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ATLAS REPORTS SECOND QUARTER 2022 RESULTS

·17 min read
NYSE:ATCO (CNW Group/Atlas Corp.)
NYSE:ATCO (CNW Group/Atlas Corp.)

Adjusted EBITDA(1) growth of 2.6% to $279.5 million compared to Q2 2021 driven by highly differentiated business model and predictable cash flow

LONDON, UK, Aug. 9, 2022 /CNW/ - Atlas Corp. ("Atlas" or the "Company") (NYSE: ATCO) announced today its results for the quarter ended June 30, 2022.

Financial Highlights:

(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 13.

 

Comments from Management:

Bing Chen, President and CEO of Atlas, commented, "We continued our strong quarterly performance amongst a backdrop of global market turmoil, demonstrating the resilience of our business model. Seaspan's customers continue to value our long-term partnerships with the forward fixing of three operating vessels in the second quarter, and an additional 14 since the end of the quarter. We are working diligently to deliver our newbuild program on time and on budget, and thanks to our experienced team and integrated platform, all seven of our newbuilds were delivered ahead of schedule. We have now completed 117 newbuilds since our IPO in 2005, a proud track record that our customers deeply value. "

"APR Energy continued to pivot the company to long-term, predictable cash flow opportunities. Our team has secured one new deployment in the second quarter, a dry rental with a Mexico-based counterparty representing 120 MW. The new contracts signed in the first quarter, including the 226 MW 44-month Brazilian contract, have commenced and evidence APR's focus, and  execution on longer-term and quality cash flow opportunities."

"Both Seaspan and APR are committed to creative customer solutions, trusted long-term partnerships, and differentiated business model to well position the companies for long-term quality growth that consistently delivers value throughout all market cycles."

Graham Talbot, CFO of Atlas, commented, "The Atlas team has continued to execute with high diligence and quality throughout the second quarter as demonstrated by the continued through-cycle performance of our resilient business model. Our fully integrated and scalable platform continued to provide leading customer solutions as exhibited through additional newbuild orders and forward fixtures.  Our long-term model and diligent focus on asset quality is evidenced through ten strategic vessel divestments this year, generating an additional $257.1 million in cashflow to optimize our balance sheet and allocate capital to future growth and further optimize our fleet. We also continued our pursuit of an investment grade credit rating with the closing of our $500.0 million of long-dated financing, creating greater financial flexibility, securing a lower cost of capital and improving our liquidity."

"Our continued strong performance, underpinned by a gross contracted cash flow balance of $17.8 billion as at June 30, 2022 and liquidity balance of $1,100.7 million, reinforces Atlas' industry-leading position and resilience in the face of global economic uncertainty."

Significant Developments in the Second Quarter of 2022 & Subsequent Events

Containership Sale Developments

In the second quarter, Seaspan completed the sale of nine vessels for total gross proceeds of $224.3 million. Seaspan continues to manage the operations of six of these vessels pursuant to management agreements entered into in connection with each sale.

The table below summarizes our Containership Leasing fleet:


Actual

Expected

Containership Leasing (# of vessels)

Q2 2022

Remainder
of 2022

2023

2024

2025

Beginning of period balance

132

127

131

154

193

Delivered/Acquired

4

Future scheduled deliveries(1)

4

23

39

1

Sold

(9)

End of period balance

127

131

154

193

194

End of period balance (managed)(2)

8

8

8

8

8

(1)

Includes four 7,700 TEU vessels that are expected to be delivered in 2024 and 2025, which remain subject to closing conditions.

(2)

Represents vessels that are operated on behalf of other owners.

 

Containership Leasing and Newbuild Developments

Seaspan entered into proactive lease extensions for three operating vessels in the second quarter of 2022, generating approximately $230.0 million in gross contracted cash flow. In July and August 2022, Seaspan entered into proactive lease extensions for an additional 14 operating vessels, generating over $1.1 billion in gross contracted cash flow.

