Expands Fleet and Contracted Revenue Stream; Fully Time Chartered Fleet Performed as Expected
HONG KONG, CHINA – March 15, 2010 /CNW/ – Seaspan Corporation (NYSE:SSW) announced today the financial results for the quarter and year ended December 31, 2009. Below is a summary of our key financial results.
Summary of Key Financial Results and Highlights (dollars in thousands):
Quarter Ended
December 31, Change
------------------- -----------------
2009 2008 $ %
------- --------- -------- -----
Reported net earnings (loss) $74,690 $(241,913) $316,603 130.9%
Normalized net earnings(1) $21,062 $20,363 $ 699 3.4%
Earnings (loss) per share,
basic $ 1.01 $ (3.63) $ 4.64 127.8%
Earnings (loss) per share,
diluted $ 0.78 $ (3.63) $ 4.41 121.5%
Normalized earnings per share,
basic(1) $ 0.22 $ 0.31 $ (0.09) (29.0)%
Normalized earnings per share,
diluted(1) $ 0.22 $ 0.31 $ (0.09) (29.0)%
Cash available for
distribution(2) $42,106 $ 36,837 $ 5,269 14.3%
Year Ended
December 31, Change
------------------- -----------------
2009 2008 $ %
------- --------- -------- -----
Reported net earnings (loss) $145,252 $(199,346) $344,598 172.9%
Normalized net earnings(1) $ 78,529 $ 76,166 $ 2,363 3.1%
Earnings (loss) per share,
basic $ 1.94 $ (3.12) $ 5.06 162.2%
Earnings (loss) per share,
diluted $ 1.58 $ (3.12) $ 4.70 150.6%
Normalized earnings per share,
basic(1) $ 0.95 $ 1.19 $ (0.24) (20.2)%
Normalized earnings per share,
diluted(1) $ 0.85 $ 1.19 $ (0.34) (28.6)%
Cash available for
distribution(2) $154,542 $ 136,153 $ 18,389 13.5%
– Achieved utilization of 99.7% for the quarter and year;
– Accepted delivery of seven newbuild vessels in 2009 and three vessels to date in 2010 to increase the operating fleet to 45 vessels. With the delivery of an additional 23 vessels, Seaspan is expected to grow its contracted revenue stream to approximately $7 billion;
– Strengthened our capital structure and financial flexibility through completion of the $200 million aggregate issuance of the Company's Series A Preferred Stock;
– Reduced our equity capital needs by up to 80% to $180 to $240 million from $900 million at the beginning of 2009. Deferred some of our equity needs by a year to second quarter 2012 from second quarter 2011;
– Paid a third quarter dividend of $0.10 per share on November 19, 2009;
– Paid a fourth quarter dividend of $0.10 per share on February 12, 2010, increasing cumulative dividends to $6.49 per share;
Gerry Wang, Chief Executive Officer of Seaspan, stated, "2009 was a year in which Seaspan continued its successful operations despite unprecedented conditions in the container shipping industry, credit markets and economy in general. With a focus on high-quality counterparties, our fully time chartered fleet continued to perform as expected. During the year, we also achieved progress in the execution of our growth strategy, expanding both our fleet and contracted revenue stream. We now have an operating fleet of 45 modern containerships with an average age of five years, which are all secured on long-term charters with an average duration of approximately seven years. We look forward to taking delivery of the remaining 23 newbuilds over the next 26 months, positioning the Company to substantially grow its annual revenue and cash flow. For each of the remaining 23 newbuilds, we entered into fixed rate charter parties in 2007 with an average duration of 11 years."
Mr. Wang concluded, "We have continued to take proactive steps to strengthen our capital structure and financial flexibility. Based upon cash retained from operations, combined with our committed debt and equity financing, we believe we are well positioned to meet our capital needs to finance our contracted fleet growth."
Vessel Delivery Deferral:
During 2009, the Company exercised options to defer the delivery date for 11 of the vessels that it had contracted to purchase. The deferrals are for periods ranging from two to 15 months from the dates agreed to under the original shipbuilding contracts. The shipbuilding contracts and time charters have been amended to provide for the new delivery dates.
The Company also deferred the delivery date for five additional vessels that the Company has contracted to purchase. The deferrals are for a period of approximately nine months from the dates that were agreed to under the original shipbuilding contracts. The shipbuilding contracts and time charters have been amended to provide for the new delivery dates.
