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HONG KONG, CHINA - Oct. 27, 2010 /CNW/ - Seaspan Corporation (NYSE:SSW) announced today the financial results for the three and nine months ended September 30, 2010. Below is a summary of our key financial results.
Summary of Key Financial Results (dollars in thousands):
Three Months Ended
September 30, Change
-------------------- --------------------
2010 2009 $ %
--------- --------- --------- ---------
Reported net loss $ (70,879) $ (65,962) $ (4,917) (7.5%)
Normalized net earnings(1) $ 26,125 $ 20,232 $ 5,893 29.1%
Loss per share, basic $ (1.15) $ (1.03) $ (0.12) (11.7%)
Loss per share, diluted $ (1.15) $ (1.03) $ (0.12) (11.7%)
Normalized earnings per share,
converted(1)(i) (Series A
preferred shares converted at
$15) $ 0.30 $ 0.27 $ 0.03 11.1%
Cash available for distribution
to common shareholders(2) $ 51,743 $ 38,635 $ 13,108 33.9%
Nine Months Ended
September 30, Change
-------------------- --------------------
2010 2009 $ %
--------- --------- --------- ---------
Reported net earnings (loss) $ (229,337) $ 70,562 $ (299,899) (425.0%)
Normalized net earnings(1) $ 68,037 $ 57,467 $ 10,570 18.4%
Earnings (loss) per share,
basic $ (3.67) $ 0.93 $ (4.60) (494.6%)
Earnings (loss) per share,
diluted $ (3.67) $ 0.90 $ (4.57) (507.8%)
Normalized earnings per share,
converted(1)(i) (preferred
shares converted at $15) $ 0.81 $ 0.78 $ 0.03 3.8%
Cash available for distribution
to common shareholders(2) $ 140,506 $ 112,437 $ 28,069 25.0%
(i) 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. For a more
detailed description of this calculation, please read "Reconciliation
of Non-GAAP Financial Measures for the Three and Nine Months Ended
September 30, 2010 - Description of Non-GAAP Financial Measures - B.
Normalized Net Earnings and Normalized Earnings per Share".
Summary of Key Highlights:
-- Achieved vessel utilization of 98.7% and 98.3%, respectively, for the
three and nine months ended September 30, 2010;
-- Accepted delivery of one newbuild vessel during the third quarter, the
COSCO Indonesia, bringing our fleet to a total of 53 vessels at
September 30, 2010;
-- Paid a second quarter dividend of $0.125 per share on August 20, 2010,
reflecting a 25% increase over the dividend paid for the first quarter
of 2010;
-- Declared a third quarter dividend of $0.125 per common share to be paid
on November 12, 2010, increasing cumulative dividends declared since our
IPO to $6.84 per common share; and
-- Subsequent to the quarter end, we also completed a corporate guarantee
reduction and, subject to customary closing conditions, a $150 million
sale-leaseback, which we believe, together, satisfy our remaining equity
needs for the acquisition of the remaining vessels that we have
contracted to acquire.
Gerry Wang, Chief Executive Officer of Seaspan, stated, "During the third quarter, Seaspan continued to grow earnings and cash flow, highlighting the Company's ongoing success in expanding its modern fleet and achieving strong utilization. Including the COSCO Indonesia, which we received in the third quarter, and the two newbuildings delivered in the current fourth quarter, Seaspan has taken delivery of a total of 13 vessels year-to-date. Going forward we expect the Company's annual cash available for distribution to grow approximately 65% over the next two years as we take delivery of 14 additional newbuildings over the next 18 months, all of which are secured on long-term charters with leading Asian-based liner companies."
Mr. Wang added, "During the quarter, Seaspan also maintained its focus on strengthening the Company's financial flexibility. Based on our most recent financing transactions, we believe we have fully secured funding for our built-in fleet growth in a manner that benefits the long-term interests of our shareholders. We are pleased to have successfully executed our plan, initiated in 2008, to finance our significant contracted fleet growth under favorable terms. Going forward, we remain committed to preserving Seaspan's strong capital structure and exploring growth opportunities that create enduring shareholder value."
