Seaspan Corporation (SSW)

SSW 
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Seaspan Corporation (SSW)

Q1 2014 Results Earnings Conference Call

April 29, 2014 8:30 AM ET

Executives

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

Sai Chu - Chief Financial Officer

Analysts

Ken Hoexter - Merrill Lynch

Keith Mori - Barclays

Seth Lowry - Citi

Gregory Lewis - Credit Suisse

Benjamin Nolan - Stifel

Michael Webber - Wells Fargo

Presentation

Operator

Welcome to the Seaspan Corporation Conference Call to discuss the financial results for the quarter ending March 31, 2014. 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. Please go ahead.

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 contained in the first quarter of 2014 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, 2013, filed with the SEC.

I'd 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 earnings per share.

In regards to such financial measures and for reconciliations 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 first quarter highlights, as well as some more recent developments.

Gerry Wang

Thank you, Sai. Please turn to slide three of the webcast presentation. In Q1 we continued to deliver on our stated strategy. We continue to grow our fleet, investing in modern fuel-efficient vessels. We ended into long-term time charters with high-quality customers. We raise capital funds, our growth which improved our financial flexibility and further diversified our sources of capital.

I will now review our results for the first quarter in more detail. First, we ended the quarter with 72 vessels in our operating fleet and 74 vessels in our managed fleet. We took delivery of our first SAVER design containership the Hanjin Buddha, which commenced a 10-year time charter with Hanjin Shipping at the end of March. Our operating fleet achieved 98.9% utilization for the quarter and continued to generate stable cash flows from long-term time charters.

Second, we entered into time charters with MOL and continue to expand our fleet with exercise of option to build four 10,000 TEU SAVER design vessels at YZJ. We have now finalized charters with MOL for additional six vessels for a total of 10,000 TEU newbuild vessels to be constructed at YZJ part of which will be owned by Seaspan.

We are in discussion with our customers to secure long-term time charters for the remaining four times 10,000 TEU fuel-efficient eco-class vessels which are being constructed at YZJ, two of these vessels will be retained by Seaspan.

Third, we completed several important financing transactions since the beginning of the year that raise approximately $470 million of capital that we intend to use primarily refund the growth of our high-quality fleet which is Sai will discuss in more detail.

I will now turn the call over to Sai to discuss our quarterly financial results. Sai, please?

Sai Chu

Thanks Gerry. Please turn to slide four, where I will discuss our results for Q1 2014 compared to Q1 2013. Seaspan has one of largest order books in the industry totaling approximately $1.8 billion, which has been entered into that bottom part of the cycle.

On delivery these vessels are expected to generate shareholder through stable cash flows from the long-term charters. However, we have raised capital early to fund this newbuild program, anticipate this will impact our certain key financial metrics as the ships deliver through to 2016.

Revenues increased by $3.1 million, 1.9%. Increase was primarily due to increase charter revenue from two 4600 that delivered in mid-2013 and Hanjin Buddha we had at the end of Q1, as well as 172 fewer unscheduled off-hire days Q1.

These increases were partially offset by lower rates on certain vessels that were re-chartered during 2013 and by 10 days of schedule dry-docking to the MOL Emerald commence during the quarter. Vessel utilization was 98.9% compared to 96.1%. Improvement in utilization was primarily results of 172 fewer unscheduled off-hire off charter days.

Ship OpEx was $41.3 million, an increase of $3.7 million or 9.9%, approximately $2.3 million of the increase is due to increases in crew wages and expenses, which were the results of raises for ship officers that took effect in Q3 2013 and Q1 this quarter, as well as an increase in Seaspan's officer headcount of approximately 4% due to expansion of our fleet, as well as ownership and managed days increased by 3.1%.

For the rest of this year we do not anticipate a material increase in crew wages and salaries other than those related to the increased fleet size as another four 10K which are schedule to deliver over the next three months -- quarters.

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