- ----------- -----------
Comprehensive income $ 21,342 $ 128,757 $ 40,775 $ 186,165
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
SEASPAN CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013
(IN THOUSANDS OF US DOLLARS)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
2014 2013 2014 2013
---------- ---------- ---------- ----------
Cash from (used in):
Operating activities:
Net earnings $ 20,004 $ 127,154 $ 38,032 $ 182,760
Items not involving cash:
Depreciation and
amortization 44,603 42,840 88,335 85,593
Share-based compensation 2,806 6,630 5,109 9,441
Amortization of deferred
charges 2,462 2,266 4,465 4,376
Amounts reclassified from
other comprehensive loss to
interest expense 1,123 1,384 2,315 2,963
Unrealized change in fair
value of financial
instruments 4,751 (102,988) 7,672 (131,857)
Equity loss on investment 43 35 275 69
Refinancing expenses and
costs 2,356 - 2,356 -
Other 2,929 - 3,195 -
Changes in assets and
liabilities 1,653 2,680 6,089 (17,501)
---------- ---------- ---------- ----------
Cash from operating activities 82,730 80,001 157,843 135,844
---------- ---------- ---------- ----------
Financing activities:
Common shares issued, net of
issuance costs 4,427 - 4,427 -
Senior unsecured notes issued 345,000 - 345,000 -
Preferred shares issued, net
of issuance costs - - 130,401 -
Draws on credit facilities - - 340,000 9,000
Repayment of credit facilities (152,491) (12,219) (780,128) (33,226)
Repayment of other long-term
liabilities (10,383) (9,787) (20,627) (19,860)
Financing fees (8,453) (2,903) (8,978) (14,780)
Dividends on common shares (15,814) (11,266) (30,132) (20,438)
Dividends on preferred shares (13,033) (9,857) (23,573) (18,976)
---------- ---------- ---------- ----------
Cash from (used in) financing
activities 149,253 (46,032) (43,610) (98,280)
---------- ---------- ---------- ----------
Investing activities:
Expenditures for vessels (23,667) (33,065) (103,248) (92,294)
Short-term investments (81,436) (15,323) (71,513) (45,596)
Restricted cash - (500) - (1,900)
Loans to affiliate (125,976) 21,560 (126,973) -
Other assets (2,303) (24,595) (2,928) (23,477)
Investment in affiliate - - - (1,111)
---------- ---------- ---------- ----------
Cash used in investing
activities (233,382) (51,923) (304,662) (164,378)
---------- ---------- ---------- ----------
Decrease in cash and cash
equivalents (1,399) (17,954) (190,429) (126,814)
Cash and cash equivalents,
beginning of period 287,350 272,518 476,380 381,378
---------- ---------- ---------- ----------
Cash and cash equivalents, end
of period $ 285,951 $ 254,564 $ 285,951 $ 254,564
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
SEASPAN CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013
(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, 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.
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2014 2013 2014 2013
----------- ----------- ----------- -----------
Net earnings $ 20,004 $ 127,154 $ 38,032 $ 182,760
Add:
Depreciation and
amortization 44,603 42,840 88,335 85,593
Interest expense 23,007 15,275 40,568 30,759
Amortization of deferred
charges 2,462 2,266 4,465 4,376
Refinancing expenses and
costs(1) 2,356 - 2,356 -
Share-based compensation 2,806 6,630 5,109 9,441
Change in fair value of
financial instruments 32,960 (71,193) 69,303 (68,527)
Change in fair value of
financial instruments
included in equity loss 402 - 601 -
Bareboat charter
adjustment, net (2) 4,300 2,465 8,486 4,860
Less:
Amounts paid for dry-dock
adjustment (4,724) (2,610) (7,181) (5,095)
Cash dividends paid on
preferred shares:
Series C (8,114) (8,312) (16,228) (16,625)
Series D (2,537) (1,545) (5,074) (2,351)
Series E (2,382) - (2,382) -
----------- ----------- ----------- -----------
Net cash flows before
interest payments 115,143 112,970 226,390 225,191
Less:
Interest expense at the
hedged rate(3) (47,109) (45,734) (90,448) (91,140)
----------- ----------- ----------- -----------
Cash available for
distribution to common
shareholders $ 68,034 $ 67,236 $ 135,942 $ 134,051
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
SEASPAN CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013
(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, 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 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 common shares was equal to or above $15.00. If the share price was less than $15.00, then Seaspan could 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 had been 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 of Seaspan'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, 2014 AND 2013
(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,
----------------------- -----------------------
2014 2013 2014 2013
----------- ----------- ----------- -----------
Net earnings $ 20,004 $ 127,154 $ 38,032 $ 182,760
Adjust:
Interest expense 23,007 15,275 40,568 30,759
Change in fair value of
financial instruments 32,960 (71,193) 69,303 (68,527)
Change in fair value of
financial instruments
included in equity loss 402 - 601 -
Refinancing expenses and
costs(1) 2,824 - 2,824 -
Interest expense at the
hedged rate(3) (47,109) (45,734) (90,448) (91,140)
----------- ----------- ----------- -----------
Normalized net earnings $ 32,088 $ 25,502 $ 60,880 $ 53,852
----------- ----------- ----------- -----------
Less: preferred share
dividends
Series A - 9,423 3,395 18,473
Series C (including
amortization of issuance
costs) 8,400 8,631 16,793 17,251
Series D 2,537 1,545 4,963 3,088
Series E 2,784 - 4,207 -
----------- ----------- ----------- -----------
13,721 19,599 29,358 38,812
----------- ----------- ----------- -----------
Normalized net earnings
attributable to common
shareholders $ 18,367 $ 5,903 $ 31,522 $ 15,040
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number of
shares used to compute
earnings per share
Reported and normalized,
basic 94,791 64,487 90,342 64,129
Share-based compensation 210 399 153 382
Contingent consideration - 508 234 743
Shares held in escrow - - - 95
Series A preferred shares
liquidation preference
converted at $15 - 21,309 3,802 21,001
----------- ----------- ----------- -----------
Reported, diluted and
normalized, converted 95,001 86,703 94,531 86,350
----------- ----------- ----------- -----------
Earnings per share:
Reported, basic $ 0.07 $ 1.67 $ 0.10 $ 2.24
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Reported, diluted $ 0.07 $ 1.35 $ 0.10 $ 1.88
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Normalized, converted -
preferred shares
converted at $15(4) $ 0.19 $ 0.18 $ 0.37 $ 0.39
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
SEASPAN CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013
(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, 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.
