Seaspan Reports Financial Results for the Three and Six Months Ended June 30, 2017

• Total revenues of $204.6 million for the second quarter and $405.9 million for the six months.
• Earnings per diluted share of $0.11 for the second quarter and $0.33 for the six months.
• Normalized earnings per diluted share⁽¹⁾ of $0.17 for the second quarter and $0.32 for the six months.
• Cash available for distribution to common shareholders⁽¹⁾ of $95.0 million for the second quarter and $155.4 million for the six months.
• Adjusted EBITDA⁽¹⁾ of $153.9 million for the second quarter and $273.2 million for the six months.

Highlights

• Accepted delivery of one 14000 TEU vessel on long-term charter with Yang Ming Marine Transport Corp. ("Yang Ming Marine").
  
  
• Achieved reductions of 13.8% and 12.3% in ship operating expense per ownership day during the three and six months ended June 30, 2017, respectively, compared to the same periods in 2016.
  
  
• Achieved vessel utilization of 98.2% and 95.0% for the three and six months ended June 30, 2017, respectively.
  
  
• Raised gross proceeds of $33.9 million through common equity sales in "at-the-market" offerings during the three months ended June 30, 2017 and $58.6 million for the six months ended June 30, 2017.
   
  
• Currently eight unencumbered vessels in the Company's operating fleet: 2 x 3500 TEUs, 2 x 4500 TEUs and 4 x 4250 TEUs.
  
  
• In July 2017, declared a quarterly dividend of $0.125 per common share for the second quarter of 2017.

Gerry Wang, Chief Executive Officer and Co-Founder of Seaspan, commented, "During the second quarter, Seaspan grew its operating fleet with the delivery of the YM Wind, a 14000 TEU containership on a long-term fixed rate time charter. We also achieved strong operating results, highlighted by our ongoing success in reducing costs and our high utilization rate for the quarter."

Mr. Wang added, "We took important steps to further strengthen our financial position during the quarter, including entering into a sale-leaseback transaction to fund the YM Wind delivery and renewing our unsecured revolving loan facility. Both of these transactions demonstrate the company's strong access to capital. We remain committed to creating long-term shareholder value and are pleased to enter the second half of the year with a strong cash position and the financial flexibility to capitalize on future opportunities." 

Summary of Key Financial Results (in thousands of US dollars):

Second Quarter Developments

Vessel Delivery and Financing

In May 2017, Seaspan accepted delivery of one 14000 TEU vessel, the YM Wind. The vessel was constructed at CSBC Corporation, Taiwan using our fuel-efficient SAVER design and commenced a 10-year fixed rate time charter with Yang Ming Marine in June 2017.

In May 2017, Seaspan entered into a sale-leaseback transaction with special purpose companies ("SPCs") for the YM Wind for gross proceeds of $144.0 million. Under the lease, Seaspan sold the vessel to the SPCs and leased the vessel back for 12 years, with an option to purchase the vessel at the 9.5 year anniversary for a pre-determined fair value purchase price. Seaspan used approximately $53.2 million of the proceeds to repay a credit facility.

Revolving Credit Facility

In April 2017, Seaspan completed the renewal of its 364-day unsecured, revolving loan facility for a total commitment of up to $120.0 million. The facility includes features providing for an increase in commitments by up to $30.0 million, enabling a total facility size of up to $150.0 million.

At-the-Market Offering of Class A Common Shares

During the first quarter of 2017, Seaspan entered into an equity distribution agreement under which it may, from time to time, issue Class A common shares in at-the-market ("ATM") offerings for up to an aggregate of $75.0 million. During the three and six months ended June 30, 2017, Seaspan issued a total of 5,650,000 and 9,350,000 Class A common shares under the ATM offerings for gross proceeds of approximately $33.9 million and $58.6 million, respectively.

Subsequent Events

Dividends

In July 2017, Seaspan declared quarterly cash dividends on its common and preferred shares.

Results for the Three and Six Months Ended June 30, 2017

At the beginning of 2017, Seaspan had 87 vessels in operation. Seaspan acquired one 4250 TEU vessel and accepted delivery of one 14000 TEU vessel during the six months ended June 30, 2017, bringing its operating fleet to a total of 89 vessels as at June 30, 2017. Revenue is determined primarily by the number of operating days, and ship operating expense is determined primarily by the number of ownership days.

The following table summarizes Seaspan's vessel utilization by quarter and for the six months ended June 30, 2017 and 2016:

The following table summarizes Seaspan's consolidated financial results for the quarter and six months ended June 30, 2017 and 2016:

Revenue

Revenue decreased by 8.8% to $204.6 million for the three months ended June 30, 2017, compared to the same period in 2016, primarily due to lower average charter rates for vessels that were on short-term charters. The decrease was partially offset by the delivery of newbuilding vessels in 2016 and 2017 and the addition of two leased-in vessels in 2016.

Revenue decreased by 7.7% to $405.9 million for the six months ended June 30, 2017, compared to the same period in 2016, primarily due to lower average charter rates for vessels that were on short-term charters and an increase in unscheduled off-hire, primarily relating to vessels being off-charter. For the six months ended June 30, 2017, 200 of the off-charter days related to three 10000 TEU vessels that were previously on long-term charters and commenced short-term charters with Hapag-Lloyd AG commencing in March and April 2017. The remaining off-charter days primarily related to panamax vessels, including four secondhand vessels purchased in December 2016. The decrease was partially offset by the delivery of newbuilding vessels in 2016 and 2017 and the addition of two leased-in vessels in 2016.

