Secures $526.5 Million Bank Financing and Completes $228 Million Equity Offering to Increase Capacity for Growth During Six Month Period
HONG KONG, CHINA – July 30, 2008 /CNW/ – Seaspan Corporation (NYSE:SSW) announced today the financial results for the three and six months ended June 30, 2008.
Second Quarter 2008 and Year-to-Date Highlights:
– Paid a first quarter dividend of $0.475 per share on May 12, 2008 to all shareholders of record as of May 2, 2008;
– Declared a second quarter dividend of $0.475 per share to be paid on August 15, 2008 to all shareholders of record as of August 6, 2008;
– Generated $32.9 million in cash available for distribution(1) for the quarter, an increase of 17.9%, or $5.0 million from $27.9 million for the prior year's quarter. Cash available for distribution increased by 25.9%, or $13.5 million to $65.4 million for the six month period compared to $51.9 million for the comparable period last year;
– Reported increased normalized net earnings(2), by $3.7 million, or 23.8%, to $19.3 million for the quarter from $15.6 million for the comparable prior year's quarter. Normalized net earnings adjusts for a deduction of non-cash unrealized gains from non-designated interest rate swaps, an add back of reported interest expense and a deduction for interest expense on operating debt at hedged rate. Normalized net earnings increased by $8.4 million, or 29.4%, to $36.8 million for the six month period from $28.4 million for the comparable period last year.
– Reported normalized earnings per share(2) of $0.30 for the quarter which is consistent with the comparable quarter last year, and reported increased normalized earnings per share by $0.03, or 5.3%, to $0.60 for the six month period from $0.57 for the comparable period last year.
– Reported net earnings of $85.3 million and $47.7 million for the three and six months ended June 30, 2008, respectively.
– Reported earnings per share of $1.32 and $0.78 for the three and six months ended June 30, 2008, respectively.
– Reported revenue of $54.9 million and $109.1 million for the three and six months ended June 30, 2008, respectively.
– Raised approximately $228 million in net proceeds from the April follow-on offering of our common stock. This equity offering pre-funded a portion of our newbuild fleet to be delivered in the future and increased our capacity for growth.
– Entered into a $291.2 million credit facility agreement with Fortis Bank S.A./N.V., New York Branch and The Export-Import Bank of Korea;
– Entered into a $235.3 million credit facility agreement with Sumitomo Mitsui Banking Corporation and others;
– Adopted a Dividend Reinvestment Plan (DRIP); and
– Accepted delivery of the first of six newbuild vessels scheduled for delivery in 2008.
Gerry Wang, Chief Executive Officer of Seaspan, stated, "During the first half and three month period ended June 30, 2008, Seaspan continued to post strong operating results while further growing the fleet with the delivery of our thirtieth vessel. The Company increased cash available for distribution by 17.9% to $32.9 million for the three months ended June 30, 2008 and 25.9% to $65.4 million for the six month period. Complementing these results, we took important steps to strengthen our financial position for future growth. We completed a $228 million equity offering and secured $526.5 million in bank financing during a challenging environment, highlighting the strength of the Company's resilient business model. As we have done since our initial public offering, we continue to apply strict return requirements and actively evaluate growth opportunities. With excess debt capacity of $850 million and continued access to the credit markets, we remain well positioned for growth despite broader credit market issues."
Three and Six Months Financial Summary (dollars in thousands):
Three months ended June 30,
---------------------------------------
Change
-----------------
2008 2007 $ %
-------- -------- -------- -----
Reported net earnings $ 85,327 $ 33,522 $ 51,805 154.5%
Normalized net earnings(2) 19,310 15,599 3,711 23.8%
Earnings per share 1.32 0.65 0.67 103.1%
Normalized earnings per
share(2) 0.30 0.30 0.00 0.0%
Six months ended June 30,
---------------------------------------
Change
-----------------
2008 2007 $ %
-------- -------- -------- -----
Reported net earnings $ 47,663 $ 48,249 $ (586) (1.2%)
Normalized net earnings(2) 36,805 28,448 8,357 29.4%
Earnings per share 0.78 0.97 (0.19) (19.6%)
Normalized earnings per
share(2) 0.60 0.57 0.03 5.3%
Results for the Three and Six Months Ended June 30, 2008:
Revenue
Revenue increased by 12.4%, or $6.0 million, to $54.9 million for the quarter ended June 30, 2008, from $48.9 million for the comparable quarter last year. The increase was due to three vessel deliveries subsequent to the quarter ended June 30, 2007. These deliveries include the COSCO Yingkou, CSCL Long Beach, and CSCL Panama. Expressed in vessel operating days, our primary revenue driver, these three vessels contributed $5.6 million in additional revenue or 230 of the 2,656 operating days in the quarter.
