Leading Independent Containership Lessor. Seaspan Corporation. Stifel Transportation & Logistics Conference February 10-11, 2015

Transcription

1 Leading Independent Containership Lessor Seaspan Corporation Stifel Transportation & Logistics Conference February 10-11, 2015 Copyright 2015

2 Notice on Forward Looking Statements This presentation 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, including, without limitation, estimated future revenues under existing time charters; containership market conditions; expansion of Seaspan's business; future time charters; future dividends and share repurchases; vessel acquisitions and deliveries, including the timing thereof; Seaspan s intention to sustainably increase dividends over time while maintaining financial flexibility for growth; Seaspan's future capital requirements and its ability to access capital, enter into additional credit facilities and refinance its debt on favorable terms; and results of the SAVER ship design. 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 of containership acquisition opportunities; the availability and cost of financing to pursue growth opportunities; chartering rates; the number of additional vessels managed by Seaspan in the future; conditions in the containership market; 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 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 capital markets; 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, 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. Copyright

3 Company Overview World s Leading Independent Containership Lessor Largest Independent Containership Lessor Proven Business Model with Sustainable LongTerm Cash Flows Compelling Growth Strategy Aligned with Customer Needs Copyright

4 Largest Independent Containership Lessor Seaspan s current operating owned and managed fleet 1 accounts for: 2.8% of the global operating fleet 5.7% of the total containership lessors operating fleet Source: Alphaliner Monthly Monitor January 2015 and company filings Copyright (1) Includes Seaspan owned and managed vessels, including 83 operating vessels and 26 newbuilds scheduled for delivery by 2016.

5 Our Business Model: Critical Link in Global Trade Infrastructure We Lease Our Containerships to Liners Who Provide Global Container Shipping Services Containership Lessor Fleet of 109 Containerships 1 Outsource Provider of Vessels With Crew LINERS Container Shipping Services Logistics Design, Maintenance, Insurance Crewing Daily Technical Operations Enter Into Fixed-rate Long-term Contracts Fuel Costs Logistical Functions Cargo Operating Expenses Copyright 2015 (1) Inclusive of 77 Seaspan-owned vessels on the water, 6 GCI-owned vessels on the water, and 26 vessels expected to deliver by 2016 (12 Seaspan-owned, 14 Seaspan managed). 5

6 Seaspan s DNA Leading Independent Containership Lessor Large and Modern Fleet 83 vessels in operation and 26 vessels to be delivered by 2016 (including managed vessels) High-Quality Customer Portfolio Focus on leading creditworthy charterers Highly Visible and Stable Cash Flows Approximately $6.6 billion 1 in total future revenues under primarily longterm, fixed-rate charters with strong credit counterparties Average remaining charter length of approximately 5 years Strong and Flexible Capital Structure Ongoing support from both the capital markets and global lending institutions Stress-tested, Resilient Business Model All charters performed; full compliance with bank covenants (1) As of September 30, 2014, the minimum future revenues to be received on committed time charter party agreements and interest income from sales-type capital leases are approximately $6.6 billion. The minimum Copyright 2015 future revenues are based on 100% utilization, relate to committed time charter party agreements currently in effect, assumes no renewals or extensions, and excludes charter revenue from managed vessels. 6

7 Large and Modern Fleet Average age: ~6.2 years¹ Average size: ~7000 TEU¹ Global Containership Fleet Average age: ~10.8 years ² Average size: ~3500 TEU ² 700, ,000 TEU Capacity 500, , ,000 > 8,500 TEU 4,250-5,100 TEU < 3,500 TEU 200, ,000 0 IPO Vessels Utilization 99.8% 100.0% 99.0% 99.0% 99.3% 99.7% 98.7% 99.3% 98.9% 98.0% 99.1%³ Note: Deliveries shown are estimated target dates notwithstanding potential deferrals and advances. TEUs represent current anticipated capacity excluding third-party managed vessels (1) Average age of Seaspan s 73 vessel fleet on the water (77 operating vessels, excluding 4 vessels on bareboat charter) and average size of 89 Seaspan-owned vessels expected to be delivered by 2016 Copyright (2) Alphaliner Monthly, January 2015 edition (3) Utilization for the 9 months ended September 30, 2014

