Announces 50 Percent Dividend Increase and Adopts Progressive Dividend Policy Announces Agreement with The Carlyle Group to Form Containership Investment Venture Re-enters Newbuilding Market
HONG KONG, CHINA – March 14, 2011 /CNW/ – Seaspan Corporation (NYSE:SSW) announced today the financial results for the quarter and year ended December 31, 2010. Seaspan also provided an update on certain recent developments disclosed in the Company's Prospectus Supplement dated January 21, 2011.
Below is a summary of our key financial results for the recent quarter and year:
Summary of Key Financial Results (dollars in thousands):
Quarter Ended December
31, Change
------------------------ ------------------------
2010 2009 $ %
----------- ------------ ------------ -----------
Reported net earnings $ 141,590 $ 74,690 $ 66,900 89.6%
Normalized net
earnings(1) $ 26,954 $ 21,062 $ 5,892 28.0%
Earnings per share, basic $ 1.96 $ 1.01 $ 0.95 94.1%
Earnings per share,
diluted $ 1.60 $ 0.78 $ 0.82 105.1%
Normalized earnings per
share, converted(1)
(Series A preferred
shares converted at $15) $ 0.31 $ 0.26 $ 0.05 19.2%
Cash available for
distribution to common
shareholders (2) $ 55,117 $ 39,922 $ 15,195 38.1%
Adjusted EBITDA(3) $ 85,390 $ 54,237 $ 31,153 57.4%
Year Ended December 31, Change
------------------------ ------------------------
2010 2009 $ %
----------- ----------- ----------- -----------
Reported net earnings
(loss) $ (87,747)$ 145,252 $ (232,999) (160.4%)
Normalized net
earnings(1) $ 94,991 $ 78,529 $ 16,462 21.0%
Earnings (loss) per
share, basic $ (1.70)$ 1.94 $ (3.64) (187.6%)
Earnings (loss) per
share, diluted(4) $ (1.70)$ 1.75 $ (3.45) (197.1%)
Normalized earnings per
share, converted(1)
(Series A preferred
shares converted at
$15) $ 1.12 $ 1.03 $ 0.09 8.7%
Cash available for
distribution to common
shareholders(2) $ 193,389 $ 149,937 $ 43,452 29.0%
Adjusted EBITDA(3) $ 289,501 $ 197,464 $ 92,037 46.6%
(1) Normalized net earnings and normalized earnings per share are non-GAAP
measures that are adjusted for items such as the change in fair value of
financial instruments, interest expense, interest expense at the hedged rate
and other items that we believe are not representative of our operating
performance. Normalized earnings per share, converted, reflects normalized
earnings per share on a pro-forma basis on the assumption that the Series A
preferred shares are converted at $15.00 per share. Please read
"Reconciliation of Non-GAAP Financial Measures for the Quarter and Year
Ended December 31, 2010 - 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 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,
amortization of deferred charges, non-cash share-based compensation, dry-
dock adjustment, change in fair value of financial instruments, interest
expense, interest expense at the hedged rate, cash dividends paid on
preferred shares and other items that we believe are not representative of
our operating performance. Please read "Reconciliation of Non-GAAP
Financial Measures for the Quarter and Year Ended December 31, 2010 -
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
(loss) before interest expense and other debt-related expenses, interest
income, income tax expense, depreciation and amortization expense, change
in fair value of financial instruments, and certain non-cash charges and
selected items that are generally unusual or non-recurring that we believe
are not representative of our operating performance. Please read
"Reconciliation of Non-GAAP Financial Measures for the Quarter and Year
Ended December 31, 2010 - Description of Non-GAAP Financial Measures - C.
Adjusted EBITDA" for a description of adjusted EBITDA and a reconciliation
of adjusted EBITDA to net earnings.
(4) Diluted earnings per share for the year ended December 31, 2009 has been
revised primarily, to correctly record the impact of the convertible Series
A preferred shares on the denominator for only the period they were
outstanding during the year. Diluted earnings per share for the year ended
December 31, 2009 has been revised by an immaterial amount from $1.58 per
share (as previously reported) to $1.75 per share.
Summary of Key Highlights:
-- Achieved vessel utilization of 99.7% and 98.7%, respectively, for the
quarter and year ended December 31, 2010;
-- Accepted delivery of 13 newbuilding vessels in 2010, two of which were
delivered during the fourth quarter (the COSCO Thailand and the Brotonne
Bridge), bringing our fleet to a total of 55 vessels at December 31,
2010;
-- Paid a third quarter dividend of $0.125 per common share on November 12,
2010, reflecting a 25% increase over the dividend paid for the first
quarter of 2010; Paid a fourth quarter dividend of $0.125 per common
share on February 11, 2011, increasing cumulative dividends paid since
our IPO in August 2005 to $6.965 per common share; Board of directors
adopts a progressive dividend policy and expects to increase dividend by
50 percent to $0.75 per share in 2011 on an annualized basis; and
-- Completed public offering of 10,000,000 9.5% Series C preferred shares
on January 28, 2011 share, for net proceeds of $241 million.
