Atlas Corp. announced its results for the quarter ended December 31, 2022.
Financial Highlights:
- Fourth quarter 2022 financial performance compared to fourth quarter 2021:
- Revenue increase of 1.9% to $436.4 million
- Net earnings of $127.2 million and Diluted EPS of $0.38
- Adjusted earnings(1)(2) of $111.7 million and Adjusted diluted EPS(1) of $0.38
- Adjusted EBITDA(1) increase of 1.5% to $287.7 million
- Robust balance sheet with liquidity of $980.0 million, total borrowings(1) to total assets of 53.8%
- Approximately 73% of Seaspan’s total borrowings including preferred shares are fixed rate, protecting against an unpredictable inflationary and rising interest rate environment
| (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 15. |
| (2) | Preferred share dividends of $15.2 million and certain other items that management believes are not representative of its ongoing performance are deducted in the calculation of Adjusted Earnings. A reconciliation of Adjusted Earnings to the most closely comparable GAAP measure is included in this release on page 17. |
Comments from Management:
Bing Chen, President and CEO of Atlas, commented, “Atlas delivered another strong annual financial and operating performance in 2022. Despite the challenges in the past year, the Seaspan team successfully executed on its newbuild program by delivering nine vessels, 115,400 TEU total, all ahead of schedule and each commencing their scheduled long-term charters. Through consistent operational excellence, we have delivered over 120 newbuilds since our IPO in 2005, and execution of the remainder of the program remains on track thanks to our experienced teams and integrated platform. We continued to strengthen our customer partnerships with global liners by forward fixing charters for 35 vessels in 2022, leveraging our creative customer solutions and differentiated business model.”
“Despite the industry and pandemic challenges, APR Energy continued to pivot to long-term predictable cash flow opportunities. In 2022, the company extended two existing contracts to greater than three years in length, and renewed numerous contracts with existing customers. APR also successfully exported all turbines from Argentina and divested all remaining interests. APR remains disciplined to expand its services into new geographies and further its growth strategy of providing longer-term energy turnkey solutions.”
“With our customers’ trusted partnerships, our dedicated team and differentiated business model, we are well positioned to drive quality growth that consistently delivers value throughout market cycles.”
Graham Talbot, CFO of Atlas, commented, “Our fourth quarter and 2022 results demonstrate our team’s consistent high performance and the resilience of our fully integrated platform that delivers in all market conditions. In 2022 we focused on executing our fully financed newbuild program, continued to optimize our capital structure and fleet, improved our hedging position amidst an unpredictable inflationary environment, and received recognition of our credit improvements through new, reaffirmed, and upgraded credit ratings for Seaspan and Atlas.”
“Our long-term model and diligent focus on asset quality is evidenced through 10 strategic vessel divestments in 2022, generating an additional $257.1 million in cashflow to optimize our balance sheet and allocate capital to future growth and to further optimize our fleet. This resulted in an expected revenue impact of $50.0 million for 2022. In October, we upgraded a $1.1 billion bank loan into a $1.5 billion ECA-backed JOLCO facility on improved terms, and in January 2023 we received a strong vote of confidence from our strategic shareholder Fairfax who exercised their remaining warrants to purchase six million common shares of Atlas.”
“As we begin 2023 with a significant liquidity position of $980.0 million, a gross contracted cash flow balance of $18.2 billion, and all capex fully funded through attractively priced long-term financings, we remain well positioned to pursue attractive opportunities across our Maritime and Energy platforms and reinforce our industry leading positions.”
Significant Developments in the Fourth Quarter of 2022 & Subsequent Events
The table below summarizes our Containership Leasing fleet as at December 31, 2022:
| Actual | Expected | |||
| Containership Leasing (# of vessels) | Q4 2022 | 2023 | 2024 | 2025 |
| Beginning of period balance | 129 | 131 | 153 | 189 |
| Delivered/Acquired | 3 | — | — | — |
| Future scheduled deliveries | — | 22 | 36 | — |
| Sold(1) | (1) | — | — | — |
| End of period balance | 131 | 153 | 189 | 189 |
| End of period balance (managed)(1)(2) | 8 | 9 | 9 | 9 |
| (1) Include one asset held for sale as at December 31, 2022. The sale completed in January 2023 |
| (2) Represents vessels that are operated on behalf of other owners |
Containership Leasing Developments
In the fourth quarter, Seaspan accepted delivery of its fifth and sixth 11,800 TEU newbuild vessels and first 15,000 TEU newbuild vessel. Each of these vessels commenced a 5-year charter upon delivery.
