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Seaspan Corporation (ATCO)
Q4 2019 Earnings Call
Feb 19, 2020, 8:30 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Welcome to the Seaspan Corporation Conference Call to Discuss the Financial Results for the Quarter and Year Ended December 31, 2019. I would like to remind everyone that this conference is being recorded today, February 19, 2020 at 8:30 a.m. Eastern Time and will be available for replay, starting today at 11:30 a.m. Eastern Time.

Hosting the call today is Bing Chen, President and Chief Executive Officer; Peter Curtis, Executive Vice President and Chief Commercial and Technical Officer; and Ryan Courson, Chief Financial Officer. We will be opening the call for questions after the presentation from management. At which point, Mr. David Sokol, Chairman of the Board and Torsten Pedersen, Executive Vice President of Ship Management, will also be available for questions.

I will now turn the call over to Ryan Courson.

Ryan Courson -- Chief Financial Officer

Good morning, everyone, and thank you for joining us to discuss Seaspan's fourth quarter earnings. This morning, prior to the call, we issued a press release announcing Seaspan's fourth quarter results for the period ended December 31, 2019. The release as well as the accompanying presentation for the conference call are available on the Investor Relations section of our website.

If you would please turn to Slide 3, I would like to remind you that our discussion today contains forward-looking statements. Actual results may differ materially from those stated or implied by forward-looking statements, due to risks and uncertainties associated with our business, which are discussed in the Risk Factors section of our annual report filed with the SEC on Form 20-F for the year ended December 31, 2018.

Our risk factors may be updated from time to time in our filings with the SEC. Please note that we assume no obligation to update any forward-looking statements.

With that, I will now pass the call over to Mr. Bing Chen to discuss Seaspan's performance.

Bing Chen -- President & Chief Executive Officer

Thank you, Ryan. Please turn to Slide 4. Over the past two years, we have maintained a laser focus on our five key priorities and installed the core competencies of successful asset managers and operators. These consist of consistent operational excellence, creative customer partnership, solid financial strength, quality growth opportunities and disciplined capital allocation.

With this as our foundation, it is our vision to continue sustainable growth and create shareholder value. The results evidenced by our constantly improving performance and transformation of our container shipping franchise. We have further deepened our position as the leader in the owner operator space as well as our long-standing reputation for full asset lifecycle management. As our core competencies continue to strengthen and broaden, it's now the right time for us to apply these core competencies beyond the shipping industry and into the new verticals where we can scale and leverage our expertise and create long-term sustainable shareholder value.

Before going further, I would like to take the opportunity to thank our dedicated team at Seaspan, our customers and our stakeholders, all of whom are trusted partners. Over the past 20 years as Seaspan, we have invested and built a unique differentiated business model that brings us unparalleled competitive advantages. These advantages come in the form of a highly predictable business model with a long-term fixed rate charters, a top quality customer base serving seven of the world's top eight liners, and an attractive fleet of large, diverse, versatile modern vessels with over 70% of which is greater than 9,000 TEU.

The balance sheet flexibility with a focus on deleveraging, utilizing our flexible portfolio financing program, and of course our integrated platform. Our integrated platform is the result of decades of investment in people, process and systems, which delivers differentiated value to our customers through our approach to full asset lifecycle management solutions. This includes the design, construction, financing, operations, commercial sale and purchase and demolitions. To deliver these best-in-class solutions, however, requires a dedicated team of both onshore and offshore staff. In addition, our executive leadership team led by Peter, Torsten, Tina and Ryan is world-class and possesses complementary skills, combined with decades of diversified industry knowledge and expertise.

When it comes to operational excellence, it's not something that just happens. It is the results of a culture, deeply committed to excellence and a strong focus on detail. Our goal is always to be the safest, most reliable, best solution provider for our customers. Our Companywide consistent efforts to improve safety, a representative of our emphasis on operational excellence and we are proud of the fact that our industry-leading safety record is a proxy for our top performance and service quality. We also take qualitative measures, including our service standards through the customer feedback surveys where we have received consistent praise for fuel consumption and cargo loading.

In addition, we're actively working with our 4,300 seafarers as a team, focusing on training and retention. Our seafarers are the people who are in constant contact with our customers. Therefore, retaining the best talent and investing in their training is vital to our business. With a focus on our people, we're able to build and maintain confidence in our customers, showcase our ability to deliver best-in-class performance.