Financing Transactions:
On October 21, 2010, the Company entered into a 12-year sale and leaseback financing for up to $150 million for one of its 13100 TEU vessels ordered from Hyundai Heavy Industries Co., Ltd. Under the terms of the transaction, subject to certain closing conditions, the vessel will be sold by the Company upon delivery to an affiliate of Credit Agricole Corporate and Investment Bank and will charter the vessel to a newly formed, wholly owned subsidiary of Seaspan Corporation. The Company will charter the vessel from its subsidiary and continue to time charter the vessel to COSCO Container Lines Co., Ltd. in accordance with the terms of the original 12-year time charter. The subsidiary's financial indebtedness under the charter is non-recourse to Seaspan Corporation.
On October 21, 2010, a subsidiary of Seaspan Corporation amended its $400 million UK tax lease facility with an affiliate of Lloyds Banking Group. Under the original terms of the lease, all of the obligations of the Company's subsidiary under the lease were guaranteed by Seaspan Corporation. Under the terms of the amended lease facility, Seaspan Corporation's guarantee of scheduled rental and termination amounts, based on current tax and other assumptions, are limited to a significantly reduced fixed amount of the subsidiary's obligations. The lease facility will continue to provide the financing for five 4500 TEU vessels, each of which has commenced or is to commence a 12-year time charter with Kawasaki Kisen Kaisha Ltd. upon delivery.
Gerry Wang, Chief Executive Officer and recently appointed Co-Chairman of Seaspan, commented, "During 2010, Seaspan grew both its fleet and contracted revenue stream by taking delivery of 13 vessels that commenced fixed rate time charters with leading liner companies. We also continued to achieve strong utilization for our fleet and significantly increased net earnings and cash flow. We look forward to the delivery of 12 additional vessels currently under construction, which we anticipate receiving through March 2012, and which will increase our contracted fleet to 69 vessels.
Mr. Wang added, "During 2010, Seaspan made significant progress in enhancing its financial strength and flexibility. Complementing the Company's success during 2010 in securing funding for its built-in fleet growth, we completed a $250 million offering of our Series C preferred shares in January 2011. This successful and unique offering is an important step in positioning Seaspan to fund growth beyond our contracted fleet. In pursuing future growth, we will remain disciplined and seek opportunities that further strengthen our position as a leading independent charter owner of containerships. Our participation in a newly formed containership investment venture established by The Carlyle Group and others, and particularly our right of first refusal on containership opportunities of the venture, is an example of a growth opportunity that we believe will strengthen our competitive position."
Dividend Policy:
Seaspan's board of directors has adopted a progressive dividend policy aimed at increasing dividends in a manner that preserves its long-term financial strength and its ability to continue to expand its fleet. Mr. Wang added, "For 2011, we anticipate that we will be able to increase our annualized dividend by approximately 50 percent to $0.75 per share, starting with a $0.1875 per share dividend for the first quarter of 2011. We have distributed $6.965 per common share in cumulative dividends since our initial public offering in August 2005 and we are pleased to once again be in a position to increase our quarterly dividends for the second time in less than a year."
Subsequent events:
Subsequent to the end of the fourth quarter, we accepted delivery of the Brevik Bridge and the Bilbao Bridge on January 25 and 28, 2011, respectively, bringing our fleet to 57 vessels.
On January 28, 2011, we completed a public offering of 10,000,000 of our Series C preferred shares at a price of $25 per share, for net proceeds of $241 million. Dividends will be payable on the Series C preferred shares at an initial rate of 9.5% per annum of the stated liquidation preference of $25 per share. We will use the net proceeds from this offering for general corporate purposes, which may include making vessel acquisitions or investments.
We recently entered into an agreement with The Carlyle Group ("Carlyle") and other parties to form a containership investment venture. This arrangement is described below and in our Report on Form 6-K describing this transaction, dated March 14, 2011.
Update on Recent Developments:
Investment in Containership-Focused Investment Venture and New Employment Agreement with Co-Chairman and CEO Gerry Wang
Seaspan, Carlyle, Tiger Group Investments Ltd., and an affiliate of Dennis R. Washington have entered into an agreement to form an investment venture (the "New Venture") to capitalize on current growth opportunities in the containership market. The New Venture will work to invest up to $900 million equity capital in containership assets, primarily newbuilding vessels strategic to the Greater China Area. Seaspan has agreed to make a minority investment in the New Venture of up to $100 million during the investment period, which is anticipated to be up to five years. Gerry Wang will serve in a senior leadership role subject to his fiduciary duties to Seaspan.
Seaspan will have a right of first refusal on containership investment opportunities available to the New Venture and a right of first offer for any containership the New Venture proposes to sell. Mr. Wang commented, "We believe the increased buying power and scale achievable through this venture, combined with Seaspan's right of first refusal, will provide a valuable means by which we can selectively and cost effectively grow our fleet and better serve our customers. In addition, we believe that the combined scale of our business and this venture will allow us to realize volume discounts for newbuilding orders, negotiate design improvements from shipyards and obtain more attractive vessel financing than we would otherwise be able to achieve on our own."
In connection with Seaspan's investment in the New Venture, the Company has entered into a new employment agreement with Gerry Wang. Mr. Wang will continue to serve as Seaspan's Chief Executive Officer through January 1, 2013, after which date he is expected to continue in a strategic leadership role as Co-Chairman. Mr. Wang has agreed to continue to provide transaction services to Seaspan following the term of his employment.
