The increases in interest expense for the quarter and year ended December 31, 2012, were primarily due to the increases in average operating debt and other long-term liabilities attributed to the delivery of four 13100 TEU newbuilding vessels in 2012 and higher average LIBOR for the year ended December 31, 2012. For the quarter ended December 31, 2012, the increase in interest expense was partially offset by a lower average LIBOR compared to the quarter ended December 31, 2011. The average LIBOR charged on Seaspan's long-term debt for the quarter and year ended December 31, 2012 was 0.3% and 0.4%, compared to 0.35% for the comparable periods in the prior year. Although Seaspan has entered into fixed interest rate swaps for much of its variable rate debt, the difference between the variable interest rate and the swapped fixed-rate on operating debt is recorded in Seaspan's change in fair value of financial instruments.
Change in Fair Value of Financial Instruments
The change in fair value of financial instruments resulted in losses of $3.4 million and $136.0 million for the quarter and year ended December 31, 2012, respectively, compared to losses of $27.5 million and $281.0 million for the comparable periods last year. The decreases in change in fair value for the quarter and year ended December 31, 2012 were primarily due to decreases in the forward LIBOR curve. The fair value of interest rate swap and swaption agreements is subject to change based on the counterparty and Seaspan's company-specific credit risk included in the discount factor and the interest rate implied by the current swap curve, including its relative steepness. In determining the fair value, these factors are based on current information available to Seaspan. These factors are expected to change through the life of the instruments, causing the fair value to fluctuate significantly due to the large notional amounts and long-term nature of Seaspan's derivative instruments. Because these factors may change, the fair value of the instruments is an estimate and may deviate significantly from the actual cash settlements realized over the term of the instruments. Seaspan's valuation techniques have not changed and remain consistent with those followed by other valuation practitioners.
About Seaspan
Seaspan provides many of the world's major shipping lines with creative outsourcing alternatives to vessel ownership by offering long-term leases on large, modern containerships combined with industry-leading ship management and a reputation for safety, quality and innovation. Seaspan's managed fleet consists of 89 containerships representing a total capacity of approximately 600,000 TEU, including 16 newbuilding containerships on order scheduled for delivery by the end of 2015. Seaspan's current operating fleet of 69 vessels has an average age of approximately six years and an average remaining lease period of approximately six years.
Seaspan's common shares, Series C Preferred Shares and Series D Preferred Shares are listed on The New York Stock Exchange under the symbols "SSW", "SSW PR C" and "SSW PR D", respectively.
Conference Call and Webcast
Seaspan will host a conference call and webcast presentation for investors and analysts to discuss its results for the quarter and year ended December 31, 2012 on March 6, 2013 at 5:00 a.m. PT / 8:00 a.m. ET. Participants should call 1-877-246-9875 (US/Canada) or 1-707-287-9353 (International) and request the Seaspan call. A telephonic replay will be available for anyone unable to participate in the live call. To access the replay, call 1-855-859-2056 or 1-404-537-3406 and enter the replay passcode: 16242920. The recording will be available from March 6, 2013 at 8:00 a.m. PT / 11:00 a.m. ET through 8:59 p.m. PT / 11:59 p.m. ET on March 20, 2013. The conference call will also be broadcast live over the Internet and will include a slide presentation. To access the live webcast and slide presentation, go to www.seaspancorp.com and click on "News & Events" and then "Events & Presentations" for the link. The webcast and slides will be archived on the site for one year.
SEASPAN CORPORATION UNAUDITED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2012 (IN THOUSANDS OF US DOLLARS) December 31, December 31, 2012 2011 -------------- --------------AssetsCurrent assets: Cash and cash equivalents $ 393,478 $ 481,123 Short-term investments 36,100 - Accounts receivable 9,573 6,837 Prepaid expenses 20,902 17,398 Gross investment in lease 15,977 14,640 -------------- -------------- 476,030 519,998Vessels 4,785,968 4,289,331Vessels under construction 77,305 407,918Deferred charges 43,816 45,917Gross investment in lease 79,821 95,798Goodwill 75,321 -Other assets 71,561 88,754Fair value of financial instruments 41,031 - -------------- -------------- $ 5,650,853 $ 5,447,716 -------------- -------------- -------------- --------------Liabilities and Shareholders' EquityCurrent liabilities: Accounts payable and accrued liabilities $ 49,997 $ 47,400 Current portion of deferred revenue 25,111 23,257 Current portion of long-term debt 66,656 81,482 Current portion of other long-term liabilities 38,542 37,649 -------------- -------------- 180,306 189,788Deferred revenue 7,903 12,503Long-term debt 3,024,288 2,914,247Other long-term liabilities 613,049 583,263Fair value of financial instruments 606,740 564,490 -------------- -------------- 4,432,286 4,264,291Share capital 804 838Treasury shares (312) -Additional paid in capital 1,859,068 1,860,979Deficit (594,153) (622,406)Accumulated other comprehensive loss (46,840) (55,986) -------------- --------------Total shareholders' equity 1,218,567 1,183,425 -------------- -------------- $ 5,650,853 $ 5,447,716 -------------- -------------- -------------- -------------- SEASPAN CORPORATION UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT FOR THE QUARTER AND YEARS ENDED DECEMBER 31, 2012 AND 2011 (IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS) Quarter Ended Year Ended December 31, December 31, ----------------------- ----------------------- 2012 2011 2012 2011 ----------- ----------- ----------- -----------Revenue $ 169,783 $ 156,117 $ 660,794 $ 565,610Operating expenses: Ship operating 36,940 35,891 138,655 135,696 Depreciation and amortization 42,799 38,154 165,541 140,354 General and administrative 6,478 5,160 24,617 16,818 Operating lease 1,110 - 3,145 - Loss (gain) on vessels - 7,347 (9,773) 16,237 ----------- ----------- ----------- ----------- 87,327 86,552 322,185 309,105 ----------- ----------- ----------- -----------Operating earnings 82,456 69,565 338,609 256,505Other expenses (income): 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 Amortization of deferred charges 2,931 853 8,574 3,421 Change in fair value of financial instruments 3,391 27,502 135,998 281,027 Equity loss on investment 42 1,180 259 1,180 Other expenses (130) - 151 - ----------- ----------- ----------- ----------- 23,473 46,048 217,304 339,905 ----------- ----------- ----------- -----------Net earnings (loss) $ 58,983 $ 23,517 $ 121,305 $ (83,400)Deficit, beginning of period (628,889) (627,340) (622,406) (469,616)Dividends - common shares (15,755) (12,989) (58,940) (47,414)Dividends - Series B preferred shares - - - (1,813)Redemption of Series B preferred shares - 2,873 - 2,873Dividends - Series C preferred shares (8,312) (8,312) (33,250) (22,206)Amortization of Series C issuance costs (180) (155) (862) (830) ----------- ----------- ----------- -----------Deficit, end of period $ (594,153) $ (622,406) $ (594,153) $ (622,406) ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------Weighted average number of shares, basic 62,727 69,551 62,923 69,217Weighted average number of shares, diluted 85,031 69,713 64,942 69,217 Earnings (loss) per share, basic $ 0.66 $ 0.13 $ 0.84 $ (2.04) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Earnings (loss) per share, diluted $ 0.59 $ 0.13 $ 0.81 $ (2.04) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- SEASPAN CORPORATION UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND LOSS FOR THE QUARTER AND YEARS ENDED DECEMBER 31, 2012 AND 2011 (IN THOUSANDS OF US DOLLARS) Quarter Ended Year Ended December 31, December 31, ----------------------- ------------------------- 2012 2011 2012 2011 ----------- ----------- ----------- -------------Net earnings (loss) $ 58,983 $ 23,517 $ 121,305 $ (83,400)Other comprehensive income: Amounts reclassified to earnings (loss) during the period, relating to cash flow hedging instruments 1,940 2,863 9,146 12,175 ----------- ----------- ----------- -------------Comprehensive income (loss) $ 60,923 $ 26,380 $ 130,451 $ (71,225) ----------- ----------- ----------- ------------- ----------- ----------- ----------- ------------- SEASPAN CORPORATION UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE QUARTER AND YEARS ENDED DECEMBER 31, 2012 AND 2011 (IN THOUSANDS OF US DOLLARS) Quarter Ended Year Ended December 31, December 31, ----------------------- ----------------------- 2012 2011 2012 2011 ----------- ----------- ----------- -----------Cash from (used in):Operating activities: Net earnings (loss) $ 58,983 $ 23,517 $ 121,305 $ (83,400) Items not involving cash: Depreciation and amortization 42,799 38,154 165,541 140,354 Share-based compensation 1,349 1,012 4,779 3,278 Amortization of deferred charges 2,931 853 8,574 3,421 Amounts reclassified from other comprehensive loss to interest expense 1,715 2,700 8,310 11,670 Unrealized change in fair value of financial instruments (28,937) (4,071) 11,215 156,671 Loss (gain) on vessels - 7,347 (9,773) 16,237 Equity loss on investment 42 1,180 259 1,180Changes in assets and liabilities 8,333 10,514 973 (9,547) ----------- ----------- ----------- -----------Cash from operating activities 87,215 81,206 311,183 239,864 ----------- ----------- ----------- -----------Financing activities: Preferred shares issued, net of issue costs 74,700 (28) 74,700 344,539 Preferred shares redeemed, including costs - (24,600) - (24,600) Draws on credit facilities - 54,417 113,672 601,577 Repayment of credit facilities (6,189) (2,253) (44,569) (2,619) Shares repurchased, including related expenses (471) - (172,812) - Repayment of other long- term liabilities (9,914) (7,151) (53,516) (19,061) Financing fees (202) (1,982) (3,817) (9,990) Dividends on common shares (14,800) (9,371) (51,772) (34,375) Dividends on preferred shares (8,312) (8,312) (33,250) (23,178) Swaption premium payment - - (10,000) - ----------- ----------- ----------- -----------Cash from (used in) financing activities 34,812 720 (181,364) 832,293 ----------- ----------- ----------- -----------Investing activities: Proceeds (expenditures) for vessels 540 (19,776) (209,599) (621,947) Short-term investments (614) - (35,737) - Cash acquired on acquisition of Manager - - 23,911 - Restricted cash - - 5,000 - Intangible assets (1,475) 1,186 (1,039) (1,342) Investment in affiliate - 2,051 - (1,964) ----------- ----------- ----------- -----------Cash used in investing activities (1,549) (16,539) (217,464) (625,253) ----------- ----------- ----------- -----------Increase (decrease) in cash and cash equivalents 120,478 65,387 (87,645) 446,904Cash and cash equivalents, beginning of period 273,000 415,736 481,123 34,219 ----------- ----------- ----------- -----------Cash and cash equivalents, end of period $ 393,478 $ 481,123 $ 393,478 $ 481,123 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- SEASPAN CORPORATION RECONCILIATION OF NON-GAAP FINANCIAL MEASURES FOR THE QUARTER AND YEARS ENDED DECEMBER 31, 2012 AND 2011 (IN THOUSANDS OF US DOLLARS)
