Atlas Corp announced its results for the quarter and year ended December 31, 2021.
Financial Highlights:
- Fourth quarter 2021 financial performance compared to fourth quarter 2020:
- Revenue growth of 18.1% to $428.2 million
- Net earnings of $142.3 million and Diluted EPS of $0.48
- Adjusted EBITDA(1) growth of 18.8% to $283.5 million
- Adjusted diluted EPS(1) growth of 44.8% to $0.42
- FFO per diluted share(1) growth of 14.3% to $0.72
- Robust balance sheet with liquidity of $888.6 million, total borrowings(1) to total assets of 54.0%, and fully funded $7.6 billion capex program
- Outperformed upgraded 2021 Atlas guidance
- Introducing initial FY2022 guidance reflecting Adjusted EBITDA of $1.138 billion
|
(1) |
Non-GAAP measure. A reconciliation of each non-GAAP financial measure to the most closely comparable GAAP measure is included in this release beginning on page 15. |
Comments from Management:
Bing Chen, President and Chief Executive Officer of Atlas, commented: “Atlas delivered another year of strong operating and financial performance in 2021. Since December 2020 and through to December 31, 2021, our containership leasing business grew by 890,750 TEU, 73 vessels net, and $12.9 billion of gross contracted cash flow primarily contributed by the 70 newbuild, four pre-owned vessels acquired, and 68 forward charter fixings. With consistent operational excellence, we have delivered three newbuild vessels ahead of schedule and expect all vessels to be in operation by year-end 2024, as scheduled. This modern newbuild program with $7.6 billion of fully funded investment is a testament to our quality growth and approach to prudent capital allocation. We continue to deliver value and strengthen our customer partnerships through our creative turnkey solutions and integrated platform.
Our resilient business model remains insulated from the ongoing global supply chain disruptions. The sustainability of our business will further differentiate us when the market returns to normal or through volatile cycles.
Despite the industry and pandemic challenges, our Mobile Power Generation business delivered solid performance during 2021. While continuing to drive operational excellence across the business, we have successfully executed our 3rd consecutive Mexicali project and serviced IID in California marking our first entry into the US market. We remain disciplined to expand our services into new geographies, such as Brazil, to transform business.
As Atlas continues to deliver to new heights, we remain focused on growing quality and long-term contracted cash flows and recycling capital prudently to fuel our sustainable growth, offering predictable financial returns through all market cycles.”
Graham Talbot, CFO of Atlas, commented, “During 2021, we made significant progress developing each of our businesses while extending our competitive lead. 2021 provided an opportunity to showcase the growth potential unlocked when combining our industry leading containership leasing platform with our reshaped and robust balance sheet. Our focus on liquidity and access to capital allowed us to take advantage of investment opportunities in the containership segment totaling $7.6 billion since December 2020, all on long-term leases. These investments will expand our capacity by 848,000 TEU and secure $11.4 billion in predictable, long-term cash flows for Atlas over the next 20+ years, resulting in $18.0 billion gross contracted cash flow at year end. We are beginning 2022 with a significant liquidity position and all capex fully funded through attractively priced long-term financings, which we believe will allow us to continue pursuing attractive opportunities across our Maritime and Energy platforms.”
Update on Strategic Initiatives
We executed on several important initiatives during 2021 and year-to-date:
1) Executed agreements for aggregate investment of $7.6 billion(1) toward newbuild containerships backed by long-term lease contracts. These investments enhance the long-term attractiveness of our Containership Leasing portfolio with asset classes designed to pave the way for the future of global trade. Concurrent with executing shipbuilding contracts, long-term leases were locked in with a diversified roster of the leading global containership liners. Committed financing arrangements were executed prior to year end 2021 for all newbuild assets, significantly de-risking our capex obligations. Three of these newbuild vessels were delivered ahead of schedule in 2021, and deliveries will continue through 2024.
2) Recycled capital into new growth. With the attractive conditions in the containership market, we are actively marketing non-core assets. During 2021, Seaspan entered into agreements to sell a total of seven vessels, including the sale of one vessel which was concluded during the fourth quarter of 2021 and a second vessel which was concluded in February 2022. The divestment of the remaining vessels is expected to be completed in the first half of 2022, subject to closing conditions.
3) Entered new markets for Mobile Power Generation. In December 2021 and January 2022, APR Energy signed agreements to provide a total of 420 MW of power generation capacity in the US and Brazil. This is the first time APR Energy has entered the Brazilian market. We believe that the country will be strategically significant as we further build out our Mobile Power Generation platform.
|
(1) |
Including agreements in December 2020. |
Significant Developments in the Fourth Quarter of 2021 & Subsequent Events
Containership Newbuild Program
Seaspan accepted delivery of two 12,200 TEU vessels during the quarter, two months ahead of schedule. Each vessel commenced an 18-year bareboat charter upon delivery.