Subsequent events:
Subsequent to the end of the third quarter, on October 15, 2010, we accepted delivery of an 8500 TEU vessel named the COSCO Thailand, and on October 25, 2010, we accepted delivery of a 4500 TEU vessel named the Brotonne Bridge bringing our fleet to 55 vessels.
On October 21, 2010, the Company entered into a twelve-year sale and leaseback financing for up to $150 million for one of its 13100 TEU container vessels ordered from Hyundai Heavy Industries Co., Ltd. Under the terms of the transaction, subject to certain closing conditions, the vessel will be sold by the Company upon delivery to an affiliate of Credit Agricole Corporate and Investment Bank and will charter the vessel to a newly formed, wholly owned subsidiary of Seaspan Corporation. The Company will charter the vessel from its subsidiary and continue to time charter the vessel to COSCO Container Lines Co., Ltd. in accordance with the terms of the original twelve-year time charter. The subsidiary's financial indebtedness under the charter is non-recourse to Seaspan Corporation.
On October 21, 2010, a subsidiary of Seaspan Corporation amended its $400 million UK Tax Lease Facility with an affiliate of Lloyds Banking Group. Under the original terms of the lease, all of the obligations of the Company's subsidiary under the lease were guaranteed by Seaspan Corporation. Under the terms of the amended lease facility, Seaspan Corporation's guarantee of scheduled rental and termination amounts, based on current tax and other assumptions, are limited to a significantly reduced fixed amount of the subsidiary's obligations. The lease facility will continue to provide the financing for five 4500 TEU vessels, each of which is to commence a twelve-year time charter with Kawasaki Kisen Kaisha Ltd. upon delivery.
Results for the Three and Nine Months Ended September 30, 2010:
The following tables summarize vessel utilization and the impact of off-hire time incurred on our revenues for the three and nine months ended September 30, 2010:
First Quarter Second Quarter Third Quarter Year to Date
--------------- --------------- ---------------- -----------------
2010 2009 2010 2009 2010 2009 2010 2009
------- ------- ------- ------- -------- ------- -------- --------
Vessel
Utili-
zation:
Ownership
Days 3,908 3,150 4,390 3,445 4,871 3,632 13,169 10,227
Less Off-
hire
Days:
Sched-
uled 5-
Year
Survey (20) - (42) - (52) (14) (114) (14)
Unsched-
uled Off-
hire (91) (1) (4) (4) (10) (6) (105) (11)
------- ------- ------- ------- -------- ------- -------- --------
Operating
Days 3,797 3,149 4,344 3,441 4,809 3,612 12,950 10,202
------- ------- ------- ------- -------- ------- -------- --------
------- ------- ------- ------- -------- ------- -------- --------
Vessel
Utili-
zation 97.2% 99.9% 99.0% 99.9% 98.7% 99.4% 98.3% 99.8%
------- ------- ------- ------- -------- ------- -------- --------
------- ------- ------- ------- -------- ------- -------- --------
First Quarter Second Quarter Third Quarter Year to Date
--------------- --------------- ---------------- -----------------
2010 2009 2010 2009 2010 2009 2010 2009
------- ------- ------- ------- -------- ------- -------- --------
Revenue (in thousands)
Revenue -
Impact
of Off-
Hire:
100%
Utili-
zation $82,378 $63,147 $98,360 $69,904 $112,473 $74,581 $293,211 $207,632
Less Off-
hire:
Sched-
uled
5-Year
Survey (347) - (738) - (914) (427) (1,999) (427)
Unsch-
eduled
Off-
hire(3) (1,662) (20) (77) (73) (208) (97) (1,947) (190)
------- ------- ------- ------- -------- ------- -------- --------
Actual
Revenue
Earned $80,369 $63,127 $97,545 $69,831 $111,351 $74,057 $289,265 $207,015
------- ------- ------- ------- -------- ------- -------- --------
------- ------- ------- ------- -------- ------- -------- --------
We accepted delivery of seven vessels in the year ended December 31, 2009. We began 2010 with 42 vessels in operation and through September 30, 2010 accepted delivery of 11 vessels bringing our fleet to a total of 53 vessels in operation as at September 30, 2010. Operating days are the primary driver of revenue while ownership days are the primary driver for ship operating costs.