Three Months Ended Six Months Ended
June 30, Increase June 30, Increase
------------------------------------------------------------
2008 2007 Days % 2008 2007 Days %
------------------------------------------------------------
Operating days 2,656 2,404 252 10.5% 5,268 4,457 811 18.2%
Ownership days 2,687 2,405 282 11.7% 5,326 4,501 825 18.3%
Operating days increased by 10.5%, or 252 days, to 2,656 days for the quarter ended June 30, 2008 from 2,404 operating days for the comparable quarter last year. We incurred 31 days of net off-hire for the quarter, which impacted revenue by $0.6 million. Most of the off-hire was due to the repair and advanced dry-docking of the CSCL Hamburg. The CSCL Hamburg was damaged in a collision with a bulk carrier in March 2008. The collision did not result in environmental damage or loss of life and repairs will likely be covered by insurance, subject to the payment of deductibles. The CSCL Hamburg was subsequently off-hire for waiting time at the repair yard and the repair of damage sustained to the vessel from the collision. The vessel also incurred additional off-hire for an advanced dry-docking that took place in conjunction with the repairs. Although the CSCL Hamburg was not expected to undergo its next scheduled 5-year survey until 2011, the Company chose to combine the repairs with an earlier dry-docking to achieve savings and defer the next scheduled dry-dock to 2013. Vessel utilization was 98.8% for the quarter ended June 30, 2008, compared to 99.9% for the comparable quarter last year.
For the six months ended June 30, 2008, revenue increased by 21.1%, or $19.0 million, to $109.1 million from $90.1 million for the comparable period last year. The increase was mainly attributable to the addition to our fleet of three vessels which contributed 412 of the 5,268 operating days for the six month period ended. Operating days increased by 18.2%, or 811 days, to 5,268 days for the six months ended June 30, 2008 from 4,457 operating days for the comparable period last year. We incurred 58 days of net off-hire for the six months ended June 30, 2008, impacting revenue by $1.1 million. Most of the off-hire was due to the repair and advanced dry-docking of the CSCL Hamburg. Vessel utilization was 98.9% for the six months ended June 30, 2008, compared to 99.0% for the comparable period last year and life to date vessel utilization of 99.1% since our initial public offering.
Ship Operating Expense
Ship operating expense increased by 14.1%, or $1.6 million, to $12.7 million for the quarter ended June 30, 2008, from $11.2 million for the comparable quarter last year. Ship operating expense increased by 21.2%, or $4.4 million, to $25.3 million for the six months ended June 30, 2008, from $20.9 million for the comparable period last year. The increase was due to the addition of three vessels to our fleet, which are based on fixed daily operating rates for each vessel. Stated in ownership days, our primary driver for ship operating expense, these three deliveries contributed an additional 230 of the 2,687 and 412 of 5,326 ownership days, respectively, for the three and six months ended June 30, 2008.
Depreciation
Depreciation expense increased by 14.0%, or $1.7 million, to $13.9 million for the quarter ended June 30, 2008, from $12.2 million for the comparable quarter last year. Depreciation expense increased by 21.7%, or $4.9 million, to $27.7 million for the six months ended June 30, 2008, from $22.7 million for the comparable period last year. The increase was due to the increase in number of ownership days from the deliveries since June 30, 2007.
General and Administrative Expenses
General and administrative expenses increased by 44.2%, or $0.7 million, to $2.1 million for the quarter ended June 30, 2008, from $1.5 million for the comparable quarter last year. The increase was due mainly to $0.4 million in share based compensation and $0.3 million in growth supporting costs for investor relations and professional services. General and administrative expenses increased by 39.2%, or $1.1 million, to $4.0 million for the six months ended June 30, 2008, from $2.8 million for the comparable period last year. Of the $1.1 million, approximately $0.8 million is share-based compensation expense and $0.2 million is professional fees for accounting and legal services.
Interest Expense
Interest expense increased by 17.2%, or $1.5 million, to $10.1 million for the quarter ended June 30, 2008, from $8.6 million for the comparable quarter last year. Interest expense increased by 23.4%, or $3.5 million, to $18.7 million for the six months ended June 30, 2008, from $15.1 million for the comparable period last year. Interest expense is composed of interest incurred on debt for operating vessels and interest amounts incurred on non-designated fixed interest rate swaps for newbuilds for which the related variable interest is capitalized.
