Seaspan Corporation (NYSE:SSW) announced the financial results for the three and six months ended June 30, 2010.
Gerry Wang, Chief Executive Officer of Seaspan, stated, “During the second quarter, Seaspan achieved high utilization for its modern fleet and posted strong operating results while further expanding its contracted revenue streams. We took delivery of six newbuildings, four of which were delivered ahead of schedule, highlighting increased demand during the quarter. All six vessels commenced long-term time charters with top liner companies as planned. In addition, we capitalized on an attractive market opportunity by acquiring a 4250 TEU newbuilding, our first acquisition since late 2007. This vessel commenced a time charter for a period of two years at a favorable rate of more than $20,000 per day, reflecting strong market conditions.”
Wang concluded, “We continue to take proactive measures to enhance our financial flexibility, including a $26 million preferred share issuance in May. Due to the strength of our business model, our increasing cash flows, and the considerable improvement in the container shipping industry fundamentals, we were able to increase our second quarter dividend by 25%. Going forward, we plan to take delivery of 16 newbuildings over the next 21 months and pursue additional growth opportunities. During a time when the fundamentals in the container shipping industry have improved considerably, we remain well-positioned to strengthen Seaspan as a leading franchise.”
Series B Preferred Share Issuance:
In May 2010, we issued 260,000 Series B Preferred Shares for $26 million to Jaccar Holdings Limited, an investor related to Zhejiang Shipbuilding Co., Ltd. of China (“Zhejiang”). These preferred shares are perpetual and not convertible into common shares. They carry an annual dividend rate of 5% until June 30, 2012, 8% from July 1, 2012 to June 30, 2013 and 10% from July 1, 2013 thereafter and are redeemable by the Company at any time for $26 million plus accrued and unpaid dividends.
Vessel Acquisitions:
On June 1, 2010, we accepted delivery of a 4250 TEU newbuilding vessel constructed by Zhejiang for approximately $43 million. The vessel commenced a two-year time charter on July 1, 2010 with United Arab Shipping Company (S.A.G.) (“UASC”) at a rate of $20,500 per day in the first year and increasing to $20,850 per day in the second year.
Subsequent to the end of the quarter, on July 5, 2010, we accepted delivery of an 8500 TEU vessel named the COSCO Indonesia, bringing our fleet to 53 vessels.
We accepted delivery of seven vessels in the year ended December 31, 2009. We began 2010 with 42 vessels in operation and accepted delivery of 10 vessels for a total of 52 vessels in operation as at June 30, 2010. Operating days are the primary driver of revenue while ownership days are the driver for ship operating costs.
Vessel utilization was 99.0% and 98.1%, respectively, for the three and six months ended June 30, 2010 compared to 99.9% for each of the comparable periods in the prior year.
This decrease in vessel utilization for the six months ended June 30, 2010 was primarily due to the 90 days of unscheduled off-hire for the CSCL Hamburg grounding in the Gulf of Aqaba on December 31, 2009. We combined the repairs of the CSCL Hamburg with an earlier dry-docking to achieve savings that resulted in 12 days of scheduled off-hire. The CSCL Hamburg was back in service in April. We also completed the dry-docking for the CSCL Vancouver, the CSCL Sydney and the CSCL New York, which resulted in a total of 62 days of scheduled off-hire. Our vessel utilization since our initial public offering is 99.1%.
Depreciation
The increase in depreciation expense was due to the additional ownership days from the 10 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 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 six months ended June 30, 2010, was due to a higher average operating debt balance compared to the comparable periods in the prior year. The average LIBOR was lower for both the three and six months ended June 30, 2010 was 0.3%, compared to 0.4% and 0.6%, respectively, for the comparable periods 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 $157.7 million for the three months ended June 30, 2010 compared to a gain of $89.3 million for the comparable quarter last year. The change in fair value of financial instruments resulted in a loss of $223.2 million for the six months ended June 30, 2010 compared to a gain of $92.5 million for the comparable period last year. The change in fair value loss for the three and six months ended June 30, 2010 was due to decreases in the forward LIBOR curve and overall market changes in credit risk.
Cash Available for Distribution to Common Shareholders(2)
During the three and six months ended June 30, 2010, we generated $48.4 million and $88.8 million, respectively, of cash available for distribution to common shareholders, compared to $39.0 million and $73.8 million, respectively, for the comparative periods in 2009. For the three months ended June 30, 2010, this represents an increase of $9.4 million, or 24.0%, as compared to the same quarter in 2009. For the six months ended June 30, 2010, this represents an increase of $15.0 million, or 20.3%, as compared to the same period in 2009. These increases are primarily due to an increased fleet size of 52 vessels at June 30, 2010 compared to 39 vessels at June 30, 2009.