CSCL Hamburg Update:
On December 31, 2009, the CSCL Hamburg went aground in the Gulf of Aqaba en route to Singapore. There were no personnel or pollution issues as a result of the incident. Any repair costs are expected to be covered by insurance, net of the insurance deductible. The vessel is expected to be off-hire for approximately 100 days. Although the vessel was not expected to undergo its next scheduled 5-year survey until 2013, the Company chose to combine the repairs with an earlier dry-docking to achieve savings and defer the next scheduled dry-dock to 2015.
Equity Capital Requirements:
As of December 31, 2009, the estimated remaining installments of the 26 vessels that we have contracted to purchase but have not yet been delivered amounted to approximately $1.7 billion. Seaspan has secured long term credit facilities to fund the newbuild vessels and does not have any credit facilities maturing until 2015. To fund the remaining portion of the price of the vessels the Company has contracted to purchase, we need to raise in the range of approximately $180 million to $240 million in common or other equity and or other forms of capital beginning no later than approximately the fourth quarter of 2010 or first quarter of 2011 and ending in approximately second quarter 2012. The current state of the global financial markets and current economic conditions may adversely impact our ability to issue additional equity at prices which will not be dilutive to our existing shareholders or preclude us from issuing equity at all. We are actively pursuing alternatives which will allow us to defer or eliminate some or all of our current equity needs.
Our credit facilities do not contain traditional vessel market value covenants that require us to repay our facilities solely because the market value of our vessels declined below a certain level. Our $1.3 billion credit facility agreement contains a loan to market value ratio requirement that must be met before we can borrow funds under that facility. Based on a valuation obtained in December of 2009, we are currently unable to borrow the remaining $267 million under our $1.3 billion credit facility; however, we do not require this amount to fund the remaining installments for our newbuild fleet.
Results for the Quarter and Year Ended December 31, 2009:
The following tables summarize vessel utilization and the impact of off-hire incurred on our revenues for the quarter and year ended December 31, 2009:
Fourth Quarter Third Quarter Second Quarter
-------------- ------------- --------------
2009 2008 2009 2008 2009 2008
------ ----- ----- ----- ----- -----
Vessel Utilization:
Ownership Days 3,814 3,107 3,632 2,844 3,445 2,687
Less Off-hire Days:
Scheduled 5-Year Survey (11) - (14) - - (10)
Unscheduled off-hire (2) (2) (6) (22) (4) (21)
------ ----- ----- ----- ----- -----
Operating Days 3,801 3,105 3,612 2,822 3,441 2,656
------ ----- ----- ----- ----- -----
------ ----- ----- ----- ----- -----
Vessel Utilization 99.7% 99.9% 99.4% 99.2% 99.9% 98.8%
------ ----- ----- ----- ----- -----
------ ----- ----- ----- ----- -----
First Quarter Year to Date
------------- ---------------
2009 2008 2009 2008
----- ----- ------ ------
Vessel Utilization:
Ownership Days 3,150 2,639 14,041 11,277
Less Off-hire Days:
Scheduled 5-Year Survey - - (25) (10)
Unscheduled off-hire (1) (27) (13) (72)
----- ----- ------ ------
Operating Days 3,149 2,612 14,003 11,195
----- ----- ------ ------
----- ----- ------ ------
Vessel Utilization 99.9% 99.0% 99.7% 99.3%
----- ----- ------ ------
----- ----- ------ ------
Fourth Quarter Third Quarter Second Quarter
----------------- ----------------- -----------------
2009 2008 2009 2008 2009 2008
------- ------- ------- ------- ------- -------
Revenue - Impact of
Off-Hire (in '000s):
100% Utilization $78,929 $62,691 $74,581 $58,101 $69,904 $55,507
Less Off-hire:
Scheduled 5-Year
Survey (315) - (427) - - (186)
Unscheduled
off-hire(3) (35) (37) (97) (497) (73) (389)
------- ------- ------- ------- ------- -------
Actual Revenue
Earned $78,579 $62,654 $74,057 $57,604 $69,831 $54,932
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
First Quarter Year to Date
------------------ --------------------
2009 2008 2009 2008
------- ------- -------- --------
Revenue - Impact of
Off-Hire (in '000s):
100% Utilization $63,147 $54,703 $286,561 $231,002
Less Off-hire:
Scheduled 5-Year
Survey - - (742) (186)
Unscheduled
off-hire(3) (20) (488) (225) (1,411)
------- ------- -------- --------
Actual Revenue
Earned $63,127 $54,215 $285,594 $229,405
------- ------- -------- --------
------- ------- -------- --------
In 2008, we accepted delivery of six vessels. We began 2009 with 35 vessels in operation and accepted delivery of seven vessels for a total of 42 vessels in operation as at December 31, 2009. We also completed the dry-docking for the CSCL Oceania and CSCL Africa resulting in 25 days of scheduled off-hire. Operating days are the primary driver of revenue while ownership days are the driver for ship operating costs.