Three Months Ended Nine Months Ended
September 30, Increase September 30, Increase
------- --------- ----- ---- --------- --------- ----- -----
2010 2009 Days % 2010 2009 Days %
------- --------- ----- ---- --------- --------- ----- -----
Operating days 4,809 3,612 1,197 33.1% 12,950 10,202 2,748 26.9%
Ownership days 4,871 3,632 1,239 34.1% 13,169 10,227 2,942 28.8%
Financial
Summary Three Months Nine Months
(in Ended Ended
millions) September 30, Change September 30, Change
--------------- ------------- ------------- -------------------
2010 2009 $ % 2010 2009 $ %
--------------- ------------- ------------- -------------------
Revenue $ 111.4 $ 74.1 $ 37.3 50.4% $289.3 $207.0 $ 82.3 39.7%
Ship
operating
expense 29.2 20.7 8.6 41.5% 78.3 57.7 20.5 35.6%
Depreciation 26.9 18.0 8.9 49.5% 71.3 51.0 20.3 39.9%
General and
administrative
expenses 2.6 2.0 0.6 29.8% 6.9 6.1 0.8 13.7%
Interest
expense 8.3 5.1 3.2 62.5% 20.3 15.8 4.5 28.3%
Change in
fair value
of financial
instruments 113.4 92.6 20.8 22.5% 336.5 0.1 336.5 442,725.0%
Other
expenses - - - 0.0% - 1.1 (1.1) (100%)
Revenue
The increase in operating days, and the dollar impact thereof, for the three and nine months ended was due to the following:
Three Months Ended Nine Months Ended
September 30, 2010 September 30, 2010
-------------------- --------------------
Operating $ impact Operating $ impact
Days (in Days (in
impact millions) impact millions)
--------- --------- --------- ---------
2010 vessel deliveries 1,007 $ 32.1 1,703 $ 54.7
Full period contribution for
2009 vessel deliveries 232 5.8 1,239 30.9
Scheduled off-hire (38) (0.5) (101) (1.5)
Unscheduled off-hire (4) (0.1) (93) (1.8)
--------- --------- --------- ---------
Total 1,197 $ 37.3 2,748 $ 82.3
--------- --------- --------- ---------
--------- --------- --------- ---------
Vessel utilization was 98.7% and 98.3%, respectively, for the three and nine months ended September 30, 2010 compared to 99.4% and 99.8%, for the comparable periods in the prior year.
This decrease in vessel utilization for the nine months ended September 30, 2010 was primarily due to the 90 days of unscheduled off-hire resulting from the grounding of the CSCL Hamburg in the Gulf of Aqaba on December 31, 2009. CSCL Hamburg's next dry-docking was originally scheduled for 2013, however we combined the repairs of the CSCL Hamburg with an earlier dry-docking which defers the next scheduled dry-docking to 2015. This dry-docking resulted in 12 days of scheduled off-hire and the CSCL Hamburg was back in service in April. We also completed the dry-dockings for the CSCL Vancouver, CSCL Sydney, CSCL New York, CSCL Melbourne, New Delhi Express, CSCL Brisbane and are in progress of completing the dry-docking for Dubai Express. This has resulted in a total of 114 days of scheduled off-hire. Our vessel utilization since our initial public offering is 99.1%.
Ship Operating Expense
The increase in ownership days, and the dollar impact thereof, for the three and nine months ended September 30, 2010 was due to the following:
Three Months Ended Nine Months Ended
September 30, 2010 September 30, 2010
-------------------- --------------------
Ownership $ impact Ownership $ impact
Days (in Days (in
impact millions) impact millions)
--------- --------- --------- ---------
2010 vessel deliveries 1,007 $ 6.2 1,703 $ 10.6
Full period contribution for
2009 vessel deliveries 232 1.3 1,239 7.0
Changes in extraordinary(4)
costs & expenses not covered by
the fixed fee - 1.1 - 2.9
--------- --------- --------- ---------
Total 1,239 $ 8.6 2,942 $ 20.5
--------- --------- --------- ---------
--------- --------- --------- ---------
Depreciation
The increase in depreciation expense was due to the additional ownership days from the 11 deliveries in 2010 and a full period for the seven deliveries in 2009.
