First Quarter Dividend Increased by 50% Compared to Fourth Quarter 2010; Company Expects Annualized Dividend of $0.75 Per Share in 2011
HONG KONG, CHINA – May 5, 2011 /CNW/ – Seaspan Corporation (NYSE:SSW) announced today the financial results for the quarter ended March 31, 2011. Below is a summary of Seaspan's key financial results for the recent quarter:
Summary of Key Financial Results (dollars in thousands):
Quarter Ended March
31, Change
------------------------------------------
2011 2010 $ %
------------------------------------------
Reported net earnings (loss) $ 50,552 $ (36,616) $ 87,168 238.1%
Normalized net earnings(1) $ 25,146 $ 19,628 $ 5,518 28.1%
Earnings (loss) per share, basic $ 0.56 $ (0.63) $ 1.19 188.9%
Earnings (loss) per share,
diluted $ 0.53 $ (0.63) $ 1.16 184.8%
Normalized earnings per share,
converted(1) (Series A preferred
shares converted at $15) $ 0.24 $ 0.24 $ 0.00 0.0%
Cash available for distribution
to common shareholders(2) $ 50,897 $ 39,932 $ 10,965 27.5%
Adjusted EBITDA(3) $ 87,235 $ 56,028 $ 31,207 55.7%
(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 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
the Series A preferred shares are converted at $15.00 per share. Please read
"Reconciliation of Non-GAAP Financial Measures for the Quarter Ended March
31, 2011 - 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 Seaspan believes are not representative of its operating
performance. Please read "Reconciliation of Non-GAAP Financial Measures for
the Quarter Ended March 31, 2011 - 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 Seaspan
believes are not representative of its operating performance. Please read
"Reconciliation of Non-GAAP Financial Measures for the Quarter Ended March
31, 2011 - 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 98.9% for the quarter ended March 31,
2011;
-- Accepted delivery of 3 newbuilding vessels during the quarter, bringing
Seaspan's fleet to a total of 58 vessels at March 31, 2011;
-- Paid a fourth quarter dividend of $0.125 per common share on February
11, 2011;
-- Board of directors adopted a progressive dividend policy and expects to
increase the dividend by 50 percent to $0.75 per share in 2011 on an
annualized basis;
-- Declared a first quarter dividend of $0.1875 per common share to be paid
on May 23, 2011 to all shareholders of record as of May 14, 2011,
increasing cumulative dividends declared to $7.1525 per common share
since August 2005 initial public offering;
-- Completed public offering of 10 million shares of 9.5% Series C
preferred stock in January 2011, for net proceeds of $241 million;
-- Entered into an investment venture established by an affiliate of The
Carlyle Group, which will invest up to $900 million equity capital in
containership assets, primarily newbuilding vessels strategic to the
People's Republic of China, Taiwan, Hong Kong and Macau; and
-- Re-entered the newbuilding market for the first time since 2007 by
signing a letter of intent with a leading Chinese shipyard for a
significant order of New Panamax 10000 TEU vessels.
Gerry Wang, Chief Executive Officer, Co-Chairman, and Co-Founder of Seaspan commented, "During the first quarter, Seaspan continued to expand its fully time chartered fleet, increasing revenue, net earnings and cash flow. Complementing this success, we took important steps to position the Company to grow beyond its contracted fleet in order to capitalize on an attractive ship acquisition environment. Specifically, we re-entered the newbuilding market by signing a letter of intent with a leading Chinese shipyard and entered into an agreement to establish what we anticipate will be a favourable containership investment venture."
Mr. Wang added, "We continue to take proactive measures to ensure that Seaspan's balance sheet remains strong and the Company has significant capital for growth. In pursuing future growth, we will continue to seek opportunities that reinforce our position as a leading independent charter owner of containerships."
Dividend Policy:
In February 2011, Seaspan's board of directors adopted a progressive dividend policy aimed at sustainably increasing dividends in a manner that preserves Seaspan's long-term financial strength and its ability to expand its fleet.