Change in Fair Value of Financial Instruments
The change in fair value of financial instruments resulted in a gain of $71.0 million for the quarter ended June 30, 2008 compared to a gain of $18.5 million for the comparable quarter last year. The change in fair value of financial instruments resulted in a gain of $17.2 million for the six months ended June 30, 2008 compared to a $20.0 million gain for the comparable period last year. The fair value of our undesignated interest rate swaps increased due to increases in the forward LIBOR rate curves. Change in fair value of 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 as though the instruments were realized as of the reporting date. There is no impact on our operating performance or ability to distribute cash to shareholders from the impact of the mark-to-market accounting adjustments. The change in fair value from the unrealized non-cash mark-to-market accounting adjustments are specifically excluded by our banks for our debt covenant calculations and have no impact on security requirements for our debt.
The accounting adjustments appear in the following locations in the financial statements:
1) Statement of Comprehensive Income – For interest rate swaps for which the Company has designated as a hedge under the technical accounting requirements for hedge accounting, an amount is included in "Other Comprehensive Income" that approximates the adjustment in fair market value.
2) Statement of Operations – For interest rate swaps which are not designated as a hedge under the accounting requirements for hedge accounting, the mark-to-market adjustment is recorded in "Change in fair value of financial instruments".
All of our interest rate swaps meet our interest rate risk and economic management criteria to ensure long term stability and visibility of cashflows. Approximately one-third of these swaps meet the technical requirements for hedge accounting.
Cash Available for Distribution(1)
During the three and six months ended June 30, 2008, we generated $32.9 million and $65.4 million, respectively, of cash available for distribution,(1) as compared to $27.9 million and $51.9 million, respectively, for the comparative periods in 2007. For the three months ended June 30, 2008, this represents an increase of $5.0 million, or 17.9%, as compared to the same quarter in 2007. For the six months ended June 30, 2008, this represents an increase of $13.5 million, or 25.9%, as compared to the same six month period in 2007.
Dividend Declared:
For the quarter ended June 30, 2008, we declared a quarterly dividend of $0.475, representing a total distribution of $31.5 million. The dividend will be paid on August 15, 2008 to all shareholders of record as of August 6, 2008. Because we recently adopted the DRIP, the actual amount of cash dividends paid may be less than $31.5 million depending on shareholder participation in the DRIP.
Mr. Wang concluded, "We are pleased to have declared our 12th consecutive dividend since going public in August 2005. To date, we have increased our dividend twice and declared cumulative dividends of $5.14 per share. With 38 additional vessels scheduled to be delivered through 2011 and a fleet of modern vessels on time charters, we remain well positioned to grow our distributable cash flow over the long-term."
Fleet Utilization:
Our fleet was utilized 98.8% and 98.9%, respectively, for the three and six months ended June 30, 2008 compared to 99.9% and 99.0% for the comparable periods in the prior year.
The following tables summarize vessel utilization and the impact of the unplanned off-hire time incurred on our revenues for the three and six months ended June 30, 2008:
Three Months Three Months Six Months
Ended Ended Ended
June 30, March 31, June 30,
--------------- --------------- ----------------
2008 2007 2008 2007 2008 2007
--------------- --------------- ----------------
Vessel Utilization:
Ownership Days 2,687 2,405 2,639 2,096 5,326 4,501
Less Off-hire Days:
Scheduled 5-Year
Survey (10) - - (33) (10) (33)
Incremental due to
rudder horn repair - - - (9) - (9)
Other unscheduled
off-hire(3) (21) (1) (27) (1) (48) (2)
--------------- --------------- ----------------
Operating Days 2,656 2,404 2,612 2,053 5,268 4,457
--------------- --------------- ----------------
--------------- --------------- ----------------
Vessel Utilization 98.8% 99.9% 99.0% 97.9% 98.9% 99.0%
Three Months Three Months Six Months
Ended Ended Ended
June 30, March 31, June 30,
--------------- --------------- ----------------
2008 2007 2008 2007 2008 2007
--------------- --------------- ----------------
(in thousands)
Revenue - Impact
of Off-Hire:
100% Utilization $55,507 $48,995 $54,703 $42,087 $110,210 $91,082
Less Off-hire:
Scheduled 5-Year
Survey (186) - - (694) (186) (694)
Incremental due to
rudder horn repair - - - (171) - (171)
Other unscheduled
off-hire(3) (390) (119) (488) 6 (877) (113)
--------------- --------------- ----------------
Actual Revenue
Earned $54,931 $48,876 $54,215 $41,228 $109,147 $90,104
--------------- --------------- ----------------
--------------- --------------- ----------------
