Q FINANCIAL RESULTS CONFERENCE CALL OCTOBER 31, Q Financial Results Conference Call

Transcription

1 THE LEADING INDEPENDENT CONTAINERSHIP OWNER AND MANAGER FINANCIAL RESULTS CONFERENCE CALL OCTOBER 31,

2 Notice on Forward Looking Statements This presentation contains forward-looking statements (as such term is defined in Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act) concerning operations, cash flows, and financial position of Seaspan Corporation ( Seaspan ), including, in particular, the likelihood of its success in developing and expanding its business. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as continue, expects, anticipates, intends, plans, believes, estimates, projects, forecasts, will, may, potential, should, guidance, and similar expressions are forward-looking statements. These forward-looking statements represent Seaspan s estimates and assumptions only as of the date of this presentation and are not intended to give any assurance as to future results. As a result, you are cautioned not to rely on any forward-looking statements. Forwardlooking statements appear in a number of places in this presentation. Although these statements are based upon assumptions Seaspan believes to be reasonable based upon available information, they are subject to risks and uncertainties. These risks and uncertainties include, but are not limited to: future growth prospects and ability to expand Seaspan s business; Seaspan s expectations as to impairments of its vessels, including the timing and amount of currently anticipated impairments; the future valuation of Seaspan s vessels and goodwill; potential acquisitions, vessel financing arrangements and other investments, and Seaspan s expected benefits from such transactions; future time charters and vessel deliveries, including future long-term charters for certain existing vessels; estimated future capital expenditures needed to preserve the operating capacity of Seaspan s fleet including, its capital base, and comply with regulatory standards, its expectations regarding future dry-docking and operating expenses, including ship operating expense and general and administrative expenses; Seaspan s expectations about the availability of vessels to purchase, the time that it may take to construct new vessels, the delivery dates of new vessels, the commencement of service of new vessels under long-term time charter contracts and the useful lives of its vessels; availability of crew, number of off-hire days and dry-docking requirements; general market conditions and shipping market trends, including charter rates, increased technological innovation in competing vessels and other factors affecting supply and demand; Seaspan s financial condition and liquidity, including its ability to borrow and repay funds under its credit facilities, to refinance its existing facilities and to obtain additional financing in the future to fund capital expenditures, acquisitions and other general corporate activities; Seaspan s continued ability to meet its current liabilities as they become due; Seaspan s ability to remediate any existing material weakness in its internal controls over financial reporting; Seaspan s continued ability to maintain, enter into or renew primarily long-term, fixed-rate time charters with its existing customers or new customers; the potential for early termination of long-term contracts and Seaspan s potential inability to enter into, renew or replace long-term contracts; the introduction of new accounting rules for leasing and exposure to currency exchange rates and interest rate fluctuations; conditions inherent in the operation of ocean-going vessels, including acts of piracy; acts of terrorism or government requisition of Seaspan s containership during periods of war or emergency; adequacy of Seaspan s insurance to cover losses that result from the inherent operational risks of the shipping industry; lack of diversity in Seaspan s operations and in the type of vessels in its fleet; conditions in the public equity market and the price of Seaspan s shares; Seaspan s ability to leverage to its advantage its relationships and reputation in the containership industry; compliance with and changes in governmental rules and regulations or actions taken by regulatory authorities, and the effect of governmental regulations on Seaspan s business; the financial condition of Seaspan s customers, lenders, refund guarantors and other counterparties and their ability to perform their obligations under their agreements with us; Seaspan s continued ability to meet specified restrictive covenants and other conditions in its financing and lease arrangements, its debt instruments and its preferred shares; any economic downturn in the global financial markets and export trade and increase in trade protectionism and potential negative effects of any recurrence of such disruptions on Seaspan s customers ability to charter Seaspan s vessels and pay for Seaspan s services; some of Seaspan s directors and investors may have separate interest which may conflict with those of its shareholders and they may be difficult to replace given the anti-takeover provisions in Seaspan s organizational documents; taxation of Seaspan s company and of distributions to its shareholders; Seaspan s exemption from tax on U.S. source international transportation income; the ability to bring claims in China and the Marshall Islands, where the legal systems are not well-developed; potential liability from future litigation; and other factors detailed from time to time in Seaspan s periodic reports. Forward-looking statements in this presentation are estimates and assumptions reflecting the judgment of senior management and involve known and unknown risks and uncertainties. These forward-looking statements are based upon a number of assumptions and estimates that are inherently subject to significant uncertainties and contingencies, many of which are beyond Seaspan s control. Actual results may differ materially from those expressed or implied by such forward-looking statements. Accordingly, these forwardlooking statements should be considered in light of various important factors listed above and including, but not limited to, those set forth in Item 3. Key Information D. Risk Factors in Seaspan s Annual Report for the year ended December 31, 2017 on Form 20-F filed on March 6, 2018, and the Risk Factors in Report on Form 6-K that are filed with the Securities and Exchange Commission, or the SEC, from time to time relating to our quarterly financial results. Seaspan does not intend to revise any forward-looking statements in order to reflect any change in Seaspan s expectations or events or circumstances that may subsequently arise. 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. You should carefully review and consider the various disclosures included in this Annual Report and in Seaspan s other filings made with the SEC, that attempt to advise interested parties of the risks and factors that may affect Seaspan s business, prospects and results of operations. 2 2