Quarter Ended Year Ended
December 31, Increase December 31, Increase
--------------- ---------- -------------- -----------
2009 2008 Days % 2009 2008 Days %
---- ----- ---- ---- ------ ------ ----- ----
Operating days 3,801 3,105 696 22.4% 14,003 11,195 2,808 25.1%
Ownership days 3,814 3,107 707 22.8% 14,041 11,277 2,764 24.5%
Financial Quarter
Summary Ended Year Ended
(in millions) December 31, Change December 31, Change
------------ --------------- ------------- ---------------
2009 2008 $ % 2009 2008 $ %
----- ------ ------ -------- ------ ------ ------ --------
Revenue $78.6 $62.7 $15.9 25.4% $285.6 $229.4 $56.2 24.5%
Ship operating
expense 22.4 15.0 7.5 49.8% 80.2 54.4 25.7 47.3%
Depreciation 19.0 15.4 3.6 23.6% 70.0 57.4 12.5 21.8%
General and
administrative 1.9 2.6 (0.7) (26.3%) 8.0 8.9 (0.9) (10.4%)
Interest expense 5.4 9.0 (3.6) (40.0%) 21.2 33.0 (11.8) (35.8%)
Change in fair
value of
financial
instruments (46.5) 261.1 (307.6) (117.8%) (46.5) 268.6 (315.0) (117.3%)
Other expenses - - - 0.0% 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, respectively, was due to the following:
Quarter ended Year ended
December 31, 2009 December 31, 2009
------------------------- -------------------------
Operating $ impact Operating $ impact
Days impact (in millions) Days impact (in millions)
----------- ----------- ----------- -----------
2009 vessel deliveries 594 $14.4 1,259 $30.5
Full year contribution
for 2008 vessel
deliveries 113 1.8 1,534 25.7
Scheduled off-hire (11) (0.3) (15) (0.6)
Other (4) - - 30 0.6
----------- ----------- ----------- -----------
Total 696 $15.9 2,808 $56.2
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Vessel utilization was 99.7% for both the quarter and year ended December 31, 2009 compared to 99.9% and 99.3%, respectively, for the comparable periods in the prior year. Our vessel utilization since our initial public offering is 99.3%.
Ship Operating Expense
The increase in ship operating expense was partially due to the adjustment of technical services fees for the period commencing January 1, 2009 which increased the fees by approximately 23% from the initial technical services fees.
The increase in ownership days, and the dollar impact thereof, for the quarter and year ended, respectively, was due to the following:
Quarter ended Year ended
December 31, 2009 December 31, 2009
------------------------- -------------------------
Ownership $ impact Ownership $ impact
Days impact (in millions) Days impact (in millions)
----------- ----------- ----------- -----------
Adjustment of
technical services
fees(5) - $ 2.9 (29) $11.5
Full year contribution
for 2008 vessel
deliveries 113 1.0 1,522 8.2
2009 vessel deliveries 594 3.3 1,271 6.9
Additional (fewer)
extraordinary(6)
costs & expenses not
covered by the fixed
fee - 0.3 - (0.9)
----------- ----------- ----------- -----------
Total 707 $ 7.5 2,764 $25.7
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Depreciation
The increase in depreciation expense was due to the additional ownership days from the seven deliveries in 2009 and a full year for the 2008 deliveries.
General and Administrative Expenses
General and administrative expenses for the quarter ended December 31, 2009 is comparable with the prior year. Overall cost reductions in the current year have resulted in decreased general and administrative expenses in the current year. The decrease is primarily due to lower share based compensation and a reduction in discretionary activities.
