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Atlas Reports Third Quarter 2021 Results

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·16 min read
In this article:
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  • ATCO
  • ATCO-PD
  • ATCO-PH
  • ATCO-PI
  • ATCOL

Revenue Growth of 17.0% in Q3
Adjusted EBITDA(1) Growth of 29.0% in Q3
Funds from Operations(1) Growth of 42.9% in Q3

Newbuild Fleet Growth of 25 Vessels, Totalling 175,000 TEU in Q3
First of 70 Newbuild Vessels Delivered Ahead of Schedule
Newbuild Financing Ahead of Schedule

$17.9 Billion(2) Total Gross Contracted Cash Flow
Reaffirms Increased 2021 Financial Guidance

Atlas Corp. Third Quarter 2021 Financial Performance Compared to Third Quarter 2020

  • Revenue growth of 17.0% to $451.9 million

  • Adjusted EBITDA(4) growth of 29.0% to $322.2 million

  • Funds From Operations ("FFO")(1) growth of 42.9% to $248.0 million and FFO Per Share(1) growth of 36.8% to $0.93

  • Earnings per diluted share of $0.30

  • Adjusted diluted EPS(1) of $0.56, representing growth of 107.4%, excluding $70.9 million non-cash charge, or $0.26 per diluted share, related to loss on debt extinguishment

LONDON, Nov. 8, 2021 /CNW/ - Atlas Corp. ("Atlas" or the "Company") (NYSE: ATCO) announced today its results for the quarter ended September 30, 2021.

Atlas Corp. Logo (CNW Group/Atlas Corp.)
Atlas Corp. Logo (CNW Group/Atlas Corp.)

(1)

This is a non-GAAP financial measure. Refer to "Definitions of Non-GAAP Financial Measures" and the "Non-GAAP Reconciliations" for a definition of this term and a reconciliation of this non-GAAP financial measure, as used in this release, to their most directly comparable GAAP financial measure..

(2)

These gross contracted cash flows include purchase obligations and exclude purchase options, extensions, higher charter rate options and profit-sharing components.

Comments from Management:
Bing Chen, President and CEO of Atlas, commented, "Our team continued to exceed expectations by delivering operational excellence and strong financial performance during the third quarter of 2021. As a result of our resilient business model focused on long term contracted cash flows, our financial performance has been unaffected by port congestion and supply chain disruptions. We are working closely with our customers through these operational challenges by leveraging our fully integrated platform to maintain industry-leading operational performance. In the third quarter, Seaspan continued exhibiting its market leadership by securing 25 newbuild vessel orders backed by long term charters. We also took delivery of the first vessel in our 70 vessel newbuild program approximately two months ahead of schedule. APR Energy delivered a solid performance, successfully executing two grid stabilization peaking power projects and is progressing on building a pipeline of longer-term projects."

"Atlas' consistent operational excellence and creative customer partnerships, coupled with our integrated platform, enables our team to deliver superior solutions for all stakeholders through all market cycles. We look forward to closing out the fourth quarter of 2021 with continued strong performance."

Graham Talbot, CFO of Atlas, commented, "Our third quarter performance reflected strong execution across the organization and the strength of our fully integrated and highly differentiated platform. We made substantial progress on key initiatives: securing funding for our newbuild program ahead of schedule and on highly competitive terms, continuing to optimize our capital structure, and broaden our access to key global financial markets. Financing of our newbuild program is materially ahead of schedule. Funding has been secured for 60 vessels and financing for the remaining 10 vessels is on track to be concluded by the end of the year. For the first time in the Company's 20-year history, we accessed the US institutional unsecured bond markets, issuing a $750 million bond into significant investor demand driving tightened pricing and a 50% upsize. We are confident in achieving our 2021 financial guidance, which was increased at the time we reported our second quarter financial results."

Atlas Corp. Q3 2021 and Recent Achievements:

  • Gross contracted cash flows of $17.9 billion(1) as of September 30, 2021, including $11.2 billion(1) related to undelivered vessels.