Mr. Wang commented, "We are pleased to increase our first quarter 2011 dividend by 50% due to our increasing cash flows generated through the strength of our business model and our continued delivery of contracted newbuilding vessels."
First Quarter Developments:
Issuance of 10 Million Series C Preferred Shares
On January 28, 2011, Seaspan completed a public offering of 10 million shares of its Series C preferred stock 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. Seaspan will use the net proceeds from this offering for general corporate purposes, which may include making vessel acquisitions or investments.
Investment in Containership-Focused Investment Venture and New Employment Agreement with Co-Chairman and CEO Gerry Wang
In March 2011, Seaspan, entered into an agreement with an affiliate of global alternative asset manager, The Carlyle Group, Tiger Management Limited, and an affiliate of Dennis R. Washington to form an investment venture (the "New Venture") to capitalize on current growth opportunities in the containership market. The New Venture will invest up to $900 million equity capital in containership assets, primarily newbuilding vessels strategic to the People's Republic of China, Taiwan, Hong Kong and Macau. This amount will be reduced by any investments The Carlyle Group makes in a tanker and bulker carrier investment vehicle. 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. Seaspan's Chief Executive Officer, Gerry Wang, will serve in a senior leadership role with the New Venture subject to his fiduciary duties to Seaspan.
Seaspan has a right of first refusal on certain containership investment opportunities that become available to the New Venture, which right of first refusal continues in place until March 31, 2015 unless earlier terminated as the result of certain triggering events, including if Seaspan exercises this right for more than 50% of the aggregate vessels subject to the right prior to specific dates. Seaspan also has a right of first offer for any containership the New Venture proposes to sell in certain transactions.
In connection with Seaspan's investment in the New Venture, Seaspan 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 his strategic leadership role as Co-Chairman of Seaspan's board of directors. Mr. Wang has agreed to continue to provide transaction services to Seaspan following the term of his employment.
On the recommendation of the conflicts committee of Seaspan's board of directors, the members of the board of directors without an interest in the transactions unanimously approved Seaspan'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 financial advisor to Seaspan and the conflicts committee.
Letter of Intent for Newbuilding Order
Seaspan also announced that it is re-entering the newbuilding market for the first time since 2007. In February 2011, Seaspan signed a letter of intent with a leading Chinese shipyard for a significant order of New Panamax 10000 TEU vessels. Seaspan 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.
Subsequent events:
Seaspan is currently in discussions with Korean and Chinese shipyards as it has re-entered the newbuilding market.
On April 21, 2011, Seaspan accepted delivery of the COSCO Vietnam, bringing its operating fleet to 59 vessels.
Results for the Quarter ended March 31, 2011:
The following tables summarize vessel utilization and the impact of off-hire time on Seaspan's revenues for the quarter ended March 31, 2011:
First Quarter
--------------------
2011 2010
--------------------
Vessel Utilization:
Ownership Days 5,087 3,908
Less Off-hire Days:
Scheduled 5-Year Survey (53) (20)
Unscheduled Off-hire (2) (91)
--------------------
Operating Days 5,032 3,797
--------------------
--------------------
Vessel Utilization 98.9% 97.2%
--------------------
--------------------
First Quarter
-------------------------
2011 2010
-------------------------
Revenue - Impact of Off-Hire:
100% Utilization $ 121,983 $ 82,378
Less Off-hire:
Scheduled 5-Year Survey (955) (347)
Unscheduled Off-hire(4) (33) (1,662)
-------------------------
Actual Revenue Earned $ 120,995 $ 80,369
-------------------------
-------------------------
(4) Includes charterer deductions that are not
related to off-hire.
Seaspan accepted delivery of 13 vessels during the year ended December 31, 2010. Seaspan began 2011 with 55 vessels in operation and during the quarter ended March 31, 2011, accepted delivery of 3 vessels, bringing its fleet to a total of 58 vessels in operation as at March 31, 2011. Operating days are the primary driver of revenue, while ownership days are the primary driver for ship operating costs.