The increase in operating days and the related financial impact thereof for the three and six months ended June 30, 2017, relative to the same periods in 2016, are attributable to the following:

Vessel utilization remained stable for the three months ended June 30, 2017, compared to the same period in 2016. Vessel utilization decreased for the six months ended June 30, 2017, compared to the same period in 2016, primarily due to an increase in off-charter days as previously described.

During the six months ended June 30, 2017, Seaspan completed dry-dockings for two 4250 TEU vessels, which were completed between their time charters.

Ship Operating Expense

Ship operating expense decreased by 9.0% to $44.8 million and by 6.6% to $90.4 million for the three and six months ended June 30, 2017, respectively, compared to the same periods in 2016, primarily due to cost savings initiatives. These decreases were achieved while the ownership days increased by 5.6% and 6.5% for the three and six months ended June 30, 2017. As a result, ship operating expense per ownership day declined by 13.8% and 12.3% for the three and six months ended June 30, 2017, compared to the same periods in 2016.

Depreciation and Amortization Expense

Depreciation and amortization expense decreased by 8.7% to $49.8 million and by 12.0% to $99.7 million for the three and six months ended June 30, 2017, respectively, compared to the same periods in 2016, primarily due to lower depreciation on 16 vessels that were impaired as of December 31, 2016.

General and Administrative Expense

General and administrative expense decreased by 17.4% to $7.5 million and 11.2% to $15.0 million for the three and six months ended June 30, 2017, respectively, compared to the same periods in 2016, primarily due to higher professional fees and other expenses incurred in 2016, partially offset by an increase in non-cash stock-based compensation expense related to grants of restricted and performance stock units in 2016.

Operating Lease Expense

Operating lease expense increased to $28.1 million and $54.7 million for the three and six months ended June 30, 2017, respectively, from $20.7 million and $35.5 million for the same periods in 2016. The increase was primarily due to the delivery of two vessels in 2016 and one vessel in 2017 that were financed through sale-leaseback transactions and two operating leases entered into in 2016. For the six months ended June 30, 2017, the increase was also due to the delivery of one 10000 TEU vessel financed through a sale-leaseback transaction in the first quarter of 2016.

Interest Expense and Amortization of Deferred Financing Fees

The following table summarizes Seaspan's borrowings:

Interest expense and amortization of deferred financing fees decreased by $1.8 million and $3.5 million to $28.3 million and $56.7 million for the three and six months ended June 30, 2017, respectively, compared to the same periods in 2016, primarily due to repayments made on existing operating borrowings in 2016 and 2017, partially offset by an increase in LIBOR.

Change in Fair Value of Financial Instruments

The change in fair value of financial instruments resulted in losses of $13.6 million and $17.0 million for the three and six months ended June 30, 2017, respectively, which losses  were primarily due to the impact of swap settlements, partially offset by an increase in the forward LIBOR curve.

About Seaspan 

Seaspan provides many of the world's major shipping lines with creative outsourcing alternatives to vessel ownership by offering long-term leases on large, modern containerships combined with industry-leading ship management services. Seaspan's managed fleet consists of 114 containerships representing a total capacity of over 915,000 TEU, including nine newbuilding containerships on order scheduled for delivery to Seaspan and third parties by the end of 2018. Seaspan's current operating fleet of 89 vessels has an average age of approximately six years and an average remaining lease period of approximately four years, on a TEU-weighted basis.

Seaspan has the following securities listed on The New York Stock Exchange:

Conference Call and Webcast

Seaspan will host a conference call and webcast presentation for investors and analysts to discuss its results for the three and six months ended June 30, 2017 on August 1, 2017 at 5:30 a.m. PT / 8:30 a.m. ET. Participants should call 1-877-246-9875 (US/Canada) or 1-707-287-9353 (International) and request the Seaspan call. A telephonic replay will be available for anyone unable to participate in the live call. To access the replay, call 1-855-859-2056 or 1-404-537-3406 and enter the replay passcode 62493328. The recording will be available from August 1, 2017 at 8:30 a.m. PT / 11:30 a.m. ET through 8:30 p.m. PT / 11:30 p.m. ET on August 15, 2017. The conference call will also be broadcast live over the Internet and will include a slide presentation. To access the live webcast of the conference call, go to www.seaspancorp.com and click on "News & Events" then "Events & Presentations" for the link. The webcast will be archived on the site for one year.

SEASPAN CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016
(IN THOUSANDS OF US DOLLARS)

Description of Non-GAAP Financial Measures

A. Cash Available for Distribution to Common Shareholders

Cash available for distribution to common shareholders is defined as net earnings adjusted for depreciation and amortization, interest expense and amortization of deferred financing fees, refinancing expenses, share-based compensation, change in fair value of financial instruments, bareboat charter adjustment, gain on sale, expenses related to customer bankruptcy, termination fee, amortization of deferred gain, dry-dock reserve adjustment, cash dividends paid on preferred shares, interest expense at the hedged rate and certain other items that Seaspan believes are not representative of its operating performance.

Cash available for distribution to common shareholders is a non-GAAP measure used to assist in evaluating Seaspan's ability to make quarterly cash dividends before reserves for replacement capital expenditures. Cash available for distribution to common shareholders is not defined by GAAP and should not be considered as an alternative to net earnings or any other indicator of Seaspan's performance required to be reported by GAAP. In addition, this measure may not be comparable to similar measures presented by other companies.