Interest Expense
Interest expense is composed of interest at the variable rate plus margin incurred on debt for operating vessels and a non-cash reclassification of amounts from accumulated other comprehensive income related to previously designated hedging relationships. Although the average operating debt balance was higher for the quarter and the year compared to the same periods in the prior year, interest expense decreased due to a decrease in LIBOR. The average LIBOR for the quarter and year ended December 31, 2009 was 0.2% and 0.4%, respectively, compared to 2.9% and 3.0%, respectively, for the prior year. Although we enter 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 $46.5 million for the quarter ended December 31, 2009 compared to a loss of $261.1 million for the comparable quarter last year. The change in fair value of financial instruments resulted in a gain of $46.5 million for the year ended December 31, 2009 compared to a loss of $268.6 million for the prior year. The change in fair value gain for the quarter and year is due to increases in the forward LIBOR curve and overall market changes in credit risk.
On September 30, 2008, due to the compliance and expense burden associated with applying hedge accounting, we elected to prospectively de-designate all interest rate swaps for which we were applying hedge accounting treatment. As a result, from October 1, 2008, all of our interest rate swap agreements and our swaption agreement are marked to market with all changes in the fair value of these instruments recorded in "Change in fair value of financial instruments" in the Statement of Operations. Prior to de-designation on September 30, 2008, approximately 30% of the change in fair value was recorded in "Accumulated other comprehensive loss" in the equity section of our balance sheet for our designated swaps with the change in fair value of our non-designated swaps recorded in "Change in fair value of financial instruments" in the statement of operations.
Change in fair value of derivative financial instruments is a required accounting adjustment under financial reporting standards. At the end of each reporting period, we must record a mark-to-market adjustment for our interest rate swap agreements and swaption as though the instruments were realized as of the reporting date.
The accounting adjustments appear in the following locations in the financial statements:
1) Other Comprehensive Income – For interest rate swaps that the Company had designated as hedges under the technical accounting requirements for hedge accounting, an amount was included in "Other comprehensive income" that approximated the adjustment in fair value. Since we have elected to prospectively de-designate the interest rate swaps for which we applied hedge accounting, no further fair value changes are recorded to "Other comprehensive income". Following the de-designations, the amounts in "Other comprehensive income" will be reclassified to earnings when and where the interest payments are reflected in earnings.
2) Statement of Operations – For interest rate swaps that are not designated as hedges under the accounting requirements for hedge accounting, mark-to-market adjustments and periodic cash interest settlements are recorded in "Change in fair value of financial instruments".
Other expenses
Additional charges of $1.1 million were accrued for in the quarter ended June 30, 2009. This amount is due to the shipyards in connection with the 11 options, of $0.1 million per ship, exercised to defer delivery dates. These amounts are due at the deferred delivery date of each vessel and are considered to represent the cost of entering into the delivery deferral options in accordance with financial reporting standards and therefore were accrued for.
Dividends:
We announced on April 28, 2009 that our board of directors decided to reduce our quarterly dividends from $0.475 to $0.10 per share to retain a higher portion of our distributable cash to fund future capital expenditures due to the uncertainties associated with the global recession and the capital markets. Our board of directors cannot determine how long this reduction will be in effect. This reduction will enable us to retain an approximate additional amount of $100 million per year that can be redeployed to fund our newbuilding program. Based on a dividend of $0.10 per quarter, our annualized dividend on the current number of shares outstanding would be approximately $27 million.
For the quarter ended December 31, 2009, we declared a quarterly dividend of $0.10, representing a total distribution of $6.8 million. The dividend was paid on February 12, 2010 to all shareholders of record as of February 1, 2010.
Since our initial public offering in August 2005, we have declared cumulative dividends of $6.49 per share. Because we adopted a dividend reinvestment plan, or DRIP, the actual amount of cash dividend paid was $5.1 million based on shareholder participation in the DRIP. Cumulatively, since we adopted the DRIP in May 2008, an additional 1.5 million shares were issued through the participation in the DRIP. As of today's date and based on a discount of 3%, participating shareholders invested $16.5 million in the DRIP since we adopted the plan in May 2008.
