Seaspan Corporation (SSW)

SSW 
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Seaspan Corporation (SSW)

Q4 2012 Results Earnings Call

March 6, 2013 8:00 p.m. ET

Executives

Sai Chu – CFO

Gerry Wang – Co-Chairman and CEO

Analysts

Urs Dur - Clarkson Capital Markets

Gregory Lewis - Credit Suisse

Ken Hoexter - Merrill Lynch

[unintelligible] - Deutsche Bank

Presentation

Operator

Welcome to the to the Seaspan Corporation call to discuss the financial results for the quarter and year ended December 31, 2012. Hosting the call today is Gerry Wang, Chief Executive Officer, Co-Chairman, and Co-Founder of Seaspan Corporation, and Sai Chu, Chief Financial Officer of Seaspan Corporation.

Mr. Wang and Mr. Chu will be making some introductory comments and then we’ll open the call for questions. I will now turn the call over to Sai Chu.

Sai Chu

Thanks, operator. Good morning, everyone, and thank you for joining us today. Before we begin, please allow me to remind you that our discussion today contains forward-looking statements. Actual results may differ materially from results projected by those forward-looking statements.

Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the fourth quarter 2012 earnings release and earnings webcast presentation slides available on our website at www.seaspancorp.com, as well as our annual report on Form 20-F for the year ended December 31, 2011 filed with the SEC.

I would also like to remind you that during this call, we will discuss certain non-GAAP financial measures including adjusted EBITDA, cash available for distribution to common shareholders, normalized net earnings, normalized earnings per share, and normalized converted earnings per share.

In regards to such financial measures and for reconciliation of such measures to the most widely comparable U.S. GAAP measures, please refer to our earnings release. I will now pass the call over to Gerry, who will discuss our fourth quarter highlights as well as some more recent developments.

Gerry Wang

Thank, Sai. Good morning from Hong Kong. Please turn to slide three of the webcast presentation. Against a backdrop of all the uncertainties in the global economy, and our shipping industry, simply speaking, our business continued to perform as expected during the year of 2012.

Our revenue and normalized earnings grew to record levels as we took delivery of the final four of the [unintelligible] [TEU] new vessels to command 12-year time charters with cost comp. We diversified our capital structure and enhanced our financial flexibility.

We returned capital to shareholders, distributing $1 per share in common dividends and repurchasing over $170 million of our common shares. And, more importantly, we are taking advantage of growth opportunities, further increasing our contractual revenue streams and cash flows and enhancing our high-quality customer base.

Turning to fourth quarter results, I would like to highlight three points. First, we now have 69 vessels in service. Our operating fleet achieved vessel utilization rates of 98.5% and 99.0%, respectively for the fourth quarter and the full year 2012 without any material off hire incidents. Specifically, our revenue and cash available for distribution grew by 8.8% and 8.2% respectively for the quarter, compared to the same period in 2011.

Second, we remain committed to growing our common share dividend in a sustainable manner that balances our financial strength and our ability to expand our fleet. I am now pleased to announce that we will increase our first quarter 2013 quarterly common share dividend by 25% to $0.3125 per share, representing an expected annual dividend of $1.25 per share for the four quarters ending December 31, 2013.

Third, we completed the public offering of our series B preferred shares for proceeds of approximately $75 million. This equity offering represents another innovative transaction for Seaspan, further strengthening our balance sheet and positioning the company to capitalize on the attractive acquisition opportunities for growth.

We are pleased to have commenced 2013 with the announcement of two important transactions that will grow our total managed fleet to 89 vessels. The two deals validate the benefits of our innovative SAVER design and the need for fuel efficient vessels while demonstrating the importance of Seaspan’s operational and technical strength as a material success factor in the competitive bidding for the project.

First, we signed a contract with Hyundai Heavy Industries for the construction of five 14000 TEU newbuilding container ships for 2015 delivery. At the same time, we entered into 10-year fixed rate time charters with Yang Ming Lines of Taiwan at market rates.

Subsequently we signed a contract with [Jiangsu] [unintelligible] Shipyard of [unintelligible] for the construction of four 10000 TEU class newbuild containerships for 2014 delivery and entered into eight-year fixed rate time charters with MOL of Japan at market rates.

In connection with this new order for the MOL transaction, we also agreed to purchase four 10-year old 2003-built 4600 TEU container ships, which are scheduled for delivery over the next 12 months and the two-year-plus charters option for one more year at fixed rate time charters with MOL at above the market charter rates.

We are very pleased with this deal, which is economically viable on a standalone basis and it becomes even more attractive when combined with the newbuilding. The 10000 TEU vessels offer tremendous upside potential and far outweigh any potential downside on the 4600 TEU vessels.

I must emphasize the significance of these two transactions by highlighting the fact that these two vessel classes will represent [unintelligible] for Yang Ming and the second largest ship class for MOL, two of the best [unintelligible] in the industry.

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