In April and May 2022, Seaspan accepted delivery of its fourth and fifth 12,200 TEU vessels, each of which commenced an 18-year charter upon delivery. These deliveries mark the completion of Seaspan's five 12,200 TEU newbuild order received from its customer in late 2020. In June 2022, Seaspan also accepted delivery of its first two 11,800 TEU vessels, each of which commenced a 5-year charter upon delivery.

In May 2022, Seaspan entered into shipbuilding contracts for four 7,700 TEU liquified natural gas dual-fuel containerships which remain subject to certain closing conditions. If and when the closing conditions are met, the four containerships are expected to be delivered in the second half of 2024 and first quarter of 2025. These vessels will commence 18-year charters with a leading global liner customer upon delivery, generating gross contracted cash flow of approximately $0.96 billion.

Mobile Power Generation Developments

In May 2022, APR Energy entered into a contract with a Mexico-based counterparty to provide a dry rental of four turbines representing 120 MW for a minimum of four consecutive months, which commenced in June 2022.

In June 2022, all of APR's turbines based at its Zappalorto plant in Argentina were demobilized from the country and redeployed on the aforementioned contract with the Mexico-based counterparty. APR's Matheu plant in Argentina is on track to be fully demobilized by the end of the third quarter of 2022.

Financing Development

In May 2022, Seaspan entered into a note purchase agreement in respect of a sustainability-linked U.S. private placement of $500.0 million of notes, to be secured by its vessel portfolio financing program. The notes were issued on August 3, 2022, and carry a weighted average maturity of approximately 12 years, and a weighted average fixed interest rate of approximately 5.3%. Seaspan plans to use proceeds from the private placement to pay down existing debt in the portfolio financing program, fund capital expenditures and for other general corporate purposes.

In June 2022, APR amended and extended its secured financing program (the "Financing Program"). The amendment lowered interest costs, extended the maturity date to 2025, and improved financial flexibility. As of June 30, 2022, the Financing Program consists of a $108.0 million term loan and a $50.0 million revolving credit facility. The revolving credit facility is committed but undrawn.

Shareholder Development

In April 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 approximately 45.1% of the then issued and outstanding common shares of Atlas. Fairfax continues to hold 6.0 million warrants.

Take Private Proposal

On August 4, 2022, Atlas' Board of Directors received a non-binding proposal letter, dated August 4, 2022, from Poseidon Acquisition Corp., 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 proposal constitutes only an indication of interest by Poseidon Acquisition Corp. and does not constitute a binding commitment with respect to the proposed transaction or any other transaction. The timing, certainty and other material terms of the proposed transaction are unknown at this time.

The Board of Directors established a special committee consisting of independent directors of the Board of Directors to consider the proposal.

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.

On July 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 August 1, 2022.

Common Shares Outstanding

As of August 1, 2022, there were 281.3 million common shares outstanding.

Consolidated Results:

The following table summarizes Atlas' consolidated results for the three months ended June 30, 2022, March 31, 2022 and June 30, 2021.


Three Months Ended

(in millions of U.S. dollars, except per share
amounts, percentages and ratios, unaudited)

June 30, 2022


March 31, 2022


June 30, 2021

Key Metrics






Revenue

$                      413.3


$                      408.1


$                    393.9

Net earnings

140.0


169.4


66.0

Adjusted EBITDA(1)

279.5


277.1


272.5

FFO(1)

201.7


204.0


193.5

FFO per Share, diluted(1)

0.70


0.73


0.73

Adjusted EPS, diluted(1)

0.35


0.39


0.39

Diluted EPS

0.43


0.56


0.18







Financial Position






Operating Net Debt to Adjusted EBITDA(1)

3.4x


3.6x


4.1x

Ending Liquidity(2)

1,100.7


951.3


1,270.5

Gross Contracted Cash Flow(3)

17,754.0


18,096.3


13,735.8

Total Borrowings(1)(4)

5,538.6


5,637.2


5,123.2

Total Borrowings to Assets (%)

51.2 %


50.0 %


50.1 %







Operational






Containership Leasing Utilization

98.3 %


100.0 %


98.5 %

Mobile Power Generation Utilization

68.8 %


60.0 %


78.2 %

 

(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 13.