8 High-Quality Customer Portfolio Focus on Leading Creditworthy Charterers 1 Charterer World Ranking 2 No. of Vessels³ Total TEU ⁴ COSCON ,800 Yang Ming ,000 MOL ,600 CSCL ,450 Hapag Lloyd ⁵ ,500 Hanjin ,000 K-Line ,500 Maersk ,000 MSC ,200 Short-term - 1 4,250 Total ,300 (1) Percentage of contracted future revenues are based on charters (excluding options) for Seaspan s chartered fleet of 89 vessels as at September 30, (2) World rankings based on market share per Copyright 2015 Alphaliner as of January 2015 (3) 89 vessels includes newbuilds under construction and excludes managed vessels. (4) All TEU values are based on nominal approximations of TEU size for each vessel class. 8 (5) Includes Hapag-Lloyd, HL USA, and Norasia Container Lines Ltd., (formerly CSAV).

9 Long-term Contract Profile with Balanced Maturity Profile Long-Term Time Charters - ~$6.6b in Contracted Future Revenue¹ SSW Vessel Charter Maturities to 2029 Average remaining charter length of ~ 5 years Fleet growth: x 14,000 TEU; 2 x 10,000 TEU x 14,000 TEU; 2 x 10,000 TEU Re-charters: x 4250/4600 TEU ~2.5% of 2015 forecast EBITDA x 4250 TEU ~3.0% of 2016 forecast EBITDA Firm Option Newbuilds (1) As of September 30, 2014, the minimum future revenues to be received on committed time charter party agreements and interest income from sales-type capital leases are approximately $6.6 billion. The minimum future Copyright 2015 revenues are based on 100% utilization, relate to committed time charter party agreements currently in effect, assumes no renewals or extensions, and excludes charter revenue from managed vessels. 9

10 Strong and Flexible Capital Structure Security Ticker (NYSE) Share/Note Price Feb. 6, 2015 Market Cap./ Value Annual Dividend/ Interest Current Yield Yield to Call CAPITAL MARKETS ACCESS Class A Common SSW $18.83 $1,802m $ % NA Series C Preferred SSW PR C $26.39 $365m $ % 3.9% Series D Preferred SSW PR D $25.90 $130m $ % 6.7% Series E Preferred SSW PR E $25.56 $139m $ % 7.7% Senior 6.375% Notes SSWN $25.00 $347m $ % 6.4% FLEXIBLE DEBT CAPACITY Debt and Lease Facilities All debt facilities are without traditional LTV market clauses Interest rates primarily fixed or hedged Issued $345m senior unsecured notes in March 2014 $1b facility refinancing and extension completed January 2014: Refinanced in advance of 2015 maturity date Reduced commitment to $435m, funded by drawing on existing facilities and from available liquidity Extended maturity date from May 2015 to May 2019 RETURN OF CAPITAL TO SHAREHOLDERS Dividend Increases and Share Repurchase Programs Current common share annualized $1.38/share dividend; five dividend increases since Q $169.5m fixed-price tender offer for 11.3 million shares at $15.00 per share in January 2012 Authorized open market share repurchase in place for up to $50 million of common shares Copyright

11 Controlled and Balanced Growth Customer Yard Announced Delivery Order Charter Length Total Total Vessels SSW GCI Delivered SSW GCI 1 YZJ Aug x 10,000 TEU 10 yr 7 x 3 x 4 x 3 x 3 x YZJ Jan x 10,000 TEU 8 yr 4 x 2 x 2 x 3 x 1 x HHI Jan x 14,000 TEU 10 yr 5 x 3 x 2 x HHI Aug x 14,000 TEU 10 yr 5 x 3 x 2 x CSBC Aug x 14,000 TEU 10 yr 5 x 2 x 3 x YZJ Sep 2013/Feb / x 10,000 TEU 8 yr 6 x 3 x 3 x YZJ March / x 10,000 TEU 5 yr 4 x 2 x 2 x Total 420,000 TEU 36 x 18 x 18 x 6 x 4 x ($000 s) 3 (1) As of Feb 6, 2015, Seaspan and GCI have taken delivery of six vessels chartered to Hanjin, the Buddha, Namu, and Tabul by Seaspan, and the Jungil, Ami and Gwanseum by GCI. Seaspan and GCI have also taken delivery of four vessels chartered to MOL, the Bravo, Brightness and Breeze by Seaspan, and the Brilliance by GCI. Copyright 2015 (2) Estimated remaining capex for Seaspan vessels as at December 31, (3) Available Credit Facilities excludes amounts already drawn to fund capex payments.

