Atlas Reports Second Quarter 2021 Results

Comments from Management:

Bing Chen, President and CEO of Atlas, commented, “Our strong second quarter performance was at the high end of our expected range, enabling us to raise financial guidance for 2021. Increasing our financial guidance reflects both our strong first half performance and the confidence we have in delivering continued high-performance over the long-term. With Seaspan’s industry record of newbuilds and significant forward fixing of our operating fleet, we’re pleased to provide one-time long-term financial guidance to assist investors understanding of how our business model benefits from the current market and the cumulative impact on our financial performance. This disclosure also demonstrates our confidence to execute consistently and achieve quality growth through all market cycles.”

“Our liner customers continued to value Seaspan’s long-term partnership through both forward-fixing of operating fleet charters and executing on strategic orders for newbuild vessels. APR reported solid Q2 performance and is focused on expanding upon the opportunities beyond the two current successful deployments in Mexicali and California.” 

“Seaspan has significantly transformed its operational and financial profile over the past four years. Today, we have a highly differentiated model in the market with unmatched business scale, operational excellence, customer flexibility, fleet versatility, financial strength, and creative solutions. Our resilient and differentiated business model has generated $16.2 billion of high-quality long-term gross contracted cash flows. We have secured 100% of our gross contracted cash flows for 2021. This is a testament to our consistent long-term approach and the ability to drive quality growth by providing value-added creative solutions to our customers through all business and market cycles.”

Graham Talbot, CFO of Atlas, commented, “Our finance teams have executed with equally high performance throughout 2021, which culminated in the achievement of several financial milestones over the past several months. In relatively short time, we have simplified our capital structure, created greater financial flexibility, secured a lower cost of capital, funded the majority of our newbuild program, and improved liquidity.”

“With the support of our strategic investor Fairfax, we have restructured their holdings and anticipate further developments to unlock value and broaden our growing base of global investors. We are now rated by three top credit agencies and expect further traction on our path to an investment grade company credit rating. To build upon our investor engagement, Atlas provided this quarter detailed disclosure of fleet, operational and growth information along with long-term financial goals. Our enhanced reporting is aligned with our commitment to transparency and highlights our differentiated and resilient business model.”

Atlas Corp. Q2 2021 and Recent Achievements:

• Gross contracted cash flows of $16.2 billion⁽¹⁾⁽²⁾ as of the day of this announcement, including $8.3 billion⁽¹⁾⁽³⁾ related to vessel fleet growth since December 31, 2020.
• Earnings per diluted share of $0.18 for the quarter ended June 30, 2021, including a $56.1 million non-cash charge, or $0.21 per diluted share, related to loss on debt extinguishment, compared to earnings per diluted share of $0.26 for the same period in 2020.
• Adjusted diluted EPS was $0.39 for the quarter ended June 30, 2021, excluding this non-cash charge⁽³⁾.
• Exchanged and amended $600.0 million Fairfax Senior Notes.
• Atlas exchanged $300.0 million Fairfax Senior Notes for 12.0 million Series J 7.0% Cumulative Redeemable Perpetual Preferred Shares with a liquidation value of $25.00 per share and 1.0 million five-year warrants to purchase an equal number of Atlas common shares at $13.71 per share.
• Seaspan amended $300.0 million of the Fairfax Senior Notes, removing security and guarantees such that the notes are pari passu with Seaspan’s existing senior unsecured indebtedness.
• Redeemed Series E and G preferred shares for $334.9 million.
• Completed exchange offer and Nasdaq Global Market listing for 7.125% senior unsecured notes due in 2027.
• In July, Atlas announced the appointment of Ms. Katie Ward as a new non-executive board member, effective September 1, 2021.

Seaspan Q2 2021 and Recent Achievements:

• Seaspan entered into agreements to acquire eight conventional fuel vessels during the quarter ended June 30, 2021, and 10 dual-fuel LNG vessels in July 2021. The table below summarizes our 55 newbuild vessels:

• Seaspan entered into forward fixtures for 45 operating vessels during the second quarter and in August 2021. Details on forward fixtures are now included in our fleet table included as part of the Q2 2021 supplemental financial workbook which can be found on our Events and Presentation page of our website.