About Seaspan
Seaspan owns containerships and charters them pursuant to long-term fixed-rate charters. Seaspan's contracted fleet of 68 containerships consists of 45 containerships in operation and 23 containerships to be delivered over approximately the next 26 months. Seaspan's operating fleet of 45 vessels has an average age of approximately five years and an average remaining charter period of approximately seven years. All of the 23 vessels to be delivered to Seaspan are already committed to long-term time charters averaging approximately 11 years in duration from delivery. Seaspan's customer base consists of seven of the world's largest liner companies, including China Shipping Container Lines, A.P. Moller-Maersk, Mitsui O.S.K. Lines, Hapag-Lloyd, COSCO Container Lines, K-Line and CSAV.
Seaspan's common shares are listed on the New York Stock Exchange under the symbol "SSW".
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, 2009 on March 16, 2010 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 replay passcode: 60701742. The recording will be available from March 16, 2010 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 30, 2010. 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, 2009
(IN THOUSANDS OF US DOLLARS)
December 31, December 31,
2009 2008
----------- -----------
Assets
Current assets:
Cash and cash equivalents $ 133,400 $ 136,285
Accounts receivable 164 172
Prepaid expenses 12,489 5,254
---------- ----------
146,053 141,711
Vessels 2,088,690 1,698,053
Vessels under construction 1,396,660 1,428,436
Deferred charges 21,667 20,306
Other assets 11,377 8,366
---------- ----------
$3,664,447 $3,296,872
---------- ----------
---------- ----------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 20,905 $ 15,211
Deferred revenue 9,787 8,443
---------- ----------
30,692 23,654
Long-term debt (operating vessels) 936,794 703,835
Long-term debt (vessels under construction) 946,352 1,017,323
Other long-term liabilities 410,598 390,931
Fair value of financial instruments 280,445 414,769
---------- ----------
2,604,881 2,550,512
Share capital 679 668
Additional paid-in capital 1,489,936 1,282,189
Deficit (349,802) (443,081)
Accumulated other comprehensive loss (81,247) (93,416)
---------- ----------
Total shareholders' equity 1,059,566 746,360
---------- ----------
$3,664,447 $3,296,872
---------- ----------
---------- ----------
SEASPAN CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT FOR THE QUARTER
AND YEAR ENDED DECEMBER 31, 2009 AND 2008
(IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE AMOUNTS)
Quarter Quarter Year Year
ended ended ended ended
December December December December
31, 2009 31, 2008 31, 2009 31, 2008
--------- --------- --------- ---------
Revenue $ 78,579 $ 62,654 $ 285,594 $ 229,405
Operating expenses:
Ship operating 22,432 14,976 80,162 54,416
Depreciation 19,027 15,394 69,996 57,448
General and administrative 1,910 2,590 7,968 8,895
--------- --------- --------- ---------
43,369 32,960 158,126 120,759
--------- --------- --------- ---------
Operating earnings 35,210 29,694 127,468 108,646
Other expenses (earnings):
Interest expense 5,392 8,994 21,194 33,035
Interest income (41) (123) (311) (694)
Undrawn credit facility fees 1,129 1,203 4,641 5,251
Amortization of deferred charges 566 451 2,042 1,825
Change in fair value of
financial instruments (46,526) 261,082 (46,450) 268,575
Other expenses - - 1,100 -
--------- --------- --------- ---------
(39,480) 271,607 (17,784) 307,992
--------- --------- --------- ---------
Net earnings (loss) 74,690 (241,913) 145,252 (199,346)
Deficit, beginning of period (417,736) (169,608) (443,081) (122,317)
Dividends on common shares (6,756) (31,560) (51,973) (121,418)
--------- --------- --------- ---------
Deficit, end of period (349,802) (443,081) (349,802) (443,081)
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average number of
shares, basic 67,641 66,610 67,340 63,802
Weighted average number of
shares, diluted 95,570 66,610 92,015 63,802
Earnings (loss) per share, basic $ 1.01 $ (3.63) $ 1.94 $ (3.12)
--------- --------- --------- ---------
--------- --------- --------- ---------
Earnings (loss) per share,
diluted $ 0.78 $ (3.63) $ 1.58 $ (3.12)
--------- --------- --------- ---------
--------- --------- --------- ---------
SEASPAN CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE QUARTER
AND YEAR ENDED DECEMBER 31, 2009 AND 2008
(IN THOUSANDS OF US DOLLARS)
Quarter Quarter Year Year
ended ended ended ended
December December December December
31, 2009 31, 2008 31, 2009 31, 2008
--------- --------- --------- ---------
Net earnings (loss) $ 74,690 $(241,913) $ 145,252 $(199,346)
