B. Normalized Net Earnings and Normalized Earnings per Share
Normalized net earnings is defined as net earnings adjusted for items such as interest expense, change in fair value of financial instruments, interest expense at the hedged rate, organizational development costs, losses (gains) on vessels and certain other items Seaspan believes affect the comparability of operating results. Normalized net earnings is a useful measure because it excludes those items that Seaspan believes are not representative of its operating performance.
Normalized net earnings is not defined by GAAP and should not be considered as an alternative to net earnings or any other indicator of Seaspan's performance required to be reported by GAAP.
Normalized earnings per share, converted, is calculated as normalized net earnings, less dividends on Series B (until their repurchase on November 30, 2011), Series C preferred shares and Series D preferred shares, divided by the "converted" number of shares outstanding for the period. The Series A preferred shares automatically convert to Class A common shares at a price of $15.00 per share at any time on or after January 31, 2014 if the trailing 30-day average trading price of the common shares is equal to or above $15.00. If the share price is less than $15.00, Seaspan can choose to not convert the preferred shares and to increase the annual increase in the liquidation preference to 15% per annum from 12%. The "converted" number of shares includes: basic weighted average number of shares, share-based compensation, contingent consideration, shares held in escrow and the impact of the Series A preferred shares converted at $15.00 per share. This method reflects Seaspan's ability to control the conversion if the share price is less than $15.00 and the per share impact of the preferred shares conversion at $15.00.
Normalized earnings per share, basic, can be computed as normalized net earnings attributable to common shareholders divided by the weighted-average number of shares used to compute reported earnings per share, basic.
Normalized earnings per share, converted, diluted, and basic are not defined by GAAP and should not be considered as an alternative to earnings per share or any other indicator of Seaspan's performance required to be reported by GAAP.
SEASPAN CORPORATION RECONCILIATION OF NON-GAAP FINANCIAL MEASURES FOR THE QUARTER AND YEARS ENDED DECEMBER 31, 2012 AND 2011 (IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
B. Normalized Net Earnings and Normalized Earnings per Share (continued)
Quarter Ended Year Ended December 31, December 31, ----------------------- ----------------------- 2012 2011 2012 2011 ----------- ----------- ----------- -----------Net earnings (loss) $ 58,983 $ 23,517 $ 121,305 $ (83,400)Adjust: Interest expense 17,333 16,048 71,996 50,849 Change in fair value of financial instruments 3,391 27,502 135,998 281,027 Organizational development costs (2) 441 3,000 1,600 3,000 Loss (gain) on vessels (4) - 7,347 (9,773) 16,237 Interest expense at the hedged rate(5) (48,070) (41,961) (184,433) (144,306) ----------- ----------- ----------- -----------Normalized net earnings $ 32,078 $ 35,453 $ 136,693 $ 123,407 ----------- ----------- ----------- -----------Less: preferred share dividends Series A 8,979 7,976 34,195 30,295 Series B - - - 1,813 Series B premium on redemption - (2,873) - (2,873) Series C (including amortization of issuance costs) 8,492 8,468 34,112 28,497 Series D 309 - 309 - ----------- ----------- ----------- ----------- 17,780 13,571 68,616 57,732 ----------- ----------- ----------- -----------Normalized net earnings attributable to common shareholders $ 14,298 $ 21,882 $ 68,077 $ 65,675 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------Weighted average number of shares used to compute earnings (loss) per shareReported and normalized, basic 62,727 69,551 62,923 69,217 Share-based compensation 297 162 238 132 Contingent consideration 1,329 - 1,236 - Shares held in escrow 586 - 545 - Series A preferred shares liquidation preference converted at $15 20,092 17,846 19,227 17,078 ----------- ----------- ----------- -----------Normalized, converted 85,031 87,559 84,169 86,427 Series A preferred shares 115% premium (30-day trailing average) - 5,453 - 2,158 ----------- ----------- ----------- -----------Reported, diluted(6) 85,031 93,012 84,169 88,585 ----------- ----------- ----------- -----------Earnings (loss) per share: Reported, basic $ 0.66 $ 0.13 $ 0.84 $ (2.04) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Reported, diluted $ 0.59 $ 0.13 $ 0.81 $ (2.04) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Normalized, converted - preferred shares converted at $15(7) $ 0.27 $ 0.31 $ 1.22 $ 1.08 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- SEASPAN CORPORATION RECONCILIATION OF NON-GAAP FINANCIAL MEASURES FOR THE QUARTER AND YEARS ENDED DECEMBER 31, 2012 AND 2011 (IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE AMOUNTS)