  • Earnings per diluted share of $0.30 for the quarter ended September 30, 2021, including a $70.9 million non-cash charge, or $0.26 per diluted share, related to loss on debt extinguishment, compared to earnings per diluted share of $0.27 for the same period in 2020.

  • Adjusted diluted EPS(2) was $0.56 for the quarter ended September 30, 2021, excluding the non-cash charge mentioned above. This represents growth of 107.4% compared to the third quarter of 2020.

  • Redeemed Series E and G preferred shares for $334.9 million, including accrued dividends.

  • Ms. Katie Wade, non-executive board member, joined effective September 1, 2021.

Seaspan Q3 2021 and Recent Achievements:

  • During the quarter ended September 30, 2021, Seaspan continued its industry leading quality growth and fleet innovation by entering into agreements to order 25 newbuild vessels:

  • The table below summarizes our 69 newbuild vessels:


Expected delivery dates

Newbuilds

Total TEU

12200 TEU

November 2021 - June 2022

4

48,800

12000 TEU

July 2022 - October 2022

4

48,000

15000 TEU

January 2023 - June 2024

10

150,000

15000 TEU LNG

February 2023 - January 2024

10

150,000

15500 TEU

August 2023 - May 2024

6

93,000

24000 TEU

June 2023 - July 2023

2

48,000

12000 TEU

October 2022 - November 2022

2

24,000

15000 TEU

September 2023 - February 2024

6

90,000

7000 TEU LNG

October 2023 - December 2024

15

105,000

7000 TEU

April 2024 - November 2024

10

70,000

Total


69

826,800

  • Seaspan:

  • We completed significant steps to increase the proportion of unsecured debt and to simplify our capital structure, including:

(1)

These gross contracted cash flows include purchase obligations and exclude purchase options, extensions, higher charter rate options and profit-sharing components.

(2)

This is a non-GAAP financial measure. Refer to "Definitions of Non-GAAP Financial Measures" and the "Non-GAAP Reconciliations" for a definition of this term and a reconciliation of this non-GAAP financial measure, as used in this release, to their most directly comparable GAAP financial measure.

Seaspan Q3 2021 and Recent Achievements (continued):

  • Kroll Bond Rating Agency upgraded Seaspan's Corporate rating to BB+ from BB; Senior Secured rating to BBB from BBB-.

  • Redeemed $27.8 million of 7.125% senior unsecured notes due in 2027 which remained outstanding following Atlas' May 2021 exchange offer.

  • In August 2021, Seaspan entered into $661.8 million in sale-leaseback financing arrangements related to six newbuild vessels (the "August Newbuild Financings").

  • As of the date of this announcement, including the August Newbuild Financings, Seaspan has secured financing arrangements totaling $5.3 billion relating to its $7.6 billion newbuild program.

  • Additional financing arrangements relating to the $7.6 billion newbuild program, totaling $1.6 billion, are in advanced stages and expected to close by the end of 2021.

APR Q3 2021 and Recent Achievements:

  • Energy-industry veteran leader Benjamin Church appointed CEO of APR Energy in August 2021.

  • Two successful APR Energy mobile power deployments delivered in Q3:

Consolidated Results:

The following table summarizes Atlas' consolidated results for the three months ended September 30, 2021, June 30, 2021, and September 30, 2020.


Three Months Ended

(in millions of US dollars, except per share amounts, percentages and ratios, unaudited)

September 30, 2021


June 30, 2021


September 30, 2020

GAAP Financial









Revenue

$

451.9


$

393.9


$

386.2

Net earnings


94.6



66.0



84.1

Earnings per share, diluted


0.30



0.18



0.27










Non-GAAP Financial









Adjusted EBITDA(1)


322.2



272.5



249.8

FFO(1)


248.0



193.5



173.5

FFO per Share(1)


0.93



0.73



0.68

Adjusted EPS(1)


0.56



0.39



0.27

Net Debt to Adjusted EBITDA(1)


5.0x



4.6x



4.8x










Financial Position









Ending Liquidity(2)


957.1



1,270.5



427.6

Gross Contracted Cash Flow(3)