12 GCI Joint Venture Strategic Objectives Vessel purchasing economies of scale with shipyards Risk-sharing and diversified funding Operational economies of scale - Seaspan manages GCI vessels Facilitate controlled and balanced growth (1) Copyright 2015 (1) Reduced by Carlyle Group Investments in non-containership vessels 12

13 World Containership Fleet Growth and Orderbook 2,000,000 Forecast Containership Deliveries by Vessel Size 1,500,000 TEU 1,000, , F 2016F 2017F <3,000 3,000-7,499 7,500-20,000 Fleet Growth Slowing Orderbook represents ~18.4% of current fleet of ~18.4 million TEU Scrapping forecast to remain elevated at ~250,000 TEU to 350,000 TEU annually Rate of fleet expansion is slowing by 2016 Orderbook Dominated by Larger Vessels ~85% > 7,500 TEU ~5% 3,000 TEU to 7,499 TEU ~10% < 3,000 TEU Copyright 2015 Source: Alphaliner Monthly, January

14 Containership Supply / Demand Fundamentals Improving Demand Growth Forecast to Exceed Fleet Supply Growth Trade Demand Growth Fleet Supply Growth Copyright 2015 Source: Clarkson Research Services., Feb

15 Charter Rates and Newbuild Prices Increasing Charter Rate and Asset Price Recovery in Early Stages New Vessel Prices 1 5-Yr Old Vessel Prices 2 10-Yr Old Vessel Prices 2 Charter Rates 3 Sources: Clarkson Research Services, Feb (1) New vessel prices based on average price per TEU across all vessel sizes Copyright (2) Secondhand vessel prices for 4,500 TEU Panamax vessel. (3) Charter rates for 4,400 TEU Panamax vessel.

16 SAVER Ship Design TEU / Ton of Fuel Per Day = Cargo Capabilities (# TEU) Fuel Consumption (MT/day) Loadability: Ballast Reduction Increasing # TEU Configuration Fuel Consumption: Engine Selection Hull Optimization Operational Practices Optimizing Rudder and Propeller Machinery & Systems Hull Optimization SAVER features provide economic benefits in low and high oil price environments Engine design capable of higher speeds, yet flexible to meet customer operational demands Copyright

17 Existing Vessel Eco-Upgrade Examples Upgrade Lashing Bulbous Bow Modification Description Benefit Estimated Fuel Savings (%)¹ Estimated Fuel Savings ($/day)² Fuel Savings Payback (days)² Allows the vessel to safely carry more containers Reduces fuel consumption per TEU Improves hull hydrodynamics Improves fuel efficiency New Propeller Improves propulsion efficiency Improves fuel efficiency Alternative Marine Power (AMP) Allows vessel to connect to shore power grids Reduces fuel consumption Trim Optimization (TROP) Loading software optimizes trim based on cargo and speed Improves fuel efficiency Variable 7% 5% Variable 2% Variable ~$1700 ~$1200 Variable ~$500 Variable Variable Upgrades initiated and paid for by customers will help close the eco gap 10 (1) Based on internal estimates for 8500 TEU vessel assuming speed of18knots, 15% sea margin, and 13.0m design draft Copyright 2015 (2) Fuel savings per day and payback based on estimated cost of modification and bunker cost of $300 per mt 17

18 Vision Growing our business in a balanced and controlled manner Pursuing long-term, fixed-rate contracts with strong credit worthy customers and high quality, modern assets Following a dividend policy aimed at sustainably growing our dividends Enhancing our financial strength and flexibility Creating long-term shareholder value Copyright

