Atlas announced its results for the quarter ended March 31, 2022.
Highlights:
- First quarter 2022 financial performance compared to first quarter 2021:
- Revenue growth of 9.5% to $408.1 million
- Net earnings of $169.4 million and Diluted EPS of $0.56
- Adjusted EBITDA(1) growth of 16.5% to $277.1 million
- Adjusted diluted EPS(1) growth of 56.0% to $0.39
- FFO per diluted share(1) growth of 21.7% to $0.73
- Robust balance sheet with liquidity of $951.3 million, total borrowings(1) to total assets of 53.2%
|
(1) |
Non-GAAP financial measure. A reconciliation of each non-GAAP financial measure to the most closely comparable GAAP measure is included in this release beginning on page 12. |
Comments from Management:
Bing Chen, President and CEO of Atlas, commented: “Following a strong 2021 performance, Atlas continued its solid financial results in the first quarter of 2022. Seaspan strengthened its customer partnership with a global liner by forward fixing charters for 18 vessels, leveraging our creative customer solutions and differentiated business model. Despite the pandemic and European conflict, Seaspan continued diligently executing its newbuild program with one newbuild delivery in April ahead of schedule. Our entire newbuild program remains on track thanks to our experienced teams and integrated platform that have now delivered 114 newbuilds.”
“APR Energy also delivered solid performance as we continue to leverage Atlas’ five key competencies to pivot the business to longer-term, predictable cash flow opportunities. APR secured three new deployments, which includes the renewal of APR’s IID contract in California for 74 MW, a new market contract in Brazil for 226 MW, and the dry leasing of five turbines for 120 MW. Focusing on operational excellence and creative partnership, APR successfully extended its Brazil contract from 12 months to 44 months, furthering its growth strategy of providing longer-term energy capacity solutions.”
“With our customers’ trusted partnerships, our dedicated team and differentiated business model, we are well positioned to drive future quality growth and continue delivering increasing shareholder value.”
Graham Talbot, CFO of Atlas, commented, “I am very proud of our entire team’s consistent high-performance during a period of considerable global uncertainty. These results demonstrate the resilience of our fully integrated platform which provides consistent delivery in all market conditions. Our continued focus on optimizing our capital structure, coupled with a gross contracted cash flow balance of $18.1 billion and liquidity balance of $951.3 million as of quarter end, positions Atlas to continue executing on our track-record of disciplined capital allocation and quality growth.”
“We are pleased to see a strong vote of confidence from our strategic shareholder, Fairfax Financial, who exercised warrants to purchase 25 million common shares of Atlas in April. This resulted in proceeds of over $200.0 million dollars to Atlas which will be used to repay outstanding debt and for other general corporate purposes. This is yet another demonstration of our shareholders’ continued confidence in our highly differentiated, risk-adjusted, capital allocation business model.”
Significant Developments in the First Quarter of 2022 & Subsequent Events
Containership Sale Developments
In February 2022, Seaspan completed the sale of one vessel for gross proceeds of $32.8 million. Seaspan continues to manage the ship operations of this vessel pursuant to a management agreement entered into in connection with the sale. As of March 31, 2022, Seaspan had also entered into agreements for five more vessel sales, one of which closed in April 2022. The remaining four vessel sales are expected to complete in the second quarter of 2022, subject to closing conditions.
In April 2022, Seaspan entered into agreements for the sale of an additional four 4,250 TEU vessels. The sales are expected to be completed in the second and third quarters of 2022, subject to closing conditions.
The table below summarizes our Containership Leasing fleet:
|
Actual |
Expected |
|||
|
Containership Leasing (# of vessels) |
Q1 2022 |
Remainder of 2022 |
2023 |
2024 |
|
Beginning of period balance |
133 |
132 |
137 |
160 |
|
Delivered/Acquired |
— |
— |
— |
— |
|
Future scheduled deliveries |
— |
8 |
23 |
36 |
|
Sold(1) |
(1) |
(3) |
— |
— |
|
End of period balance |
132 |
137 |
160 |
196 |
|
End of period balance (managed)(1)(2) |
2 |
4 |
4 |
4 |
|
(1) Excludes vessel sales that have not yet closed as at May 10, 2022 and includes assets held for sale |
|
(2) Represents vessels that are operated on behalf of other owners |
Containership Leasing and Newbuild Developments
Seaspan entered into proactive lease extensions for 18 operating vessels in the first quarter of 2022.