Now for the financing performance -- financial performance. Coupled with the strong financial and operational results, we are confident that our transformation to Atlas Corp and the acquisition of APR Energy will support our growth momentum throughout 2020. As a team, we're well positioned and confident for our continued sustainable quality growth and the long-term value creation. We're also extremely fortunate to have the full support of our two largest shareholders, the Washington Companies and the Fairfax Financial Holdings. Seaspan continually benefits from these two committed capital partners. Not only are we always aligned in our strategic vision, but this relationship also makes us a stronger competitive company and a more effective team by leveraging the network and expertise.

When it comes to the growth opportunities and capital allocation, our disciplined approach is built upon a rigorous investment process and a strict set of quantitative and qualitative criteria. This approach has enabled us to create long-term value in finding high-quality assets and to capitalize on opportunities based on our customers' needs. Within this key priority, our competitive advantage are based on the following four pillars.

First, our diversified flexible portfolio financing program enables us to quickly act on opportunistic and special situations.

Second, as a best-in-class operator, it enables us to generate the maximum cash flow on the same assets.

Third, creative customer partnership that mutually benefits all parties, one being that our partners provide us with backing in terms of long-term chartering opportunities and the others being to best address the customer business needs such as vessel modification, upgrades, creative financing, charter modifications etc.

Fourth, deep industry network that provides us with a strong proprietary deal flow. For example, the $400 million plus of acquisition of the seven vessels in 2019 was a result of working closely with our financing partners and customers to create win-win outcomes. The $750 million acquisition of APR Energy with its attracted long-term cash flow came about from our key investor and partner Fairfax.

So, please turn to Slide 5. 2019 was another year of quality growth for Seaspan, marked by a number of corporate financial and operational achievements, which I would like to address here. During 2019, we executed agreements to acquire seven vessels on long-term charters, increasing Seaspan's contracted revenue to $4.3 billion with an average remaining term of 4.2 years on a fully delivered fleet basis. We remain committed to providing our stakeholders with a business sustained by long-term cash flow. This is one of the strengths of our business model as it minimizes short-term volatility, caused by external impacts such as the trade war and coronavirus. Operationally, Seaspan's commitment to being the safest, most reliable solution provider for our customers, result in best-in-class performance on the key metrics we monitor.

We achieved fourth quarter vessel utilization of 99.1% and 98.9% for the full year, the highest since the year ended December 31, 2014. In addition, as of December 31, 2019, we had achieved seven consecutive months with no idle days. This achievement is a testament to the team's focus on Operational Excellence as well as our strong Customer Partnerships. We look forward to continuing to exceed our customers' expectation throughout 2020. Operating earnings were $116.5 million for the fourth quarter and a record of $687 million for the full year, while our cash flow from operations was $137.8 million for the fourth quarter and a record $783 million for the full year.

EPS per diluted shares was $0.24 for the fourth quarter of 2019 while full-year EPS per diluted share reached a $1.67 for the full year. Changes in fair value of financial instruments contributed to $0.01 per diluted share for the fourth quarter and a loss of $0.16 per diluted share for the full year. As a reminder, the $2027 million [Phonetic] cash received from the contract modification in Q1, 2019 accelerated our operating profit and cash flows, which in turn adversely influenced the remaining three quarters. We estimate the adverse first quarter impact to be $12.5 million of net earnings and $0.06 of the EPS.

During the first quarter, we took delivery of five of the six containerships we acquired in Q4, 2019 and took delivery of the six in January 2020. With the acquisition of these large and high quality vessels, Seaspan is approaching 1 million TEU as we continue executing on our quality growth strategy through disciplined capital allocation. By leveraging our strong balance sheet, growing our trusted Customer Partnership and our unique integrated platform, we are well positioned to expand our market leading position to capture the increasingly attractive opportunities in the containership sector.

At our Investor Day in November, we made two major announcements. The first of these was the reorganization of Seaspan to form Atlas Corp, a new global asset manager and operator. The second is the acquisition of APR energy, a global leader in fast-tracking mobile power solution in a transaction valued at $750 million. These two developments and our continued commitment to strengthen Seaspan's global market leading position have laid foundation for us to deploy capital through cycles and across verticals in a disciplined manner.

Finally, on December 30, 2019, we increased the committed amount under the portfolio financing program by $155 million and expected to further increase the committed amount by $70 million in February 2020 to a total of $1.725 billion. The net proceeds from the program are intended to finance the previous announced acquisition of six high-quality containerships.