General and Administrative Expenses
The increase in general and administrative expenses was primarily due to an increase in non-cash share based compensation resulting from higher share prices at the awards' grant dates and increased costs to support growth.
Interest Expense
Interest expense is composed of interest at the variable rate plus margin incurred on debt for operating vessels and a reclassification of amounts from accumulated other comprehensive income related to previously designated hedging relationships. The increase in interest expense for the three and nine months ended September 30, 2010, was primarily due to a higher average operating debt balance compared to the comparable periods in the prior year. The average LIBOR for the quarter ended September 30, 2010 was 0.3% which is consistent with the comparable period in the prior year. The average LIBOR for the nine months ended September 30, 2010 was 0.3%, compared to 0.5% for the comparable period in the prior year. Although we have entered into fixed interest rate swaps, the difference between the variable interest rate and the swapped fixed rate on operating debt is recorded in our change in fair value of financial instruments caption as required by financial reporting standards. The interest incurred on our long-term debt for our vessels under construction is capitalized to the respective vessels under construction.
Change in Fair Value of Financial Instruments
The change in fair value of financial instruments resulted in a loss of $113.4 million for the three months ended September 30, 2010 compared to a loss of $92.6 million for the comparable quarter last year. The change in fair value of financial instruments resulted in a loss of $336.5 million for the nine months ended September 30, 2010 compared to a loss of $0.1 million for the comparable period last year. The change in fair value loss for the three and nine months ended September 30, 2010 was primarily due to decreases in the forward LIBOR curve.
Cash Available for Distribution to Common Shareholders(2)
These increases in cash available for distribution for the three and nine months ended September 30, 2010 over the comparable periods in the prior year are primarily due to an increased fleet size of 53 vessels at September 30, 2010 compared to 41 vessels at September 30, 2009.
Dividend Declared:
For the quarter ended September 30, 2010, we declared a quarterly dividend of $0.125 per common share, representing a total distribution of $8.5 million. The dividend will be paid on November 12, 2010 to all shareholders of record as of November 2, 2010. Because we adopted a dividend reinvestment plan, or DRIP, the actual amount of cash dividends paid may be less than the $8.5 million based on shareholder participation in the DRIP.
Since our initial public offering in August 2005, we have declared cumulative dividends of $6.84 per common share. Cumulatively, since we adopted the DRIP in May 2008, an additional 1.8 million shares have been issued through the participation in the DRIP. As of today's date and based on a discount of 3%, participating shareholders have invested $18.4 million in the DRIP since the plan's adoption.
About Seaspan
Seaspan owns containerships and charters them pursuant to primarily long-term fixed-rate charters. Seaspan's contracted fleet of 69 containerships consists of 55 containerships in operation and 14 containerships to be delivered over approximately the next 18 months. Seaspan's operating fleet of 55 vessels has an average age of approximately four years and an average remaining charter period of approximately seven years. All of the 14 vessels to be delivered to Seaspan are already committed to primarily long-term time charters averaging approximately 12 years in duration from delivery. Seaspan's customer base consists of eight of the world's largest liner companies, including to A.P. Moller-Maersk A/S, China Shipping Container Lines (Asia) Co., Ltd., Compania Sud Americana de Vapores, 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".