(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 June 30, 2022 includes $5.7 billion of lease payments receivable from operating leases, $1.8 billion of gross lease receivable from finance leases and $10.3 billion of gross lease payments from newbuild vessels with signed charter agreements that are undelivered as at June 30, 2022, which excludes $0.96 billion related to the four 7,700 TEU vessels that remain subject to closing conditions. Gross contracted cash flow as at June 30, 2021, includes $5.4 billion of lease payments receivable from operating leases, $0.9 billion of gross lease receivable from financing leases and $7.4 billion of gross lease payments for acquired vessels with signed charter agreements that are undelivered as at June 30, 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 4.9% to $413.3 million for the three months ended June 30, 2022, compared to the same period in 2021. For the quarter ended June 30, 2022, the increase in revenue for the Containership Leasing segment was primarily attributable to the delivery of 11 vessels since the second quarter of 2021.  The revenue for the Mobile Power Generation segment decreased for the quarter ended June 30, 2022 due to lower asset utilization.

Adjusted EBITDA growth of 2.6% to $279.5 million for the three months ended June 30, 2022, compared to the same period in 2021. The growth was primarily driven by the increase in revenue.

FFO Per Share decrease of 4.1% to $0.70 for the three months ended June 30, 2022, compared to the same period in 2021. The decrease was partially driven by an increase in diluted share count from the issuance of 25 million shares from the exercise of warrants and the impact of the maximum dilutive effect of the exchangeable notes based on the if-converted method.

Diluted EPS was $0.43 for the three months ended June 30, 2022, compared to $0.18 for the same period in 2021.  The increase in diluted EPS was primarily driven by a non-cash gain in the current year on derivative instruments related to the increase in the forward LIBOR curve and a lower loss on debt extinguishment in 2022.  In the prior year, the loss on debt extinguishment, primarily related to the repayment of Fairfax notes.

Adjusted Diluted EPS decrease of 10.3% to $0.35 for the quarter ended June 30, 2022,  compared to $0.39 for the same period in 2021. The decrease in adjusted diluted EPS was primarily related to the increase diluted share count.

Liquidity
As of June 30, 2022, Atlas had total liquidity of $1,100.7 million, consisting of $400.7 million of cash and cash equivalents and $700.0 million of availability under undrawn committed credit facilities. As of June 30, 2022, we also had $5.7 billion of undrawn committed financing related to our newbuild vessels and an unencumbered asset base including 30 vessels with a book value of $1.2 billion.

Segmented Financial Results:
The following table summarizes selected segmented financial results for the three months ended June 30, 2022.


Three Months Ended June 30, 2022

(in millions of U.S. dollars,
unaudited)

Containership
Leasing


Mobile Power
Generation


Elimination
and Other(3)


Total

Revenue

$                      375.7


$                        37.6


$                       —


$            413.3

Operating expense

77.6


8.8



86.4

G&A expense

16.7


10.3


(2.4)


24.6

Indemnification claim (income)
under acquisition agreement


(7.8)



(7.8)

Operating lease expense

29.0


0.6



29.6

Adjusted EBITDA(1)

252.4


27.5


(0.4)


279.5

FFO(1)

194.5


23.0


(15.8)


201.7

Gross Contracted Cash Flow(2)

17,426.6


327.4



17,754.0

 

(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 13.

(2)

Gross contracted cash flow as at June 30, 2022, includes $5.7 billion of lease payments receivable from operating leases, $1.8 billion of gross lease receivable from finance leases and $10.3 billion of gross lease payments from newbuild vessels with signed charter agreements that are undelivered as at June 30, 2022, which excludes $0.96 billion related to the four 7,700 TEU vessels that remain subject to closing conditions. 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.

 

Conference Call and Webcast:

Atlas plans to host a conference call for all shareholders and interested parties at 8:30 a.m. Eastern Time on Wednesday, August 10, 2022, to discuss the results.