The table below summarizes our Containership Leasing fleet:
|
Containership Leasing (# of vessels) |
2021 |
2022 |
2023 |
2024 |
|
Owned and leased vessels, beginning of the year |
127 |
133 |
140 |
164 |
|
Delivered/Acquired |
7 |
— |
— |
— |
|
Future scheduled deliveries |
— |
8 |
24 |
35 |
|
Sold (1) |
(1) |
(1) |
— |
— |
|
End of period balance |
133 |
140 |
164 |
199 |
|
End of period balance (managed)(1)(2) |
1 |
2 |
2 |
2 |
|
(1) |
Excludes vessel sales that have not yet closed as at the date of this release |
|
(2) |
Represents vessels that are operated on behalf of other owners |
Containership Leasing Developments
Seaspan entered into proactive lease extensions for eight operating vessels in the fourth quarter of 2021. As of December 31, 2021, there are five remaining charter roll-offs in 2022.
In October 2021, Seaspan sold one 4,250 TEU vessel for $38.3 million, recognizing a gain on the sale of $15.9 million. The ultimate purchaser of the vessel was Zhejiang Energy Atlas Marine Technology Co., Ltd., which is 50% owned by Atlas (the “ZE JV”). Seaspan continues to manage the ship operations of the vessel.
In December, Seaspan entered into agreements to sell six vessels with one sale completed in February 2022 for gross proceeds of $32.8 million. Seaspan continues to manage the ship operations of this vessel. The remaining five sales are expected to be completed in the first half of 2022, subject to closing conditions.
Kroll Credit Rating Upgrade
Kroll Bond Rating Agency provided Seaspan an unsecured issuance rating of BB+, in line with its recently upgraded BB+ corporate rating.
Mobile Power Generation Developments
APR Energy will provide Evolution Power Partners with up to 226 MW of gas power generation capacity in Itaguaí, Rio De Janeiro, for a minimum of twelve consecutive months commencing in May 2022. 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 twelve consecutive months commencing 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 their first renewal with APR Energy.
Financing Developments
On December 23, 2021, Seaspan completed the last of its financings related to its 70 vessel newbuild program, including three vessels delivered in 2021. The proceeds from these financings total approximately $6.9 billion and will be drawn throughout construction to fund a total investment of approximately $7.6 billion.
On February 16, 2022, Seaspan closed its new $250.0 million 3-year unsecured revolving credit facility (the “New Seaspan RCF”), which replaces it’s $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.
Distribution
On January 5, 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 January 31, 2022.
Common Shares Outstanding
As of February 1, 2022, there were 247.6 million Common Shares outstanding.
Consolidated Results:
The following table summarizes Atlas’ consolidated results for the three months and year ended December 31, 2021, and December 31, 2020.
|
Three Months Ended |
Year Ended |
||||||||||
|
(in millions of US |
December 31, 2021 |
December 31, 2020 |
December 31, 2021 |
December 31, 2020 |
|||||||
|
Key Metrics |
|||||||||||
|
Revenue |
$ |
428.2 |
$ |
362.7 |
$ |
1,646.6 |
$ |
1,421.1 |
|||
|
Net earnings (loss) |
142.3 |
(26.1) |
400.5 |
192.6 |
|||||||
|
Adjusted EBITDA(1) |
283.5 |
238.7 |
1,116.2 |
923.8 |
|||||||
|
FFO(1) |
190.5 |
162.8 |
791.1 |
622.3 |
|||||||
|
FFO per Share, diluted(1) |
0.72 |
0.63 |
2.98 |
2.48 |
|||||||
|
Adjusted EPS, diluted(1) |
0.42 |
0.29 |
1.68 |
0.97 |
|||||||
|
Diluted EPS (2) |
0.48 |
(0.17) |
1.26 |
0.50 |
|||||||
|
Financial Position |
|||||||||||
|
Operating Net Debt to Adjusted EBITDA(1) |
3.8x |
4.6x |
|||||||||
|
Ending Liquidity(3) |
$ |
888.6 |
$ |
771.3 |
|||||||
|
Gross Contracted Cash Flow(4) |
18,023.6 |
5,090.8 |
|||||||||
|
Total Borrowings(1)(5) |
5,703.5 |
4,490.5 |
|||||||||
|
Total Borrowings to Assets (%) |
54.0 % |
48.3 % |
|||||||||
|
Operational |
|||||||||||
|
Containership Leasing |
98.5 % |
99.6 % |
98.7 % |
98.4 % |
|||||||
|
Mobile Power Generation |
61.4 % |
61.8 % |
73.8 % |
68.9 % |
|||||||
|
(1) |
Non-GAAP measure. A reconciliation of each non-GAAP financial measure to the most closely comparable GAAP measure is included in this release beginning on page 15. |
|
(2) |
The three months and year ended December 31, 2020 results include $117.9 million of non-cash goodwill impairment. |
|