In April 2022, Seaspan accepted delivery of its fourth 12,200 TEU vessel which commenced an 18-year bareboat charter upon delivery.
Mobile Power Generation Developments
APR Energy entered into contracts to provide a customer with up to 226 MW of gas power generation capacity in Itaguaí, Rio De Janeiro, for a minimum of 12 consecutive months commencing in May 2022. In March 2022, APR Energy extended this 12-month gas generation capacity contract in Brazil to a 44-month contract. Additionally, APR Energy entered into a contract with a US counterparty to provide a dry rental of five turbines representing 120 MW for a minimum of 12 consecutive months which commenced in February 2022. APR Energy also entered into a contract with Imperial Irrigation District (“IID”) for three turbines to provide grid stabilization solutions to Southern California. The contract with IID represents its first renewal with APR Energy.
Financing Development
On February 16, 2022, Seaspan closed its new $250.0 million 3-year unsecured revolving credit facility (the “New Seaspan RCF”), which replaces a $150.0 million 2-year unsecured revolving credit facility. The New Seaspan RCF includes several new lenders and improvements driven by Seaspan’s improving credit quality, including greater liquidity, tenor and pricing.
Exercise of Fairfax Warrants
On April 7, 2022, Fairfax Financial Holdings Limited (“Fairfax”) exercised warrants to purchase 25.0 million common shares of Atlas. The warrants, which were originally issued on July 16, 2018, had an exercise price of $8.05 per common share for an aggregate exercise price of $201.3 million. Immediately following this exercise, Fairfax and its affiliates held in aggregate 124,805,753 common shares, representing 45.1% of the then issued and outstanding common shares of Atlas. Fairfax continues to hold 6.0 million warrants.
Distribution
On April 7, 2022, the Board of Directors of Atlas declared a quarterly distribution in the amount of $0.125 per common share. Regular quarterly dividends on the Series D, Series H, Series I and Series J preferred shares were also declared. All dividends were paid on May 2, 2022.
Common Shares Outstanding
As of May 1, 2022, there were 276.9 million common shares outstanding.
Consolidated Results:
The following table summarizes Atlas’ consolidated results for the three months ended March 31, 2022, and March 31, 2021.
|
Three Months Ended |
|||
|
(in millions of U.S. dollars, except per share amounts, |
March 31, 2022 |
March 31, 2021 |
|
|
Key Metrics |
|||
|
Revenue |
$ 408.1 |
$ 372.6 |
|
|
Net earnings |
169.4 |
97.6 |
|
|
Adjusted EBITDA(1) |
277.1 |
237.9 |
|
|
FFO(1) |
204.0 |
159.2 |
|
|
FFO per Share, diluted(1) |
0.73 |
0.60 |
|
|
Adjusted EPS, diluted(1) |
0.39 |
0.25 |
|
|
Diluted EPS |
0.56 |
0.31 |
|
|
Financial Position |
|||
|
Operating Net Debt to Adjusted EBITDA(1) |
3.6x |
4.3x |
|
|
Ending Liquidity(2) |
$ 951.3 |
$ 837.5 |
|
|
Gross Contracted Cash Flow(3) |
18,096.3 |
12,086.5 |
|
|
Total Borrowings(1)(4) |
5,637.2 |
4,604.4 |
|
|
Total Borrowings to Assets (%) |
53.2 % |
49.0 % |
|
|
Operational |
|||
|
Containership Leasing Utilization |
98.5 % |
99.2 % |
|
|
Mobile Power Generation Utilization |
61.9 % |
63.7 % |
|
|
(1) |
Non-GAAP financial measure. A reconciliation of each non-GAAP financial measure to the most closely comparable GAAP measure is included in this release beginning on page 12. |
|
(2) |
This is the total cash and cash equivalents balance plus the total available undrawn committed credit facilities at period end, excluding committed and undrawn newbuild financings. |
|
(3) |
Gross contracted cash flow as at March 31, 2022, includes $5.8 billion of lease payments receivable from operating leases, $1.5 billion of gross lease receivable from finance leases and $10.8 billion of gross lease payments from newbuild vessels with signed charter agreements that are undelivered as at March 31, 2022. The gross contracted cash flow at March 31, 2022, excludes $54.0 million of lease payments from three vessels that are classified as “Assets held for sale”. Gross contracted cash flow includes purchase obligations and excludes purchase options, extension options, higher charter rate options and profit-sharing components. Gross contracted cash flow as at March 31, 2021, includes $4.2 billion of lease payments receivable from operating leases, $0.9 billion of gross lease receivable from financing leases and $7.0 billion of gross lease payments for acquired vessels with signed charter agreements that are undelivered as at March 31, 2021. Gross contracted cash flow includes purchase obligations and excludes purchase options, extension options, higher charter rate options and profit-sharing components. |
|
(4) |
Total borrowings do not include debt to be incurred in connection with certain undelivered vessels. |
Financial Results Summary:
Revenue growth of 9.5% to $408.1 million for the three months ended March 31, 2022, compared to the same period in 2021.