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 nine months ended September 30, 2010 on Wednesday October 27, 2010 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: 17734764. The recording will be available from October 27, 2010 at 10:00 a.m. PT / 1:00 p.m. ET through to 8:59 p.m. PT / 11:59 p.m. ET on November 10, 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.comand 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 SEPTEMBER 30, 2010
(IN THOUSANDS OF US DOLLARS)
September 30, 2010 December 31, 2009
------------------ -----------------
Assets
Current assets:
Cash and cash equivalents $ 146,709 $ 133,400
Accounts receivable 993 164
Prepaid expenses 10,873 12,489
------------------ -----------------
158,575 146,053
Vessels 2,996,083 2,088,689
Vessels under construction 1,086,798 1,396,661
Deferred charges 29,931 21,667
Other assets 18,177 11,377
------------------ -----------------
$ 4,289,564 $ 3,664,447
------------------ -----------------
------------------ -----------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 23,579 $ 20,905
Deferred revenue 4,729 9,787
Current portion of other long-term
liabilities 18,657 -
------------------ -----------------
46,965 30,692
Long-term debt (operating vessels) 1,787,639 936,794
Long-term debt (vessels under construction) 582,807 946,352
Other long-term liabilities 488,593 410,598
Fair value of financial instruments 532,907 280,445
------------------ -----------------
3,438,911 2,604,881
Share capital 689 679
Additional paid-in capital 1,523,623 1,489,936
Deficit (602,055) (349,802)
Accumulated other comprehensive loss (71,604) (81,247)
------------------ -----------------
Total shareholders' equity 850,653 1,059,566
------------------ -----------------
$ 4,289,564 $ 3,664,447
------------------ -----------------
------------------ -----------------
SEASPAN CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE AMOUNTS)
Three Three Nine Nine
months months months months
ended ended ended ended
September September September September
30, 2010 30, 2009 30, 2010 30, 2009
--------- --------- --------- ---------
Revenue $ 111,351 $ 74,057 $ 289,265 $ 207,015
Operating expenses:
Ship operating 29,229 20,659 78,269 57,730
Depreciation 26,929 18,017 71,302 50,969
General and administrative 2,577 1,985 6,885 6,058
--------- --------- --------- ---------
58,735 40,661 156,456 114,757
--------- --------- --------- ---------
Operating earnings 52,616 33,396 132,809 92,258
Other expenses (earnings):
Interest expense 8,293 5,104 20,272 15,802
Interest income (5) (21) (41) (270)
Undrawn credit facility fees 1,011 1,156 3,072 3,512
Amortization of deferred
charges 808 543 2,296 1,476
Change in fair value of
financial instruments 113,388 92,576 336,547 76
Other expenses - - - 1,100
--------- --------- --------- ---------
123,495 99,358 362,146 21,696
--------- --------- --------- ---------
Net earnings (loss) (70,879) (65,962) (229,337) 70,562
Deficit, beginning of period (522,061) (345,041) (349,802) (443,081)
Dividends on common shares (8,522) (6,733) (22,105) (45,217)
Dividends on series B preferred
shares (593) - (811) -
--------- --------- --------- ---------
Deficit, end of period (602,055) (417,736) (602,055) (417,736)
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average number of
shares, basic 68,270 67,436 68,099 67,238
Weighted average number of
shares, diluted 68,270 67,436 68,099 78,511
Earnings (loss) per share,
basic $ (1.15) $ (1.03) $ (3.67) $ 0.93
--------- --------- --------- ---------
--------- --------- --------- ---------
Earnings (loss) per share,
diluted $ (1.15) $ (1.03) $ (3.67) $ 0.90
--------- --------- --------- ---------
--------- --------- --------- ---------
SEASPAN CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(IN THOUSANDS OF US DOLLARS)
Three Three Nine Nine
months months months months
ended ended ended ended
September September September September
30, 2010 30, 2009 30, 2010 30, 2009
--------- --------- --------- ---------
Net earnings (loss) $ (70,879) $ (65,962) $(229,337) $ 70,562
Other comprehensive income:
Amounts reclassified to
earnings (loss) during the
period 3,601 2,952 9,643 8,992
--------- --------- --------- ---------
Comprehensive income (loss) $ (62,278) $ (63,010) $(219,694) $ 79,554
--------- --------- --------- ---------
--------- --------- --------- ---------
SEASPAN CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(IN THOUSANDS OF US DOLLARS)
Three months Three months Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
2010 2009 2010 2009
------------ ------------ ------------ ------------
Cash provided by
(used in):
Operating activities:
Net earnings (loss) $ (70,879) $ (65,962) $ (229,337) $ 70,562
Items not involving
cash:
Depreciation 26,929 18,017 71,302 50,969
Share-based
compensation 706 559 1,980 1,583
Amortization of
deferred charges 808 543 2,296 1,476
Amounts
reclassified from
other comprehensive
loss 3,520 2,925 9,444 8,930
Unrealized change
in fair value of
financial
instruments 84,903 68,975 252,462 (62,668)