Quarter Ended March 31, Increase
-----------------------------------------------
2011 2010 Days %
-----------------------------------------------
Operating days 5,032 3,797 1,235 32.5%
Ownership days 5,087 3,908 1,179 30.2%
Quarter Ended March
Financial Summary (in millions) 31, Change
------------------------------------------
2011 2010 $ %
------------------------------------------
Revenue $ 121.0 $ 80.4 $ 40.6 50.5%
Ship operating expenses 31.1 22.5 8.6 38.3%
Depreciation 30.0 20.3 9.6 47.4%
General and administrative
expenses 2.7 1.9 0.8 43.0%
Interest expense 10.1 5.1 5.1 100.8%
Change in fair value of financial
instruments (gain)/loss
(5.8) 65.5 71.3 108.9%
Revenue
The increase in revenue was due to an increase in operating days and the dollar impact thereof for the quarter ended March 31, 2011 was due to the following:
Quarter Ended March 31, 2011
----------------------------------
Operating Days $ impact
impact (in millions)
----------------------------------
2011 vessel deliveries 137 $ 4,834
Full period contribution for 2010 vessel
deliveries 1,042 34,725
Change in daily charterhire rate - 46
Scheduled off-hire (33) (608)
Unscheduled off-hire 89 1,629
----------------------------------
Total 1,235 $ 40,626
----------------------------------
----------------------------------
Vessel utilization was 98.9% for the quarter ended March 31, 2011, compared to 97.2% for the corresponding period of the prior year.
This increase in vessel utilization for the quarter ended March 31, 2011 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. For the quarter ended March 31, 2010 there was one dry-docking for CSCL Vancouver which resulted in 20 days of scheduled off-hire. During the quarter ended March 31, 2011 Seaspan completed four dry-dockings for CSCL Sao Paulo, Jakarta Express, Saigon Express and Rio Grande Express. CSCL Sao Paulo's next dry-docking was originally scheduled for 2013; however, we combined the scheduled dry-docking for this vessel with repairs initiated in December 2010 to achieve savings and defer the next scheduled dry-docking to 2016. This dry-docking resulted in a total of seven days of scheduled off-hire. The four dry-dockings resulted in a total of 53 days of scheduled off-hire. Seaspan's vessel utilization since its initial public offering in August 2005 is 99.1%.
Ship Operating Expense
The increase in ship operating expenses was mainly due to the increase in ownership days, which impact, together with the dollar impact thereof for the quarter ended March 31, 2011, was due to the following:
Quarter Ended March 31, 2011
---------------------------------
Ownership $ impact
Days impact (in millions)
---------------------------------
2011 vessel deliveries 137 $ 938
Full period contribution for 2010 vessel
deliveries 1,042 6,456
Changes in extraordinary(5) costs and
expenses not covered by the fixed fee - 1,215
---------------------------------
Total 1,179 $ 8,609
---------------------------------
---------------------------------
(5) Extraordinary costs and expenses are defined in Seaspan's management
agreements and do not relate to extraordinary items as defined by financial
reporting standards. The portion of extraordinary costs compared to the
fixed technical management fee has increased to 5.6% for the quarter ended
March 31, 2011 from 2.3% for the quarter ended March 31, 2010.
Depreciation
The increase in depreciation expense for the quarter ended March 31, 2011 compared to the corresponding period of the prior year was due to the additional ownership days from the 3 deliveries in 2011 and a full period of ownership for the 13 deliveries in 2010.
General and Administrative Expenses
The increase in general and administrative expenses for the quarter ended March 31, 2011 was primarily due to the new employment agreement with our chief executive officer, additional fees paid to our board of directors for an increased number of meetings and increased costs to support growth.