On the recommendation of Seaspan's conflicts committee, the members of the board of directors without an interest in the transactions unanimously approved the Company's investment in the New Venture and the related transactions, including the right of first refusal, and Mr. Wang's new employment agreement and his post-employment transaction services agreement. Bank of America Merrill Lynch acted as advisor to Seaspan and the conflicts committee.
Letter of Intent for Newbuilding Order
The Company also announced today that it is re-entering the newbuilding market for the first time since 2007. Seaspan has signed a letter of intent with a leading Chinese shipyard for a significant order of New Panamax 10000 TEU vessels. The Company expects that any order resulting from this letter of intent will be made available to the New Venture and that any vessels ordered thereunder will be subject to Seaspan's right of first refusal. Consistent with its strategy, Seaspan expects to enter into long-term time charters with leading liner companies concurrently with reaching a definitive purchase agreement.
Potential Non-Recourse Loan Facility Transaction; Potential Acquisition of Seaspan Management Services Limited and Change in Management Fees
Discussions relating to these developments are ongoing and remain in-progress. Please read the applicable sections of "Summary-Recent Developments-Potential Transactions" in the Company's Prospectus Supplement dated January 21, 2011 for additional details about these potential transactions.
Results for the Quarter and Year ended December 31, 2010:
The following tables summarize vessel utilization and the impact of off-hire time on our revenues for the quarter and year ended December 31, 2010:
First Quarter Second Quarter Third Quarter
------------------ --------------------- -------------------
2010 2009 2010 2009 2010 2009
-------- --------- --------- ----------- --------- ---------
Vessel
Utilization:
Ownership Days 3,908 3,150 4,390 3,445 4,871 3,632
Less Off-hire
Days:
Scheduled 5-
Year Survey (20) - (42) - (52) (14)
Unscheduled
Off-hire (91) (1) (4) (4) (10) (6)
-------- --------- --------- ----------- --------- ---------
Operating Days 3,797 3,149 4,344 3,441 4,809 3,612
-------- --------- --------- ----------- --------- ---------
-------- --------- --------- ----------- --------- ---------
Vessel
Utilization 97.2% 99.9% 99.0% 99.9% 98.7% 99.4%
-------- --------- --------- ----------- --------- ---------
-------- --------- --------- ----------- --------- ---------
Fourth Quarter Year to Date
------------------------ ------------------------
2010 2009 2010 2009
----------- ----------- ----------- -----------
Vessel Utilization:
Ownership Days 5,015 3,814 18,184 14,041
Less Off-hire Days:
Scheduled 5-Year
Survey (5) (11) (119) (25)
Unscheduled Off-hire (9) (2) (114) (13)
----------- ----------- ----------- -----------
Operating Days 5,001 3,801 17,951 14,003
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Vessel Utilization 99.7% 99.7% 98.7% 99.7%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
First Quarter Second Quarter Third Quarter
--------------------- --------------------- --------------------
2010 2009 2010 2009 2010 2009
---------- ---------- ---------- ---------- --------- ----------
Revenue (in
thousands)
Revenue -
Impact of
Off-Hire:
100%
Utilization $ 82,378 $ 63,147 $ 98,360 $ 69,904 $ 112,473 $ 74,581
Less Off-
hire:
Scheduled
5-Year
Survey (347) - (738) - (914) (427)
Unscheduled
Off-
hire(5) (1,662) (20) (77) (73) (208) (97)
---------- ---------- ---------- ---------- --------- ----------
Actual
Revenue
Earned $ 80,369 $ 63,127 $ 97,545 $ 69,831 $ 111,351 $ 74,057
---------- ---------- ---------- ---------- --------- ----------
---------- ---------- ---------- ---------- --------- ----------
Fourth Quarter Year to Date
--------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- -----------
Revenue - Impact of Off-Hire:
100% Utilization $ 118,186 $ 78,929 $ 411,397 $ 286,561
Less Off-hire:
Scheduled 5-Year Survey (85) (315) (2,084) (742)
Unscheduled Off-hire(5) (155) (35) (2,102) (225)
---------- ---------- ---------- -----------
Actual Revenue Earned $ 117,946 $ 78,579 $ 407,211 $ 285,594
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
(5) Includes charterer deductions that are not related to off-hire.
We accepted delivery of seven vessels during the year ended December 31, 2009. We began 2010 with 42 vessels in operation and during the year ended December 31, 2010 accepted delivery of 13 vessels bringing our fleet to a total of 55 vessels in operation as at December 31, 2010. Operating days are the primary driver of revenue, while ownership days are the primary driver for ship operating costs.