Change in assets and
liabilities (5,980) (293) (10,474) (6,072)
------------ ------------ ------------ ------------
Cash provided by
operating activities 40,007 24,764 97,673 64,780
------------ ------------ ------------ ------------
Financing activities:
Preferred shares
issued, net of
share issue costs (15) (57) 25,880 98,785
Preferred shares
subscribed - 80,000 - 80,000
Draws on credit
facilities 124,820 59,581 487,300 103,142
Other long-term
liabilities - - 21,250 -
Financing fees (237) - (3,314) (3,372)
Dividends on
common shares(ii) (6,324) (5,371) (16,630) (39,688)
Dividends on series
B preferred shares (328) - (449) -
------------ ------------ ------------ ------------
Cash provided by
financing activities 117,916 134,153 514,037 238,867
------------ ------------ ------------ ------------
Investing activities:
Expenditures for
vessels (17,446) (117,157) (592,071) (334,972)
Restricted cash - - (5,000) -
Intangible assets (156) (248) (1,330) (931)
------------ ------------ ------------ ------------
Cash used in
investing activities (17,602) (117,405) (598,401) (335,903)
------------ ------------ ------------ ------------
Increase (decrease)
in cash and cash
equivalents 140,321 41,512 13,309 (32,256)
Cash and cash
equivalents,
beginning of period 6,388 62,517 133,400 136,285
------------ ------------ ------------ ------------
Cash and cash
equivalents, end
of period $ 146,709 $ 104,029 $ 146,709 $ 104,029
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
(ii) During the three and nine months ended September 30, 2010, non-cash
dividends of $2.2 million and $5.5 million, respectively, were paid
through the dividend reinvestment program. Shareholders have invested
$18.4 million in the dividend reinvestment program since its adoption
in May 2008.
SEASPAN CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(IN THOUSANDS OF US DOLLARS)
Description of Non-GAAP Financial Measures
A. Cash Available for Distribution to Common Shareholders
Cash available for distribution to common shareholders is defined as net earnings adjusted for depreciation, amortization of deferred charges, non-cash undrawn credit facility fees, write-off of deferred financing fees on debt refinancing, non-cash share-based compensation, amounts paid for dry-docking, non-cash interest income, change in fair value of financial instruments, interest expense(5), cash interest paid at the hedged rate(7), 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 the Company's ability to make quarterly cash dividends before reserves. Cash available for distribution to common shareholders is not defined by GAAP and should not be considered as an alternative to net earnings or any other indicator of Seaspan's performance required to be reported by GAAP.
Three months Three months Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
2010 2009 2010 2009
------------ ------------ ------------ ------------
Net earnings (loss) $ (70,879) $ (65,962) $ (229,337) $ 70,562
Add:
Depreciation 26,929 18,017 71,302 50,969
Interest expense(5) 8,293 5,104 20,272 15,802
Amortization of
deferred charges 808 543 2,296 1,476
Undrawn credit
facility fees 1,011 1,156 3,072 3,512
Share-based
compensation 706 559 1,980 1,583
Change in fair
value of financial
instruments 113,388 92,576 336,547 76
Other expenses - - - 1,100
Less:
Amounts paid for
dry-dock (2,064) (903) (4,894) (2,580)
Interest income (5) (21) (41) (270)
Series B preferred
share dividends
paid(6) (328) - (449) -
------------ ------------ ------------ ------------
Net cash flows
before cash
interest payments 77,859 51,069 200,748 142,230
Less:
Cash interest paid
at the hedged
rate(7) (25,562) (11,961) (58,482) (28,367)
Cash paid for
undrawn credit
facility fees (559) (498) (1,801) (1,696)
Add:
Cash interest
received 5 25 41 270
------------ ------------ ------------ ------------
Cash available for
distribution to
common shareholders $ 51,743 $ 38,635 $ 140,506 $ 112,437
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
SEASPAN CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE AMOUNTS)
Description of Non-GAAP Financial Measures
B. Normalized Net Earnings and Normalized Earnings per Share
Normalized net earnings is defined as net earnings adjusted for items such as the change in fair value of financial instruments, write-off of deferred financing fees on debt refinancing, interest expense(5) and interest expense at the hedged rate(8) and certain other items the Company believes affect the comparability of operating results. With these adjustments, normalized net earnings reflects interest expense on our operating debt at the fixed rate on our interest rate swaps plus the applicable margin on the related credit facilities. Normalized net earnings is useful because it excludes the change in fair value of financial instruments that affects the comparability of the Company's operating results and includes interest at the hedged rate, which includes the effect of the interest rate swaps on our operating debt.