Seaspan Q2 2021 and Recent Achievements (continued):

• Seaspan took delivery of the following vessels:
• Two 8,500 TEU scrubber-fitted containerships in April 2021 and May 2021.
• One 15,000 TEU scrubber-fitted containership in May 2021 and the second of the pair subsequent to quarter end in early-July 2021.
• Seaspan continued industry leading newbuild fleet growth and innovation with flexibility to adopt future fuel alternatives:
• 20 dual-fuel LNG vessels on order, adding two key vessel size categories to our fleet and furthering the sustainability development of some of global trade’s fast-growing shipping lanes.
• In July 2021, Seaspan further aligned with its commitment to ESG principles by ordering the installation of fuel tanks capable of conversion to ammonia-based next generation fuel in five LNG newbuild vessels
• 35 conventional vessels on order to position fleet for emerging trend of larger capacity vessels servicing the same routes.
• Seaspan completed significant steps to increase its proportion of unsecured debt and simplify its capital structure:
• Expanded unsecured debt by $1.05 billion during the second quarter and through to July 2021, setting precedents for container shipping financing.
• Seaspan issued $300.0 million of 6.5% sustainability-linked senior unsecured notes due in 2026 in the Nordic bond market.
• Subsequent to quarter end, Seaspan issued $750.0 million of 5.50% senior unsecured notes due in 2029.
• Amended and upsized its vessel portfolio financing program to, among other things, lower interest costs and improve credit terms, creating greater financial flexibility.
• Increased size of revolving credit facility from $300.0 million to $400.0 million.
• Added $180.0 million of capacity under the bank loan facilities.
• Completed largest reported sustainability-linked US private placement of $500.0 million of notes, secured by the same portfolio of vessels, with a weighted average maturity of approximately 12 years, and weighted average initial interest rate of approximately 4.1%.
• Kroll Bond Rating Agency placed Seaspan’s BB corporate rating and BBB- senior secured rating⁽¹⁾ on watch upgrade.
• S&P Global Ratings assigned an issuer credit rating of ‘BB-‘ to Seaspan and a ‘BB-‘ rating to Seaspan’s senior unsecured notes.
• Fitch ratings assigned a first-time Issuer Default Rating (IDR) of ‘BB’ to Seaspan and a ‘BB’ rating to Seaspan’s senior unsecured notes.

APR Q2 2021 and Recent Achievements:

• APR successfully deployed two peaking power grid stability projects.
• APR secured contracts to provide 330MW utilizing ten gas turbines to provide peaking power in Mexico.
• APR secured US market contract to provide three mobile turbines to California’s Imperial Irrigation District.

Consolidated Results:

The following table summarizes Atlas’ consolidated results for the three months ended June 30, 2021, March 31, 2021 and June 30, 2020.

Financial Results Summary:

Revenue growth of 8.3% to $393.9 million for the quarter ended June 30, 2021, compared to the same quarter in 2020. The growth was primarily driven by the contribution of seven vessels delivered to Seaspan after June 2020.

Adjusted EBITDA growth of 14.1% to $272.5 million for the quarter ended June 30, 2021, compared to the same quarter in 2020. The growth was primarily driven by the contribution of seven vessels delivered to Seaspan after June 2020.         

FFO Per Share growth of 14.1% to $0.73 for the quarter ended June 30, 2021, compared to the same quarter in 2020. The growth was primarily driven by the contribution of seven vessels delivered to Seaspan after June 2020.

Earnings Per Diluted Share was $0.18 for the quarter ended June 30, 2021, including a $56.1 million non-cash charge, or $0.21 per diluted share, related to loss on debt extinguishment, compared to earnings per diluted share of $0.26 for the same period in 2020. 

Adjusted Earnings Per Diluted Share growth of 50% to $0.39 for the quarter ended June 30, 2021, excluding the non-cash charge, compared to $0.26 for the same period in 2020. 

Liquidity
As of June 30, 2021, Atlas had total liquidity of $1.27 billion, consisting of $591.0 million of cash and cash equivalents and $679.5 million of availability under undrawn committed credit facilities. As of June 30, 2021, Atlas had an unencumbered asset base including 33 vessels with a book value of $1.2 billion.