Quarter Ended Year Ended
December 31, Increase December 31, Increase
---------------- -------------- ---------------- ------------
2010 2009 Days % 2010 2009 Days %
------- -------- ------- ------ ------- -------- ------ -----
Operating days 5,001 3,801 1,200 31.6% 17,951 14,003 3,948 28.2%
Ownership days 5,015 3,814 1,201 31.5% 18,184 14,041 4,143 29.5%
Financial Summary (in Quarter Ended December
millions) 31, Change
------------------------- -------------------------
2010 2009 $ %
------------ ------------ ------------ ------------
Revenue $ 117.9 $ 78.6 $ 39.4 50.1%
Ship operating expense 29.8 22.4 7.4 33.0%
Depreciation 28.4 19.0 9.3 49.0%
General and
administrative
expenses 2.7 1.9 0.8 42.8%
Interest expense 8.5 5.4 3.1 58.2%
Change in fair value of
financial instruments
(gain)/loss (95.5) (46.5) 49.0 105.3%
Other expenses - - - 0.0%
Financial Summary (in
millions) Year Ended December 31, Change
------------------------- ---------------------------
2010 2009 $ %
------------ ------------ ------------ --------------
Revenue $ 407.2 $ 285.6 $ 121.6 42.6%
Ship operating expense 108.1 80.2 27.9 34.8%
Depreciation 99.7 70.0 29.7 42.4%
General and
administrative
expenses 9.6 8.0 1.6 20.6%
Interest expense 28.8 21.2 7.6 35.9%
Change in fair value of
financial
instruments (gain)/loss 241.0 (46.5) (287.5) (618.9%)
Other expenses - 1.1 (1.1) (100.0%)
Revenue
The increase in revenue is due to an increase in operating days and the dollar impact thereof for the quarter and year ended December 31, 2010 were due to the following:
Quarter Ended Year Ended
December 31, 2010 December 31, 2010
----------------------------- ----------------------------
Operating $ impact Operating $ impact (in
Days impact (in millions) Days impact millions)
--------------- ------------- --------------- ------------
2010 vessel
deliveries 1,151 $ 37.8 2,854 $ 92.5
Full period
contribution for
2009 vessel
deliveries 50 1.5 1,289 32.3
Scheduled off-
hire 6 0.2 (94) (1.3)
Unscheduled off-
hire (7) (0.1) (101) (1.9)
--------------- ------------- --------------- ------------
Total 1,200 $ 39.4 3,948 $ 121.6
--------------- ------------- --------------- ------------
--------------- ------------- --------------- ------------
Vessel utilization was 99.7% and 98.7%, respectively, for the quarter and year ended December 31, 2010, compared to 99.7% for both the comparable periods in the prior year.
This decrease in vessel utilization for the year ended December 31, 2010 was primarily due to the 90 days of unscheduled off-hire resulting from the grounding of the CSCL Hamburg (currently the CSAV Licanten) in the Gulf of Aqaba on December 31, 2009. CSCL Hamburg's next dry-docking was originally scheduled for 2013; however we combined the repairs of the CSCL Hamburg with the scheduled dry-docking, which defers the vessel's next scheduled dry-docking to 2015. This dry-docking resulted in 12 days of scheduled off-hire. The CSCL Hamburg returned to service in April 2010. During 2010 we also completed the dry-dockings for the CSCL Vancouver, CSCL Sydney, CSCL New York, CSCL Melbourne, New Delhi Express, CSCL Brisbane and Dubai Express. These dry-dockings resulted in a total of 119 days of scheduled off-hire. Our vessel utilization since our initial public offering in August 2005 is 99.1%.
Ship Operating Expense
The increase in ship operating expenses is mainly due to the increase in ownership days, and the dollar impact thereof, for the quarter and year ended December 31, 2010 were due to the following:
Quarter Ended Year Ended
December 31, 2010 December 31, 2010
----------------------------- ----------------------------
$ impact
Ownership Days $ impact Ownership Days (in
impact (in millions) impact millions)
--------------- ------------- --------------- ------------
2010 vessel
deliveries 1,151 $ 7.2 2,854 $ 17.8
Full period
contribution for
2009 vessel
deliveries 50 0.3 1,289 7.3
Changes in
extraordinary(6)
costs & expenses
not covered by
the fixed fee - (0.1) - 2.8
--------------- ------------- --------------- ------------
Total 1,201 $ 7.4 4,143 $ 27.9
--------------- ------------- --------------- ------------
--------------- ------------- --------------- ------------
(6) Extraordinary costs and expenses are defined in our management agreements and do not relate to extraordinary items as defined by financial reporting standards.
Depreciation
The increases in depreciation expense for the quarter and year ended December 31, 2010 were due to the additional ownership days from the 13 deliveries in 2010 and a full period for the seven deliveries in 2009.
General and Administrative Expenses
The increases in general and administrative expenses for the quarter and year ended December 31, 2010 were primarily due to the increases in non-cash share based compensation resulting from higher share prices at the awards' grant dates and increased costs to support growth.
Interest Expense
Interest expense is composed of interest at the variable rate plus margin incurred on debt for operating vessels and a reclassification of amounts from accumulated other comprehensive income related to previously designated hedging relationships. The increases in interest expense for the quarter and year ended December 31, 2010, were primarily due to higher average operating debt balances compared to the comparable periods. The average LIBOR for the quarter ended December 31, 2010 was 0.4% compared to 0.2% for the comparable period in the prior year. The average LIBOR for the year ended December 31, 2010 was 0.4%, which is consistent with the comparable period in the prior year. Although we have entered into fixed interest rate swaps, the difference between the variable interest rate and the swapped fixed rate on operating debt is recorded in our change in fair value of financial instruments caption as required by financial reporting standards. The interest incurred on our long-term debt for our vessels under construction is capitalized to the respective vessels under construction.
Change in Fair Value of Financial Instruments
The change in fair value of financial instruments resulted in a gain of $95.5 million for the quarter ended December 31, 2010, compared to a gain of $46.5 million for the comparable quarter last year. The change in fair value of financial instruments resulted in a loss of $241.0 million for the year ended December 31, 2010, compared to a gain of $46.5 million for the comparable period last year. The change in fair value gain for the quarter and loss for the year ended December 31, 2010 was primarily due to fluctuations in the forward LIBOR curve and actual cash interest payments made.