Normalized net earnings is not defined by GAAP and should not be considered as an alternative to net earnings or any other indicator of Seaspan's performance required to be reported by GAAP.
Normalized earnings per share, converted, is calculated as normalized net earnings, less dividends on Series B preferred shares, divided by the "converted" number of shares outstanding for the period. The Series A preferred shares automatically convert to Class A common shares at a price of $15.00 per share at any time on or after January 31, 2014 if the trailing 30-day average trading price of the common shares is equal to or above $15.00. If the share price is less than $15.00, the Company 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 the Company'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, diluted can be computed as the lower of: (1) normalized net earnings less dividends on Series B preferred shares divided by the weighted average number of shares used to compute reported earnings per share, diluted and (2) normalized earnings per share, basic.
Normalized earnings per share, converted, diluted, and basic are not defined by GAAP and should not be considered as an alternative to earnings per share or any other indicator of Seaspan's performance required to be reported by GAAP.
Three months Three months Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
2010 2009 2010 2009
------------ ------------ ------------ ------------
Net earnings (loss) $ (70,879) $ (65,962) $ (229,337) $ 70,562
Adjust:
Change in fair
value of financial
instruments 113,388 92,576 336,547 76
Interest expense(5) 8,293 5,104 20,272 15,802
Interest expense at
the hedged rate(8) (24,677) (11,486) (59,445) (28,973)
------------ ------------ ------------ ------------
Normalized net
earnings $ 26,125 $ 20,232 $ 68,037 $ 57,467
------------ ------------ ------------ ------------
Less: preferred
share dividends
Series A 6,879 3,177 19,831 8,200
Series B 593 - 811 -
------------ ------------ ------------ ------------
7,472 3,177 20,642 8,200
------------ ------------ ------------ ------------
Normalized net
earnings
attributable to
common
shareholders $ 18,653 $ 17,055 $ 47,395 $ 49,267
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Weighted average
number of shares
used to compute
earnings (loss)
per share:
Reported, basic 68,270 67,436 68,099 67,238
Share-based
compensation 140 - 89 25
Preferred shares
liquidation
preference
converted at $15 15,390 7,002 14,947 6,667
------------ ------------ ------------ ------------
Normalized, converted 83,800 74,438 83,135 73,930
Preferred shares
115% premium
(30-day trailing
average) 5,476 9,669 6,712 4,581
------------ ------------ ------------ ------------
Reported, diluted
(Note 1) 89,276 84,107 89,847 78,511
------------ ------------ ------------ ------------
Earnings (loss) per
share:
Reported, basic $ (1.15) $ (1.03) $ (3.67) $ 0.93
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Reported, diluted $ (1.15) $ (1.03) $ (3.67) $ 0.90
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Normalized,
converted-preferred
shares converted
at $15 $ 0.30 $ 0.27 $ 0.81 $ 0.78
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Note 1: 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.
(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, 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 Three
and Nine Months Ended September 30, 2010 - 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 to common shareholders 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 Three and
Nine Months Ended September 30, 2010 - Description of Non-GAAP Financial
Measures - A. Cash Available for Distribution to Common Shareholders"
for a description of cash available for distribution to common
shareholders and a reconciliation of cash available for distribution to
net earnings.
(3) Includes charterer deductions that are not related to off-hire.
(4) Extraordinary costs and expenses are defined in our management
agreements and do not relate to extraordinary items as defined by
financial reporting standards.
(5) Interest expense as reported on the consolidated statement of
operations.
(6) Dividends paid in cash on the Series B Preferred Shares have been
deducted as they reduce cash available for distribution to common
shareholders.
(7) 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.
(8) 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.
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, and our equity capital requirements. 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 primarily 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 and our filings with the Securities and Exchange Commission. 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.