Interest Expense
Interest expense is comprised of interest at the variable rate plus the applicable margin incurred on debt for operating vessels and a reclassification of amounts from accumulated other comprehensive income related to previously designated hedging relationships. The increase in interest expense for the quarter ended March 31, 2011, was primarily due to higher average operating debt balances compared to the same quarter in the prior year. The average LIBOR for the quarter ended March 31, 2011 was 0.4%, compared to 0.2% for the corresponding period of the prior year. Although Seaspan has entered into fixed interest rate swaps, 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 caption as required by financial reporting standards. The interest incurred on long-term debt for Seaspan's 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 $5.8 million for the quarter ended March 31, 2011, compared to a loss of $65.5 million for the corresponding period of the prior year. The change in fair value gain for the quarter ended March 31, 2011 was primarily due to fluctuations in the forward LIBOR curve and actual cash interest payments made.
Dividend Declared:
For the quarter ended March 31, 2011, Seaspan declared a quarterly dividend of $0.1875 per common share, representing a total distribution of $12.9 million. The dividend will be paid on May 23, 2011 to all shareholders of record as of May 14, 2011. Because Seaspan adopted a dividend reinvestment plan, or DRIP, the actual amount of cash dividends paid may be less than $12.9 million based on shareholder participation in the DRIP.
Since Seaspan's initial public offering in August 2005, the company has declared cumulative dividends of $7.1525 per common share. Since Seaspan adopted the DRIP in May 2008, a total of 2.2 million shares have been issued through shareholder participation in the DRIP. Since the plan's adoption, participating shareholders have invested $23.0 million in the DRIP.
On May 2, 2011, Seaspan paid a quarterly dividend of $0.606944 per share on its 9.5% Series C preferred shares, representing a distribution of $6.1 million. The dividend was paid to all 9.5% Series C preferred shareholders of record as of April 29, 2011 for the period from January 28, 2011 to April 29, 2011.
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 59 containerships in operation and 10 containerships scheduled for delivery through March 2012. Seaspan's operating fleet of 59 vessels has an average age of approximately five years and an average remaining charter period of approximately seven years. All of the 10 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 ended March 31, 2011 on Thursday May 5, 2011 at 7:00 a.m. PT / 10:00 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 1-800-642-1687 or 1-706-645-9291 and enter the replay passcode: 62724997. The recording will be available from May 5, 2011 at 10:00 a.m. PT / 1:00 p.m. ET through to 8:59 p.m. PT / 11:59 p.m. ET on May 19, 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 MARCH 31, 2011
(IN THOUSANDS OF US DOLLARS)
March 31, December 31,
2011 2010
---------------------------
Assets
Current assets:
Cash and cash equivalents $ 212,278 $ 34,219
Accounts receivable 1,714 1,017
Prepaid expenses 12,209 11,528
---------------------------
226,201 46,764
Vessels 3,482,951 3,191,734
Vessels under construction 805,200 1,019,138
Deferred charges 37,834 37,607
Other assets 85,930 81,985
---------------------------
$ 4,638,116 $ 4,377,228
---------------------------
---------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 25,073 $ 28,394
Deferred revenue 6,557 10,696
Current portion of other long-term liabilities 27,838 19,096
---------------------------
59,468 58,186
Long-term debt 2,398,681 2,396,771
Other long-term liabilities 529,844 524,716
Fair value of financial instruments 372,267 407,819
---------------------------
3,360,260 3,387,492
Share capital 793 691
Additional paid-in capital 1,770,408 1,526,822
Deficit (428,560) (469,616)
Accumulated other comprehensive loss (64,785) (68,161)
---------------------------
Total shareholders' equity 1,277,856 989,736
---------------------------
$ 4,638,116 $ 4,377,228
---------------------------
---------------------------
SEASPAN CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT FOR THE QUARTER
ENDED MARCH 31, 2011 AND 2010
(IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE AMOUNTS)
Quarter Quarter
ended ended
March 31, March 31,
2011 2010
---------------------------
Revenue $ 120,995 $ 80,369
Operating expenses:
Ship operating 31,066 22,457
Depreciation 29,958 20,318
General and administrative 2,694 1,884
---------------------------
63,718 44,659
---------------------------
Operating earnings 57,277 35,710