Dividend Declared:
For the quarter ended December 31, 2010, we declared a quarterly dividend of $0.125 per common share, representing a total distribution of $8.6 million. The dividend was paid on February 11, 2011 to all shareholders of record as of January 28, 2011. Because we adopted a dividend reinvestment plan, or DRIP, the actual amount of cash dividend paid was $6.3 million based on shareholder participation in the DRIP.
Since our initial public offering in August 2005, we have declared cumulative dividends of $6.965 per common share. Cumulatively, since we adopted the DRIP in May 2008, an additional 2.2 million shares have been issued through shareholder participation in the DRIP. Since the plan's adoption, based on a discount of 3%, participating shareholders have invested $23.0 million in the DRIP.
About Seaspan
Seaspan is a leading independent charter owner of containerships, which it charters primarily pursuant to long-term fixed-rate time charters to major container liner companies. Seaspan's contracted fleet of 69 containerships consists of 57 containerships in operation and 12 containerships scheduled for delivery through March 2012. Seaspan's operating fleet of 57 vessels has an average age of approximately five years and an average remaining charter period of approximately seven years. All of the 12 vessels to be delivered to Seaspan are already committed to fixed-rate time charters of 12 years in duration from delivery. Seaspan's customer base consists of eight of the world's largest liner companies, including A.P. Moller-Maersk A/S, China Shipping Container Lines (Asia) Co., Ltd., Compania Sud Americana de Vapores S.A., COSCO Container Lines Co., Ltd., Hapag-Lloyd USA, LLC, Kawasaki Kisen Kaisha Ltd., Mitsui O.S.K. Lines, Ltd., and United Arab Shipping Company (S.A.G.).
Seaspan's common shares are listed on the New York Stock Exchange under the symbol "SSW".
Seaspan's Series C preferred shares are listed on the New York Stock Exchange under the symbol "SSW PR C".
Conference Call and Webcast
Seaspan will host a conference call and webcast presentation for investors and analysts to discuss its results for the quarter and year ended December 31, 2010 and our participation in the New Venture investment and related transactions on Monday March 14, 2011 at 5:30 a.m. PT / 8:30 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 1-800-642-1687 or 1-706-645-9291 and enter the replay passcode: 48905530. The recording will be available from March 14, 2011 at 8:30 a.m. PT / 11:30 a.m. ET through to 8:59 p.m. PT / 11:59 p.m. ET on March 28, 2011. The conference call will also be broadcast live over the Internet and will include a slide presentation. To access the live webcast and slide presentation, go to www.seaspancorp.com and click on "News & Events" 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 DECEMBER 31, 2010
(IN THOUSANDS OF US DOLLARS)
December 31, 2010 December 31, 2009
----------------- -------------------
Assets
Current assets:
Cash and cash equivalents $ 34,219 $ 133,400
Accounts receivable 1,017 164
Prepaid expenses 11,528 12,489
----------------- -----------------
46,764 146,053
Vessels 3,191,734 2,088,689
Vessels under construction 1,019,138 1,396,661
Deferred charges 37,607 21,667
Other assets 81,985 11,377
----------------- -----------------
$ 4,377,228 $ 3,664,447
----------------- -----------------
----------------- -----------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued
liabilities $ 28,394 $ 20,905
Deferred revenue 10,696 9,787
Current portion of other long-term
liabilities 31,281 -
----------------- -----------------
70,371 30,692
Long-term debt 2,396,771 1,883,146
Other long-term liabilities 512,531 410,598
Fair value of financial instruments 407,819 280,445
----------------- -----------------
3,387,492 2,604,881
Share capital 691 679
Additional paid-in capital 1,526,822 1,489,936
Deficit (469,616) (349,802)
Accumulated other comprehensive loss (68,161) (81,247)
----------------- -----------------
Total shareholders' equity 989,736 1,059,566
$ 4,377,228 $ 3,664,447
----------------- -----------------
----------------- -----------------
SEASPAN CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
FOR THE QUARTER AND YEAR ENDED DECEMBER 31, 2010 AND 2009
(IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE AMOUNTS)
Quarter Quarter
ended ended Year ended Year ended
December 31, December 31, December 31, December 31,
2010 2009 2010 2009
------------- ------------- ------------- -------------
Revenue $ 117,946 $ 78,579 $ 407,211 $ 285,594
Operating
expenses:
Ship operating 29,829 22,432 108,098 80,162
Depreciation 28,351 19,027 99,653 69,996
General and
administrative 2,727 1,910 9,612 7,968
------------- ------------- ------------- -------------
60,907 43,369 217,363 158,126
------------- ------------- ------------- -------------
Operating
earnings 57,039 35,210 189,848 127,468
Other expenses
(earnings):
Interest expense 8,529 5,392 28,801 21,194
Interest income (19) (41) (60) (311)
Undrawn credit
facility fees 1,443 1,129 4,515 4,641
Amortization of
deferred
charges 1,010 566 3,306 2,042
Change in fair
value of
financial
instruments (95,514) (46,526) 241,033 (46,450)
Other expenses - - - 1,100
------------- ------------- ------------- -------------
(84,551) (39,480) 277,595 (17,784)
------------- ------------- ------------- -------------
Net earnings
(loss) $ 141,590 $ 74,690 $ (87,747) $ 145,252
Deficit,
beginning of
period $ (602,055) $ (417,736) $ (349,802) $ (443,081)
Dividends on
common shares $ (8,553) $ (6,756) $ (30,658) $ (51,973)
Dividends on
Series B
preferred
shares $ (598) $ - $ (1,409) $ -
------------- ------------- ------------- -------------
Deficit, end of
period $ (469,616) $ (349,802) $ (469,616) $ (349,802)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Weighted average
number of
shares, basic 68,479 67,641 68,195 67,340
Weighted average
number of
shares, diluted 87,866 95,570 89,353 83,166
Earnings (loss)
per share, basic$ 1.96 $ 1.01 $ (1.70) $ 1.94
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Earnings (loss)
per share,
diluted(4) $ 1.60 $ 0.78 $ (1.70) $ 1.75
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
(4) Diluted earnings per share for the year ended December 31, 2009 has been
revised primarily, to correctly record the impact of the convertible Series
A preferred shares on the denominator for only the period they were
outstanding during the year. Diluted earnings per share for the year ended
December 31, 2009 has been revised by an immaterial amount from $1.58 per
share (as previously reported) to $1.75 per share.