Guidance:

The following table* is based on Atlas’ current expectations for the years ending December 31, 2021, 2022, 2023 and 2024.

Segmental Financial Results:
The following table summarizes segmental financial results for the three months ended June 30, 2021.

Distribution:
On July 7, 2021, the Board of Directors of Atlas declared a quarterly distribution in the amount of $0.125 per common share, unchanged from the prior quarter. Regular quarterly dividends on the Series D, Series H, Series I and Series J preferred shares were also declared. All dividends were paid on July 30, 2021.

Conference Call and Webcast:
Atlas will host a conference call and webcast presentation for investors, analysts and interested parties to discuss its second quarter results on August 10, 2021 at 8:30 a.m. ET. Participants should call, 1-877-246-9875, International Dial-In, 1-707-287-9353, Listen Only Toll-Free Dial-In Number, 1-888-556-5741, and Listen Only International Dial-In Number, 1-857-270-6226 and request the Atlas call (conference ID: 2941786). The live webcast and slide presentation are available under “Events & Presentations” at www.atlascorporation.com. A webcast replay will be available until August 12, 2022.

The replay telephone numbers are: US/Canada 1-855-859-2056 and International 1-404-537-3406, and the replay passcode is: 2941786. The phone replay will be available until August 25, 2021.

About Atlas
Atlas is a leading global asset management company, differentiated by its position as a best-in class owner and operator with a focus on disciplined capital deployment to create sustainable shareholder value. We target long-term, risk adjusted returns across high quality infrastructure assets in the maritime sector, energy sector and other infrastructure verticals. For more information visit atlascorporation.com.

About Seaspan
Seaspan is a leading independent owner and operator of containerships. We charter our vessels primarily pursuant to long-term, fixed-rate charters to the world’s largest container shipping liners. Seaspan’s fully-delivered fleet consists of 186 containerships, representing total capacity of approximately 1,854,200 TEU. Seaspan’s fully delivered fleet of vessels has an average age of approximately four years and an average remaining lease period of approximately seven years, on a TEU-weighted basis. For more information, visit seaspancorp.com.

About APR
APR provides rapidly deployable, large-scale power and fast-track mobile power to underserved markets and industries. APR’s mobile, turnkey power plants help run industries, cities and countries globally in both developed and developing markets. For more information, visit aprenergy.com.

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Definitions of Non-GAAP Financial Measures

This release includes various financial measures that are non-GAAP financial measures as defined under the rules of the United States Securities and Exchange Commission (“SEC”). These non-GAAP financial measures, which include FFO, FFO Per Share, Diluted (“FFO Per Share”), Adjusted Earnings, Adjusted Earnings Per Share, Diluted (“Adjusted EPS”), Adjusted EBITDA, Net Debt and Total Borrowings, are intended to provide additional information and are not prepared in accordance with, and should not be considered substitutes for financial measures prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Investors are cautioned that there are material limitations associated with the use of the non-GAAP financial measures as an analytical tool.

For a reconciliation of each non-GAAP measure to its most comparable GAAP measure, please see the “Non-GAAP Reconciliations” tables in this press release. A reconciliation of projected Adjusted EBITDA and Adjusted Net Income as shown under “Guidance” is not provided herein because the projected comparable GAAP measure for the years ended December 31, 2021, 2022, 2023 and 2024 cannot be prepared without unreasonable burden and with sufficient certainty. The components of the projected GAAP measure that cannot be so prepared include, but are not limited to, income tax expense, gains/losses on sale, loss on derivative instruments, impairment, change in contingent consideration asset and loss on foreign currency repatriation.

FFO and FFO Per Share represent net earnings adjusted for depreciation and amortization, gains/losses on sale, unrealized change in fair value of derivative instruments, loss on foreign currency repatriation, change in contingent consideration asset, preferred share dividends accumulated, impairment, loss on debt extinguishment and certain other items that management believes are not representative of its operating performance. FFO and FFO Per Share are useful performance measures because they exclude those items that management believes are not representative of its performance.

FFO and FFO Per Share are not defined by GAAP and should not be considered as an alternative to net earnings, earnings per share or any other indicator of the Company’s performance required to be reported by GAAP. In addition, this measure may not be comparable to similar measures presented by other companies.