Other expenses (earnings):
Interest expense 10,147 5,053
Interest income (155) (30)
Undrawn credit facility fees 1,261 1,155
Amortization of deferred charges 1,274 657
Change in fair value of financial instruments (5,802) 65,491
---------------------------
6,725 72,326
---------------------------
Net earnings (loss) $ 50,552 $ (36,616)
Deficit, beginning of period (469,616) (349,802)
Dividends on common shares (8,581) (6,783)
Dividends on Series B preferred shares (591) -
Amortization of Series C issuance costs (324) -
---------------------------
Deficit, end of period $ (428,560) $ (393,201)
---------------------------
---------------------------
Weighted average number of shares, basic 68,854 67,910
Weighted average number of shares, diluted 85,285 92,666
Earnings (loss) per share, basic $ 0.56 $ (0.63)
---------------------------
---------------------------
Earnings (loss) per share, diluted $ 0.53 $ (0.63)
---------------------------
---------------------------
SEASPAN CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE QUARTER
ENDED MARCH 31, 2011 AND 2010
(IN THOUSANDS OF US DOLLARS)
Quarter Quarter
ended ended
March 31, March 31,
2011 2010
---------------------------
Net earnings (loss) $ 50,552 $ (36,616)
Other comprehensive income:
Amounts reclassified to earnings (loss) during
the period 3,376 2,681
---------------------------
Comprehensive income (loss) $ 53,928 $ (33,935)
---------------------------
---------------------------
SEASPAN CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTER ENDED MARCH 31, 2011 AND 2010
(IN THOUSANDS OF US DOLLARS)
Quarter Quarter
ended ended
March 31, March 31,
2011 2010
---------------------------
Cash provided by (used in):
Operating activities:
Net earnings (loss) $ 50,552 $ (36,616)
Items not involving cash:
Depreciation 29,958 20,318
Share-based compensation 387 547
Amortization of deferred charges 1,274 657
Amounts reclassified from other comprehensive
loss 3,285 2,630
Unrealized change in fair value of financial
instruments (35,552) 38,415
Change in assets and liabilities (13,515) (8,448)
---------------------------
Cash provided by operating activities 36,389 17,503
---------------------------
Financing activities:
Preferred shares issued, net of share issue
costs 240,376 -
Draws on credit facilities 1,910 179,356
Other long-term liabilities - 21,250
Repayment on other long-term liabilities (2,213) -
Financing fees (682) (2,863)
Dividends on common shares(6) (6,251) (5,147)
Dividends on Series B preferred shares (320) -
---------------------------
Cash provided by financing activities 232,820 192,596
---------------------------
Investing activities:
Expenditures for vessels (90,561) (258,309)
Restricted cash - (5,000)
Intangible assets (589) (420)
---------------------------
Cash used in investing activities (91,150) (263,729)
---------------------------
Increase (decrease) in cash and cash equivalents 178,059 (53,630)
Cash and cash equivalents, beginning of period 34,219 133,400
---------------------------
Cash and cash equivalents, end of period $ 212,278 $ 79,770
---------------------------
---------------------------
(6) During the quarter ended March 31, 2011, non-cash dividends of $2.3
million were paid through the dividend reinvestment plan. 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 ENDED MARCH 31, 2011 AND 2010
(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(7), interest expense at the
hedged rate(9), 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 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.
Quarter Quarter
ended ended
March 31, March 31,
2011 2010
---------------------------
Net earnings (loss) $ 50,552 $ (36,616)
Add:
Depreciation 29,958 20,318
Interest expense(7) 10,147 5,053
Amortization of deferred charges 1,274 657
Share-based compensation 387 547
Change in fair value of financial instruments (5,802) 65,491
Less:
Amounts paid for dry-dock adjustment (1,458) (1,218)
-
Series B preferred share dividends paid(8) (320)
Series C preferred share dividends
accumulated(8) (4,090) -
---------------------------
Net cash flows before cash interest payments 80,648 54,232
Less:
Interest expense at the hedged rate(9) (29,751) (14,300)
---------------------------
Cash available for distribution to common
shareholders $ 50,897 $ 39,932
---------------------------
---------------------------
Seaspan has changed the definition of cash available for distribution to
common shareholders for comparative figures to reflect adjustments to the
definition in the prior 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. (9) This change resulted in a
decrease of approximately 1% in cash available for distribution to common
shareholders for the quarter ended March 31, 2010.