The following table summarizes the number of vessels in our fleet as it takes scheduled delivery:
Forecasted
Year Ending December 31,
TEU Vessel Size ----------------------------------
---------------------------- As of ----------------------------------
Class Actual 30-Jun-08 2008 2009 2010 2011
---------------------------------------------------------------------------
13100 13092 - - - - 8
---------------------------------------------------------------------------
9600 9580 2 2 2 2 2
---------------------------------------------------------------------------
8500 8468 2 2 2 2 2
---------------------------------------------------------------------------
8500 8495 - - 2 8 8
---------------------------------------------------------------------------
5100 5087 - - 4 4 4
---------------------------------------------------------------------------
4800 4809 4 4 4 4 4
---------------------------------------------------------------------------
4500 4520 - - - 2 5
---------------------------------------------------------------------------
4250 4253 19 19 23 23 23
---------------------------------------------------------------------------
3500 3534 2 2 2 2 2
---------------------------------------------------------------------------
2500 2546 1 6 8 10 10
---------------------------------------------------------------------------
Operating Vessels 30 35 47 57 68
---------------------------------------------------------------------------
---------------------------------------------
Actual Capacity (TEU) 145,753 158,483 217,925 283,027 401,323
---------------------------------------------
---------------------------------------------
(1) 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 on debt refinancing, non-cash share-based compensation, dry-dock adjustment, change in fair value of financial instruments, interest expense, and cash interest paid at hedged rate. Please read "Reconciliation of Non-GAAP Financial Measures for the Three and Six Months Ended June 30, 2008 – Description of Non-GAAP Financial Measures – A. Cash Available for Distribution" on page 14 for a description of Cash Available for Distribution and a reconciliation of net earnings to Cash Available for Distribution.
(2) 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 on debt refinancing, interest expense, and interest expense at hedged rate. Please read "Reconciliation of Non-GAAP Financial Measures for the Three and Six Months Ended June 30, 2008 – Description of Non-GAAP Financial Measures – B. Normalized Net Earnings and Normalized Earnings per Share" on page 16 for a description of Normalized Net Earnings and a reconciliation of net earnings to normalized net earnings.
(3) Other includes charterer deductions that are not related to off-hire.
About Seaspan
Seaspan owns containerships and charters them pursuant to long-term fixed-rate charters. Seaspan's contracted fleet of 68 containerships consists of 30 containerships in operation and 38 containerships to be delivered over approximately the next three years. Seaspan's operating fleet of 30 vessels has an average age of approximately five years and an average remaining charter period of approximately seven years. All of the 38 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, publicly traded 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 three and six months ended June 30, 2008 on July 30, 2008, at 2:00 p.m. PT / 5:00 p.m. ET. Participants should call 1-877-397-0297 (US/Canada) or 1-719-325-4869 (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 1-888-203-1112 or 1-719-457-0820 and enter replay passcode: 1492176. The recording will be available from July 30, 2008 at 6:00 p.m. PT / 9:00 p.m. ET through to 8:59 p.m. PT / 11:59 p.m. ET on August 13, 2008. The conference call will also be broadcast live over the Internet and include a slide presentation. To access the live webcast and slide presentation, go to www.seaspancorp.com and click on "Investor Relations" 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 AT JUNE 30, 2008
(IN THOUSANDS OF US DOLLARS)
June 30, December 31,
2008 2007
------------------------------
Assets
Current assets:
Cash and cash equivalents $ 31,902 $ 123,134
Accounts receivable 205 2,527
Prepaid expenses 4,589 4,657
------------------------------
36,696 130,318
Vessels 2,808,843 2,424,253
Deferred charges 21,733 17,240
Other assets 6,258 5,090
------------------------------
$ 2,873,530 $ 2,576,901
------------------------------
------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 13,024 $ 8,516
Deferred revenue 2,528 7,200
------------------------------
15,552 15,716
Long-term debt (operating vessels) 375,845 640,259
Long-term debt (vessels under construction) 904,768 699,179
Other long-term liability 381,999 223,804
Fair value of financial instruments 137,127 135,617
------------------------------
1,815,291 1,714,575
Share Capital 663 575
Additional paid-in capital 1,275,453 1,046,412
Deficit (133,013) (122,317)
Accumulated other comprehensive loss (84,864) (62,344)
------------------------------
Total shareholders' equity 1,058,239 862,326
------------------------------
$ 2,873,530 $ 2,576,901
------------------------------
