Depreciation and Amortization Expense
The increase in depreciation and amortization for the quarter ended March 31, 2013 was due to the increase in the size of the fleet. Four vessels delivered in 2012 and a full quarter of depreciation was taken in the first quarter of 2013.
General and Administrative Expense
For the quarter ended March 31, 2013, general and administrative expenses increased by $1.9 million to $7.8 million from $5.9 million for the same period of 2012. The increase was due primarily to the non-cash stock appreciation rights granted to the chief executive officer in December 2012. In March 2013, additional stock appreciation rights were granted to certain members of management. Seaspan expects to incur non-cash compensation expenses of approximately $9.2 million for the remainder of 2013 and $4.2 million in 2014 relating to the stock appreciation rights granted to the chief executive officer and management.
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 was repaid using the proceeds from the sale to the bank. During the quarter ended March 31, 2013, Seaspan incurred operating lease expense of $1.1 million. In the comparable period of 2012, instead of operating lease expense, Seaspan incurred interest expense of $0.6 million on the $53.0 million loan.
As at March 31, 2013, the balance of Seaspan's long-term debt totaled $3.1 billion and Seaspan's other long-term liabilities was $641.5 million. As at March 31, 2013, Seaspan's operating debt balance was $2.9 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 loss 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.
The decrease in interest expense for the quarter ended March 31, 2013, was primarily due to a lower reclassification of accumulated other comprehensive loss into earnings. The remaining decrease was due to lower operating debt and other long-term liabilities as well as a reduction in the average LIBOR. In 2012, the term loan of $53.0 million was repaid using the proceeds from the sale of the Madinah. The average LIBOR charged on Seaspan's long-term debt for the quarter ended March 31, 2013 was 0.2% compared to 0.5% for the comparable period 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.
Undrawn Credit Facility Fee
During the quarter ended March 31, 2013, the decrease in undrawn credit facility fees compared to 2012 was due to a reduction in average undrawn balances on Seaspan's credit facilities due to debt draws for construction and final delivery of vessels. Seaspan pays commitment fees of 0.2% and 0.4% on its credit facilities, which are expensed as incurred.
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