(7) Interest expense as reported on the consolidated statement of
operations.
(8) Dividends related to the Series B and Series C preferred shares have
been deducted as they reduce cash available for distribution to common
shareholders.
(9) 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 ENDED MARCH 31, 2011 AND 2010
(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(7),
interest expense at the hedged rate(9) and certain other items Seaspan
believes affect the comparability of operating results. With these
adjustments, normalized net earnings reflects interest expense on Seaspan's
operating debt at the fixed rate on its 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 Seaspan's operating results and
includes interest at the hedged rate, which includes the effect of the
interest rate swaps on Seaspan's 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, less dividends on
Series C 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, Seaspan 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
Seaspan's 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, 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.
Quarter Quarter
ended ended
March 31, March 31,
2011 2010
-------------------------
Net earnings (loss) $ 50,552 $ (36,616)
Adjust:
Change in fair value of financial instruments (5,802) 65,491
Interest expense(7) 10,147 5,053
Interest expense at the hedged rate(9) (29,751) (14,300)
-------------------------
Normalized net earnings $ 25,146 $ 19,628
-------------------------
Less: preferred share dividends
Series A 7,142 6,346
Series B 591 -
Series C (including amortization of issuance
costs) 4,414 -
-------------------------
12,147 6,346
-------------------------
Normalized net earnings attributable to common
shareholders $ 12,999 $ 13,282
-------------------------
-------------------------
Weighted average number of shares used to compute
earnings (loss) per share:
Reported, basic 68,854 67,910
Share-based compensation 101 9
Series A preferred shares liquidation preference
converted at $15 16,330 14,298
-------------------------
Normalized, converted 85,285 82,217
Series A preferred shares 115% premium (30-day
trailing average) - 10,449
-------------------------
Reported, diluted(10) 85,285 92,666
-------------------------
Earnings (loss) per share:
Reported, basic $ 0.56 $ (0.63)
-------------------------
-------------------------
Reported, diluted $ 0.53 $ (0.63)
-------------------------
-------------------------
Normalized, converted-preferred shares converted
at $15 (11) $ 0.24 $ 0.24
-------------------------
-------------------------
(10) 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.
(11) Normalized earnings per share, converted, remained the same for the
three-months ended March 31, 2011 as compared to the comparable quarter in
the prior year. Excluding share count changes, an increase of $0.07 per
share due to a rise in normalized net earnings was offset by a decrease of
$0.06 cents due to the impact of the Series B and C preferred shares.
Furthermore, due to a rise in converted share count (from 82,217 to 85,285),
there is a decrease of $0.01 per share.
SEASPAN CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE QUARTER ENDED MARCH 31, 2011 AND 2010
(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(7)
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
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 (loss) or any other indicator of Seaspan's performance required to
be reported by GAAP.
Quarter Quarter
ended ended
March 31, March 31,
2011 2010
---------------------------
Net earnings (loss) $ 50,552 $ (36,616)
Add:
Interest expense(7) 10,147 5,053
Interest income (155) (30)
Undrawn credit facility fees 1,261 1,155
Depreciation 29,958 20,318
Amortization of deferred charges 1,274 657
Change in fair value of financial instruments (5,802) 65,491
---------------------------
Adjusted EBITDA $ 87,235 $ 56,028
---------------------------
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; Seaspan's arrangement with and investment in the New Venture and its effects on its growth, business and customers; Seaspan's recently revised dividend policy and its effect on future dividends; Seaspan's letter of intent and potential orders to acquire additional newbuilding vessels; vessel deliveries; and Seaspan's future capital requirements. 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 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; 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; negotiation and completion, if at all, of definitive agreements relating to vessel acquisition letters of intent; 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 renew or replace long-term contracts; conditions in the public equity markets; 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, 2010. 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.