SEASPAN CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE QUARTER AND YEAR ENDED DECEMBER 31, 2010 AND 2009
(IN THOUSANDS OF US DOLLARS)
Quarter Quarter
ended ended Year ended Year ended
December December December 31, December 31,
31, 2010 31, 2009 2010 2009
------------ ------------ ------------- -------------
Net earnings (loss) $ 141,590 $ 74,690 $ (87,747) $ 145,252
Other comprehensive
income:
Amounts
reclassified to
earnings during
the period 3,443 3,177 13,086 12,169
------------ ------------ ------------- -------------
Comprehensive income
(loss) $ 145,033 $ 77,867 $ (74,661) $ 157,421
------------ ------------ ------------- -------------
------------ ------------ ------------- -------------
SEASPAN CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTER AND YEAR ENDED DECEMBER 31, 2010 AND 2009
(IN THOUSANDS OF US DOLLARS)
Quarter Quarter
ended ended Year ended Year ended
December 31, December 31, December 31, December 31,
2010 2009 2010 2009
------------- ------------- ------------- -------------
Cash provided by
(used in):
Operating
activities:
Net earnings
(loss) $ 141,590 $ 74,690 $ (87,747) $ 145,252
Items not
involving cash:
Depreciation 28,351 19,027 99,653 69,996
Share-based
compensation 690 601 2,670 2,184
Amortization of
deferred
charges 1,010 566 3,306 2,042
Amounts
reclassified
from other
comprehensive
loss 3,353 3,138 12,797 12,068
Unrealized
change in fair
value of
financial
instruments (125,088) (71,656) 127,374 (134,324)
Change in assets
and liabilities 6,008 3,430 (4,466) (2,642)
------------- ------------- ------------- -------------
Cash provided by
operating
activities 55,914 29,796 153,587 94,576
------------- ------------- ------------- -------------
Financing
activities:
Preferred
shares issued,
net of
share issue
costs 16 19,657 25,896 198,442
Draws on credit
facilities 26,325 58,846 513,625 161,988
Other long-term
liabilities - - 21,250 -
Financing fees (4,042) (158) (7,356) (3,530)
Dividends on
common
shares(7) (6,328) (5,153) (22,958) (44,841)
Dividends on
Series B
preferred
shares (328) - (777) -
------------- ------------- ------------- -------------
Cash provided by
financing
activities 15,643 73,192 529,680 312,059
------------- ------------- ------------- -------------
Investing
activities:
Expenditures
for vessels (123,569) (73,585) (715,640) (408,557)
Restricted cash (60,000) - (65,000) -
Intangible
assets (478) (32) (1,808) (963)
------------- ------------- ------------- -------------
Cash used in
investing
activities (184,047) (73,617) (782,448) (409,520)
------------- ------------- ------------- -------------
Increase
(decrease) in
cash and
cash equivalents (112,490) 29,371 (99,181) (2,885)
Cash and cash
equivalents,
beginning of
period 146,709 104,029 133,400 136,285
------------- ------------- ------------- -------------
Cash and cash
equivalents, end
of period $ 34,219 $ 133,400 $ 34,219 $ 133,400
------------- ------------- ------------- -------------
(7) During the quarter and year ended December 31, 2010, non-cash dividends
of $2.2 million and $7.7 million, respectively, were paid through the
dividend reinvestment plan. Including the dividend paid in February 2011,
shareholders have invested a total of $23.0 million in the dividend
reinvestment plan since its adoption in May 2008.
SEASPAN CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE QUARTER AND YEAR ENDED DECEMBER 31, 2010 AND 2009
(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, amortization of deferred charges, non-cash share-based compensation, amounts paid for dry-docking, change in fair value of financial instruments, interest expense(8), interest expense at the hedged rate(10), cash dividends paid on preferred shares and certain other items that the Company believes affect the comparability of its operating results. Cash available for distribution to common shareholders is a non-GAAP measure used to assist in evaluating Seaspan's ability to make quarterly cash dividends before reserves. Cash available for distribution to common shareholders is not defined by 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.
