Seaspan Corporation (SSW)

SSW 
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Seaspan Corporation (SSW)

Q1 2013 Earnings Call

April 30, 2013 8:00 am ET

Executives

Sai W. Chu – Chief Financial Officer

Gerry Wang, CEO – Co-Chairman and Co-Founder

Analysts

Ken Hoexter – Bank of America/Merrill Lynch

Gregory Lewis – Credit Suisse

Michael Webber – Wells Fargo Securities

Presentation

Operator

Welcome to the Seaspan Corporation Conference Call to Discuss the Financial Results for the Quarter Ended March 31, 2013. 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 will open up the call for questions.

I will now turn the call over to Sai Chu.

Sai W. Chu

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 first quarter 2013 earnings release and earnings webcast presentation slides available on our website at www.seaspancorp.com as well as in our Annual Report on Form 20-F for the year ended December 31, 2010 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 and normalized converted earnings per share. 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 first quarter highlights as well as some more recent developments.

Gerry Wang

Thank you, Sai. Please turn to slide three of the webcast presentation. For the first quarter, we continue to execute our strategy and deliver solid results. Our revenue and cash flows from operations continue to grow. We’ve further differentiated the company by successfully accessing attractive pricing to support our growth strategy. We announced our fourth dividend increase since March 2010. We continue to grow our fleet and diversify our customer base. And finally, we maintain a strong balance sheet and flexible capital structure, which position Seaspan to capitalize on future growth opportunities.

I will now review our results for the first quarter in more details. First, revenue and adjusted EBITDA grew by 7.5% and 4.7% respectively for the quarter compared to the same period in 2012. Seaspan 69 vessel operating fleet continued to perform well operationally during the quarter. Seasonality contributed to off-hire for four 4250 TEU vessels on short-term time charters, which affected our financial results and broaden our utilization for the quarter to 96.1%. As we speak, all of these vessels are now employed on time charters.

Second, based on Seaspan’s financial strength, strong contracted revenue stream and our confidence in the future, our Board approved a 25% increase in our quarterly common share dividend to $0.3125 per share for the first quarter of 2013 representing an expected annual dividend of a $1.25 per share for the four quarters ending December 31, 2013. We’ll remain committed to growing our common share dividends in a sustainable manner, but manages to our financial strength and our ability to expand our fleet.

Third, in January, we announced two transactions with Yang Ming Lines and MOL. We believe that the two deals, which will enable Seaspan to grow its fleet, managed fleet to 89 vessels, validate the benefits of our innovative SAVER design and the need for state-of-the-art efficient vessels. The deals demonstrated the importance of Seaspan’s operational and technical strength as the key effective factors in the competitive process we need new business with major line operators who have high demand for operational performance excellence.

In January, we signed newbuilding contract with Hyundai Heavy Industries for the construction of five 14,000 TEU class containerships for 2015 delivery. At the same time, we entered into long-term fixed-rate time charters with Yang Ming Lines of Taiwan at market rates. Subsequently, we signed newbuilding contracts with (inaudible) for the construction of four 10,000 TEU class containerships for 2014 delivery and entered into long-term fixed-rate charters with MOL at market rates.

As I mentioned on the fourth quarter call, those two vessel classes will present the flagship class for Yang Ming and the second largest ship class for MOL. In connection with this newbuilding order for the MOL transaction, we also agreed to purchase four 2003-built 4,600 TEU containerships and the two-year fixed-rate time charters with MOL plus MOL option for one more substantially above market charter rates. This year. And our right of first refusal agreement with GCI, Seaspan will retain the ownership of three of the five 14,000 TEU vessels, two of the four 10,000 TEU vessels; and two of the four 4600 TEU 2003-built ships. GCI will acquire the remaining ships, which will be included in Seaspan’s managed fleet.

We recently completed the financing for two of our Yang Ming 14,000 TEU new building vessels with an Asian bank and have progressed the documentation for financing of the first 14,000 TEU vessels with a European bank.

In addition, we have received various financing proposals for the remaining vessels, and we expect to close them within the next three months or so. Worth mentioning here, this financing transaction demonstrates our ability to access financing at attractive returns in the market that remains challenging to many of our competitors.

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