(3) |
This is the total cash and cash equivalents balance plus the total available undrawn committed credit facilities at period end. |
|
(4) |
Gross contracted cash flow as at December 31, 2021, includes $5.9 billion of lease payments receivable from operating leases, $1.3 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 December 31, 2021. Gross contracted cash flow as at December 31, 2020, includes $4.2 billion of lease payments receivable from operating leases and $0.9 billion of gross lease receivable from financing leases. Gross contracted cash flow includes purchase obligations and excludes purchase options, extension options, higher charter rate options and profit-sharing components. |
|
(5) |
Total borrowings do not include debt to be incurred in connection with certain undelivered vessels. |
FY2021 Performance vs Guidance
|
FY2021 |
||||
|
Guidance Metrics |
Guidance |
Actual Results |
||
|
(in millions of US dollars) |
||||
|
Revenue(1) |
$ |
1,585.0 |
$ |
1,646.6 |
|
Operating expense |
339.0 |
339.6 |
||
|
G&A expense |
97.0 |
90.6 |
||
|
Operating lease expense |
156.0 |
146.3 |
||
|
Adjusted EBITDA(2) |
993.0 |
1,116.2 |
||
|
Adjusted Net Earnings(2)(3) |
440.0 |
497.0 |
||
|
Interest expense |
205.0 |
197.1 |
||
Introducing guidance for the year ended December 31, 2022:
|
Operating Metrics |
|
|
(in millions of US dollars) |
2022 Guidance |
|
Revenue(4) |
1,718.0 |
|
Operating expense |
365.0 |
|
G&A expense |
100.0 |
|
Operating lease expense |
127.0 |
|
Adjusted EBITDA(2) |
1,138.0 |
|
Adjusted Net Earnings(2)(5) |
515.0 |
|
Interest expense |
215.0 |
|
(1) |
Guidance Revenue for 2021 includes impact of indemnification claim under acquisition of $42.7 million. Actual revenue excludes the impact of the indemnification and this is separately presented in the income statement as a recovery under operating expenses as “Indemnity claim under acquisition agreement” in the amount of $42.4 million for the year ended December 31, 2021. |
|
(2) |
Non-GAAP measure. A reconciliation of each non-GAAP financial measure to the most closely comparable GAAP measure is included in this release beginning on page 15. |
|
(3) |
Adjusted Earnings for the purpose of computing adjusted diluted EPS is $446.0 million for the year ended December 31, 2021 and excludes $65.1 million of preferred dividends and includes $14.1 million gain on derivative instruments, among other adjustments. A reconciliation of Adjusted Earnings, which is a non-GAAP financial measure, to the most closely comparable GAAP measure is included in this release on page 17. Adjusted Net Earnings in the guidance excludes preferred share dividends and the impact from the gain on derivative instruments. Excluding preferred share dividends of $65.1 million, $14.1 million gain on derivative instruments, $127.0 million loss on debt extinguishment and the $16.4 million gain on sale, Adjusted Net Earnings is $497.0 million for FY2021 Actual. |
|
(4) |
Includes approximately $41 million of Revenue from five vessels that are under sales agreements subject to closing conditions. The estimated proceeds from the sales of such vessels are approximately $154 million. Also includes impact from indemnification claim under acquisition agreement of approximately $21 million. The classification of a lease will be determined at the commencement date of the lease. Sales type lease was assumed for the bareboat charters arranged for the newbuilds delivering in 2022. |
|
(5) |
Guidance Adjusted Net Earnings excludes preferred dividends and impact from the change in fair value of financial instruments. |
Financial Results Summary:
Revenue growth of 18.1% to $428.2 million and 15.9% and $1,646.6 million for the quarter and year ended December 31, 2021, respectively, compared to the same periods in 2020.
For the quarter ended December 31, 2021, 23.7% revenue growth was attributable to the Containership Leasing segment, of which 81.0% was attributable to the existing asset base, and 19.0% was attributable to assets added during the year. For the quarter ended December 31, 2021, there was a 4.9% decrease attributable to the Mobile Power Generation segment. The lower revenue is due to an injunction at one of our project sites. We are indemnified for the lost revenue and have recognized a corresponding recovery under the acquisition agreement for this indemnity.