Other comprehensive income
(loss):
Change in fair value of
financial instruments
designated as cash flow hedging
instruments - - - (40,156)
Amounts reclassified to earnings
during the period 3,177 2,167 12,169 9,084
--------- --------- --------- ---------
Other comprehensive income
(loss) 3,177 2,167 12,169 (31,072)
--------- --------- --------- ---------
Comprehensive income
(loss) $ 77,867 $(239,746) $ 157,421 $(230,418)
--------- --------- --------- ---------
--------- --------- --------- ---------
SEASPAN CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTER AND YEAR ENDED DECEMBER 31, 2009 AND 2008
(IN THOUSANDS OF US DOLLARS)
Quarter Quarter
ended ended Year ended Year ended
December 31, December 31, December 31, December 31,
2009 2008 2009 2008
--------------------------------------------------
Cash provided by
(used in):
Operating activities:
Net earnings (loss) $ 74,690 $(241,913) $ 145,252 $(199,346)
Items not involving
cash:
Depreciation 19,027 15,394 69,996 57,448
Share-based
compensation 601 642 2,184 2,555
Amortization of
deferred charges 566 451 2,042 1,825
Amounts reclassified
from other
comprehensive loss 3,138 2,155 12,068 2,155
Unrealized change
in fair value of
financial instruments (71,656) 250,689 (134,324) 253,037
Change in assets
and liabilities 3,430 7,339 (2,642) 7,078
-----------------------------------------------
Cash provided by
operating activities 29,796 34,757 94,576 124,752
-----------------------------------------------
Financing activities:
Preferred shares
issued, net of share
issue costs 19,657 - 198,442 -
Common shares issued,
net of share issue
costs - (154) - 227,474
Draws on credit
facilities 58,846 252,392 161,988 764,720
Other long-term
liabilities - - - 35,405
Repayment of credit
facility - (40,000) - (383,000)
Financing fees incurred (158) (1) (3,530) (5,841)
Dividends on common
shares(i) (5,153) (28,653) (44,841) (115,577)
-----------------------------------------------
Cash provided by
financing activities 73,192 183,584 312,059 523,181
-----------------------------------------------
Investing activities:
Expenditures for vessels (73,585) (105,658) (408,557) (626,783)
Cash payments on
interest rate swaps - - - (7,124)
Intangible assets (32) (468) (963) (875)
-----------------------------------------------
Cash used in investing
activities (73,617) (106,126) (409,520) (634,782)
-----------------------------------------------
Increase (decrease) in
cash and cash equivalents 29,371 112,215 (2,885) 13,151
Cash and cash
equivalents, beginning of
period 104,029 24,070 136,285 123,134
-----------------------------------------------
Cash and cash equivalents,
end of period 133,400 $ 136,285 $ 133,400 $ 136,285
-----------------------------------------------
-----------------------------------------------
(i) During the quarter and year ended December 31, 2009, non-cash dividends
of $1.4 million and $6.9 million were paid through the dividend
reinvestment program. Including the dividend paid in February of 2010,
shareholders have invested $16.5 million in the dividend reinvestment
program since its adoption in May 2008.
SEASPAN CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE QUARTER AND YEAR ENDED DECEMBER 31, 2009 AND 2008
(IN THOUSANDS OF US DOLLARS)
Description of Non-GAAP Financial Measures
A. Cash Available for Distribution
Cash available for distribution represents net earnings adjusted for depreciation, amortization of deferred charges, non-cash undrawn credit facility fees, write-off of deferred financing fees on debt refinancing, non-cash share-based compensation, dry-dock adjustment, non-cash interest income, change in fair value of financial instruments, interest expense(7), cash interest paid at the hedged rate(9) and other items that the Company believes are not representative of its operating performance. Cash available for distribution is a non-GAAP quantitative standard used to assist in evaluating a company's ability to make quarterly cash dividends before reserves. Cash available for distribution is not defined by accounting principles generally accepted in the United States and should not be considered as an alternative to net earnings or any other indicator of Seaspan's performance required by accounting principles generally accepted in the United States. Cash available for distribution is a non-GAAP measure used to assist in evaluating a company's overall operating performance because cash available for distribution eliminates the effects of non-cash items and items that do not impact our operating performance or our ability to distribute cash to our shareholders.