Quarter Quarter
ended ended Year ended Year ended
December 31, December 31, December 31, December 31,
2010 2009 2010 2009
------------- ------------- ------------- -------------
Net earnings
(loss) $ 141,590 $ 74,690 $ (87,747) $ 145,252
Add:
Depreciation 28,351 19,027 99,653 69,996
Interest
expense(8) 8,529 5,392 28,801 21,194
Amortization of
deferred
charges 1,010 566 3,306 2,042
Share-based
compensation 690 601 2,670 2,184
Change in fair
value of
financial
instruments (95,514) (46,526) 241,033 (46,450)
Other expenses - - - 1,100
Less:
Amounts paid for
dry-dock (1,560) (1,334) (6,454) (3,914)
Series B
preferred share
dividends
paid(9) (328) - (777) -
------------- ------------- ------------- -------------
Net cash flows
before cash
interest
payments 82,768 52,416 280,485 191,404
Less:
Interest expense
at the
hedged rate(10) (27,651) (12,494) (87,096) (41,467)
------------- ------------- ------------- -------------
Cash available
for
distribution to
common
shareholders $ 55,117 $ 39,922 $ 193,389 $ 149,937
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Seaspan has changed the definition of cash available for distribution to common shareholders for comparative figures to reflect adjustments to the definition in the current year. The following items are now excluded as adjustments: non-cash undrawn credit facility fees and non-cash interest income. In addition, cash interest paid at the hedged rate is replaced with interest expense at the hedged rate(10). This change resulted in decreases of approximately 5% and 3%, respectively, in cash available for distribution to common shareholders for the quarter and year ended December 31, 2009.
(8) Interest expense as reported on the consolidated statement of
operations.
(9) Dividends paid in cash on the Series B preferred shares have been
deducted as they reduce cash available for distribution to common
shareholders.
(10) 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, on an
accrual basis.
SEASPAN CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE QUARTER AND YEAR ENDED DECEMBER 31, 2010 AND 2009
(IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE AMOUNTS)
Description of Non-GAAP Financial Measures
B. Normalized Net Earnings and Normalized Earnings per Share
Normalized net earnings is defined as net earnings adjusted for items such as the change in fair value of financial instruments, interest expense(8), interest expense at the hedged rate(10) and certain other items Seaspan believes affect the comparability of operating results. With these adjustments, normalized net earnings reflects interest expense on our operating debt at the fixed rate on our interest rate swaps plus the applicable margin on the related credit facilities. Normalized net earnings is useful because it excludes the change in fair value of financial instruments that affect the comparability of our operating results and includes interest at the hedged rate, which includes the effect of the interest rate swaps on our operating debt.
Normalized net earnings is not defined by GAAP and should not be considered as an alternative to net earnings or any other indicator of Seaspan's performance required to be reported by GAAP.
Normalized earnings per share, converted, is calculated as normalized net earnings, less dividends on Series B preferred shares, divided by the "converted" number of shares outstanding for the period. The Series A preferred shares automatically convert to Class A common shares at a price of $15.00 per share at any time on or after January 31, 2014 if the trailing 30-day average trading price of the common shares is equal to or above $15.00. If the share price is less than $15.00, we can choose to not convert the preferred shares and to increase the annual increase in the liquidation preference to 15% per annum from 12%. The "converted" number of shares includes: basic weighted average number of shares, share-based compensation, and the impact of the Series A preferred shares converted at $15.00 per share. This method is reflective of our ability to control the conversion if the share price is less than $15.00 and the per share impact of the preferred shares conversion at $15.00.
Normalized earnings per share, basic can be computed as normalized net earnings attributable to common shareholders divided by the weighted average number of shares used to compute reported earnings per share, basic.
Normalized earnings per share, diluted can be computed as the lower of: (1) normalized net earnings less dividends on Series B preferred shares divided by the weighted average number of shares used to compute reported earnings per share, diluted and (2) normalized earnings per share, basic.
Normalized earnings per share, converted, diluted, and basic are not defined by GAAP and should not be considered as an alternative to earnings per share or any other indicator of Seaspan's performance required to be reported by GAAP.
