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ATLAS REPORTS THIRD QUARTER 2022 RESULTS

Continuing to optimize business by increasing contract duration, delivering on newbuild program and maintaining robust liquidity

LONDON, UK, Nov. 1, 2022 /CNW/ - Atlas Corp. ("Atlas" or the "Company") (NYSE: ATCO) announced today its results for the quarter ended September 30, 2022.

NYSE:ATCO (CNW Group/Atlas Corp.)
NYSE:ATCO (CNW Group/Atlas Corp.)

Financial Highlights:

  • Third quarter 2022 financial performance compared to third quarter 2021:

  • Robust balance sheet with liquidity of $1,294.3 million, total borrowings(1) to total assets of 52.5%

  • Approximately 70% of Seaspan's total borrowings and preferred shares is fixed rate, protecting against the prevailing 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 14

 

Comments from Management:

Bing Chen, President and CEO of Atlas, commented, "Our team continued to deliver consistent performance and operational excellence in the third quarter."

"Seaspan bolstered its customer partnership with leading global liners by forward fixing 14 operating vessels in the quarter. We continued diligently executing our newbuild program with four deliveries since the beginning of the third quarter, all ahead of schedule, with each successfully commencing their long-term charters. Despite the unprecedented challenges, our dedicated and experienced teams have proven again their reliable execution.  We have now successfully delivered 121 newbuilds since our IPO in 2005."

"APR Energy continued its pivot to quality and predictable cash flow opportunities. Our team successfully completed its 4-month power generation contract with Imperial Irrigation District in the US in September and its Mexicali dry-lease contract in October, with demobilization expected to be completed during the fourth quarter. APR's 44-month contract in Brazil, effective since May 2022, successfully completed installation in this quarter, and its Lifecycle dry-lease contract will continue until early 2023. Lastly, all of APR's turbine assets in Argentina have now been fully demobilized from the country."

"With our focus on creative customer solutions, a dedicated team and relentless pursuit of operational excellence, we remain well positioned to offer predictable financial returns through all market cycles."

Graham Talbot, CFO of Atlas, commented, "Our third quarter performance reflects diligent execution of our business plan."

"Seaspan revenue was maintained due to early delivery of newbuild vessels and higher market rates, offset by planned vessel sales. APR revenue declined due to relatively high utilization in the third quarter of 2021."

"We have continued to grow our backlog by proactively extending charters with customers, adding over $1.1 billion of gross contracted cash flow through 14 extensions during the quarter. We enhanced our capital structure by upgrading a $1.1 billion bank loan financing for newbuild vessels into a $1.5 billion ECA-backed JOLCO financing on improved terms. Alongside the current inflationary environment and macroeconomic headwinds, we remain well positioned with approximately 70% of our interest rate exposure fixed based on total borrowings and preferred shares, and liquidity of $1.3 billion as at quarter end. The reported gain on our derivative instruments is $126.6 million year to date 2022 which highlights the impact of our proactive interest rate exposure management.

On the back of these enhancements, Atlas received its first credit rating during the quarter, achieving a BB+ corporate rating from Kroll Bond Rating Agency, and Seaspan maintained its corporate ratings of BB-, BB, and BB+ after annual review from S&P, Fitch, and Kroll, respectively."

"With a gross contracted cash flow balance of $18.6 billion and our fully financed newbuild program, we are well positioned for through-cycle value creation."

Significant Developments in the Third Quarter of 2022 & Subsequent Events

The table below summarizes our Containership Leasing fleet as at September 30, 2022:


Actual

Expected

Containership Leasing (# of vessels)

Q3 2022

Remainder of
2022

2023

2024

Beginning of period balance

127

129

132

154

Delivered/Acquired

2

Future scheduled deliveries

3

22

36

Sold

End of period balance

129

132

154

190

End of period balance (managed)(1)

8

8

8

8

(1) Represents vessels that are operated on behalf of other owners.

 

Containership Leasing Developments

Seaspan entered into proactive lease extensions for 14 operating vessels in the third quarter of 2022, adding approximately $1.1 billion in gross contracted cash flow.

In August and September of 2022, Seaspan accepted delivery of its third and fourth 11,800 TEU vessels, each of which commenced a 5-year charter upon delivery, respectively. In October 2022, Seaspan also accepted delivery of another 11,800 TEU vessel and its first 15,000 TEU vessel, 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 remained subject to certain closing conditions. Due to certain conditions not being fulfilled by the counterparty, the contracts have become null and void. No payments were made by Seaspan in relation to the contract. Seaspan has notified the relevant parties and has reserved its rights to claim against the counterparty in relation to the contracts.