Seaspan has changed the definition of cash available for distribution in the current year to include other items the Company believes are not representative of its operating performance. The following item is now included as adjustments: Other expenses. Please refer to footnote(8) for a detailed description of Other expenses. This new definition of cash available for distribution used in the current period does not impact the cash available for distribution for the comparative periods.
Quarter Quarter
ended ended Year ended Year ended
December 31, December 31, December 31, December 31,
2009 2008 2009 2008
--------------------------------------------------
Net earnings (loss) $ 74,690 $(241,913) $145,252 $(199,346)
Add:
Depreciation 19,027 15,394 69,996 57,448
Interest expense(7) 5,392 8,994 21,194 33,035
Amortization of
deferred charges 566 451 2,042 1,825
Undrawn credit
facility fees 1,129 1,203 4,641 5,251
Share-based
compensation 601 642 2,184 2,555
Change in fair value
of financial
instruments (46,526) 261,082 (46,450) 268,575
Other expenses(8) - - 1,100 -
Less:
Dry-dock adjustment (1,334) (809) (3,914) (2,945)
Interest income (41) (123) (311) (694)
-------------------------------------------------
Net cash flows before
cash interest payments 53,504 44,921 195,734 165,704
Less:
Cash interest paid at
the hedged rate(9) (10,714) (7,947) (39,082) (27,174)
Cash paid for undrawn
credit facility fees (704) (261) (2,400) (3,088)
Add:
Cash interest received 20 124 290 711
-------------------------------------------------
Cash available for
distribution $ 42,106 $ 36,837 $154,542 $136,153
-------------------------------------------------
-------------------------------------------------
SEASPAN CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE QUARTER AND YEAR ENDED DECEMBER 31, 2009 AND 2008
(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 represent net earnings adjusted for items such as the non-cash change in fair value of financial instruments, write-off of deferred financing fees on debt refinancing, interest expense(7) and interest expense at the hedged rate(10). With these adjustments normalized net earnings reflect interest expense on our operating debt at the fixed rate on our interest rate swaps plus the applicable margin on the related credit facilities. We believe that this presentation of normalized net earnings is useful because investors and securities analysts frequently adjust net earnings for non-operating items, as described above, to evaluate companies in our industry. Normalized net earnings is a non-GAAP measure used to assist in evaluating a company's overall operating performance and liquidity because normalized net earnings eliminates the effects of non-cash items and items that do not impact our operating performance or our ability to distribute cash to our shareholders.
Normalized net earnings is not defined by accounting principles generally accepted in the United States and should not be considered as an alternative to net earnings or any other indicator of Seaspan's performance required by accounting principles generally accepted in the United States. Normalized earnings per share are calculated using the normalized net earnings and weighted average number of shares.
Quarter Quarter
ended ended Year ended Year ended
December 31, December 31, December 31, December 31,
2009 2008 2009 2008
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Net earnings (loss) $ 74,690 $(241,913) $145,252 $(199,346)
Adjust:
Change in fair value
of financial
instruments (46,526) 261,082 (46,450) 268,575
Interest expense(7) 5,392 8,994 21,194 33,035
Interest expense at
the hedged rate(10) (12,494) (7,800) (41,467) (26,098)
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Normalized net earnings $ 21,062 $ 20,363 $ 78,529 $ 76,166
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Basic 67,641 66,610 67,340 63,802
Diluted 95,570 66,610 92,015 63,802
Earnings (loss) per
share, basic and diluted
Reported, basic(ii) $ 1.01 $ (3.63) $ 1.94 $ (3.12)
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Reported, diluted(iii) $ 0.78 $ (3.63) $ 1.58 $ (3.12)
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Normalized, basic(ii) $ 0.22 $ 0.31 $ 0.95 $ 1.19
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Normalized, diluted(iii) $ 0.22 $ 0.31 $ 0.85 $ 1.19
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(ii) Basic earnings per share (Reported and Normalized) are calculated as
net earnings (loss) or normalized net earnings, less the dividends
accrued for Series A preferred shares, divided by the basic number of
shares outstanding for the period. During the quarter and year ended
December 31, 2009, dividends of $6,264 and $14,464 were accrued for
Series A preferred shares, respectively.