------------------------------
SEASPAN CORPORATION
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008
(IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE AMOUNTS AND NUMBER OF
SHARES)
Three Three Six Six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
--------- --------- --------- ---------
Revenue $ 54,932 $ 48,876 $ 109,147 $ 90,104
Operating expenses:
Ship operating 12,731 11,153 25,335 20,910
Depreciation 13,924 12,220 27,665 22,736
General and administrative 2,139 1,483 3,956 2,842
--------- --------- --------- ---------
28,794 24,856 56,956 46,488
--------- --------- --------- ---------
Operating earnings 26,138 24,020 52,191 43,616
Other expenses (earnings):
Interest expense 10,055 8,580 18,671 15,127
Interest income (163) (1,040) (439) (2,115)
Undrawn credit facility fees 1,492 587 2,604 1,248
Amortization of deferred
charges 446 248 908 429
Write-off on debt refinancing - 635 - 635
Change in fair value of
financial instruments (71,019) (18,512) (17,216) (19,957)
--------- --------- --------- ---------
(59,189) (9,502) 4,528 (4,633)
--------- --------- --------- ---------
Net earnings 85,327 33,522 47,663 48,249
Deficit, beginning of period (187,340) (24,161) (122,317) (17,658)
Dividends on common shares (31,000) (23,674) (58,359) (44,904)
Deficit, end of period (133,013) (14,313) (133,013) (14,313)
Weighted average number of
shares (in millions)
basic and diluted 64.6 51.6 61.1 49.6
Earnings per share, basic and
diluted $ 1.32 $ 0.65 $ 0.78 $ 0.97
--------- --------- --------- ---------
--------- --------- --------- ---------
SEASPAN CORPORATION
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008
(IN THOUSANDS OF US DOLLARS)
Three Three Six Six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
--------- --------- --------- ---------
Net earnings $ 85,327 $ 33,522 $ 47,663 $ 48,249
Other comprehensive income:
Change in fair value of
financial instruments
designated as cash flow
hedging instruments 39,796 27,091 (27,525) 23,971
Amounts reclassified to
earnings (loss) during the
period 2,318 - 5,005 -
--------- --------- --------- ---------
Other comprehensive income
(loss) 42,114 27,091 (22,520) 23,971
--------- --------- --------- ---------
Comprehensive income $ 127,441 $ 60,613 $ 25,143 $ 72,220
--------- --------- --------- ---------
--------- --------- --------- ---------
SEASPAN CORPORATION
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008
(IN THOUSANDS OF US DOLLARS)
Three Three Six Six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
--------- --------- --------- ---------
Cash provided by (used in):
Operating activities:
Net earnings $ 85,327 $ 33,522 $ 47,663 $ 48,249
Items not involving cash:
Depreciation 13,924 12,220 27,665 22,736
Share-based compensation 632 270 1,273 595
Amortization of deferred
charges 446 248 908 429
Write-off on debt
financing - 635 - 635
Change in fair value of
financial instruments (71,019) (18,512) (17,216) (19,957)
Change in assets and
liabilities 2,865 (187) 897 826
--------- --------- --------- ---------
Cash provided by operating
activities 32,175 28,196 61,190 53,513
--------- --------- --------- ---------
Financing activities:
Common shares issued,
net of share issue costs 227,856 154,361 227,856 154,361
Draws on credit facilities
(operating vessels) 20,625 47,999 20,625 205,849
Draws on credit facilities
(vessels under construction) 99,989 178,927 263,550 193,487
Other long-term liability - - 35,405 -
Repayment of credit facility (205,000) - (343,000) -
Financing fees incurred (2,291) (3,892) (5,630) (3,961)
Dividends on common shares (31,000) (23,674) (58,359) (44,904)
--------- --------- --------- ---------
Cash provided by financing
activities 110,179 353,721 140,447 504,832
--------- --------- --------- ---------
Investing activities:
Expenditures for vessels (43,862) (57,578) (43,862) (280,399)
Deposits on vessels (80,121) (248,426) (245,076) (260,216)
Cash payments on interest
rate swaps (2,440) - (3,795) -
Intangible assets (136) (129) (136) (28)
--------- --------- --------- ---------
Cash used in investing
activities (126,559) (306,133) (292,869) (540,643)
--------- --------- --------- ---------
Increase (decrease) in cash
and cash equivalents 15,795 75,784 (91,232) 17,702
Cash and cash equivalents,
beginning of period 16,107 34,145 123,134 92,227
--------- --------- --------- ---------
Cash and cash equivalents,
end of period $ 31,902 $ 109,929 $ 31,902 $ 109,929
--------- --------- --------- ---------
--------- --------- --------- ---------
SEASPAN CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 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 on debt refinancing, non-cash share-based compensation, dry-dock adjustment, non-cash interest income, change in fair value of financial instruments, interest expense(4) and cash interest paid at hedged rate(5). Cash available for distribution is a non-GAAP quantitative standard used to assist in evaluating a company's ability to make quarterly cash dividends. 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 that do not impact our operating performance or our ability to distribute cash to our shareholders.