In the third quarter of 2013, the definition of Adjusted EBITDA was revised to exclude share-based compensation expense and, accordingly, the comparative figures for the prior periods have been adjusted to reflect this change. The impact of excluding share-based compensation resulted in an increase in Adjusted EBITDA for the three and six months ended June 30, 2013 of approximately 5.6% and 3.9%, 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. 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,
----------------------- -----------------------
2014 2013 2014 2013
----------- ----------- ----------- -----------
Net earnings $ 20,004 $ 127,154 $ 38,032 $ 182,760
Add:
Interest expense 23,007 15,275 40,568 30,759
Interest income (2,683) (600) (3,789) (787)
Undrawn credit facility
fees 672 748 1,238 1,145
Depreciation and
amortization 44,603 42,840 88,335 85,593
Amortization of deferred
charges 2,462 2,266 4,465 4,376
Refinancing expenses and
costs(1) 2,356 - 2,356 -
Share-based compensation 2,806 6,630 5,109 9,441
Bareboat charter
adjustment, net (2) 4,300 2,465 8,486 4,860
Change in fair value of
financial instruments 32,960 (71,193) 69,303 (68,527)
Change in fair value of
financial instruments
included in equity loss 402 - 601 -
----------- ----------- ----------- -----------
Adjusted EBITDA $ 130,889 $ 125,585 $ 254,704 $ 249,620
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
(1) In April 2014, Seaspan issued in a registered public offering 13,800,000
senior unsecured notes. Seaspan used a portion of the net proceeds from
the offering to repay its $125.0 million credit facility. In connection
with the refinancing, Seaspan incurred refinancing expenses and costs of
$2.8 million, of which $0.5 million was cash and $2.3 million was non-
cash.
(2) 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.
(3) 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 borrowings is calculated on the effective interest rate.
(4) Normalized earnings per share, converted, increased for the three
months, and decreased for the six months ended June 30, 2014 as detailed
in the table below:
Three Months Six Months
Ended Ended
June 30, June 30,
2014 2014
------------ ------------
Normalized earnings per share, converted-
preferred shares converted at $15, June 30, 2013 $ 0.18 $ 0.39
Excluding share count changes:
Increase in normalized earnings(a) 0.07 0.08
Decrease from impact of Series C, D and E
preferred shares (0.04) (0.07)
Share count changes:
Increase in converted share count (from 86,703
shares to 95,001 shares and from 86,350 to
94,531 for the three and six months ended,
respectively) (0.02) (0.03)
------------ ------------
Normalized earnings per share, converted-
preferred shares converted at $15, June 30, 2014 $ 0.19 $ 0.37
------------ ------------
------------ ------------
--------------------------------------------------
(a) The increases in normalized net earnings are primarily due to increases
in revenue of $6.1 million and $9.1 million and decreases in general and
administrative expenses of $4.4 million and $4.1 million, partially
offset by increases in ship operating expenses of $3.7 million and $7.4
million, and increases in depreciation and amortization expense of $1.8
million and $2.7 million, for the three and six months ended June 30,
2014, respectively. Please read "Results for the Three and Six Months
Ended June 30, 2014" for a description of the increases in revenue, ship
operating expense, and depreciation and amortization expense, and the
decreases in general and administrative expense.
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; future time charters and dividends; vessel deliveries; vessel financing arrangements; use of public offering net proceeds and Seaspan's capital requirements; and amendments to the GCI ROFR and ROFO, the employment and transaction services agreements with Gerry Wang and the financing services agreement with Tiger Ventures Limited. 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; amounts of any payments to the former owners of Seaspan's Manager related to fleet growth; 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; 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; negotiations with GCI, Gerry Wang and Tiger Ventures Limited about agreement amendments; 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; 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, 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