Cash dividends paid on the Series B Preferred Shares have been deducted from the Cash Available for Distribution to Common Shareholders calculation. The Series A Preferred Shares are non-cash and accrue until January 31, 2014 and thus, do not impact the Cash Available for Distribution to Common Shareholders.
Dividend Declared:
For the quarter ended June 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 August 20, 2010 to all shareholders of record as of August 9, 2010. Because we adopted a dividend investment 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 $6.715 per common share. Cumulatively, since we adopted the DRIP in May 2008, an additional 1.6 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 $16.3 million in the DRIP since the plan’s adoption.
13. Excel Maritime Q2 and Six Month Results
Excel Maritime Carriers Ltd (NYSE: EXM), an owner and operator of dry bulk carriers and an international provider of worldwide seaborne transportation services for dry bulk cargoes, announced its operating and financial results for the second quarter and six month period ended June 30, 2010.
Management Commentary:
Pavlos Kanellopoulos, Chief Financial Officer of Excel, stated, “We are pleased to report another profitable quarterly performance with strong cash flow generation. The consistent implementation of our business strategy combined with better market conditions in the dry bulk sector during the second quarter of this year, resulted in an improved EBITDA and operating cash flow generation compared to the respective period of last year. In this context, we have opted to accelerate bank debt repayments and further enhance our balance sheet structure, in order to qualify for lower applicable margin on our $1.4bn Credit Facility for the future quarters. We acknowledge the high volatility in the dry bulk market, especially in the Capesize vessels, however, we continue to be optimistic for the medium and long term outlook of the markets in which we operate.”
Year to Date Corporate Developments
During the six month period ended June 30, 2010, the following corporate developments took place, which are discussed in more detail in our earnings release for the first quarter of 2010 released on May 5, 2010:
– The delivery of M/V Christine and scheduled installments paid to the shipyard in relation to M/V Hope (tbn Mairaki);
– The conclusion of new loan agreements for the above mentioned vessels;
– The repayment of the RBS credit facilities related to the new building vessels; and
– An exercise of warrants by their holders
Furthermore, on June 30, 2010, we notified our major lenders of our intention to make an additional payment of $28.0 million, on top of our regular installment of $18.0 million due on July 1, 2010, under our $1.4 billion credit facility. The payment was made in accordance with the excess cash flow provision as defined in the amended agreement and as such, it will be applied against the term loan instalment due on April 1, 2016. Another $12.0 million will be maintained in a pledged account to fund the capital expenditures for the newbuilding vessel M/V Hope (tbn Mairaki). These payments were made on July 1, 2010.
Following the total payment of $46.0 million, we have repaid the total principal amount of $455.0 million that we would have paid in accordance with the original credit facility dated April 14, 2008 and we are in compliance with the relevant financial covenants as applicable after the end of the waiver period. As a result, the excess cash flow provision will be terminated and the loan applicable margin for the interest period starting July 1, 2010 and ending October 1, 2010 will decrease from 2.5% to 1.25% and will remain at this level as long as we follow the repayment schedule provided in the original loan agreement and we are in compliance with the relevant financial covenants as applicable after the end of the waiver period.
On July 1, 2010, a total amount of $46.0 million was paid as discussed above, while, an amount of $12.0 million was transferred in a pledged account to fund future capital expenditures for M/V Hope (tbn Mairaki).
Fleet Developments
– On May 19, 2010, the M/V Happy Day, a Panamax vessel of 71,694 dwt built in 1997, was fixed under a new time charter for a period of 12-15 months at a daily rate of $27,000.
– On July 9, 2010, the M/V Angela Star, a Panamax vessel of 73,798 dwt built in 1998, was involved in a collision while departing in ballast condition from a Panamanian port. Damages were sustained on her hull structure and as a result temporary repairs were carried out locally. The vessel later sailed to a yard in Bahamas for permanent repairs. The vessel is currently estimated to remain off hire for approximately 47 days and the estimated repair cost will be approximately $2.8 million which is an insured loss covered, subject to a small deductable, under the vessel’s hull and machinery insurance policy. At the time of the incident the vessel was fixed under a trip time charter at $23,000 per day for 50-55 days.
Time Charter Coverage
As of today, we have secured under time charter employment 63.1% of our operating days for 2010 (Q3-Q4) and 18.2% for the year ending December 31, 2011.