Three Three Six Six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
--------- --------- --------- ---------
Net earnings $ 85,327 $ 33,522 $ 47,663 $ 48,249
Add:
Depreciation 13,924 12,220 27,665 22,736
Interest expense(4) 10,055 8,580 18,671 15,127
Amortization of deferred
charges 446 248 908 429
Undrawn credit facility fees 1,492 587 2,604 1,248
Write-off on debt refinancing - 635 - 635
Share-based compensation 632 270 1,273 595
Change in fair value of
financial instruments (71,019) (18,512) (17,216) (19,957)
Less:
Dry-dock adjustment (703) (616) (1,394) (1,162)
Interest income (163) (1,040) (439) (2,115)
--------- --------- --------- ---------
Net cash flows before cash
interest payments 39,991 35,894 79,735 65,785
Less:
Cash interest paid at hedged
rate(5) (6,031) (8,614) (13,112) (15,090)
Cash paid for undrawn credit
facility fees (1,211) (421) (1,678) (929)
Add:
Cash interest received 138 1,040 432 2,157
--------- --------- --------- ---------
Cash available for
distribution $ 32,887 $ 27,899 $ 65,377 $ 51,923
--------- --------- --------- ---------
--------- --------- --------- ---------
Seaspan has changed the definition of cash available for distribution for
comparative figures to reflect adjustments to the definition in the current
year. The following items are now included as adjustments: undrawn credit
facility fees, cash interest paid on operating vessels, cash paid for
undrawn credit facility fees, interest expense(4) and cash interest
paid at hedged rate(5). Seaspan previously reported $27,137 and
$51,252, respectively, of cash available for distribution for the three and
six months ended June 30, 2007. Based on the new definition of cash
available for distribution used in the current period, the cash available
for distribution has been adjusted to $27,899 and $51,923, respectively,
for the three and six months ended June 30, 2007.
(4) Interest expense as reported on the consolidated statement of
operations.
(5) Interest expense at 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.
SEASPAN CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008
(IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE AMOUNTS AND NUMBER OF SHARES)
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 on debt refinancing, interest expense(4) and interest expense at hedged rate(5). This definition has changed to include accounting adjustments for interest expense(4) and interest expense at hedged rate(5). With these adjustments normalized net earnings reflects interest expense on our operating debt at the fixed rate on the related 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 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.
Three Three Six Six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
--------- --------- --------- ---------
Net earnings $ 85,327 $ 33,522 $ 47,663 $ 48,249
Adjust:
Change in fair value of
financial instruments (71,019) (18,512) (17,216) (19,957)
Write-off on debt refinancing - 635 - 635
Interest expense(4) 10,055 8,580 18,671 15,127
Interest expense at hedged
rate(5) (5,053) (8,626) (12,313) (15,606)
--------- --------- --------- ---------
Normalized net earnings $ 19,310 $ 15,599 $ 36,805 $ 28,448
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average number of
shares (in millions)
Basic and Diluted 64.6 51.6 61.1 49.6
Earnings per share, basic and
diluted
Reported $ 1.32 $ 0.65 $ 0.78 $ 0.97
--------- --------- --------- ---------
--------- --------- --------- ---------
Normalized $ 0.30 $ 0.30 $ 0.60 $ 0.57
--------- --------- --------- ---------
--------- --------- --------- ---------
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 forecasts of 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 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; 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 and subordinated shares.