To attend the conference call or webcast, participants should register online at ir.atlascorporation.com/events-and-presentations, and will be provided with details to access the event. To avoid delays, participants are encouraged to register a day in advance or at a minimum 15 minutes before the start of the call. A replay of the call will also be available approximately two hours following the conclusion of the call and accessible until August 10, 2023, on the same webpage.

Date of Conference Call:

Wednesday, August 10, 2022



Scheduled Time:

8:30 a.m. ET



Direct Link to Dial-In Registration Webpage:

Click Here



Direct Link to Webcast Registration Webpage:

Click Here

 

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 the largest global containership lessor, primarily focused on long-term, fixed-rate leases with the world's largest container shipping liners. As at June 30, 2022, Seaspan's operating fleet consisted of 127 vessels with a total capacity of 1,156,630 TEU, and an additional 67 vessels under construction, increasing total fleet capacity to 1,950,430 TEU, on a fully delivered basis, including the four 7,700 TEU vessels which remain subject to closing conditions. 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.

ATLAS CORP.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS OF U.S. DOLLARS)



June 30, 2022


December 31, 2021

Assets





Current assets:





Cash and cash equivalents


$                                     400.7


$                                     288.6

Accounts receivable


85.2


56.2

Inventories


50.9


46.4

Prepaid expenses and other


29.8


35.7

Net investment in lease


20.1


16.8

Acquisition related assets


119.7


104.0



706.4


547.7






Property, plant and equipment


6,760.2


6,952.2

Vessels under construction


1,204.8


1,095.6

Right-of-use assets


765.9


724.9

Net investment in lease


898.9


741.5

Goodwill


75.3


75.3

Deferred tax assets


0.5


1.9

Derivative instruments


66.9


6.1

Other assets


328.3


424.4



$                                10,807.2


$                                10,569.6

Liabilities and shareholders' equity





Current liabilities:





Accounts payable and accrued liabilities


$                                     179.5


$                                     183.4

Deferred revenue


39.3


46.6

Income tax payable


95.5


96.9

Long-term debt - current


510.3


551.0

Operating lease liabilities - current


125.0


155.1

Finance lease liabilities - current


175.5


Other financing arrangements - current


115.1


100.5

Other liabilities - current


44.0


42.0



1,284.2


1,175.5






Long-term debt


3,349.3


3,731.8

Operating lease liabilities


454.2


562.3

Other financing arrangements


1,490.7


1,239.3

Derivative instruments


9.9


28.5

Other liabilities


17.9


17.7

Total liabilities


6,606.2


6,755.1






Cumulative redeemable preferred shares


296.9


296.9






Shareholders' equity:





Share capital


2.8


2.4

Additional paid in capital


3,711.2


3,526.8

Retained earnings


208.7


7.5

Accumulated other comprehensive loss


(18.6)


(19.1)



3,904.1


3,517.6



$                                10,807.2


$                                10,569.6

 

ATLAS CORP.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS OF U.S. DOLLARS, EXCEPT SHARES IN THOUSANDS AND PER SHARE AMOUNTS)

 



Three Months Ended
June 30, 2022


Six Months Ended
June 30, 2022



2022


2021


2022


2021










Revenue


$            413.3


$             393.9


$          821.4


$         766.5










Operating expenses:









Operating expenses


86.4


87.2


173.0


166.3

Depreciation and amortization


101.8


90.8


189.9


178.1

General and administrative


24.6


12.1


52.5


32.7

Indemnity claim under acquisition agreement


(7.8)


(15.5)


(21.3)


(15.5)

Operating leases


29.6


36.8


63.2


72.9

Loss (Gain) on sale


1.9


(0.4)


4.3


(0.9)



236.5


211.0


461.6


433.6










Operating earnings


176.8


182.9


359.8


332.9










Other expenses (income):









Interest expense


51.6


54.6


97.4


101.4

Interest income


(0.4)


(1.7)


(0.6)


(2.2)

Loss on equity investment


0.7




(Loss) Gain on derivative instruments


(27.8)


1.7


(68.5)


(7.0)

Loss on debt extinguishment


7.2


56.1


7.2


56.1

Other expenses


4.3


4.6


13.4


12.7



35.6


115.3


48.9


161.0