Please turn to Slide 6. Two aspects I would like to focus on are our commitment to strengthening customer partnership and our operational excellence. Our partnership approach allows us to exceed expectations through understanding our customers' requirements and priorities. To achieve this, in 2019, we executed agreements to acquire seven high quality containerships on long-term charter with top global liners. We also signed an MOU with COSCO SHIPPING Energy Transportation, expanding our close relationship with COSCO into potential new areas of a cooperation. By working with a key customer, we signed a mutually beneficial charter modification agreement, creating a strong win-win outcome for both parties.

Lastly, our innovative index-based contract structure is another example of how Seaspan creates solutions for our customers and enable long-term charters that deliver value for our customers and our shareholders. We were able to achieve these results only through the tremendous efforts of our global team. Operationally, we achieved seven consecutive months with no idle days as of December 31, 2019. Our lost-time injury frequency, which is how we measure our safety performance improved 40% from 2018 to make 2019 our safest year on record. Our emphasis on a safety culture, not only has benefit our well-being of our seafarers, but there are also clear correlations between high safety standards and better operational performance, therefore by encouraging safety, we are also encouraging superior performance and efficiency.

During 2019, Seaspan managed a seamless transition to the IMO 2020 regulations, successfully prepared all of our 118 vessels to be IMO 2020 fuel compliant as of January 1, 2020.

Finally, our 2019 utilization rate of 98.9% was the best since the year ended December 31, 2014. In order for us to further grow our customer partnership and advance our industry-leading position, we will stay focused on operational excellence as it's one of the most important differentiating factors and one of the key reasons why major liners continue to grow and deepen their partnership with Seaspan.

I will now pass it over to Peter Curtis, who will discuss the current industry outlook.

Peter Curtis -- Executive Vice President, Chief Commercial & Technical Officer

Thank you, Bing.

Please turn to Slide 7. Before discussing the fourth quarter of 2019, first I'd like to provide a couple of comments regarding the industry over the year. The container shipping markets closed out 2019 on a relative high, driven primarily by improved fundamentals and scrubber-related projects as we have discussed in prior quarters. Throughout 2019, the charter party -- the charter markets benefited from three primary themes, namely marginal degree of capacity removals at a little over 200,000 TEU which was almost double that of 2018.

Secondly, the continued discipline and focus of liner companies in regard to supply and demand balance. And thirdly, the supply disruption due to scrubber retrofits and which includes the combination of vessels taken out of service for scrubber retrofitting as well as significant delays after payoffs.

Turning to Q4. In regard to IMO 2020, which had a deadline of 1st of January 2020, Seaspan completed the fuel change of our entire fleet within budget and without disruption, on target for the deadline. The team spent a diligent amount of time and effort planning to ensure execution for a smooth transition and on close communication with our customers to minimize impact on business. We are proud of our team who developed and determined cost effective methods of tank cleaning and preparation.

As previously announced, 10 of our vessels will have scrubber retrofits, and as of today, our first two ships are in the shipyards with installation well under way. Time charter rates remained stable throughout the fourth quarter with larger vessels remaining in demand and rates for mid-size vessels remaining at healthy levels. These benefiting from the cascading of demand as [Indecipherable]. The smaller feeder size segments continued to underperform against the wider markets as a result of the cascade effect and likely compounded by IMO 2020 increasing the slot cost as fuel costs increase.

We see the potential for incremental slow steaming and associated network adjustments to maintain demand for tonnage above the feeder size segment. In terms of vessel values, the secondhand prices remain somewhat resilient and with relatively limited S&P activity. We've seen and [Phonetic] continue to assess opportunity and acquire quality vessels and grow our fleet as we have demonstrated with the announcement of a number of vessel acquisitions in the fourth quarter. As being discussed, one of our benefits -- one of the benefits of our strong customer and industry relationships is that these deals are often internally sourced where we focus on delivering mutually beneficial and creative solutions and transactions in cooperation with our customers.

I'd like to take a moment to address the issue of coronavirus and Seaspan's position. This was for obvious reasons a topic of discussion with our personnel, customers, shipyards and other stakeholders. First and foremost is the safety of our crew. We are ensuring the appropriate protection for our personnel at sea and ashore through the best safety practices and close dialog with our customers and risk management advisors. Of course, we also follow the various requirements of the ports and governments in the locations where our vessels fall.

