Seaspan Corporation (SSW)

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Seaspan Corp. (SSW)

Q3 2009 Earnings Call

November 4, 2009 08:30 AM ET


Sai Chu - Chief Financial Officer

Gerry Wang - Chief Executive Officer


Omar Nokta - Dahlman Rose

Urs Dur - Lazard Capital Markets

Gregory Lewis - Credit Suisse

Noah Parquette - Cantor Fitzgerald

Michael Urban - Deutsche Bank

Matthew Troy - Citigroup



Welcome to the Seaspan Corporation conference call to discuss the financial results for the three and nine-month period ended September 30th, 2009. Hosting the call today is Gerry Wang, Chief Executive Officer of the 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 to questions and answers. 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 this presentation contains certain forward-looking statements as such term is defined in Section 21-E of the Securities Exchange Act of 1934 as amended, concerning future events in our operations, performance and financial condition including, in particular, the likelihood of our success in developing and expanding our business.

These forward-looking statements reflect the management's current views only as of the date of this presentation and are not intended to give any assurance as to future results. As a result, you are cautioned not to rely on any forward-looking statement.

Although these statements are based upon assumptions we believe to be reasonable based upon available information, they are subject to risks and uncertainties detailed from time to time in our periodic reports.

We expressly disclaim any obligation to update or revise any of these forward-looking statements whether it’s because of future events, new information, a change in our views or our expectations or otherwise. We make no prediction or statement about the performance of our common shares.

I will now turn the call over to Gerry.

Gerry Wang

Good morning everyone. Thank you for joining today’s conference call. During the third quarter, Seaspan continued it’s successful operations despite the ongoing industry downturn.

We achieved the following: first, we continued to grow aboard our fleet and in contracted revenue streams. Second, our fully time chartered fleet continued to achieve strong utilization with minimal upside.

Third, we continued to receive revenue from our charterers all of whom performed their obligations as expected under their respective charter party agreements. And finally, we enhanced our capital structure and the financial flexibility while continuing to distribute dividends to our shareholders.

Please turn to slide three, which summarizes Seaspan’s third quarter financial and operational highlights. In terms of our financial performance, we reported revenue of $74.1 million, normalized earnings of $20.2 million and the cash available for distribution of $38.6 million.

On October the 1st, we closed the second and final $100 million tranche of the $200 million preferred share issuance with a group of our sponsors including Dennis Washington. We appreciate the strong support our sponsors continue to demonstrate for the company’s strategy and the future prospects.

During the third quarter our fleet continued to perform very well achieving 99.4% utilization. We once again had no major incidents related to piracy, collisions or the environment, which is a result of our modern fleet, experienced crews and commitment to operational excellence. Charter parties continue to perform as expected.

During the third quarter, we also took delivery of two new vessels increasing our operating fleet to 41 vessels. 27 container ships are to be delivered over approximately the next 2.5 years. These are the new building contracts we have contracted.

All of the 68 vessels of Seaspan’s contracted fleet are committed to long-term time charters. Seaspan’s contracted annual revenue for its 41vessel operating fleet, currently totals approximately $300 million. Upon delivery of our entire fleet of 68 vessels, annual revenue and cash flow are expected to grow substantially.

For the third quarter, we declared a $0.10 per share dividend increase in cumulative dividends declared since our IPO in August 2005 to $6.39 per share. It is important to highlight that the $0.10 dividend represents a conservative PI ratio and it reflects our prudent focus on redeploying Seaspan’s growing cash flow to help fund our new building program.

This conservative PI ratio combined with other actions we have taken including the $300 million preferred share issuance that I discussed a moment ago and the delivery deferral of 30 new building vessels has significantly enhanced the company’s financial strength and the capital structure.

Based on cash returns from operations combined with our committed debt and equity financing we have now secured nearly all of the capital needed to finance our contracted fleet growth.

Now please turn to slide four. I will review the company’s contracted revenue stream. Seaspan’s fleet of 68 vessels are all signed to long-term contracts with a total contracted revenue of approximately $7 billion. Our operating fleet continues to perform in accordance with our charter agreements.

All 41 operating vessels are committed to long-term time charters with average charger ratings of approximately seven years and maturities staggered over a period of approximately 12 years. The earliest contractual renewal is around mid 2011. Upon delivery of our 27 new buildings, our total fleet of 68 vessels will commence time charters with an average duration of approximately nine years and maturities staggered over a period of approximately 15 years.

Please turn to Slide 5, where I will briefly discuss our customer relations. Seaspan’s customer base consists primarily of leading Asian liner companies, which we believe represent a core differentiator for the company in the current economic environment. Our future deliveries of 27 new buildings remain committed to charters with 16 ships to COSCO, two to MOL, seven to Kline and two to CSAV.

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