SEASPAN CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE QUARTER AND YEAR ENDED DECEMBER 31, 2010 AND 2009
(IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE AMOUNTS)
Description of Non-GAAP Financial Measures
B. Normalized Net Earnings and Normalized Earnings per Share (continued)
Quarter ended Quarter ended Year ended Year ended
December 31, December 31, December 31, December 31,
2010 2009 2010 2009
-------------- -------------- ------------- -------------
Net earnings
(loss) $ 141,590 $ 74,690 $ (87,747) $ 145,252
Adjust:
Change in fair
value of
financial
instruments (95,514) (46,526) 241,033 (46,450)
Interest
expense(8) 8,529 5,392 28,801 21,194
Interest
expense at the
hedged
rate(10) (27,651) (12,494) (87,096) (41,467)
-------------- -------------- ------------- -------------
Normalized net
earnings $ 26,954 $ 21,062 $ 94,991 $ 78,529
-------------- -------------- ------------- -------------
Less: preferred
share dividends
Series A 7,087 6,264 26,918 14,464
Series B 598 - 1,409 -
-------------- -------------- ------------- -------------
7,685 6,264 28,327 14,464
-------------- -------------- ------------- -------------
Normalized net
earnings
attributable to
common
shareholders $ 19,269 $ 14,798 $ 66,664 $ 64,065
-------------- -------------- ------------- -------------
-------------- -------------- ------------- -------------
Weighted average
number of
shares
used to compute
earnings (loss)
per share:
Reported, basic 68,479 67,641 68,195 67,340
Share-based
compensation 202 50 117 23
Series A
preferred
shares
liquidation
preference
converted at
$15 15,856 13,880 15,174 8,707
-------------- -------------- ------------- -------------
Normalized,
converted 84,537 81,571 83,486 76,070
Series A
preferred
shares 115%
premium
(30-day
trailing
average) 3,329 13,999 5,867 7,096
-------------- -------------- ------------- -------------
Reported,
diluted(11) 87,866 95,570 89,353 83,166
-------------- -------------- ------------- -------------
Earnings (loss)
per share:
Reported,
basic $ 1.96 $ 1.01 $ (1.70) $ 1.94
-------------- -------------- ------------- -------------
-------------- -------------- ------------- -------------
Reported,
diluted(12) $ 1.60 $ 0.78 $ (1.70) $ 1.75
-------------- -------------- ------------- -------------
-------------- -------------- ------------- -------------
Normalized,
converted-
preferred
shares
converted at
$15 $ 0.31 $ 0.26 $ 1.12 $ 1.03
-------------- -------------- ------------- -------------
-------------- -------------- ------------- -------------
(11) If the effect of Series A preferred shares is anti-dilutive, their
effect is excluded from the computation of reported diluted earnings
(loss) per share.
(12) Diluted earnings per share for the year ended December 31, 2009 has
been revised primarily, to correctly record the impact of the convertible
Series A preferred shares on the denominator for only the period they were
outstanding during the year. Diluted earnings per share for the year ended
December 31, 2009 has been revised by an immaterial amount from $1.58 per
share (as previously reported) to $1.75 per share.
SEASPAN CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE QUARTER AND YEAR ENDED DECEMBER 31, 2010 AND 2009
(IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE AMOUNTS)
Description of Non-GAAP Financial Measures
C. Adjusted EBITDA
Adjusted EBITDA is defined as net earnings (loss) before interest expense(8) and other debt-related expenses, interest income, income tax expense, depreciation and amortization expense, change in fair value of financial instruments, and certain non-cash charges and selected items that are generally unusual or non-recurring.
Adjusted EBITDA provides useful information to investors in assessing our results of operations. We believe that this measure is useful in assessing performance and highlighting trends on an overall basis. We also believe that this measure can be useful in comparing our results with those of other companies. The GAAP measure most directly measure can be useful in comparing our results with those of other companies. The GAAP measure most directly comparable to Adjusted EBITDA is net earnings. Adjusted EBITDA is not defined by GAAP and should not be considered as an alternative to net earnings (loss) or any other indicator of Seaspan's performance required to be reported by GAAP.
Quarter ended Quarter ended Year ended Year ended
December 31, December 31, December 31, December 31,
2010 2009 2010 2009
-------------- -------------- -------------- --------------
Net earnings
(loss) $ 141,590 $ 74,690 $ (87,747)$ 145,252
Add:
Interest
expense(8) 8,529 5,392 28,801 21,194
Interest income (19) (41) (60) (311)
Undrawn credit
facility fees 1,443 1,129 4,515 4,641
Depreciation 28,351 19,027 99,653 69,996
Amortization of
deferred
charges 1,010 566 3,306 2,042
Change in fair
value of
financial
instruments (95,514) (46,526) 241,033 (46,450)
Other expenses - - - 1,100
-------------- -------------- -------------- --------------
Adjusted EBITDA $ 85,390 $ 54,237 $ 289,501 $ 197,464
-------------- -------------- -------------- --------------
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 our business; our arrangement with and investment in the New Venture and its effects on our growth, business and customers; our recently revised dividend policy and its effect on future dividends; our letter of intent to acquire additional newbuilding vessels; vessel deliveries; and our future capital requirements. Although these statements are based upon assumptions we believe to be reasonable, they are subject to risks and uncertainties. These risks and uncertainties include, but are not limited to: the availability to Seaspan and the New Venture of containership acquisition opportunities; the availability and cost to Seaspan and the New Venture of financing to pursue growth opportunities; chartering rates; conditions in the containership market; increased operating expenses; the number of off- hire days; dry-docking requirements; our ability to borrow funds under our credit facilities and to obtain additional financing in the future; our expectations relating to dividend payments and our ability to make such payments; the time that it may take to construct new ships; our continued ability to enter into primarily long-term, fixed-rate time charters with customers; negotiation and completion, if at all, of definitive agreements relating to the vessel acquisition letter of intent; our ability to leverage to our advantage Seaspan Management Services Limited's relationships and reputation in the containership industry; changes in governmental rules and regulations or actions taken by regulatory authorities; the financial condition of our shipyards, charterers, lenders, refund guarantors and other counterparties and their ability to perform their obligations under their agreements with us; the potential for early termination of long-term contracts and our potential inability to renew or replace long-term contracts; conditions in the public equity markets; and other factors detailed from time to time in our periodic reports and our filings with the Securities and Exchange Commission, including our Report on Form 20-F for the year ended December 31, 2009. We expressly disclaim any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in our views or expectations, or otherwise.
