Global Ship Lease, Inc. (GSL)

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Global Ship Lease, Inc. (GSL)

Q4 2012 Earnings Conference Call

March 11, 2013 10:30 am ET

Executives

Ian J. Webber - Chief Executive Officer

Susan J. Cook - Chief Financial Officer

Analysts

Mark Suarez - Euro Pacific Capital

Presentation

Operator

Good day, everyone, and welcome to the Global Ship Lease Fourth Quarter 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. 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 that you’ve been able to look at the earnings release which we issued before the market opened and have also been able to access the slides that accompany this call. As ever, slides 1 and 2 remind you that today's call 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 filed on Form 20-F, on April 13, 2012, which you can access via our website or via the SEC.

All our statements are qualified by these and other disclosures in our reports filed with the SEC. We do not undertake any duty to update forward looking statements. For reconciliations of the non-GAAP financial measures to which we will refer during this call to the most directly comparable measures calculated and presented in accordance with GAAP, please refer to the earnings release that we issued this morning, which is also available on our website.

I'd like to start by reviewing the fourth quarter and the full-year 2012 highlights and then discuss our charters. After reminding you about our relief from the loan-to-value test, I'll offer some comments on the industry overall, including CMA CGM in particular, as our charterer. Then also turn the call over to Susan for comments on our financials. Finally, after concluding remarks, we'll open the call up for questions.

Slide 3 shows the Company's highlights for the fourth quarter and the full year. 2012 was another year in which we delivered strong consistent results, pretty much exactly in line with our business plan. All of our 17 vessels were and remain fully employed on time charters and with only 98 days offhire, a vast majority of which were for fixed planned drydockings, we achieved overall utilization of 98.4% for the year. Our high utilization enabled us to generate adjusted EBITDA of $102.2 million in the year on revenue of $153.2 million.

Along with strong financial results, we continue to focus on delevering our balance sheet by using a sizable cash flow to reduce our outstanding borrowings. For the year, we paid down a little under $58 million of debt and a total of $173.4 million since we started repaying debt in fourth quarter 2009. At the end of the year, our ratio of net bank debt to adjusted EBITDA continued to be less than 4 to 1.

As discussed on our third quarter earnings call in November, we proactively approached our bank group to waive the loan-to-value test required by our credit facility. The waiver was to last for a two-year period. This cleared one obstacle to exploring capital market opportunities to recapitalize the Company as we've now brought long-term relief from asset value volatility. More on this subject later.

Slide 4 provides a summary of our financial results since the Company began operations in a meaningful way in the first quarter of 2008. This slide clearly demonstrates the value of our business model. Despite the volatility that charter rates have experienced for much of the past several years, as the balance between supply and demand flexed and as seen in the time charter index rate at the top of the page, we've delivered consistent results from our long-term fixed-rate charters.

With the successful execution of our business model, we've generated solid revenue, adjusted EBITDA, operating income, and new optimization on a quarter-to-quarter basis. In fact, the only quarterly fluctuations that we've experienced since we grew our fleet to 17 vessels are primarily due to days of offhire the planned drydockings. You could say that we have not missed the number.

Turning to Slide 5, I'll briefly review our fleet and charter profile. For those of you who are new to GSL, our fleet has an average age of 8.8 years out of an economic life of 30. Our time charter coverage has an average remaining contract term of 7.4 years, giving a revenue stream of approximately $1 billion. This is very important to us as with a stable and reasonably predictable cost raise, together with this contracted revenue, we have high visibility of future cash flow.

In the meantime, our near-term exposure to the spot market is very limited with only two vessels coming open in the next three years. Under the terms of their current contracts, these vessels earn just under $10,000 each per day or approximately $7 million annualized. This is only 5% of our total revenue. We started to explore opportunities to re-charter these vessels when the current contracts expire, which would at the earliest be in May of this year.

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