Mobile Power Generation Developments

In August 2022, the last of APR's turbines based at its Matheu plant in Argentina were demobilized from the country. This concludes the successful demobilization of all 14 turbines previously deployed in Argentina. APR is actively maturing opportunities to redeploy these turbines on long-term contracts.

In September and October 2022, APR successfully completed its 4-month Imperial Irrigation District and Mexicali dry-lease contracts, with demobilization of both sites currently underway.

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.

In August 2022, Seaspan received $500.0 million in proceeds pursuant to a sustainability-linked U.S. private placement which was signed in May 2022. 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%. The financing is secured by Seaspan's vessel portfolio financing program. During August, Seaspan partially used proceeds from the financing to pay down approximately $240 million of existing debt under the portfolio financing program, with the remaining proceeds intended to be used to fund capital expenditures, transaction costs, and for other general corporate purposes.

Credit Rating Developments

In the third quarter of 2022, Seaspan's credit ratings from Fitch, S&P, and Kroll were reaffirmed at BB, BB-, and BB+, respectively. Key drivers of reaffirming the ratings included Seaspan's growing levels of unsecured debt and unencumbered assets.

In September 2022, Atlas received its first corporate credit rating of BB+ from Kroll.

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.

In a separate press release issued 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.

Distribution

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.

On October 6, 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 October 31, 2022.

Common Shares Outstanding

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

Consolidated Results:

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


Three Months Ended

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

September 30, 2022  


June 30, 2022  


September 30, 2021  

Key Metrics






Revenue

$                         439.6


$                     413.3


$                       451.9

Net earnings

185.7


140.0


94.6

Adjusted EBITDA(1)

291.1


279.5


322.2

FFO(1)

205.4


201.7


248.0

FFO per Share, diluted(1)

0.71


0.70


0.93

Adjusted EPS, diluted(1)

0.39


0.35


0.54

Diluted EPS

0.59


0.43


0.30







Financial Position






Operating Net Debt to Adjusted EBITDA(1)

3.6x


3.4x   


4.0x

Ending Liquidity(2)

1,294.3


1,100.7


957.1

Gross Contracted Cash Flow(3)

18,603.2


17,754.0


17,850.6

Total Borrowings(1)(4)

5,982.2


5,538.6


5,605.8

Total Borrowings to Assets (%)

52.5 %


51.2 %


53.9 %







Operational






Containership Leasing Utilization

98.6 %


98.3 %


98.6 %

Mobile Power Generation Utilization

80.0 %


68.8 %


91.9 %



(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 14.

(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 September 30, 2022 includes $6.6 billion of lease payments receivable from operating leases, $1.8 billion of gross lease receivable from finance leases and $10.2 billion of gross lease payments from newbuild vessels with signed charter agreements that are undelivered as at September 30, 2022. 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 financing 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.

(4)       

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

 

Financial Results Summary:

Revenue decrease of 2.7% to $439.6 million for the three months ended September 30, 2022, compared to the same period in 2021. The decrease in revenue is primarily related to the Mobile Power Generation segment due to lower asset utilization. Revenue from the Containership Leasing segment increased 2.2% due to vessel deliveries and higher market rates which  was partially offset by lower revenue from the sale of 11 vessels since the fourth quarter of 2021.

Adjusted EBITDA decrease of 9.7% to $291.1 million for the three months ended September 30, 2022, compared to the same period in 2021. The decrease in adjusted EBITDA is primarily due to lower revenue and increased general and administrative expenses related to higher share based compensation and professional fees compared to the prior period, primarily related to the take private proposal.  In 2021 through to May 2022,  the Company recognized a recovery relating to an indemnity claim under acquisition agreement which ended in May 2022. The recovery recognized in the 2021 comparative period was $13.6 million.

FFO Per Share decrease of 23.7% to $0.71 for the three months ended September 30, 2022, compared to the same period in 2021. Funds from operations were lower due to decreased revenue, higher interest and general and administrative expenses and a recovery recognized in the comparative 2021 period related to an indemnity claim made by Atlas relating to its acquisition of APR Energy.  The decrease was partially driven by an increase in diluted share count from the issuance of 25 million shares from the exercise of warrants in April 2022 and the impact of the maximum dilutive effect of the exchangeable notes based on the if-converted method.

Diluted EPS was $0.59 for the three months ended September 30, 2022, compared to $0.30 for the same period in 2021.  The increase in diluted EPS was primarily driven by a non-cash gain on derivative instruments during the 2022 period related to changes in the forward interest rate curve, as well as a loss on debt extinguishment that was recognized in the 2021 comparative period primarily related to the repayment of Fairfax notes.

Adjusted Diluted EPS decrease of 27.8% to $0.39 for the quarter ended September 30, 2022,  compared to $0.54 for the same period in 2021. The decrease in adjusted diluted EPS was primarily due to the increase diluted share count.