Adjusted Earnings and Adjusted EPS represents net earnings adjusted for preferred share dividends accumulated, impairment, loss on debt extinguishment and other items that management believes are not representative of its ongoing performance.

Adjusted Earnings and Adjusted EPS are not defined by GAAP and should not be considered as an alternative to net earnings, net earnings per share or any other indicator of the Company’s performance required to be reported by GAAP. In addition, this measure may not be comparable to similar measures presented by other companies and the closest measure is net earnings. Management believes that these metrics are helpful in providing investors with information to assess the on-going operations of the business.

Adjusted EBITDA represents net earnings before interest expense and income, tax expense, depreciation and amortization, impairments, write-down and gains/losses on sale, gains/losses on derivative instruments, loss on foreign currency repatriation, change in contingent consideration asset, loss on debt extinguishment, other expenses and certain other items that management believes are not representative of its operating performance.

Adjusted EBITDA provides useful information to investors in assessing the Company’s results from operations. Management believes that this measure is useful in assessing performance and highlighting trends on an overall basis. Management also believes that this performance measure can be useful in comparing its results with those of other companies, even though other companies may not calculate this measure in the same way. The GAAP measure most directly comparable to Adjusted EBITDA is net earnings. Adjusted EBITDA is not defined by GAAP and should not be considered as an alternative to net earnings or any other indicator of the Company’s performance required to be reported by GAAP.

The Company is unable to provide reconciliations of forward-looking Adjusted EBITDA and its components to their most directly comparable GAAP financial measures on a forward-looking basis because the necessary components that impact those GAAP financial measures cannot be reliably predicted. These components include, but are not limited to, income tax expense, gains/losses on sale, loss on derivative instruments, impairment, change in contingent consideration asset and loss on foreign currency repatriation. Such components may have a significant, and potentially unpredictable, impact on our future financial results.

Net Debt represents total borrowings before debt discount and fair value adjustments, net of cash and cash equivalents and restricted cash. Total Borrowings represents long-term debt and other financing arrangements, excluding deferred financing fees.

Operating Net Debt represents total borrowings before debt discount and fair value adjustments, net of cash and cash equivalents, restricted cash and vessels under construction.

Net Debt and Total Borrowings provide useful information to investors in assessing the Company’s leverage. Management believes this measure is useful in assessing the Company’s ability to settle contracted debt payments. Management also believes that this leverage measurement can be useful in comparing its position with those of other companies, even though other companies may not calculate this measure in the same way. The GAAP measure most directly comparable to Net Debt and Total Borrowings is the total of long-term debt and other financing arrangements. Net Debt and Total Borrowings are not defined by GAAP and should not be considered as an alternative to long-term debt and other financing arrangements or any other indicator of the Company’s financial position required to be reported by GAAP.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This release contains forward-looking statements (as such term is defined in Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act) concerning Atlas’ operations, cash flows, and financial position, including, without limitation, Atlas’ financial guidance, including 2022 to 2024 outlook, and its ability to continue to grow its business and create increased shareholder value. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “continue,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” “projects,” “forecasts,” “will,” “may,” “potential,” “should” and similar expressions are forward–looking statements. These forward-looking statements represent Atlas’ estimates and assumptions only as of the date of this release and are not intended to give any assurance as to future results. As a result, you are cautioned not to rely on any forward-looking statements. Forward-looking statements appear in a number of places in this release. Although these statements are based upon assumptions Atlas believes to be reasonable based upon available information, they are subject to risks and uncertainties. These risks and uncertainties include, but are not limited to:

