Seaspan Corporation (NYSE:SSW) reported third-quarter results after the closing bell today. The containership owner reported normalized net earnings of $38.1 million, or $0.25 per share. That was a penny off what Wall Street analysts were expecting and about 10.7% less than last year's third-quarter. However, it's not the most important number to look for at Seaspan, so let's take a closer look at the quarter.
A look at the numbers that matter
A number of factors work against Seaspan's reported normalized earnings. Cash flow is thus much more important than earnings, as it gives us a better idea of how the underlying business is performing. That's why Seaspan investors should focus their attention on cash available for distribution, which is the amount of money Seaspan has left over to pay its dividend. The proxy for free cash flow came in at $77.7 million, or about double its earnings. That was also 7.4% higher than last year's third quarter and well above the $46.5 million the company paid out in common and preferred dividends in the past quarter.
Driving that cash flow was strong revenue growth. Seaspan reported revenue of $185.9 million, 7.8% higher than last year's third quarter. The increase in revenue was due to the delivery of four new vessels so far this year, including the delivery of the MOL Bravo in July. Those deliveries brought the company's fleet up to 75 vessels.
More fleet news
In addition to adding that vessel in the quarter, Seaspan announced several agreements that expanded its relationships with customers, increased its time charter coverage, and grew its future containership fleet. Among its notable accomplishments was a fixed-rate time charter agreement with Maersk for four newbuild vessels and an extension of time charters for five vessels with Yang Ming, as well as the confirmation that it will build and manage 15 vessels for Yang Ming under long-term, fixed-rate time charters.
As a result of these announcements, the company strengthened its future outlook as it now has all of its newbuilds signed to fixed-rate time charters. That development pushed the company's committed revenue up to $6.6 billion. This committed revenue will provide the company with a growing stream of secure cash flow that will allow it to keep growing its quarterly dividend.
Seaspan delivered a pretty solid quarter. Cash flow continues to grow as the company adds new vessels to its fleet. On top of that, the company has strengthened its contracts with customers so that its newbuilds will all be under contract and delivering cash flow immediately upon delivery.