For the year ended December 31, 2021, 16.7% revenue growth was attributable to the Containership Leasing segment, of which 87.6% was attributable to the existing asset base, and 12.4% was attributable to assets added during the year. For the year ended December 31, 2021, there was a 0.8% decrease attributable to the Mobile Power Generation segment.
Adjusted EBITDA growth of 18.8% to $283.5 million and 20.8% to $1,116.2 million for the quarter and year ended December 31, 2021, respectively compared to the same periods in 2020. The growth was primarily driven by the increase in revenue.
FFO Per Share growth of 14.3% to $0.72 and 20.2% to $2.98 for the quarter and year ended December 31, 2021, respectively, compared to the same periods in 2020. The growth was primarily driven by the increase in revenue. APR Energy’s income tax expense in 2021 also increased due to a non-cash valuation allowance against certain deferred tax assets that were previously recorded.
Diluted EPS was $0.48 and $1.26 for the quarter and year ended December 31, 2021, respectively compared to loss per diluted share of $0.17 for quarter ended December 31, 2020 and earnings per diluted share of $0.50 for the year ended December 31, 2020. The three months and year ended December 31, 2020 results include $117.9 million of non-cash goodwill impairment. The year ended December 31, 2021 includes a $127.0 million non-cash charge related to loss on debt extinguishment. Excluding these non-cash charges, the increases in diluted earnings per share are primarily due to increases in revenue.
Adjusted Diluted EPS growth of 44.8% to $0.42 and 73.2% to $1.68 for the quarter and year ended December 31, 2021, respectively, compared to $0.29 and $0.97 for the same periods in 2020.
Liquidity
As of December 31, 2021, Atlas had total liquidity of $888.6 million, consisting of $288.6 million of cash and cash equivalents and $600.0 million of availability under undrawn committed credit facilities. As of December 31, 2021, we also had $6.9 billion of undrawn committed financing related to our newbuild vessels and an unencumbered asset base including 36 vessels with a book value of $1.4 billion.
Segmented Financial Results:
The following table summarizes selected segmented financial results for the three months and year ended December 31, 2021.
|
Three Months Ended December 31, 2021 |
|||||||||||
|
(in millions of US dollars, |
Containership |
Mobile Power |
Elimination and |
Total |
|||||||
|
Revenue |
$ |
404.1 |
$ |
24.1 |
$ |
— |
428.2 |
||||
|
Operating expense |
73.7 |
19.7 |
— |
93.4 |
|||||||
|
G&A expense |
15.0 |
13.0 |
7.0 |
35.0 |
|||||||
|
Indemnification claim (income) |
— |
(13.3) |
— |
(13.3) |
|||||||
|
Operating lease expense |
36.0 |
0.9 |
— |
36.9 |
|||||||
|
Adjusted EBITDA(1) |
279.5 |
3.7 |
0.3 |
283.5 |
|||||||
|
FFO(1) |
228.3 |
(22.6) |
(15.2) |
190.5 |
|||||||
|
Gross Contracted Cash Flow(2) |
17,803.5 |
220.1 |
— |
18,023.6 |
|||||||
|
Year Ended December 31, 2021 |
|||||||||||
|
(in millions of US dollars) |
Containership |
Mobile Power |
Elimination and |
Total |
|||||||
|
Revenue |
$ |
1,460.4 |
$ |
186.2 |
$ |
— |
1,646.6 |
||||
|
Operating expense |
289.3 |
50.3 |
— |
339.6 |
|||||||
|
G&A expense |
49.9 |
37.1 |
3.6 |
90.6 |
|||||||
|
Indemnification claim (income) |
— |
(42.4) |
— |
(42.4) |
|||||||
|
Operating lease expense |
143.0 |
3.3 |
— |
146.3 |
|||||||
|
Adjusted EBITDA(1) |
978.4 |
136.4 |
1.4 |
1,116.2 |
|||||||
|
FFO(1) |
765.4 |
88.9 |
(63.2) |
791.1 |
|||||||
|
Gross Contracted Cash Flow(2) |
17,803.5 |
220.1 |
— |
18,023.6 |
|||||||
|
(1) |
Non-GAAP measure. A reconciliation of each non-GAAP financial measure to the most closely comparable GAAP measure is included in this release beginning on page 15. |
|
(2) |
Gross contracted cash flow as at December 31, 2021, includes $5.9 billion of lease payments receivable from operating leases, $1.3 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 December 31, 2021. 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. |