For the quarter ended March 31, 2022, 16.0% of revenue growth was attributable to the Containership Leasing segment, of which 67% was attributable to the existing asset base, and 33% was attributable to assets added during the year. For the quarter ended March 31, 2022, there was a 42.7% decrease attributable to the Mobile Power Generation segment. The lower revenue is primarily due to an injunction at one of our project sites which commenced in March 2021. We are indemnified for the lost revenue and have recognized a corresponding recovery under the acquisition agreement for this indemnity.
Adjusted EBITDA growth of 16.5% to $277.1 million for the three months ended March 31, 2022, compared to the same period in 2021. The growth was primarily driven by the increase in revenue.
FFO Per Share growth of 21.7% to $0.73 for the three months ended March 31, 2022, compared to the same period in 2021. The growth was primarily driven by the increase in revenue.
Diluted EPS was $0.56 for the three months ended March 31, 2022, compared to $0.31 for the same period in 2021. The increase in diluted EPS was primarily driven by the increase in revenue and non-cash gain on derivative instruments related to the increase in the forward LIBOR curve.
Adjusted Diluted EPS growth of 56.0% to $0.39 for the quarter ended March 31, 2022, compared to $0.25 for the same period in 2021. The increase in adjusted diluted EPS is primarily related to the increase in revenue.
Liquidity
As of March 31, 2022, Atlas had total liquidity of $951.3 million, consisting of $251.3 million of cash and cash equivalents and $700.0 million of availability under undrawn committed credit facilities. As of March 31, 2022, we also had $6.0 billion of undrawn committed financing related to our newbuild vessels and an unencumbered asset base including 38 vessels with a book value of $1.4 billion.
Segmented Financial Results:
The following table summarizes selected segmented financial results for the three months ended March 31, 2022.
|
Three Months Ended March 31, 2022 |
|||||||
|
(in millions of U.S. dollars, |
Containership |
Mobile Power |
Elimination and |
Total |
|||
|
Revenue |
$ 384.6 |
$ 23.5 |
$ — |
$ 408.1 |
|||
|
Operating expense |
75.0 |
11.6 |
— |
86.6 |
|||
|
G&A expense |
13.9 |
11.4 |
2.6 |
27.9 |
|||
|
Indemnification claim (income) |
— |
(13.5) |
— |
(13.5) |
|||
|
Operating lease expense |
32.9 |
0.7 |
— |
33.6 |
|||
|
Adjusted EBITDA(1) |
262.8 |
13.3 |
1.0 |
277.1 |
|||
|
FFO(1) |
209.4 |
8.9 |
(14.3) |
204.0 |
|||
|
Gross Contracted Cash Flow(2) |
17,734.9 |
361.4 |
— |
18,096.3 |
|||
|
(1) |
Non-GAAP financial measure. A reconciliation of each non-GAAP financial measure to the most closely comparable GAAP measure is included in this release beginning on page 12. |
|
(2) |
Gross contracted cash flow as at March 31, 2022, includes $5.8 billion of lease payments receivable from operating leases, $1.5 billion of gross lease receivable from finance leases and $10.8 billion of gross lease payments from newbuild vessels with signed charter agreements that are undelivered as at March 31, 2022. The gross contracted cash flow at March 31, 2022, excludes $54.0 million of lease payments from three vessels that are classified as “Assets held for sale”. Gross contracted cash flow includes purchase obligations and excludes purchase options, extension options, higher charter rate options and profit-sharing components. |
|
(3) |
Elimination and Other includes amounts relating to preferred shares, change in contingent consideration asset, elimination of intercompany transactions and unallocated amounts. |