(iii) Diluted earnings per share (Reported and Normalized) are calculated
as net earnings or normalized net earnings divided by the diluted
number of shares outstanding for the period. The diluted number of
shares includes the impact of the convertible Series A preferred
shares. In periods where there is a net loss, the convertible Series
A preferred shares are not included for the diluted number of shares
as the impact of the Series A preferred shares is anti-dilutive.
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) concerning future events and our operations, performance and financial condition, including, in particular, the likelihood of our success in developing and expanding our business. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expects", "anticipates", "intends", "plans", "believes", "estimates", "projects", "forecasts", "will", "may", "potential", "should", and similar expressions are forward-looking statements. These forward-looking statements reflect management's current views only as of the date of this presentation and are not intended to give any assurance as to future results. As a result, you are cautioned not to rely on any forward-looking statements. Forward-looking statements appear in a number of places in this release. Although these statements are based upon assumptions we believe to be reasonable based upon available information, including operating margins, earnings, cash flow, working capital and capital expenditures, they are subject to risks and uncertainties.
These risks and uncertainties include, but are not limited to: future operating or financial results; our expectations relating to dividend payments and our ability to make such payments; pending acquisitions, business strategy and expected capital spending; operating expenses, availability of crew, number of off-hire days, dry-docking requirements and insurance costs; general market conditions and shipping market trends, including charter rates and factors affecting supply and demand; our financial condition and liquidity, including our ability to borrow funds under our credit facilities and to obtain additional financing in the future to fund capital expenditures, acquisitions and other general corporate activities; estimated future capital expenditures needed to preserve our capital base; our expectations about the availability of ships to purchase, the time that it may take to construct new ships, or the useful lives of our ships; our continued ability to enter into long-term, fixed-rate time charters with our customers; 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; changes in worldwide container demand; changes in trading patterns; competitive factors in the markets in which we operate; potential inability to implement our growth strategy; potential for early termination of long-term contracts and our potential inability to renew or replace long-term contracts; ability of our customers to make charter payments; potential liability from future litigation; conditions in the public equity markets; and other factors detailed from time to time in our periodic reports. 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. We make no prediction or statement about the performance of our common shares.
(1) Normalized net earnings and normalized earnings per share are
non-GAAP measures that are adjusted for non-cash items such as the
non-cash change in fair value of financial instruments, write-off of
deferred financing fees on debt refinancing, interest expense and
interest expense at the hedged rate. Please read "Reconciliation
of Non-GAAP Financial Measures for the Quarter and Year Ended
December 31, 2009 and 2008 - Description of Non-GAAP Financial
Measures - B. Normalized Net Earnings and Normalized Earnings per
Share" for a description of normalized net earnings and a
reconciliation of net earnings to normalized net earnings.
(2) Cash available for distribution is a non-GAAP measure that represents
net earnings adjusted for depreciation, amortization of deferred
charges, non-cash undrawn credit facility fees, write-off of deferred
financing fees on debt refinancing, non-cash share-based compensation,
dry-dock adjustment, non-cash interest income, change in fair value of
financial instruments, interest expense, cash interest paid at the
hedged rate and other items that the Company believes are not
representative of its operating performance. Please read "Reconciliation
of Non-GAAP Financial Measures for the Quarter and Year Ended
December 31, 2009 and 2008 - Description of Non-GAAP Financial
Measures - A. Cash Available for Distribution" for a description of cash
available for distribution and a reconciliation of cash available for
distribution to net earnings.
(3) Other includes the impact of: 59 fewer days of unscheduled off-hire
off-set by the 29 day ownership impact due to the leap year in 2008
for the 29 vessels in operation at that time.
(4) Includes charterer deductions that are not related to off-hire.
(5) The 29 day ownership impact is due to the leap year in 2008 for the 29
vessels in operation at that time.
(6) Extraordinary costs and expenses are defined in our management
agreements and do not relate to extraordinary items as defined by
financial reporting standards.
(7) Interest expense as reported on the consolidated statement of
operations.
(8) Other expenses represent additional payments of $1.1 million that were
accrued for in the quarter ended June 30, 2009. This amount is due
to the shipyards in connection with the 11 options of $0.1 million each
that we exercised subsequent to the quarter end. These amounts are due
at the deferred delivery date of each vessel and are considered to
represent the cost of entering into the delivery deferral options in
accordance with financial reporting standards and therefore were accrued
for in the period.
(9) Cash interest paid 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 a cash basis.
(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.
