Seaspan's (ATCO) first-quarter results require some context before investors get too excited by the surge in its profitability. One of the containership leasing company's top-five customers needed to modify the contracts on seven vessels it leased from Seaspan. This adjustment resulted in those agreements ending on the last day of the quarter. In exchange, Seaspan received a significant one-time payment, which boosted first-quarter results. The company was able to quickly recharter those vessels with other customers, which should further mute the impact of this modification.

Seaspan Corporation results: The raw numbers


Q1 2019

Q1 2018

Year-Over-Year Change


$285.3 million

$224.8 million


Net earnings

$267.1 million

$50 million


Earnings per share




Data source: Seaspan Corporation.

What happened with Seaspan Corporation this quarter?

The contract modification positively impacted profitability:

  • Seaspan's revenue surged nearly 27% compared to the year-ago period, thanks in large part to last year's acquisition of Greater China Intermodal Investments (GCI). In addition to that, the company also benefited from vessel deliveries in the past year, as well as higher rates for ships on short-term charters.
  • Operating earnings, meanwhile, zoomed to triple digits compared to the prior-year period. That's because the company recorded $227 million in income relating to the modification of leases on seven vessels. If we adjust for that impact, net earnings would have been about $40 million. That's lower than the year-ago period due to higher ship operating and leasing costs as well as increased interest expenses. These costs rose due to the acquisition of GCI as well as an accounting change in how the company records operating lease expenses.
  • Cash from operating activities, meanwhile, rocketed 76% year over year to $122.6 million.
  • Seaspan used its cash flow as well as the $500 million in proceeds from a financing agreement with Fairfax Financial to pay off debt. The company repaid $231.6 million across three credit facilities during the quarter. Those payoffs freed up 13 vessels that had served as collateral on the loans. The company also paid off a $311.4 million note upon maturity at the end of last month. These actions will help reduce interest expenses while bolstering the company's financial flexibility.
  • Seaspan closed the acquisition of an 80% stake in Swiber Holdings Limited in March for $10 million. Swiber is an offshore engineering, procurement, and construction business that owns five maritime vessels. Seaspan will also invest up to an additional $190 million in an LNG-to-power project in Vietnam that's under development as long as it meets certain milestones.
  • Seaspan announced a framework agreement with COSCO SHIPPING Energy Transportation, which has the largest LNG shipping fleet in China. The companies plan to work together to pursue opportunities to invest in LNG-related projects.
Shipping containers on a ship at port with the sun rising in the background.

Image source: Getty Images.

What management had to say 

CEO Bing Chen commented on the company's progress during the quarter, saying:

During the first quarter of 2019, we continued to deliver on our five-priority focus and capitalize on the scale, flexibility, and quality of our integrated operating platform. This platform provides the fleet life cycle services our customers depend on, as demonstrated by our utilization rate of 98% during the quarter, which is consistent with our industry-leading average of 98% since IPO. As always, our team is dedicated to strengthening our existing partnerships, as well as expanding our platform with new customers.

One of those five priorities is customer partnerships, which the company demonstrated last quarter. Not only did it work with its customers to modify the leases and then recharter seven of its vessels, but it leveraged its relationship with COSCO SHIPPING to pursue growth opportunities in the LNG market, which is another one of its key priorities. These efforts position the company for continued growth.

Looking forward 

Seaspan has started exploring opportunities in the fast-growing LNG market over the past few months. Not only is it potentially investing in an LNG-to-power project in Vietnam, but it's working with COSCO SHIPPING to pursue LNG-related projects, including transporting LNG and ethane. This market makes lots of sense for Seaspan since customers typically sign long-term contracts for LNG and ethane ships, which is similar to its containership leasing business model. That makes it a key growth area for investors to watch over the coming years.