3 Q3 Highlights Q3 Operational and Financial Performance Vessel utilization of 98.4% during the quarter Revenue of $295.0 million Cash Flow from Operations of $142.2 million EPS per diluted share of $0.36 Financing Developments Redeemed $140 million 10.5% Series F Preferred Shares Closed $150 million two-year Revolving Credit Facility Issued $150 million 8.0% Series I Fixed-to-Float Preferred Shares Repaid $225 million of secured debt, part of which will unencumber 6 vessels Other Corporate Developments Announced signing of binding term sheet for investment in Swiber Announced additions of CHRO, EVP Ship Management, and General Counsel 3 3

4 Key Priorities & Recent Developments 1 Operational Excellence Reduced Lost Time Injury incidence to the lowest number since we began tracking in Customer Partnerships Contracts with two new customers Coheung and Arkas New and extended contracts with COSCO, Hapag-Lloyd, and Maersk Financial Strength and Stability Unencumbering of vessels Increased liquidity, decreased leverage and cost of capital Expanding sources of long-term capital with the aim of improving flexibility Pursuit of Growth Opportunities Development of Special Projects team Evaluating opportunities within and outside of the containership leasing industry, including investments to strengthen our existing business Capital Allocation Swiber Investment 4 4

5 # Lost Time Injuries Commercial & Operational Highlights Strengthening Partnerships Two innovative multi-year contracts with two customers Six new contracts with COSCO (1 new, and 5 extensions) Contracts with 2 new customers: Coheung and Arkas New charter with Hapag-Lloyd Extensions with Hapag-Lloyd for seven vessels Improvements in Safety Major Fleet Expansion month running LTIF average 3.0 Improved our Lost Time Injury Frequency (LTIF) significantly since 2013 Health, safety, and wellness initiatives have improved the safety and reliability of our crew Q18 2Q18 3Q18 (0.5) 5 5

6 US$ Millions, Index = 100 Rate per day, Index = 100 Demand Growth and Supply Constraint Driving Rate Improvement Improving fundamentals driving charter rate improvement across asset classes Support from limited number of deliveries scheduled for 2018 and 2019, and continuing restraint on newbuild ordering 350% 300% 250% 200% 150% 100% 50% Charter Rate Improvement TEU 3500 TEU 4400 TEU 9000 TEU 0% Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Historical Containership Asset Value 1 Asset values are on an upward trajectory Momentum in sale and purchase markets has continued into 2018, with significant deal flow worldwide 200% 180% 160% 140% 120% 100% 80% 60% Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 2,600-2,900 TEU 3,200-3,600 TEU 8,500-9,100 TEU (1) Clarksons Research October

7 Indian subcont. South Europe SE Asia Africa Oceania Latin America North America China+HK North Europe Middle East Other North Asia TEU (mllions) Broad Based Global Seaborne Trade Growth Annual Capacity and Throughput Growth 1 Demand growth has outperformed supply over the last two years Improving supply / demand balance supporting charter rates Fleet Capacity Capacity Growth Throughput Growth (TEU) 20% 15% 10% 5% Trade growth is expected to exceed fleet growth in (5%) (10%) (15%) Balanced growth across regions 2017 growth was broad based, in both primary and secondary trade lanes 2018 growth has remained robust despite trade uncertainty Growth outlook supported by strong economic fundamentals in emerging and developed markets Good utilization on main trades: Eur/Asia ~90%, Asia/US ~95% 8.8% 2018 Growth Rates by Region 1 6.0% 5.5% 5.0% 5.0% 4.5% 4.3% 4.1% 3.5% 3.2% 2.8% 2017 Growth Rates by Region (1) Alphaliner Monthly Monitor October 2018; Global port throughput includes empty container and transshipment cargo. 12% 7% 6% 4% 8% 7% 8% 8% 5% 2% 5% 7 7

