C. Adjusted EBITDA
Adjusted EBITDA is defined as net earnings before interest expense and other debt-related expenses, income tax expense, interest income, depreciation and amortization, bareboat charter adjustment, organizational development costs, losses (gains) on vessels, change in fair value of financial instruments and certain other items that Seaspan believes are not representative of its operating performance.
Adjusted EBITDA provides useful information to investors in assessing Seaspan's results of operations. Seaspan believes that this measure is useful in assessing performance and highlighting trends on an overall basis. Seaspan also believes that this measure can be useful in comparing its results with those of other companies. The GAAP measure most directly comparable to Adjusted EBITDA is net earnings. Adjusted EBITDA 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.
Quarter Ended Year Ended December 31, December 31, ----------------------- ----------------------- 2012 2011 2012 2011 ----------- ----------- ----------- -----------Net earnings (loss) $ 58,983 $ 23,517 $ 121,305 $ (83,400)Add: Interest expense 17,333 16,048 71,996 50,849 Interest income (262) (383) (1,190) (854) Undrawn credit facility fees 168 848 1,516 4,282 Depreciation and amortization 42,799 38,154 165,541 140,354 Amortization of deferred charges 2,931 853 8,574 3,421 Bareboat charter adjustment, net (1) 2,446 1,490 9,472 1,490 Organizational development costs (2) 441 3,000 1,600 3,000 Loss (gain) on vessels(4) - 7,347 (9,773) 16,237 Change in fair value of financial instruments 3,391 27,502 135,998 281,027 ----------- ----------- ----------- -----------Adjusted EBITDA $ 128,230 $ 118,376 $ 505,039 $ 416,406 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------(1) In the second half of 2011, Seaspan entered into agreements to bareboat charter four 4800 TEU vessels to MSC for a five year term, beginning from vessel delivery dates that occurred in 2011. Upon delivery of the vessels to MSC, the transactions were accounted for as sales-type leases. The vessels were disposed of and a gross investment in lease was recorded, which is being amortized to income through revenue. The bareboat charter adjustment is included to reverse the GAAP accounting treatment and reflect the transaction as if the vessels had not been disposed of. Therefore, the bareboat charter fees are added back and the interest income from leasing, which is recorded in revenue, is deducted resulting in a net bareboat charter adjustment.(2) Organizational development costs include professional fees and integration costs related to the acquisition of the Manager.(3) Dividends related to the Series B and Series C preferred shares have been deducted as they reduce cash available for distribution to common shareholders. All outstanding Series B preferred shares were redeemed on November 30, 2011.(4) Gains or losses on disposal of vessels are excluded from the calculation. Included in the current period adjustment is the gain on sale of vessel that resulted from the sale of the Madinah to a U.S. bank on June 27, 2012. Included in the prior period adjustment is the loss on vessels that resulted from the sale of the four 4800 TEU vessels to MSC as a result of the bareboat charters which is considered a sales-type lease and accounted for as a disposition upon delivery of the vessels in October 2011.(5) Interest expense at the hedged rate is calculated as the interest incurred on operating debt at the fixed rate on the related interest rate swaps plus the applicable margin on the related credit facilities and variable rate leases, on an accrual basis. Interest expense on fixed rate leases is calculated on the effective interest rate.(6) If the effect of Series A preferred shares is anti-dilutive, their effect is excluded from the computation of reported diluted earnings per share.(7) Normalized earnings per share, converted, decreased for the quarter ended December 31, 2012, and increased for the year ended December 31, 2012 as detailed in the table below: Quarter Ended Year Ended December 31, December 31, --------------- ---------------Normalized earnings per share, converted- preferred shares converted at $15, December 31, 2011 $ 0.31 $ 1.08Excluding share count changes: Increase (decrease) in normalized earnings (0.04) 0.15 Decrease from impact of preferred shares (0.01) (0.05)Share count changes: Decrease in converted share count (from 87,559 to 85,031 and from 86,427 to 84,169 for the quarter and year ended, respectively) 0.01 0.04 --------------- ---------------Normalized earnings per share, converted- preferred shares converted at $15, December 31, 2012 $ 0.27 $ 1.22 --------------- --------------- --------------- ---------------
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This release contains certain forward-looking statements (as such term is defined in Section 21E of the Securities Exchange Act of 1934, as amended), which reflect management's current views with respect to certain future events and performance, including, in particular, statements regarding: future operating results; expansion of Seaspan's business; future time charters; future dividends; the effects of the acquisition of the Manager on Seaspan's ship operating expenses and general and administrative expenses; repurchases of Seaspan common shares under its share repurchase program; vessel deliveries; vessel financing arrangements; and Seaspan's capital requirements. Although these statements are based upon assumptions Seaspan believes to be reasonable, they are subject to risks and uncertainties. These risks and uncertainties include, but are not limited to: the availability to Seaspan of containership acquisition opportunities; the availability and cost to Seaspan of financing to pursue growth opportunities; the number of additional vessels managed by the Manager in the future; chartering rates; conditions in the containership market; increased operating expenses; the number of off-hire days; dry-docking requirements; Seaspan's ability to borrow funds under its credit facilities and to obtain additional financing in the future; Seaspan's future cash flows and its ability to make dividend and other payments; the time that it may take to construct new ships; Seaspan's continued ability to enter into primarily long-term, fixed-rate time charters with customers; changes in governmental rules and regulations or actions taken by regulatory authorities; the financial condition of shipyards, charterers, lenders, refund guarantors and other counterparties and their ability to perform their obligations under their agreements with Seaspan; the potential for early termination of long-term contracts and Seaspan's potential inability to renew or replace long-term contracts; conditions in the public equity markets and the price of Seaspan's common shares; and other factors detailed from time to time in Seaspan's periodic reports and filings with the Securities and Exchange Commission, including Seaspan's Report on Form 20-F for the year ended December 31, 2011. Seaspan expressly disclaims any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in Seaspan's views or expectations, or otherwise.
Contacts:
Investor Relations Inquiries:
Seaspan Corporation
Mr. Sai W. Chu
Chief Financial Officer
604-638-2575
www.seaspancorp.com
Media Inquiries:
The IGB Group
Mr. Leon Berman
212-477-8438