Liquidity

As of September 30, 2022, Atlas had total liquidity of $1,294.3 million, consisting of $594.3 million of cash and cash equivalents and $700.0 million of availability under undrawn committed credit facilities. As of September 30, 2022, we also had $6.0 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 September 30, 2022.


Three Months Ended September 30, 2022

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

Containership
Leasing


Mobile Power
Generation


Elimination
and Other(3)


Total

Revenue

$                      384.9


$                        54.7


$                       —


$            439.6

Operating expense

77.6


6.7



84.3

G&A expense

23.0


9.2


(1.0)


31.2

Operating lease expense

29.1


0.8



29.9

Adjusted EBITDA(1)

255.2


38.0


(2.1)


291.1

FFO(1)

193.4


29.2


(17.2)


205.4

Gross Contracted Cash Flow(2)

18,329.6


273.6



18,603.2



(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 14.

(2)     

Gross contracted cash flow as at September 30, 2022, includes $6.6 billion of lease payments receivable from operating leases, $1.8 billion of gross lease receivable from finance leases and $10.2 billion of gross lease payments from newbuild vessels with signed charter agreements that are undelivered as at September 30, 2022. 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, November 2, 2022, to discuss the results.

To attend the conference call or webcast, participants should register online at ir.atlascorporation.com/events-and-presentations, and you 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 November 2, 2023, on the same webpage.

Date of Conference Call:

Wednesday, November 2, 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 September 30, 2022, Seaspan's operating fleet consisted of 129 vessels with a total capacity of 1,180,230 TEU, and an additional 61 vessels under construction, increasing total fleet capacity to 1,919,230 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 U.S. DOLLARS)



September 30, 2022


December 31, 2021

Assets





Current assets:





Cash and cash equivalents


$                                     594.3


$                                     288.6

Accounts receivable


87.2


56.2

Inventories


52.0


46.4

Prepaid expenses and other


32.1


35.7

Net investment in lease


20.7


16.8

Acquisition related assets


108.8


104.0



895.1


547.7






Property, plant and equipment


6,889.8


6,952.2

Vessels under construction


1,337.6


1,095.6

Right-of-use assets


770.0


724.9

Net investment in lease


893.4


741.5

Goodwill


75.3


75.3

Deferred tax assets


0.6


1.9

Derivative instruments


119.5


6.1

Other assets


402.9


424.4



$                                11,384.2


$                                10,569.6

Liabilities and shareholders' equity





Current liabilities:





Accounts payable and accrued liabilities


$                                     180.4


$                                     183.4

Deferred revenue


46.7


46.6

Income tax payable


92.1


96.9

Long-term debt - current


531.4


551.0

Operating lease liabilities - current


114.6


155.1

Finance lease liabilities - current


229.1


Other financing arrangements - current


123.1


100.5

Other liabilities - current


40.0


42.0



1,357.4


1,175.5






Long-term debt


3,623.6


3,731.8

Operating lease liabilities


412.0


562.3

Other financing arrangements


1,630.7


1,239.3

Derivative instruments


3.6


28.5

Other liabilities


14.4


17.7

Total liabilities


7,041.7


6,755.1






Cumulative redeemable preferred shares


296.9


296.9






Shareholders' equity:





Share capital


2.8


2.4

Additional paid in capital


3,717.7


3,526.8

Retained earnings


343.5


7.5

Accumulated other comprehensive loss


(18.4)


(19.1)



4,045.6


3,517.6



$                                11,384.2


$                                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
September 30,


Nine Months Ended
September 30,



2022


2021


2022


2021










Revenue


$            439.6


$             451.9


$       1,261.0


$      1,218.4










Operating expenses:









Operating expenses


84.3


86.9


257.3


253.2

Depreciation and amortization


93.0


106.6


282.9


284.7

General and administrative


31.2


15.9


83.7


48.6

Indemnity claim under acquisition agreement



(13.6)


(21.3)


(29.1)

Operating leases


29.9


36.5


93.1


109.4

(Gain) Loss on sale


(0.6)


(0.1)


3.7


(1.0)



237.8


232.2


699.4


665.8










Operating earnings


201.8


219.7


561.6


552.6










Other expenses (income):









Interest expense


61.5


50.0


158.9


151.4

Interest income


(2.3)


(0.6)


(2.9)


(2.8)

Loss on equity investment


2.3



2.3


(Gain) Loss on derivative instruments


(58.1)


0.2


(126.6)


(6.8)

Loss on debt extinguishment


2.2


70.9


9.4


127.0

Other expenses


1.9


4.5


15.3


17.2



7.5


125.0


56.4


286.0