8 TEU (000's) Improvement in Industry s Ability to Manage Supply Industry supply rationalization and demand improvement driving idle fleet reduction and supporting time charter rate improvement Idle containership fleet of vessels over 500 TEU less than 180, or 2.3% of the global fleet 2 Idle Fleet Continues to Decline (% TEU) 1,2 1,800 Total Idle TEU Idle Fleet as % of Total Fleet 1, % 8.0% 4.0% 2.3% 0.0% Orderbook at Historically Low Levels 1,2 Fewer operators and increased discipline tempering supply growth 75% 50% Orderbook-to-fleet ratio currently at 13.0% 2 Orderbook delivery schedule continues to get pushed out 25% 0% 13.0% Historical Demolition Volumes demolition reached an all-time high and remained elevated in scrapping down to ~44k 1 TEU YTD as market recovery continues YTD Average Age (yrs) TEU Scrapped Other Deletions Average Age (Scrapped Units) (1) Clarksons Research October 2018 (2) Alphaliner Monthly Monitor October

9 Q3 Financial Highlights Key Performance Metrics US$ Millions, except operating data and per share amounts Ownership Days 9,844 8,148 Operating Days 9,690 7,894 Vessel Utilization 98.4% 96.9% Revenue $295.0 $211.0 Ship Operating Expense $55.4 $45.4 G&A $8.1 $14.0 Net Earnings $80.0 $48.4 EPS, diluted $0.36 $0.26 Cash Flow From Operations $142.2 $95.1 Key Balance Sheet Metrics Quarter Ended September 30 As of US$ Millions Sep 30, 2018 Sep 30, 2017 Cash and cash equivalents, and short-term investments $394 $309 Total borrowings 1 $4,296 $3,193 Shareholders equity $2,434 $1,867 Highlights Operating days increased by 23% to 9,690 primarily from Seaspan s acquisition of GCI, as well as deliveries during 2018 The increase in utilization is primarily due to the higher utilization of GCI vessels and the new deliveries Revenue increased by 40% to a record high quarter Cash Flow From Operating Activities increased 50% to a record high quarter Ship Operating Expense was positive versus guidance due to drive for efficiency through scale (1) Total borrowings as at Sep 30, 2018 includes Fairfax s $250 million 2018 Debenture adjusted for discount and fair value adjustment 9 9

10 Financial Strength and Stability (US$ Millions) Improvements in Liquidity Improvements in Capital Structure GCI Integration 150 (135) As of US$ Millions Jun 30, 2018 Sep 30, (143) 150 Net Debt 1 4,275 3,993 Shareholders' Equity 2,091 2,434 Net Debt / Shareholders' Equity 2.0x 1.6x Liquidity (30-Jun-2018) Fairfax Investment Series F Redemption Revolving Credit Facility Series I Issuance Other Cash Flows (Net) Liquidity (30-Sep-2018) $250 million equity investment from Fairfax in July significantly improves leverage ratios Corporate revolving credit facility provides greater flexibility and the ability to operate with a leaner cash balance Enhanced liquidity allows for more robust growth through disciplined allocation of capital Repaid $225 million of secured debt, part of which will unencumber 6 vessels Reduced cost of capital with redemption of 10.5% Series F Preferred Shares, and issuance of 8% Series I Preferred Shares (1) Total borrowings (Sep 30, 2018 adjusted to include Fairfax s $250 million 2018 Debenture at full principal amount), less cash and cash equivalents 10 10

11 Forward Guidance Key Financial Items for Q Q Estimated as at October 31, 2018, in US$ millions 1 Low High Revenue Ship Operating Expense Operating Lease Expense Depreciation & Amortization G&A 8 10 (1) All estimates are approximate, based on current information, and are subject to change. See Notice on Forward Looking Statements on slide

12 Chairman s Closing Remarks Chairman s Message David Sokol Chairman 12 12

13 APPENDIX 13 13

14 Quarterly Performance Revenue Utilization Rate (US$ Millions) $211 $214 $225 $282 $ % 96.0% 96.8% 98.6% 98.4% 3Q17 4Q17 1Q18 2Q18 3Q18 3Q17 4Q17 1Q18 2Q18 3Q18 Cash Flow from Operations Net Earnings (US$ Millions) $142 (US$ Millions) $80 $95 $89 $70 $113 $48 $59 $68 $68 3Q17 4Q17 1Q18 2Q18 3Q18 3Q17 4Q17 1Q18 2Q18 3Q