Seaspan Corporation (SSW)

SSW 
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Seaspan Corporation (SSW)

Q2 2013 Earnings Call

July 30, 2013 08:00 AM ET

Executives

Sai Chu - CFO

Gerry Wang - CEO

Analysts

Ken Hoexter - Bank of America-Merrill Lynch

Josh Katzeff - Deutsche Bank (ph)

Keith Mori - Barclays

Michael Webber – Wells Fargo

Ben Nolan - Stifel

Presentation

Operator

Welcome to the Seaspan Corporation Conference Call to discuss the Financial Results for the Three and Six Months ended June 30, 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 the call for questions.

I will now turn the call over to Sai Chu.

Sai 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 second 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, 2012 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 converted. In regards to such financial measures and for reconciliation of such measures to the most closely comparable U.S. GAAP measures, please refer to our earnings release.

I will now pass the call over to Gerry, who will discuss our second quarter highlights as well as some more recent developments.

Gerry Wang

Thank you very much, Sai. Please turn to slide three of the webcast presentation. For Q2 we continue to execute on our strategy and deliver solid results. Firstly our operating fleet performed well and achieved high levels of utilization for the quarter.

Secondly our new building program is progressing very smoothly at both HHI and YZJ (ph). Thirdly we ordered certain large fuel efficient container ships, with one major Asian ship builder, as part of a growth strategy and expect to execute long term charters with one of the majors shortly. Finally we finalized sea financing transactions to cover our first fleet Yang Ming 14,000 tier vessels.

I will now review our results, for the second quarter in more detail. Seaspan's operating fleet achieved 99% utilization and continued to generate predictable and stable cash flows from its long term time charters. This provides fundamental support or our dividend, and combined with our strong balance sheet and flexible capital structure, it positions Seaspan to continue to capitalize on growth opportunities.

Our 10,000 TEU new building program at YZJ (ph) and our 14,000 TEU program at HHI are both proceeding nicely. We expect deliveries to take place at full contracts and the construction quality to meet our standards.

For the year 2014, including GCI vessels, we plan to take deliveries of 10,000 TEU vessels built at YZJ (ph). Our Board of Directors declared $31.25 per share dividend on our class A common shares for Q2 2013, representing an expected annual dividend of $1.25 for the year 2013.

We took delivery of 4,600 TEU vessel on a two year fixed time charter with MOL, which increased the operating fleet to 70 vessels at quarter's end. And we also took delivery of the second 4,600 TEU vessels on charter to MOL at the beginning of July to reach our current operating fleet of 71 vessels.

We've closed two financing transactions during the quarter, including $174 million term loan facility with an Asian Bank for two (inaudible) building container ships that will be charter Yang Ming. And subsequently last week we concluded the financing arrangement with a European bank for our third 14,000 TEU new building containership. This concludes the financing requirements for our first three ship charters with Yang Ming Lines.

Furthermore we also closed a $30 million term loan facility with a U.S. bank, and Australian bank to fund the acquisition of the two 4,600 TEU containerships on charter MOL. We now only have two 10,000 TEU vessels, remaining and financed but we have received a number of competitive financing proposals and we expect to conclude the transaction shortly.

Finally I am pleased to announce that we have started Q3 2013 by ordering certain large fuel efficient containerships with a major Asian ship builder, for approximately $550 million for delivery in 2015.

Seaspan expects to sign long term time charters for these vessels with one of the majors shortly. The allocation of the vessels between Seaspan and GCI is to be determined as per the ROFR. As part of our strategy we'll be actively pursuing additional growth opportunities and will report the transactions as soon as they are closed entirely. Before turning the call over to Sai, our CFO, a note that except for Seaspan Ningbo, which was delivered to us on July30th, our entire operating suite remains charted out.

Sai will now discuss our quarterly financial results. Sai please.

Sai Chu

Thanks Gerry. Please turn to slide four for a summary of our second quarter and first half results compared to the results for the comparable period of 2012. Revenues were consistent in Q2 compared with last year as additional revenue from entire quarter’s worth of earnings from two 13,000 TEU vessels that delivered during Q2 were offset by lower revenues from the five 4250s operating in the short term market during the quarter. Vessel utilization continuing to be strong at 99% during the quarter, compared to 99.4% for last year’s quarter.

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