19 Appendix: Supplemental Information Copyright

20 Results for Three and Nine Months Ended September 30 Three Months Ended Sept. 30 Change Nine Months Ended Sept. 30 Change Operating Metrics $ % $ % Revenue $185.9 $172.4 $ % $527.7 $505.1 $ % Ship operating expenses $41.5 $36.7 $ % $123.9 $111.6 $ % Operating Cash Flow Metrics Adjusted EBITDA 1 $139.9 $131.4 $ % $394.6 $381.0 $ % Cash available for distribution to common shareholders 1 $77.7 $72.4 $ % $213.7 $206.4 $ % Cash dividends paid (incl. non-convertible preferred shares, excl. DRIP) $29.4 $21.3 $ % $83.1 $60.8 $ % Earnings Metrics Normalized net earnings 1 $38.1 $34.1 $ % $99.0 $87.9 $ % Normalized converted EPS 1 $0.25 $0.28 $(0.03) (10.7)% $0.62 $0.66 $(0.04) (6.1)% Converted shares outstanding (in millions) % % Dollar amounts in millions, except per share amounts (1) Adjusted EBITDA, cash available for distribution to common shareholders, normalized net earnings and normalized converted EPS are non-gaap measures. Please refer to Copyright 2015 Appendices A, B, C, D, and E for definitions of these terms and reconciliations of such measures to measures under GAAP. 20

21 Balance Sheet Dollar amounts in millions Q Q $ Change % Change Current assets $580.4 $600.1 $(19.7) (3.3)% Operating vessels $4,854.6 $4,670.9 $ % Vessels under construction $306.4 $321.4 $(15.0) (4.7)% Total assets $6,084.5 $5,947.8 $ % Current liabilities $304.9 $520.4 $(215.5) (41.4)% Total liabilities $4,341.8 $4,376.1 $(34.2) (0.8)% Shareholders equity $1,742.7 $1,571.7 $ % Total liabilities & shareholders equity $6,084.5 $5,947.8 $ % Copyright

22 Appendix A: Reconciliation of GAAP to non-gaap Measures Adjusted EBITDA Adjusted EBITDA (millions of USD) 3 Months Ended Sep 30 9 Months Ended Sep Net earnings $65.4 $48.0 $103.5 $230.8 Add: Interest Expense Interest Income (3.5) (0.5) (7.3) (1.2) Undrawn credit facility fees Depreciation and amortization Amortization of deferred charges Refinancing expenses and costs (1) Share-based compensation Bareboat charter adjustment, net (2) Change in fair value of financial instruments (3.0) (51.8) Change in fair value of financial instruments included in equity income Adjusted EBITDA $139.9 $131.4 $394.6 $381.0 (1) In April 2014, Seaspan issued in a registered public offering senior unsecured notes in an aggregate principal amount of $345.0 million. Seaspan used a portion of the net proceeds from the offering to repay its $125.0 million credit facility. In connection with the refinancing, Seaspan incurred refinancing expenses and costs of $2.8 million, of which $0.5 million was cash and $2.3 million was non-cash (2) In the second half of 2011, Seaspan entered into agreements to bareboat charter four 4800 TEU vessels to Mediterranean Shipping Company S.A. ("MSC") for a fiveyear term, beginning from vessel delivery dates that occurred in 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 in the applicable non-gaap measures 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. Copyright

23 Appendix B: Reconciliation of GAAP to non-gaap Measures Cash Available for Distribution to Common Shareholders Cash Available for Distribution to Common Shareholders (millions of USD) 3 Months Ended Sep 30 9 Months Ended Sep Net earnings $65.4 $48.0 $103.5 $230.8 Add: Less: Depreciation and amortization Interest expense Amortization of deferred charges Refinancing expenses and costs (1) Share-based compensation Change in fair value of financial instruments (3.0) (51.8) Change in fair value of financial instruments included in equity income Bareboat charter adjustment, net (2) Amounts paid for dry-dock adjustment (2.7) (3.1) (9.9) (8.2) Series C preferred share dividends paid (8.1) (8.3) (24.3) (24.9) Series D preferred share dividends paid (2.5) (1.5) (7.6) (3.9) Series E preferred share dividends paid (2.8) - (5.2) - Net cash flows before interest payments Less: Interest expense at the hedged rate (3) (48.7) (45.8) (139.1) (137.0) Cash available for distribution to common shareholders $77.7 $72.4 $213.7 $206.4 (1) In April 2014, Seaspan issued in a registered public offering senior unsecured notes in an aggregate principal amount of $345.0 million. Seaspan used a portion of the net proceeds from the offering to repay its $125.0 million credit facility. In connection with the refinancing, Seaspan incurred refinancing expenses and costs of $2.8 million, of which $0.5 million was cash and $2.3 million was non-cash (2) In the second half of 2011, Seaspan entered into agreements to bareboat charter four 4800 TEU vessels to Mediterranean Shipping Company S.A. ("MSC") for a five-year term, beginning from vessel delivery dates that occurred in 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 in the applicable non-gaap measures 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. (3) 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 variable rate credit facilities and leases, on an accrual basis. Interest expense on fixed rate borrowings is calculated on the effective interest rate. Copyright