As we always say, we are a business that is both on long-term contracted cash flows. As such, short-term items really impact us in a materially way. This was true of coronavirus as well. The ways in which we have seen coronavirus effect show up, have been around our dry docking schedules with the slowdown at shipyards in China due to the regulations that came into force to avoid migration of people during and after the Chinese New Year holidays and which were put into force to mitigate and contain the spread.

We are leveraging our relationships with customers as well as shipyards to mitigate impacts. In terms of global trade and effects on container trades, it's too early to determine what the full impact would be. Certainly the extension of the Chinese New Year holidays has influenced manufacturing in China and has resulted in slowdown in both imports and exports. This has resulted in our customers adjusting schedules and affecting many blank sailings. All of Seaspan's vessels remain on higher, other than two vessels which are in drydock and are fixed forward for employment.

I will now move on to discussing industry supply.

Please turn to Slide 8. In regards to the idle fleet, the capacity effect has shown a small increase and currently it is at approximately 6%, up from 4% and 5% in the early and latter part of Q4. This is primarily due to the number of large vessels, undergoing scrubber retrofitting, and these being included in the classification as idle. These large vessels account for about 60% of the aggregate idle capacity. The effect of idle fleet is significantly lower than this at approximately 2% and for the most part, this was made up of vessels smaller than 3,000 TEU. The order book remains at historically low levels, despite a small increase in ordering in the last quarter of 2019, the largest of them being 10 units of 23,000 TEU placed by Evergreen.

The [Indecipherable] comprises over 35% of the order book. As mentioned, the individual liner companies continue to display a high degree of discipline in regard to ordering and coordinate this through their alliances. The natural effect on charter tonnage providers is the adoption of a similar discipline. In regards to recycling, as mentioned 2019 ended with volumes almost double 2018 figures, but below expectations. Charter rates benefited from supply disruption from scrubber retrofitting and trade route upsizing, resulting in improved charter rates and therefore reduced appetite for recycling. We are optimistic that there will be continued longer-term pressure through higher fuel prices, providing a positive impetus for increased recycling volumes through 2020 and onwards.

Lastly, we expect that in the shorter term, charter rates should continue to be positively affected by scrubber retrofitting through 2020, barring the immediate effects of the coronavirus matter.

I now hand the call over to Ryan.

Ryan Courson -- Chief Financial Officer

Thank you, Peter. If we could all please turn to Slide 9, I'll provide a summary of our financial results for the fourth quarter and full year. Our vessel utilization for the fourth quarter was 99.1%, an increase from 97.5% in the fourth quarter of 2018, while vessel utilization for the full year was 98.9% up from 97.9% in 2018. Our 2019 revenue decreased by 2.3% to $288 million for the quarter ended, but increased by 3.2% to $1.132 million [Phonetic] for the full year.

As a reminder, during the year, Seaspan recognized $227 million of income from a charter modification and these seven vessels were subsequently rechartered to other customers at market rates. This contract modification pulled forward revenue and decreased revenue for the quarter by an estimated $13 million and $38.5 million for the full year. Adjusting for this, Q4 revenue would have increased by approximately 2% with full-year revenue increasing by approximately 7%.

For the full year, we exceeded the top end of our guidance range. 2019 operating cost per ownership day, which is measured as ship operating expense divided by ownership days, increased by 7.4% in the quarter and increased by 0.1% for the full year. The fourth quarter increase in operating cost per ownership day was primarily due to a higher schedule of maintenance and repairs. For the full year, we held cost flat at a 0.1% increase, below general inflation.

General and administrative expenses were $9.8 million in the fourth quarter, which included $3.3 million of transaction expenses, and $33.1 million for the full year. For the full year, we were in line with our guidance -- our expense guidance range. Excluding the transaction expenses, we were at the bottom end of our guidance range.

On operating earnings -- our operating earnings for the fourth quarter were $116.5 million and a record $687 million for the full year, representing an increase for the full year of 46.2%. The aforementioned contract modification decreased operating earnings by approximately $13 million for the quarter. Adjusting for this Q4 operating earnings would have decreased by 3% with the full-year operating earnings increasing by 6.3%.

