Seaspan Corporation (SSW +0.00%) reported its second-quarter results after the market closed on Tuesday. The container-ship owner delivered solid year-over-year growth in revenue, earnings, and cash flow thanks in part to the addition of four new vessels to its fleet in the quarter. With more ships on the way, Seaspan expects continued growth for the foreseeable future.
A look at the numbers
Seaspan's reported revenue of $199.2 million, which was 14.5% higher than the year-ago quarter. Driving this revenue growth were new vessels added over the past year, as the company has increased its fleet by 10 over the same period, including four new additions last quarter alone, bringing its fleet to 82. These new additions helped to more than offset some weakness from lower charter rates from vessels that were on short-term charter. Further, it offset weaker vessel utilization, which was down from 99.3% in last year's second quarter to 98% this quarter because of an increase in unscheduled and scheduled off-hire time during the quarter.
Those weaknesses aside, the company was able to turn its strong revenue growth into even stronger earnings and cash flow. This is as adjusted EBITDA jumped 29%, normalized earnings per share increased by 15.8%, and cash available for distribution to common shareholders surged 55.4%. Of those numbers, the one that matters most to investors is cash available for distribution, which was $105.7 million for the quarter. That number is important, because it supports the company's robust dividend payment, which totaled roughly $50.6 million in common and preferred dividends during the quarter, suggesting that the dividend is safe and has room to move higher.
A look at the outlook
Looking ahead, Seaspan expects this growth to continue, as it now has 23 new-build container ships under construction after it ordered seven more container ships in the quarter. In the first set of orders, the company entered into contracts totaling $467.5 million for five 11,000-TEU new-build container ships. The ships will be delivered in 2017 and are already under 17-year charters with a leading operator. Seaspan, however, will be taking delivery of only three of the vessels, with the other two being acquired by its GCI joint venture. In addition, the company signed contracts totaling $186 million for two 10,000-TEU new builds that will also be delivered in 2017. Seaspan will retain one of the vessels, while GCI will acquire the other.
What's worth noting here is that the company's joint-venture partnership enables the company to order more ships than it probably could have otherwise handled by itself. This ability enables the company to participate in the growth it's creating, without out all the risk, especially on the financing side.
Investor takeaway
Seaspan continues its steady growth after taking delivery of four more vessels in the quarter, which really drove strong growth in revenue, earnings, and cash flow. With nearly two dozen more ships on the way through 2017, the company has a lot more growth ahead of it.