17,850.6



13,735.8



4,912.2

Total Borrowings(4)


5,605.8



5,123.2



4,302.7










Operational









Vessel Utilization


98.6%



98.5%



98.6%

Power Fleet Utilization


91.9%



78.2%



80.0%

(1)

This is a non-GAAP financial measure. Refer to "Definitions of Non-GAAP Financial Measures" and the "Non-GAAP Reconciliations" for a definition of this term and a reconciliation of this non-GAAP financial measure, as used in this release, to their most directly comparable GAAP financial measure. Adjusted EPS for the quarter ended September 30, 2020, is the same as diluted earnings per share for the period.

(2)

This is the total cash and cash equivalents balance plus the total available undrawn committed credit facilities at period end.

(3)

Gross contracted cash flow as at September 30, 2021, includes $5.7 billion of lease payments receivable from operating leases, $1.0 billion of gross lease receivable from finance leases and $11.2 billion of gross lease payments for acquired vessels with signed charter agreements that are undelivered as at September 30, 2021. 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 finance leases and $7.4 billion of gross lease payments from newbuild vessels with signed charter agreements that were undelivered as at June 30, 2021. Gross contracted cash flow as at September 30, 2020, includes $3.9 billion of lease payments receivable from operating leases and $1.0 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.

(4)

Total borrowings do not include debt to be incurred in connection with certain undelivered vessels.

Financial Results Summary:

Revenue growth of 17.0% to $451.9 million for the quarter ended September 30, 2021, compared to the same quarter in 2020. The growth was primarily driven by an increase in average charter rates for its existing vessels and the contribution of six second-hand vessels delivered to Seaspan after September 2020.

Adjusted EBITDA growth of 29.0% to $322.2 million for the quarter ended September 30, 2021, compared to the same quarter in 2020. The growth was primarily driven by the increase in revenue.

FFO Per Share growth of 36.8% to $0.93 for the quarter ended September 30, 2021, compared to the same quarter in 2020. The growth was primarily driven by the increase in revenue.

Earnings Per Diluted Share was $0.30 for the quarter ended September 30, 2021, compared to earnings per diluted share of $0.27 for the same period in 2020.

Adjusted Earnings Per Diluted Share growth of 107.4% to $0.56 for the quarter ended September 30, 2021, compared to $0.27 for the same period in 2020. Adjusted earnings per diluted share of $0.56 for the quarter ended September 30, 2021, excludes a non-cash charge for loss on debt extinguishment related to the redemption of the Fairfax Notes in August 2021.

Liquidity
As of September 30, 2021, Atlas had total liquidity of $957.1 million, consisting of $257.6 million of cash and cash equivalents and $699.5 million of availability under undrawn committed credit facilities (not including committed financing related to newbuild vessels). As of September 30, 2021, Atlas had an unencumbered asset base including 33 vessels with a book value of $1.2 billion.

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


Three Months Ended September 30, 2021

(in millions of US dollars, unaudited)

Containership Leasing


Mobile Power Generation


Elimination and Other(2)


Total

Revenue

$

376.6


$

75.3


$

-


$

451.9

Operating expense


73.0



13.1



-



86.1

G&A expense


12.2



8.8



(4.4)



16.6

Operating lease expense


35.6



0.9



-



36.5

Adjusted EBITDA(1)


255.8



66.0



0.4



322.2

FFO(1)


202.2



60.8



(15.0)



248.0

Net earnings


60.1



30.4



4.1



94.6

Gross Contracted Cash Flow(3)


17,684.1



166.5



-



17,850.6

(1)

This is a non-GAAP financial measure. Refer to "Definitions of Non-GAAP Financial Measures" and "Non-GAAP Reconciliations" for a definition of this term and a reconciliation of this non-GAAP financial measure, as used in this release, to their most directly comparable GAAP financial measure.

(2)

Elimination and Other includes amounts relating to preferred shares, change in contingent consideration asset, elimination of intercompany transactions and unallocated amounts.