GAAP EPS per diluted share was $0.24 for the quarter of 2019, while full-year EPS per diluted share reached $1.67 for the full year. Changes in the fair value of financial instruments contributed to $0.01 per diluted share for the fourth quarter and a loss of $0.16 per diluted share for the full year. Cash flow from operations for the quarter was $137.8 million, a record $783 million for the full year. Onto the balance sheet, our balance sheet -- our cash balance at the end of Q4, 2019 including short-term investments was $195 million.

If we could please turn to Slide 10, I will provide an overview of Seaspan's progression as a result of our execution on our strategy over the past two years. On this slide, we present a simple table to provide a sense of how our key performance metrics have evolved since the management team took over.

Since 2017, we have significantly improved both our fleet size and composition through strategic acquisitions of 30 large modern vessels, increasing the total capacity of Seaspan's fleet by over 300,000 TEU, allowing Seaspan to approach nearly 1 million TEU of capacity. Over the same period, Seaspan has also improved its fleet utilization from 95.7% in 2017 to 98.9% in 2019, the highest achieved by Seaspan since 2014. The evolution of this metric is a demonstration of our commitment to operational excellence and customer partnerships through the improvement of the -- of utilization has come with a larger fleet and more complex customer relationships and engagements.

Our focus pursuing opportunistic acquisitions of containerships, continuous cost improvement, and creativity on customer solutions is also reflected in our financial results with earnings per diluted share, increasing from $0.94 in 2017 to $1.67 in 2019. Cash flow from operating activities also reached a record high for 2019 of $783 million. These improvements across our operations and cash flow, combined with a relentless focus on capital allocation has allowed us to make significant strides in strengthening our balance sheet, increasing shareholder equity by 29% and reducing our net debt-to-equity ratio from 1.5 times to 1.1 times, all while increasing our capital structure flexibility and lowering our cost of capital via the creation of a one of a kind portfolio financing program. These achievements have helped translate into considerable returns for our shareholders with a 45% annualized growth rate of the share price of Seaspan's common shares during the same time period.

If we could please turn to Slide 11, I will further discuss some of the more recent developments across our capital structure. As discussed in the previous slide, over the course of 2019, we made significant improvements across our capital structure. We continue to improve on our liquidity position with several financing initiatives, the latest being an increase of $155 million committed under the current portfolio financing program, bringing the total committed to $1.655 billion under the facility with a further $70 million expected in February 2020.

The incremental amount will be used to finance the recent acquisition of six containerships. Through this facility, we have also delivered improved liquidity to the corporation by adding $300 million of revolving credit capacity, under the financing program. During the fourth quarter, $327 million went to purchase the first five vessels and on January 24 of 2020, we closed the purchase of the last vessel for an additional $63 million, while paying down throughout the course of 2019 approximately $735 million of debt across our portfolio.

At December 31, 2019, our net debt-to-equity ratio was 1.1 times and considerable improvement from the 1.6 times at the same time last year. We're pleased with our progress we have made over the past quarter and throughout 2019. We believe we are well positioned to leverage our strong balance sheet to explore new growth opportunities and continue to create long-term value for our stakeholders.

Finally, if we could please turn to Slide 12, I will go over our forward-looking guidance. As stated in our previous earnings calls, we will issue guidance with Q4 results and update this as necessary when we report Q2, rather than adjust our outlook quarterly. As always, please note that the following amounts are based on current information and estimates are subject to change. Seaspan's 2020 fiscal year -- for Seaspan's 2020 fiscal year, we anticipate revenue will be between $1.17 billion and $1.195 billion.

Ship operating expense is expected to be within a range of $240 million and $250 million. Our G&A expense is expected to be in a range between $35 million and $40 million and finally operating lease expense is expected to be in a range of $145 million and $155 million.

That concludes my formal remarks, and with that, I would like to turn the call over back to our CEO, Mr. Bing Chen.

Bing Chen -- President & Chief Executive Officer

Thank you, Ryan.

During the 2019, Seaspan delivered record annual revenue of $1.13 billion, the operating earnings of $687 million and a cash flow from operations of $783 million. Operationally, we delivered a utilization rate of 98.9% for the full year, the highest since December 31, 2014 and our key safety metrics such as lost time injury frequency, now stands at a all-time low. Our unique integrated platform is a source of long-term value creation with $4.3 billion contracted revenue, and average remaining term of 4.2 years on a fully delivered fleet basis that enabled us to grow strong lasting partnerships with our customers.