In December 2022, Seaspan entered an agreement to sell a 4,250 TEU vessel for gross proceeds of $21.6 million, subject to closing conditions. The sale was completed in January 2023, and Seaspan continues to manage this vessel pursuant to a management agreement entered into in connection with the sale.
Mobile Power Generation Developments
In December 2022, APR Energy divested its diesel power generation business in Argentina through the sale of all of the shares in APR Energy SrL to Enerinv SrL and Enerarge SrL. As of the closing, APR Energy has no additional interests in Argentina and all turbines have been exported.
In January 2023, APR Energy renewed its contract with Imperial Irrigation District for a three year term commencing January 1, 2023 through to December 31, 2025.
In February 2023, APR Energy successfully completed its 12 month contract with a US counterparty to rent five turbines representing 120 MW.
Financing Developments
In October 2022, Seaspan completed its planned upgrade of a previously signed $1.1 billion bank loan financing into a $1.5 billion ECA-Backed JOLCO financing (the “Financing Upgrade”). Proceeds remain intended to finance Seaspan’s package of 15 7,000 TEU newbuild vessels. This marks Seaspan’s third ECA-JOLCO transaction. The Financing Upgrade increases the proceeds raised and significantly lowers the cost of capital through partnership with Sinosure, a Chinese ECA, and a tranche of fixed-rate capital from Japanese investors. The financing carries a 12-year tenor.
On January 13, 2023, Fairfax Financial Holdings Limited (“Fairfax”) exercised the remainder of their warrants to purchase six million common shares of Atlas. The warrants, of which five million were issued in April 2021 and one million in June 2021, had exercise prices of $13.00 and $13.71 per common share, respectively, for gross aggregate proceeds of $78.7 million. Immediately following this exercise, Fairfax and its affiliates held in aggregate 130.8 million common shares, representing 45.5% of the then issued and outstanding common shares of Atlas.
Poseidon Acquisition of Atlas
On August 4, 2022, Atlas’ Board of Directors received a non-binding proposal letter from Poseidon Acquisition Corp. (“Poseidon”), an entity formed by certain affiliates of Fairfax, certain affiliates of the Washington Family (“Washington”), David Sokol, Chairman of the Board of Atlas, and Ocean Network Express Pte. Ltd., and certain of their respective affiliates, to acquire all of the outstanding common shares of Atlas, other than common shares owned by Fairfax, Washington, Mr. Sokol and certain executive officers of the Company, for $14.45 cash per common share. The Board of Directors established a Special Committee consisting of independent directors to consider and negotiate the proposal.
On November 1, 2022, Atlas announced that, following the recommendation of the Special Committee and unanimous approval of the Board of Directors, Atlas had entered into a merger agreement with Poseidon pursuant to which Poseidon will acquire Atlas for cash consideration of $15.50 per common share. The transaction, which is subject to approval of holders of a majority of the common shares not owned by affiliates of Poseidon, regulatory approvals and receipt of consents, is expected to close in the first half of 2023.
On January 20, 2023, Atlas announced that it will hold its Annual Meeting of Shareholders on February 24, 2023 (the “Annual Meeting”). At the Annual Meeting, Atlas common shareholders will be asked to, among other matters, consider and vote upon a proposal to adopt and approve the previously announced Agreement and Plan of Merger (the “Merger Agreement”) among Atlas, Poseidon and Poseidon Merger Sub, Inc., and the transactions contemplated by the Merger Agreement. The completion of the transactions contemplated by the Merger Agreement remains subject to closing conditions described in Atlas’ Proxy Statement filed with the U.S. Securities and Exchange Commission (the “SEC”) on January 9, 2023, including receipt of common shareholder approval at the Annual Meeting.