Second Quarter 2010 Results:
Excel reported net profit for the quarter of $78.9 million or $0.95 per weighted average diluted share compared to a net profit of $78.0 million or $1.05 per weighted average diluted share in the second quarter of 2009.
The second quarter 2010 results include a non-cash unrealized interest-rate swap loss of $5.1 million compared to a non-cash unrealized interest-rate swap gain of $14.3 million in the corresponding period in 2009. The changes in the fair values of interest rate swaps are recorded in income as they do not meet the criteria for hedge accounting.
Included in the above net income is also the amortization of favorable and unfavorable time charters that were recorded upon acquiring Quintana Maritime Limited (Quintana) on April 15, 2008 amounting to a net income of $80.9 million ($0.98 per weighted average diluted share) and $65.3 million ($0.88 per weighted average diluted share) for the second quarters of 2010 and 2009, respectively.
Adjusted net income, excluding all the above items, for the second quarter of 2010 would have amounted to $3.1 million or $0.04 per weighted average diluted share compared to an adjusted net loss, excluding all the above items, for the second quarter of 2009 of $1.6 million or $0.02 per weighted average diluted share.
A reconciliation of adjusted Net income to Net Income is included in a subsequent section of this release.
Included in the above adjusted net income is also the amortization of stock based compensation expense of $1.1 million ($0.01 per weighted average diluted share) and $3.0 million ($0.04 per weighted average diluted share), for the quarters ended June 30, 2010 and 2009, respectively.
Voyage revenues for the second quarter of 2010 amounted to $107.0 million as compared to $98.4 million for the same period in 2009, an increase of approximately 8.7%.
An average of 47.7 and 47.0 vessels were operated during the second quarters of 2010 and 2009, respectively, earning a blended average time charter equivalent rate of $24,062 and $22,148 per day, respectively. Please refer to a subsequent section of this Press Release for a calculation of the TCE.
Adjusted EBITDA for the second quarter of 2010 was $60.1 million compared to $57.3 million for the second quarter of 2009, an increase of approximately 4.9%. Please refer to a subsequent section of this Press Release for a reconciliation of adjusted EBITDA to Net Income.
Six Months to June 30, 2010 Results:
Excel reported net profit for the period of $146.2 million or $1.78 per weighted average diluted share compared to a net profit of $196.0 million or $3.27 per weighted average diluted share in the respective period of 2009.
The results for the six month period ended June 30, 2010 include a non-cash unrealized interest-rate swap loss of $4.8 million compared to a non-cash unrealized interest-rate swap gain of $21.0 million in the corresponding period in 2009. The changes in the fair values of interest rate swaps are recorded in income as they do not meet the criteria for hedge accounting. In addition, the results for the six month period ended June 30, 2009 include $0.1 million of a non-cash gain on sale of a vessel.
Included in the above net income is also the amortization of favorable and unfavorable time charters that were recorded upon acquiring Quintana Maritime Limited (“Quintana”) on April 15, 2008 amounting to a net income of $138.9 million ($1.69 per weighted average diluted share) and $184.6 million ($3.08 per weighted average diluted share) for the second quarters of 2010 and 2009, respectively.
Adjusted net income, excluding all the above items, for the six months to June 30, 2010 would have amounted to $12.0 million or $0.15 per weighted average diluted share compared to an adjusted net loss, excluding all the above items, for the respective period of 2009 of $9.7 million or $0.17 per weighted average diluted share.
A reconciliation of adjusted Net income to Net Income is included in a subsequent section of this release.
Included in the above adjusted net income is also the amortization of stock based compensation expense of $1.9 million ($0.02 per weighted average diluted share) and $5.4 million ($0.09 per weighted average diluted share), for the six months to June 30, 2010 and 2009, respectively.
Voyage revenues for the six month period ended June 30, 2010 amounted to $211.3 million as compared to $191.2 million for the same period in 2009, an increase of approximately 10.5%.
An average of 47.3 and 47.4 vessels were operated during the six months to June 30, 2010 and 2009, respectively, earning a blended average time charter equivalent rate of $24,254 and $21,559 per day, respectively. Please refer to a subsequent section of this Press Release for a calculation of the TCE.
Adjusted EBITDA for the period was $122.1 million compared to $110.5 million for the respective period of 2009, an increase of approximately 10.5%. Please refer to a subsequent section of this Press Release for a reconciliation of adjusted EBITDA to Net Income.