In addition, over the past two years, we have deployed over $2 billion in capital in the container shipping sector, growing our fleet over 300,000 TEU during the period, and now approaching 1 million TEU. Through our laser focus commitment to our five key priorities, the hard work of our leadership team and all of our 4,600 onshore and offshore employees globally, Seaspan has proven itself as the leader in owner operator space.

We thank you for your time today, and with that, I will pass the call back to the operator who will open the call for questions.

Questions and Answers:


Thank you. [Operator Instructions] Our first question will come from the line of Randy Giveans from Jefferies. You may begin.

Chris Robertson -- Jefferies -- Analyst

Hey guys, this is Chris Robertson on for Randy. Thanks for taking our call. This first question is for Peter. Peter, on those two vessels that are getting the scrubber retrofits at the moment, are there going to be any delays related to coronavirus there at the port and any concerns for the remaining vessels in that program too.

Peter Curtis -- Executive Vice President, Chief Commercial & Technical Officer

Hi, Chris. Thanks for the question. In short, no, not really. We've worked around some of the difficulties that we've faced in terms of logistics of getting bits and pieces to the yard, but we've managed to do pretty well on that. On the following vessels, it's not so much an extension of the state. It's rather a slight shifting of the date that the vessel arrives at the yard. So, the impact to us is expected to be minimal.

Chris Robertson -- Jefferies -- Analyst

Okay, great. And Peter, can you kind of remind us on the charter arrangements. Regarding those vessels, is it simply just a step-up agreement that pays for the installation plus a small return on that?

Peter Curtis -- Executive Vice President, Chief Commercial & Technical Officer

In all cases, we have returns. We have two different arrangements. One is a step up, the other one is actually a pass-through with a -- an amount for operating expense, plus a return on any costs that we've incurred.

Chris Robertson -- Jefferies -- Analyst

Okay. Just changing gears. So, we've heard in both the tanker and the bulker market that there's kind of some downward pressure on ordering new building vessels just related to the regulatory and technological uncertainty that's out there right now, especially as it relates to IMO 2030 and some of the EU pending regulations. So, what do you think the way forward is for the container industry in terms of meeting the IMO 2030 carbon emissions goals and are there are similar concerns out there within your industry segment about new buildings?

Peter Curtis -- Executive Vice President, Chief Commercial & Technical Officer

That's a very good question. There is no clear path, the IMO put forward targets. There is no regulation around it yet. So, we don't know exactly how the IMO and then various nations through their own legislation would actually regulate it. That said, our operating platform has always been one where we look for innovation, which includes retrofitting on vessels, improving vessels, going forward in terms of designs for improved efficiencies, etc. So we've actually already made great strides toward meeting that through our SAVER program, which you probably recall. In regards to other technologies, there's a lot of reports in media about different types of fuel, etc. I think pragmatism needs to prevail in terms of the availability of these types of fuels and indeed the technologies as they become available.

Chris Robertson -- Jefferies -- Analyst

Got you. Thanks, Peter. Ryan, this question is for you. On your 2020 financial guidance, can you clarify how many operating days that assumes for the revenue and ship opex?

Ryan Courson -- Chief Financial Officer

From an operating days standpoint, we limit our disclosure to revenue and operating expenses. You can look through our fleet table though that we disclosed. And our fleet is pro forma on a fully delivered basis will be 119 vessels for 2020, and you'll get a good sense of what those days are.

Chris Robertson -- Jefferies -- Analyst

Got you. All right. Guys, keep up the good work. Appreciate your time. Thank you.


Our next question comes from the line of Sanjay Ramaswamy from Bank of America. You may begin.

Sanjay Ramaswamy -- Bank of America -- Analyst

Good morning, guys. Thanks for taking my question. Maybe just a question for you, Peter. I know you mentioned in your prepared remarks about the secondhand price environment for builds remaining resilient. And just interested to hear about how you're thinking about the return profile of new builds in this environment, and whether you see secondhand prices remaining resilient across 2020?

Bing Chen -- President & Chief Executive Officer

Yeah, this is Bing Chen. I will answer your question. The way we see the -- obviously, on one hand, the new build is -- have the request ongoing where we're working closely with our customer. But at the same time, we see more attractive opportunities where the secondhand vessels is -- one is in demand from both side. One is from the seller side, and the other part is from the liner side, and which is why that we successfully acquired the seven vessels over the past five months time. It is very important, I think, Seaspan in this sector where -- that we provide the solutions to our customers where that -- there's a demand from our liner side, from their business requirements. At the same time, the Seaspan has the balance sheet and has the ability, and the customer base, where it's very attractive to the sellers whether we are able to execute.

