Global Ship Lease, Inc. (GSL)

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Global Ship Lease, Inc. (GSL)

Q3 2012 Earnings Call

November 14, 2012 10:30 am ET

Executives

Ian J. Webber – Chief Executive Officer

Susan J. Cook – Chief Financial Officer

Analysts

Mark Suarez – Euro Pacific Capital

Chris Snyder – Sidoti & Company

Zach Pancratz – DRZ

Steven Schuster – Bridge Street Asset Management

Michael Demaray – Elevated Capital LLC

Ross Taylor – Somerset Capital Advisers LLC

Presentation

Operator

Good day everyone and welcome to the Global Ship Lease 2012 Conference Call. This call is being recorded. Joining us on the call today are Ian Webber, Chief Executive Officer and Susan Cook, Chief Financial Officer. We will conduct a question-and-answer session after the opening remarks and instructions will follow at that time.

I will now turn the call over to Mr. Webber, please go ahead sir.

Ian J. Webber

Thank you very much. Good morning everybody and thank you for joining us today. I hope you’ve been able to look at the earnings release that we issued earlier on and have been able to access the slides that accompany this call. Slides one and two remind you that the call today may include forward-looking statements that are based on current expectations and assumptions and are, by their nature, inherently uncertain and outside of the Company’s control.

Actual results may differ materially from these forward-looking statements due to many factors including those described in the Safe Harbor section of the slide presentation. We also draw your attention to the risk factors section of our annual report on Form 20-F, which we filed in April of this year. You can access this via our website or via the SECs. All of our statements are qualified by these and other disclosures in our reports filed with the SEC.

And we don’t undertake any duty to update forward looking statements. For reconciliations of the non U.S. GAAP financial measures to which we will refer during this call to the most directly comparable measures calculated and presented in accordance with GAAP, you should refer to the earnings release that we issued earlier today, which is also available at our website www.globalshiplease.com.

I will start by reviewing the third quarter highlights and then discuss our charters and after some comments on the industry overall and details on our recently obtained bank waiver. I’ll turn the call over to Susan for comments on our financials. Finally, after brief concluding remarks, we’ll open the call out for questions.

Slide three shows the third quarter highlights. We don’t generated strong financial results during the third quarter, as a challenging market conditions for the container shipping industry have less of an impact on Global Ship Lease due to our long-term charter coverage. As discussed on our Q2 earnings call, we renewed charters for two ships that expired in September, consistent with our business model of operating our entire fleets of 17 vessels on fixed rate charters.

With the new charters in operation, we continue to achieve a strong utilization and stable predictable cash flows.

For the third quarter, we reported revenue of $39.5 million and adjusted EBITDA of $26.9 million both up from the third quarter 2011, from improved utilization which was 99.2% for the quarter. The improvements is mainly from 47 days less offhire during the current quarter and the prior period from fewer planned in drydockings.

As we have previously discussed on average, we lose approximately $300,000 in revenue for each drydocking with the further approximate $1.3 million of cost per vessel that most of which indeed is capitalized on inventories.

In the coming years, we will continue to see a positive impact on our results in cash flow as we’re scheduled for only 3 drydockings in 2013, two in 2014 and none in 2015. This compares to six both this year and last year.

Our strong cash flows have enabled us to further strengthen our balance sheet by aggressively repaying debt. In the third quarter, we reduced the outstanding borrowings under our credit facility by $23 million and since the fourth quarter of 2009, when we started to repay debt, we’ve repaid a total of $162.3 million.

With net bank debt at September 30, 2012 up just over $407 million on a trailing 12-month adjusted EBITDA of $105.4 million. And net bank debt to adjusted EBITDA was 3.9 times at the end of the quarter.

While we’ve made significant reductions in the amount outstanding under our credit facility. The downturn in the container shipping market particularly effecting owners, continues to weight heavily on asset values. Given this reality, we proactively initiated discussions with our bank group and have agreed that the loan-to-value test required by a credit facility will be waived for two years. I’ll talk more on this shortly.

Slide four shows an overview of our financial results for the last 19 quarters. The base or the bottom of that page our performance correlates with the graph about the time charter index, which is designed to indicate the hope or not of the spot charger market.

As you can see, there has been much volatility in the time charter rate index. The financial crisis, an onset of the global recession in 2008 have negative effects on the rate of demand growth for our industry while supply continue to grow strongly.

With the exception of 2010, which saw an unexpected surge in demand, there has been an excessive containership in capacity and this combined with continuing uncertainty about the global economy has created uncertainty in the industry. That said, despite the volatility of the market, Global Ship Lease results have remained consistently strong, illustrating the robustness of our long-term leasing model through the cycle.

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