Depreciation and Amortization Expense
The increases in depreciation and amortization for the quarter and year ended December 31, 2012, from the corresponding periods in the prior year, are due to the increase in the size of the fleet. Four vessels delivered in 2012 and a full year of depreciation was taken for the 10 vessels delivered in 2011. The increase was partially offset by a reduction in depreciation as four vessels were sold to MSC in 2011 and the Madinah was sold in 2012.
General and Administrative Expense
For the quarter and year ended December 31, 2012, general and administrative expenses increased by $1.3 million and $7.8 million from $5.2 million and $16.8 million for the corresponding periods of the prior year. The increases were primarily attributable to a reclassification of $10.7 million in general and administrative expenses that would have been included in ship operating expense prior to the January 2012 acquisition of the Manager. Prior to the acquisition of the Manager, Seaspan was charged a portion of the Manager's general and administrative expenses and the remainder of the Manager's general and administrative expenses was included in the technical services fee and classified as ship operating expense. After the acquisition, based on the non-operating nature of the expenses, all of the Manager's general and administrative expenses have been reclassified from ship operating expense to general and administrative expenses.
For the quarter and year ended December 31, 2012, stock compensation expense and integration costs increased compared to the corresponding periods of the prior year but were offset by a decrease in professional fees that were incurred in 2011 related to the acquisition of the Manager.
Operating Lease Expense
On June 27, 2012, Seaspan sold the Madinah to a U.S. bank and is leasing the vessel back for approximately nine years. Prior to June 27, 2012, Seaspan owned the vessel and financed it with a term loan of $53.0 million which Seaspan entered into during November 2011. The $53.0 million loan was repaid using the proceeds from the sale to the U.S. bank. During the quarter and year ended December 31, 2012, Seaspan incurred operating lease expenses of $1.1 million and $3.1 million, respectively, for the six months in 2012 that Seaspan leased the Madinah. Since Seaspan had a $53.0 million term loan, Seaspan incurred interest expense of $0.4 million instead of operating lease expense for the quarter and year ended December 31, 2011.
Loss/Gain on Vessels
The Madinah $53.0 million term loan credit facility matured on June 27, 2012. On June 27, 2012, Seaspan sold the Madinah to the U.S. bank for $52.1 million, the amount outstanding under the term loan, which resulted in a non-cash gain on vessel of $9.8 million. The proceeds of this sale were used to fully repay the term loan. The losses of $7.3 million and $16.2 million for the quarter and year ended December 2011 resulted from the lease and sale of four vessels to MSC. The transactions were considered sales-type leases and were accounted for as a disposition of the vessels upon commencement of each lease.
As at December 31, 2012, the balance of Seaspan's long-term debt totaled $3.1 billion and Seaspan's other long-term liabilities was $651.6 million. As at December 31, 2012, Seaspan's operating debt balance was $3.0 billion. Interest expense is comprised primarily of interest incurred on long-term debt and other long-term liabilities at the variable rate calculated by reference to LIBOR plus the applicable margin incurred on debt for operating vessels and a reclassification of amounts from accumulated other comprehensive income related to previously designated hedging relationships. Interest incurred on long-term debt and other long-term liabilities for Seapsan's vessels under construction is capitalized to the cost of the respective vessels under construction.
Most Popular Stories
- American Airlines, US Airways Complete Merger
- ACA Delay Stresses Small Businesses
- Unemployed Wait as Lawmakers Debate
- Saab Gets Back into the Game; U.S. Auto Sales Soar
- Dell Offers Undisclosed Number of Employee Buyouts
- General Dynamics Plans 200 New Jobs in N.M.
- Authorities Close to Deal with JPMorgan Chase over Madoff Response
- Questions Remain in Jenni Rivera's Death
- U.S. Stocks Rise on Sysco Acquisition
- Harley Issues Motorcycle Recall