So, going forward, we see the increasing activities. And because that the special roles that the Seaspan plays in this marketplace, because we are not buying these vessels on a speculative basis, rather we are buying these vessels to service our customers' needs. Meanwhile, fulfill this -- the, I would say the role in the marketplace to be able to bridge the seller and the buyer. And we see that, it will continue to grow, and plus that if we're looking at the opportunities, particularly in the Chinese market where it has been the center of the container shipping activities over the past decades, particularly in the areas of financing the ship building, and also the liner companies, I think we have a very -- a broader network where we're working with the leasing houses, we're working with the banks, we're working with the financial investors, we're working with the yards and also the customers, and that's how we will be able to get these proprietary deals where that brings the value to our customer, and also to our shareholders.

Sanjay Ramaswamy -- Bank of America -- Analyst

Great, that's really useful. Thanks for that, Bing. Maybe just a question for Ryan here. Just on the utilization levels, and what we should expect moving into 2020. Great job on that, with the slide showing the improvement from 2017 to 2019. Just with the order book at these low levels, and given the tight supply environment for shipping, where should we kind of see that utilization level at -- in 2020? And do you expect this 98% plus 99% utilization level to sustain itself across the next couple of years?

Ryan Courson -- Chief Financial Officer

Thanks for that. It's a good question. The way that I would help to answer that is, if you look at our fleet disclosures, again, in our fee table provided in our 6-K, you'll see the number of vessels that we have in the contracts that are in place. And then I think if you work through the guidance range that's implied to that you'll see what's contracted versus what's not, and you'll get a sense of how we think about spot exposure, a short-term exposure for the fleets -- for the vessels that would be rolling off of contract in 2020. I'll let Peter jump in and talk a little bit about some of the supply and demand dynamics here. But I think broadly, we -- as you will see, and what's included in our guidance range, we continue to feel positive momentum and are very confident in our operating results and financial results in 2020.

Peter Curtis -- Executive Vice President, Chief Commercial & Technical Officer

Sure. I think Ryan's essentially covered it. But really the way -- how we see the way forward with the upsizing of various trades, not only on the main trades, but on the smaller trades, and the cascading effect, where larger ships coming into, for instance, the Asia-Europe trade, push vessels down. There's also a pull effect on the many other trades. If you reflect on what we said at the Investor Day, I gave some illustrations on the upsizing in many of the intra-regional trades, which actually account for well over 60% of global moves. So we see the situation being optimistic.

Sanjay Ramaswamy -- Bank of America -- Analyst

Great. And that makes sense, and great job on the results again, in beating guidance.


Thank you. [Operator Instructions]

Our next question will come from the line of Fadi Chamoun from BMO Capital Markets. You may begin.

Fadi Chamoun -- BMO Capital Markets -- Analyst

Good morning. Thanks for taking my question. Peter, maybe -- I mean, we are seeing a lot of disruptions here on both the demand side and the supply side of this container shipping industry, in terms of coronavirus and IMO and some trade volatility as well. Does this drive more opportunities to acquire assets in this environment? Are you seeing a stronger pipeline for potential M&A?

Bing Chen -- President & Chief Executive Officer

Hey, good morning. This is Bing. I will answer this question, and Peter, feel free to jump in. To answer to your question that -- with regarding to this coronavirus, I think the impact currently, that does not -- has not directly result in increased opportunity to have the assets up for sale. The reason being, I think, the impact so far is relatively, it's a manmade because this virus itself, based on the current statistics that's been published, it's under control. Rather, the impact is caused by the measures that is being imposed by the government to make sure that have -- they will be able to curtail the spread of the virus in the shortest period of time.

And secondly, I think at this time around, because of the general public's awareness of the fear factor is at a much higher level than before. So, therefore that with the impact of the lock down that was the current impact has been on the supply and demand side. However, I think to expand on your question is, that we anticipate, based on the current trend, the -- with the more -- with half of the people in the coastal city right now is already returning to work. Plus that Chinese government has the experience in the effective ways of controlling the virus. We believe that the impact will be not sustained. And -- so therefore, that, I think, in terms of the impact to the supply side and the demand side, over the time, most likely will be taped out in a month or two to the maximum. And with that being the situation, I think the Q2 will be the recovery quarter, and Q3 and Q4 will be the quarter that will be ramping up, particularly with regarding to the manufacturing sector. And I think, we'll be able to have some ramping-up factors. So, that's what we see in terms of the impact of the coronavirus on the supply side of the vessel that is for sale.