24 Appendix C: Reconciliation of GAAP to non-gaap Measures Normalized Net Earnings Normalized Net Earnings (millions of USD) 3 Months Ended Sep 30 9 Months Ended Sep Net earnings $65.4 $48.0 $103.5 $230.8 Adjust: Interest expense Change in fair value of financial instruments (3.0) (51.8) Change in fair value of financial instruments included in equity income Refinancing expenses and costs (1) Interest expense at the hedged rate (2) (48.7) (45.8) (139.1) (137.0) Normalized net earnings $38.1 $34.1 $99.0 $87.9 (1) In April 2014, Seaspan issued in a registered public offering senior unsecured notes in an aggregate principal amount of $345.0 million. Seaspan used a portion of the net proceeds from the offering to repay its $125.0 million credit facility. In connection with the refinancing, Seaspan incurred refinancing expenses and costs of $2.8 million, of which $0.5 million was cash and $2.3 million was non-cash (2) 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 variable rate credit facilities and leases, on an accrual basis. Interest expense on fixed rate borrowings is calculated on the effective interest rate. Copyright

25 Appendix D: Reconciliation of GAAP to non-gaap Measures Normalized Net Earnings and Normalized Net Earnings per Share Normalized Net Earnings and Normalized Net Earnings per Share (millions of USD, except share and per share amounts) 3 Months Ended Sep 30 9 Months Ended Sep Normalized net earnings $38.1 $34.1 $99.0 $87.9 Less preferred share dividends: Series A Series C (including amortization of issuance costs) Series D Series E Total preferred share dividends Normalized net earnings attributable to common shareholders $24.3 $14.3 $55.9 $29.4 Weighted average number of shares used to compute earnings per share Reported and normalized, basic Share-based compensation Contingent consideration Shares held in escrow Series A preferred shares liquidation preference converted at $ Reported, diluted and normalized, converted Earnings per share, reported: Basic $0.54 $0.42 $0.66 $2.66 Diluted $0.54 $0.42 $0.65 $2.30 Normalized, converted preferred shares converted at $15 $0.25 $0.28 $0.62 $0.66 Copyright

26 Appendix E: Description of Non-GAAP Measures 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, amortization of deferred charges, refinancing expenses and costs, share-based compensation, bareboat charter adjustment, 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, even though other companies may not calculate this measure in the same way as Seaspan. The United States generally accepted accounting principles ("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. Cash Available for Distribution to Common Shareholders Cash available for distribution to common shareholders is defined as net earnings adjusted for depreciation and amortization, interest expense, amortization of deferred charges, refinancing expenses and costs, share-based compensation, change in fair value of financial instruments, bareboat charter adjustment, amounts paid for dry-docking, cash dividends paid on preferred shares, interest expense at the hedged rate and certain other items that Seaspan believes are not representative of its operating performance. Cash available for distribution to common shareholders is a non-gaap measure used to assist in evaluating Seaspan's ability to make quarterly cash dividends before reserves for replacement capital expenditures. Cash available for distribution to common shareholders 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 Net Earnings and Normalized Net 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, refinancing expenses and costs 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 C (excluding the retained earnings impact of any repurchases), Series D and Series E preferred shares, divided by the "converted" number of Class A common shares outstanding for the period. On January 30, 2014, Seaspan's outstanding 200,000 Series A preferred shares automatically converted into a total of 23,177,175 Class A common shares pursuant to Seaspan's articles of incorporation. The conversion provisions provided for automatic conversion to Class A common shares at a price of $15.00 per share (and based on the applicable liquidation preference of the Series A preferred shares), if the conversion occurred on or after January 30, 2014 and the trailing 30-day average trading price of the Class A common shares was equal to or above $ If the Class A common share price was less than $15.00, then Seaspan could choose to not convert the Series A preferred shares and to increase the annual increase in the liquidation preference to 15% per annum from 12%. The "converted" number of Series A preferred 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 had been less than $15.00 and the per share impact of the actual Series A preferred share conversion at $ Normalized net earnings and normalized earnings per share, converted, are not defined by GAAP and should not be considered as an alternative to net earnings, earnings per share or any other indicator of Seaspan's performance required to be reported by GAAP. Copyright