• Atlas’ future operating and financial results;
• Atlas’ future growth prospects;
• Atlas’ business strategy and capital allocation plans, and other plans and objectives for future operations;
• Atlas’ primary sources of funds for short, medium and long-term liquidity needs;
• potential acquisitions, financing arrangements and other investments, and the expected benefits from such transactions;
• Atlas’ financial condition and liquidity, including its ability to realize the benefits of recent financing activities, borrow and repay funds under its credit facilities, its ability to obtain waivers or secure acceptable replacement charters under the credit facilities, its ability to refinance existing facilities and notes, and to obtain additional financing in the future to fund capital expenditures, acquisitions and other general corporate activities;
• conditions in the public equity market and the price of Atlas’ shares;
• changes in governmental rules and regulations or actions taken by regulatory authorities, and the effect of governmental regulations on Atlas’ business;
• the financial condition of Seaspan’s and APR’s customers, lenders and other counterparties and their ability to perform their obligations under their agreements with Seaspan and APR, respectively;
• the continued ability to meet specified restrictive covenants in Atlas’ and its subsidiaries’ financing and lease arrangements, notes and preferred shares;
• any economic downturn in the global financial markets and potential negative effects of any recurrence of such disruptions on the demand for the services of Seaspan’s containerships or APR’s mobile power solutions or on our customers’ ability to charter our vessels, lease our power generation assets and pay for our services;
• the length and severity of the novel coronavirus (COVID-19) pandemic, including as a result of new variants of the virus, and its impact on Atlas’ business;
• a major customer experiencing financial distress, due to the COVID-19 pandemic, bankruptcy or otherwise;
• global economic and market conditions and shipping industry trends, including charter rates and other factors affecting supply and demand for our containerships and power generation solutions;
• disruptions in global credit and financial markets as the result of the COVID-19 pandemic or otherwise;
• Atlas’ expectations as to impairments of its vessels and power generation assets, including the timing and amount of potential impairments;
• the future valuation of Atlas’ vessels, power generation assets and goodwill;
• future time charters and vessel deliveries, including future long-term charters for certain existing vessels;
• estimated future capital expenditures needed to preserve the operating capacity of Seaspan’s containership fleet and comply with regulatory standards, as well as Atlas’ expectations regarding future dry-docking and operating expenses, including ship operating expense and expenses related to performance under our contracts for the supply of power generation capacity, and general and administrative expenses;
• availability of crew, number of off-hire days and dry-docking requirements;
• Seaspan’s continued ability to maintain, enter into or renew primarily long-term, fixed-rate time charters for its vessels and leases of our power generation assets;
• the potential for early termination of long-term time charters and Seaspan’s potential inability to enter into, renew or replace long-term time charters;
• Seaspan’s ability to leverage to its advantage its relationships and reputation in the containership industry;
• changes in technology, prices, industry standards, environmental regulation and other factors which could affect Atlas’ competitive position, revenues and asset values;
• disruptions and security threats to our technology systems;
• taxation of Atlas and of distributions to its shareholders;
• Atlas’ exemption from tax on U.S. source international transportation income;
• the continued availability of services, equipment and software from subcontractors or third-party suppliers required to provide APR’s power generation solutions;
• APR’s ability to protect its intellectual property and defend against possible third-party infringement claims relating to its power generation solutions;
• Atlas’ ability to achieve or realize expected benefits from ESG initiatives;
• potential liability from future litigation;
• other factors detailed from time to time in Atlas’ periodic reports; and
• other risks that are not currently material or known to us.

Forward-looking statements in this release are estimates and assumptions reflecting the judgment of senior management and involve known and unknown risks and uncertainties. These forward-looking statements are based upon a number of assumptions and estimates that are inherently subject to significant uncertainties and contingencies, many of which are beyond Atlas’ control. Actual results may differ materially from those expressed or implied by such forward-looking statements. The risk that the assumptions on which the 2022 to 2024 outlook and guidance are based prove incorrect may increase the later the period to which the outlook relates, and the extended period of this outlook may increase the chance actual results vary materially from such expectations. Accordingly, all forward-looking statements should be considered in light of various important factors listed above and including, but not limited to, those set forth in “Item 3. Key Information—D. Risk Factors” in Atlas’ Annual Report for the year ended December 31, 2020 on Form 20-F filed with the SEC on March 19, 2021.

Atlas does not intend to revise any forward-looking statements in order to reflect any change in its expectations or events or circumstances that may subsequently arise. Atlas expressly disclaims any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in Atlas’ views or expectations, or otherwise. You should carefully review and consider the various disclosures included in Atlas’ Annual Report and in Atlas’ other filings made with the SEC that attempt to advise interested parties of the risks and factors that may affect Atlas’ businesses, prospects and results of operations.

SOURCE Atlas Corp.

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