On the demand side of it, I think we continue to see our customers having the demand for fixing the charter. And given the Seaspan's business model actually, we have a very little -- a handful of vessels that is going to be on spot over the next months or two, because that we have a majority of our resources [Phonetic] on long-term charter. As I said it earlier, we have a very predictable business model with the long-term charter. And specifically, we have about $4.3 billion of revenue that is under long-term charter, an average of 4.5 years of guaranteed charter. And that is exactly the model actually insulate us from the short-term market volatilities, such as the trade war and the coronavirus as for now.

Fadi Chamoun -- BMO Capital Markets -- Analyst

Okay. That's helpful. And just a follow-up kind of on this question is, during the Investor Day, and obviously, as you move toward this Atlas structure, you've highlighted that you would like to be invested in more verticals over the medium term. And is there a desire to diversify the asset base of this Company away from container shipping? Or does it really strictly going to be based on where you find the returns to be more interesting relative to your cost of capital?

Bing Chen -- President & Chief Executive Officer

Yes. The answer to that is, no. We have no intention to diversify away from container shipping sector. Rather, we actually will continue to be fully committed to that sector. As you can see, over the past five months, we actually deployed over $400 million and acquired seven vessels within the five months period of time. So, this is definitely the case where we are fully committed.

In terms of the Atlas Corp., and that is a platform because Seaspan, we -- at Seaspan, we are very proud that we are capable of operating the assets. At the same time, we own the assets versus many of our peers who actually wants the own assets, but they don't really operate the assets. And that's the key difference. That's why I highlighted saying that we are the asset manager, and we are the owner and the operator. So Atlas is a platform where it allows us to be able to further scale our business because we have the ability in terms of operating assets. And if you're looking at APR, as an example, I think APR fits very naturally into this Atlas platform. Because one is that the business shares a lot of the similar characteristics in the sense that it is a capital-intensive, if the operating and owner situation where we have a long-term contract. And therefore, I think these two pieces, there's a lot of similarity and also I think in terms of the prospects that is -- they own the good assets and have a lot of growth potential.

So, from an investment perspective, we absolutely focusing on the return and the risk-adjusted return, in a sense that, as I also specifically outlined during our Investor Day presentation, where at Seaspan, I think, we are very disciplined in sticking to the investment criteria, and those are the investment criteria, is that, first of all, it needs to have the business rationale. And secondly, that it has to have to customer needs, and thirdly, it has to have the risk-adjusted return and fourthly, it has to be accretive, and fifth is that, it has to have the positive impact to the balance sheet.

So in terms of the investment, we will continue to stick to these investment criterias. And only, and if only, when we see those type of right business opportunities, has the right rationale that meets these investment criterias, then we will be making that investment decision. And with the containership space, I think we have a competitive advantage, as I outlined in earlier discussion, those are unparalleled events that we have today, namely our -- the top quality customer base, our long-term contract, our financing capability, our excellent, consistent operational quality, and our platform, the integrated platform, which is scalable, which is flexible and also is efficient. So therefore, I think that is the sector we will continue to grow. At the same time, we're also looking at other verticals, if and when there's right opportunity that meets our investment criteria.

Fadi Chamoun -- BMO Capital Markets -- Analyst

That's helpful. Thanks for the comments. And congrats on strong results this year.

Bing Chen -- President & Chief Executive Officer

Thank you.


Thank you. And I'm not showing any further questions at this time. I'd like to turn the call back to Bing Chen for any closing remarks.

Bing Chen -- President & Chief Executive Officer

Thank you all very much for your time and participation, and wish you all have a great day.


[Operator Closing Remarks]

Duration: 52 minutes

Call participants:

Ryan Courson -- Chief Financial Officer

Bing Chen -- President & Chief Executive Officer

Peter Curtis -- Executive Vice President, Chief Commercial & Technical Officer

Chris Robertson -- Jefferies -- Analyst

Sanjay Ramaswamy -- Bank of America -- Analyst

Fadi Chamoun -- BMO Capital Markets -- Analyst

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