Seaspan Corporation announced its financial results for the quarter and year ended December 31, 2011.
Gerry Wang, Chief Executive Officer, Co-Chairman, and Co-Founder of Seaspan, commented, "During 2011, Seaspan once again grew both its fleet and revenue stream under contract, achieved strong utilization and increased net earnings and cash flow. In addition to taking delivery of 10 vessels that commenced fixed-rate time charters with leading liner companies, we took advantage of a compelling ship acquisition environment to commence our next phase of fleet growth. As we pursue opportunities to further grow our fleet, we intend to continue to capitalize on our SAVER vessel design, which we believe provides customers with improved efficiency and operational savings."
Mr. Wang added, "Following the completion of our recent tender offer, we are pleased to announce a 33.3% increase in our common share dividend for the first quarter of 2012 and an additional $50 million common share repurchase program. The share repurchase program underscores the Board's confidence in Seaspan's future prospects as well as our commitment to enhance shareholder value while preserving a strong balance sheet and flexible capital structure that positions us well to manage uncertain market conditions and pursue select opportunities to grow our fleet."
Fourth Quarter Developments
Bareboat Charters
Seaspan entered into agreements to bareboat charter to Mediterranean Shipping Company S.A. ("MSC") four 4800 TEU vessels, each for a five-year term, beginning from the vessel delivery dates that occurred in October and November 2011. MSC has agreed to purchase the vessels for $5.0 million each at the end of the five-year bareboat charter terms. Each transaction is considered a sales-type lease and is accounted for as a disposition of vessels upon delivery of each vessel. As a result, Seaspan incurred a loss on vessels of $16.2 million for the year ended December 31, 2011.
Term Loan Financing
In October 2011, Seaspan, through one of its subsidiaries, entered into a financing transaction with a leading U.S. bank for the UASC Madinah, a 4250 TEU vessel. The vessel has been sold from Seaspan to one of its subsidiaries, funded by a $53 million mortgage-secured term loan from an affiliate of the U.S. bank, leased by the subsidiary to Seaspan and Seaspan continues to time charter the vessel to United Arab Shipping Company (S.A.G.). In June 2012, subject to certain conditions, it is expected that the vessel will be sold to the same affiliate of the U.S. bank for the amount outstanding under the term loan, and will be leased back to Seaspan's subsidiary under an operating lease for approximately nine years. Seaspan anticipates that it will continue to time charter the vessel to third parties.
Subsequent Events
Dividends
On January 17, 2012, Seaspan declared a quarterly dividend of $0.59375 per Series C preferred share, representing a total distribution of $8.3 million. The dividend was paid on January 30, 2012 to all shareholders of record on January 27, 2012.
On February 1, 2012, Seaspan declared a quarterly dividend of $0.1875 per common share. The dividend was paid on February 22, 2012 to all shareholders of record as of February 13, 2012.
In February 2012, Seaspan's board of directors approved a 33.3% increase in the quarterly common share dividend to $0.25 per share, which dividend will be subsequently declared for the quarter ending March 31, 2012. With this dividend, Seaspan will have increased its quarterly common share dividend by 150% since March 31, 2010. Seaspan expects common share dividends for the four quarters ending December 31, 2012 to total $1.00 per share.
Tender offer
On January 19, 2012, Seaspan repurchased 11.3 million shares of its Class A common stock tendered in a tender offer at a price of $15.00 per share, for an aggregate cost of $169.5 million excluding fees and expenses related to the tender offer.
Acquisition of Seaspan Management Services Limited
On January 27, 2012, Seaspan acquired all of the issued and outstanding share capital of Seaspan Management Services Limited (the "Manager"), and acquired and cancelled all of the issued and outstanding shares of Seaspan's Class C common stock, which were owned by a subsidiary of the Manager.
The purchase price for the acquisition, excluding potential balance sheet adjustments and any contingent consideration for managed fleet growth payments, was $54.0 million, which Seaspan paid through the issuance of approximately 4.2 million shares of its Class A common stock, valued on a per share basis equal to $12.794, being the volume-weighted average trading price for the 90 trading days immediately preceding the closing date of the acquisition.
The Manager provides technical, administrative and strategic services to Seaspan. Prior to the acquisition, the Manager was owned by affiliates of Seaspan's largest shareholder and certain of Seaspan's directors. The acquisition increases Seaspan's control over access to services that the Manager provides on a long-term basis, and reduces certain conflicts between Seaspan and its directors who had interests in the Manager. Seaspan previously paid fees to the Manager for technical services on a fixed basis, which fees were adjusted every three years. As a result of the acquisition, Seaspan's costs for these services will vary more directly with the actual cost, set by the market, of providing technical services for Seaspan's fleet. The conflicts committee of Seaspan's board of directors, which committee is composed of independent directors, with the assistance of financial and legal advisors, reviewed and approved the acquisition of the Manager. For additional information about Seaspan's acquisition of the Manager, please see Seaspan's Form 6-K filed with the SEC on January 30, 2012.
Open Market Share Repurchase Plan
Seaspan's Board of Directors has authorized the repurchase of up to $50.0 million of its Class A common shares. The share repurchase authorization does not have an expiration date and repurchase activity will depend on factors such as working capital needs, repayment of debt, share price, and economic and market conditions. Share repurchases may be effected from time to time through open market purchases or in privately negotiated transactions, and the repurchase program may be suspended, delayed or discontinued at any time. Seaspan intends to enter into a Rule 10b5-1 plan in connection with the share repurchase program.
Dividends Declared:
For the quarter ended December 31, 2011, Seaspan declared a quarterly dividend of $0.1875 per common share, representing a total distribution of $11.7 million. The dividend was paid on February 22, 2012 to all shareholders of record as of February 13, 2012. Because Seaspan adopted a dividend reinvestment plan, or DRIP, the actual amount of cash dividend paid was $7.4 million based on shareholder participation in the DRIP.
Since Seaspan's initial public offering in August 2005, it has paid cumulative dividends of $7.72 per common share. Since Seaspan adopted the DRIP in May 2008, a total of 3.3 million shares have been issued, and $38.1 million of dividends have been reinvested, through shareholder participation in the DRIP.
Source: Seaspan Corporation