(3)

Gross contracted cash flow as at September 30, 2021, includes $5.7 billion of lease payments receivable from operating leases, $1.0 billion of gross lease receivable from finance leases and $11.2 billion of gross lease payments for acquired vessels with signed charter agreements that are undelivered as at September 30, 2021. Gross contracted cash flow includes purchase obligations and excludes purchase options, extension options, higher charter rate options and profit-sharing components.

Distribution:
On October 6, 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 November 1, 2021.

Conference Call and Webcast:
Atlas will host a conference call and webcast presentation for investors, analysts and interested parties to discuss its third quarter results on November 9, 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: 3042969). The live webcast and slide presentation are available under "Events & Presentations" at www.atlascorporation.com. A webcast replay will be available until November 4, 2022.

The replay telephone numbers are: US/Canada 1-855-859-2056 and International 1-404-537-3406, and the replay passcode is: 3042969. The phone replay will be available until November 23, 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 primarily charter our vessels on long-term, fixed-rate time charters to the world's largest container shipping liners. As at September 30, 2021, Seaspan's operational fleet, consists of 132 vessels with a total capacity of 1,132,400 TEU. We also have 69 vessels under construction, increasing total fleet capacity to 1,959,200 TEU, on a fully delivered 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.

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


September 30, 2021


December 31, 2020

Assets






Current assets:






Cash and cash equivalents

$

257.6


$

304.3

Accounts receivable


91.2



75.9

Inventories


58.3



60.2

Prepaid expenses and other


34.1



33.9

Net investment in lease


13.7



10.7

Acquisition related assets


101.5



99.3



556.4



584.3







Property, plant and equipment


7,047.4



6,974.7

Vessels under construction


1,019.9



42.0

Right-of-use assets


756.4



841.2

Net investment in lease


578.0



418.6

Goodwill


75.3



75.3

Deferred tax assets


26.1



19.3

Derivative instruments


2.4



-

Other assets


344.7



333.7


$

10,406.6


$

9,289.1







Liabilities and shareholders' equity






Current liabilities:






Accounts payable and accrued liabilities

$

166.3


$

134.1

Deferred revenue


21.1



28.2

Income tax payable


109.7



110.4

Long-term debt - current


377.4



332.1

Operating lease liabilities - current


154.7



160.9

Other financing arrangements - current


92.7



64.1

Other liabilities - current


65.7



24.8



987.6



854.6







Long-term debt


3,955.9



3,234.0

Operating lease liabilities


592.2



669.3

Other financing arrangements


1,096.9



801.7

Derivative instruments


38.5



63.0

Other liabilities


19.4



40.9



6,690.5



5,663.5







Cumulative redeemable preferred shares


296.9



-







Shareholders' equity:






Share capital


2.4



2.4

Additional paid in capital


3,524.0



3,842.7

Deficit


(87.8)



(199.2)

Accumulated other comprehensive loss


(19.4)



(20.3)



3,419.2



3,625.6


$

10,406.6


$

9,289.1

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



Three Months Ended
September 30,


Nine Months Ended
September 30,



2021


2020


2021


2020














Revenue


$

451.9


$

386.2


$

1,218.4


$

1,058.4














Operating expenses:













Operating expenses



86.1



78.2



245.2



205.0

Depreciation and amortization



106.6



103.9



284.7



264.6

General and administrative



16.6



21.1



55.6



51.3

Indemnity claim under acquisition agreement



(13.6)





(29.1)



Operating leases



36.5



37.0



109.4



113.7




232.2



240.2



665.8



634.6














Operating earnings



219.7



146.0



552.6



423.8














Other expenses (income):













Interest expense



50.0



45.3



151.4



145.7

Interest income



(0.6)



(0.9)



(2.8)



(3.4)

Loss (gain) on derivative instruments



0.2



2.2



(6.8)



34.0

Loss on debt extinguishment



70.9





127.0



Other expenses



4.5



10.8



17.2



16.3




125.0



57.4



286.0



192.6














Income tax expense



0.1



4.5



8.4



12.5














Net earnings


$

94.6


$

84.1


$

258.2


$

218.7






...

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